/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/030508.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, May 8, 2003, Vol. 7, No. 90 Headlines ACTERNA CORP: Wants Nod to Obtain $30 Million of DIP Financing AIR CANADA: Urging Court to Approve New CIBC Aerogold Agreement AK STEEL: S&P Cuts Corp Rating to BB- Due to Rising Legacy Costs ALAMO GROUP: Lenders Waive Technical Default Under Credit Pact ALTERRA HEALTHCARE: Court Fixes July 10 General Claims Bar Date ALTRIA GROUP: Fitch Downgrades Ratings with Negative Outlook AMRESCO INC: Moody's Withdraws Junk Senior Debt Ratings ANC RENTAL: Wants Approval to Issue Additional Medium-Term Notes ARMSTRONG: AWI Files Third Amended Plan and Disclosure Statement AT&T CANADA: Reports Q1 2003 Financial and Operating Results AT&T CANADA: Selling Contour and Argos Telecom to YAK Comms. AVADO BRANDS: Reports Full Compliance with All Debt Covenants AVAYA INC: Prices $200 Million of 11-1/8% Senior Secured Notes BASIS100 INC: Will Host Q1 2003 Earnings Conference Call Today BAYOU STEEL: Continues Employing Ordinary Course Professionals BERTHEL: Balance-Sheet Insolvency Raises Going Concern Doubt BIO-RAD LAB: S&P Upgrades Low-B Ratings with Stable Outlook BURLINGTON: Urges Court to Allow RLI Insurance Bonding Program CALPINE CORP: Initiates 2003 Liquidity Enhancing Program CELLULAR TECHNICAL: Fails to Meet Nasdaq Listing Requirements CELLULAR TECHNICAL: Reports Weaker Operating Results for Q1 2003 CHAMPIONLYTE: Unit's New Sports Drink to be Shipped Next Week CORNING: Launches Debt Reduction & Modified Dutch Auction Tender COX COMMS: Commences Tender Offer for Prizes & Phones Securities CRESCENT REAL: Achieves Q1 2003 Results Within Expected Range CUMULUS MEDIA: First-Quarter 2003 Results Reflect Strong Growth DAISYTEK INT'L: 400 Layoffs & Two Distribution Center Closings DENNY'S CORP: Same-Store Sales & Guest Count Fall in April 2003 DIGITAL FUSION: Nasdaq to Delist Shares Effective Tomorrow EATERIES INC: Red Ink Flows in First Quarter 2003 ENCOMPASS SERVICES: Court to Consider Plan on May 21, 2003 ENRON CORP: Woos Court to Clear Master Definitive Agreement EVERGREEN INT'L: S&P Junks Rating Over Potential Debt Default EXIDE TECH.: Sues Arthur Hawkins, et. al. to Recover Transfers FLEETWOOD ENTERPRISES: Names Chris Braun as SVP for RV Group FLEMING COS.: Court Approves $150MM DIP Financing on Final Basis FLEMING COS.: Confirms Regular Quarterly Dividends Suspended FLEMING COS.: Signing-Up Ernst & Young as Internal Auditor FREESTAR: Files $54-Mill. Fraud Claim vs. vFinance & Affiliates GLIMCHER REALTY: Consummates Sale of Former Kmart Anchor Store GLOBAL CROSSING: Unveils Redesigned Two-Tier Agent Program GMAC MORTGAGE: Fitch Takes Rating Action on 4 Securitizations IMC GLOBAL: Schedules Annual Shareholders' Meeting for May 16 INSIGHT COMMS: March 31 Working Capital Deficit Tops $49 Million INTERFACE: Ratings Slide to Low-B/Junk Levels with Neg. Outlook KAISER ALUMINUM: Court Approves Goodmans LLP as Canadian Counsel KLEINERT'S INC: Voluntary Chapter 11 Case Summary KMART CORP: GE Group Serves as Lead Agent for $2B Exit Financing KMART CORP: Edward S. Lampert Appointed Chairman of the Board KMART CORP: Court OKs Sale of Store No. 3166 to Burlington Coat LEAP WIRELESS: Wants Court Approval for Employee Retention Plan LIN TV: Unit Selling 6.5% Senior Sub. Notes and 2.5% Debentures LOUDEYE: Achieves Key Milestones in Restructuring Initiatives MCDERMOTT INT'L: Reports Improved Results for First Quarter 2003 MTR GAMING: Q1 Results Show Margin Improvement over Dec. Quarter MUZAK LLC: S&P Assigns BB- Ratings to Proposed $60MM Facility NEXTEL PARTNERS: Selling $100 Million Convertible Senior Notes NORTHWEST AIRLINES: Reports 13.1% Traffic Decrease in April 2003 OLYMPIC PIPE LINE: Taps Sidley Austin as FERC and WUTC Counsel OWENS-BROCKWAY: Closes Sale of $450 Million Senior Secured Notes PIONEER-STANDARD: KeyLink Forges Distribution Pact with Oracle PPM AMERICA: Fitch Downgrades 2 Classes of Notes to BB/CCC- PRIMEDIA INC: Commences Private Offering of $300MM Senior Notes PRIMUS TELECOMMS: Board Okays Stockholders Rights Plan Amendment REGUS: Committee Turns to Ernst & Young for Restructuring Advice R.H. DONNELLEY: Appoints Jenny L. Apker as VP and Treasurer ROYAL CARIBBEAN: S&P Rates Proposed $250MM Senior Notes at BB+ SALOMON BROTHERS: S&P Cuts Ratings on Ser. 2000-C3 Note Classes SAMSONITE: S&P Changes Ratings Outlook After Refinancing Pact SAMSONITE CORP: Delays Filing of Annual Report on Form 10-K SAMSONITE CORP: Moody's Affirms Low-B and Junk Ratings SAMSONITE: Inks 4th Amendment to Rights Pact with BankBoston SERVICE MERCHANDISE: Challenging US Bank and Trust's $7MM+ Claim SIERRA PACIFIC: S&P Raises Refunding Revenue Bonds Rating to BB STARWOOD HOTELS: S&P Yanks Corporate Credit Rating to BB+ SYSTECH RETAIL: Wants Lease Decision Period Extended to July 14 TANGER FACTORY: First-Quarter Results Show Continued Improvement TDC ENERGY LLC: Successfully Emerges from Bankruptcy Proceeding TENFOLD CORP: Q1 Results Reflect Sequential-Quarter Improvement TOUCHTUNES MUSIC: Ernst & Young Expresses Going Concern Doubt TRICO MARINE: First Quarter 2003 Net Loss Widens to $13 Million U.S. CELLULAR: March 31 Working Capital Deficit Stands at $540MM U.S. STEEL: Fitch Ratchets Low-B Ratings Down One Notch U.S. STEEL: Commences Sr. Debt Offering & Consent Solicitation USG CORP: Futures Rep. Earns Nod to Continue CIBC's Engagement WASTE CONNECTIONS: S&P Affirms BB Rating with Positive Outlook WELLFLEET CAPITAL: Chapter 11 Case Summary & Largest Creditor WHEREHOUSE ENTERTAINMENT: Has Until June 30 to Decide on Leases WINSTAR COMMS: Court Approves Trustee's Settlement Pact with PwC WORLDCOM: MCI Bondholders Seek Chapter 11 Trustee Appointment * Dewey Ballantine Adds 3 Corporate Partners to New York Office * Jefferies Hires Samuel Pearlstein as Senior Aerospace Analyst * Sheppard Mullin Welcomes Three Experienced Litigators * DebtTraders' Real-Time Bond Pricing ********* ACTERNA CORP: Wants Nod to Obtain $30 Million of DIP Financing -------------------------------------------------------------- In order to continue its restructuring efforts, Acterna Corp. determined needs additional liquidity to fund projected post- petition cash losses. For the 30-day period following the Petition Date, John D. Ratliff, Acterna's Corporate Vice President and Chief Financial Officer, tells the Court, the Company anticipates cash disbursements will exceed cash receipts: ACTERNA CORPORATION, et al. Projected Cash Receipts and Disbursements For the Month of May 2003 Projected Cash Receipts $33,000,000 Projected Cash Disbursements 36,500,000 ----------- Projected Net Cash Loss $3,500,000 =========== Projected Unpaid Obligations $17,000,000 Projected Unpaid Receivables $27,000,000 To bridge this cash gap, Acterna, together with its attorneys and advisers, sought a proposal for postpetition financing from JP Morgan Chase Bank, who serves as the agent to the Prepetition Lenders. JP Morgan and other lenders agreed to step-up to the plate and advance postpetition DIP financing. The DIP Lenders submitted a formal proposal to the Debtors regarding postpetition financing. Acterna has concluded that the proposed financing from the DIP Lenders presented the best and only option available and would enable Acterna to continue to operate is businesses and maintain its going concern value. The terms and conditions of the proposed postpetition facility are detailed in a Revolving Credit, Guaranty and Security Agreement, dated as of May 6, 2003, among Acterna LLC, as borrower, each of the other Debtors, as guarantors, JPMorgan Chase Bank, as Administrative Agent, Documentation Agent and Collateral Agent, J.P. Morgan Securities Inc., as Bookrunner and Lead Arranger, General Electric Capital Corporation, as Syndication Agent, and a consortium of lenders comprised of: Lender Commitment Percentage ------ ---------- ---------- JPMorgan Chase Bank 270 Park Avenue New York, New York 10017 Attention: Patrick Daniello Telephone: 212-270-0313 Facsimile: 212-270-0453 $10,000,000 33.33334% General Electric Capital Corp. 6 High Ridge Park, Building 6C Stamford, Connecticut 06927 Attention: Brent Chase Telephone: 203-357-6176 Facsimile: 203-316-7978 $10,000,000 33.33333% Silver Oak Capital, LLC c/o Angelo, Gordon & Co., L.P. 245 Park Avenue, 26th Floor New York, New York 10167 Attention: Todd Arden Telephone: 212-692-2052 Facsimile: 212-867-1388 $8,800,000 29.3333% AG Capital Funding Partners, L.P. c/o Angelo, Gordon & Co., L.P. $1,200,000 4.0000% ----------- --------- Total $30,000,000 100.0000% Acterna asks the Court to approve the DIP Loan Agreement. The DIP Loan Agreement provides for a $30,000,000 revolving working capital facility, with a $10,000,000 sublimit for letters of credit. Prior to any asset sale, the commitment is limited to an adjustable borrowing base of approximately $15,000,000. The DIP Facility expires on May 31, 2004. The Debtors' obligations are secured by a first priority priming lien on substantially all of Acterna's assets. The basket of collateral does not include any of the Debtors' Avoidance Actions (for recoveries on account of fraudulent conveyance claims or preference payments) under chapter 5 of the Bankruptcy Code, but DOES INCLUDE the proceeds on any recoveries. These new liens are subject only to a consensual $1.5 million carve-out for payment of professional fees and fees payable to the U.S. Trustee and Court Clerk, subject to a $150,000 cap for professionals retained by any official committees and further subject to a $50,000 cap for any trustee. The DIP Financing pact prohibits the Debtors from granting new liens -- including junior liens. Loans under the DIP Facility initially bear interest at LIBOR (subject to a 2% floor) plus 4%, falling to LIBOR plus 2% after the sale of either Itronix or da Vinci. In the event of a default, the interest rate increases by 2%. Acterna will pay a variety of fees to the Post-Petition Lenders: * a $1,200,000 Structuring and Underwriting Fee; * an annual $150,000 Collateral Monitoring Fee; * a $500,000 Engagement Fee "for JPMorgan's agreement to consider arranging and providing a portion of the DIP Facility"; * a $250,000 Due Diligence Fee; * 1.0% per year as a Commitment Fee on every dollar Acterna does not borrow from the DIP Lenders; and * customary letter of credit fees. The Debtors promise to comply with two key financial covenants: (1) The Debtors will limit Capital Expenditures to: Maximum Testing Period CapEx -------------- ------- May 1, 2003 - May 31, 2003 $850,000 May 1, 2003 - June 30, 2003 $1,700,000 May 1, 2003 - July 31, 2003 $2,300,000 May 1, 2003 - August 31, 2003 $2,900,000 May 1, 2003 - September 30, 2003 $3,500,000 May 1, 2003 - October 31, 2003 $4,075,000 May 1, 2003 - November 30, 2003 $4,650,000 May 1, 2003 - December 31, 2003 $5,225,000 May 1, 2003 - January 31, 2004 $5,625,000 May 1, 2003 - February 29, 2004 $6,025,000 May 1, 2003 - March 31, 2004 $6,425,000 May 1, 2003 - April 30, 2004 $6,825,000 May 1, 2003 - May 31, 2004 $7,225,000 (2) The Debtors will not permit Consolidated EBITDA to fall below: Minimum Consolidated Testing Period EBITDA -------------- ------------ May 1, 2003 - May 31, 2003 ($6,800,000) May 1, 2003 - June 30, 2003 ($6,575,000) May 1, 2003 - July 31, 2003 ($9,175,000) May 1, 2003 - August 31, 2003 ($11,450,000) May 1, 2003 - September 30, 2003 ($9,000,000) May 1, 2003 - October 31, 2003 ($6,350,000) May 1, 2003 - November 30, 2003 ($2,525,000) May 1, 2003 - December 31, 2003 $6,875,000 May 1, 2003 - January 31, 2004 $9,150,000 May 1, 2003 - February 29, 2004 $11,400,000 May 1, 2003 - March 31, 2004 $20,025,000 May 1, 2003 - April 30, 2004 $22,025,000 May 1, 2003 - May 31, 2004 $24,025,000 Peter Pantaleo, Esq., at Simpson Thacher & Bartlett represents the DIP Lenders in the Debtors' chapter 11 cases. The Prepetition Credit Facility Acterna LLC is the primary borrower under a Credit Agreement, dated as of May 23, 2000, as amended, among Acterna LLC (f/k/a Dynatech LLC), as borrower, various lenders party thereto, JPMorgan Chase Bank (as successor to Morgan Guaranty Trust Company of New York), as administrative agent, Credit Suisse First Boston, as syndication agent and JPMorgan Chase Bank (f/k/a The Chase Manhattan Bank) and Deutsche Bank Trust Company Americas (f/k/a Bankers Trust Company), as co-documentation agents. Acterna Corporation, Acterna Business Trust, da Vinci Systems, Inc., Itronix Corporation, and TTC Federal Systems, Inc. guarantee Acterna LLC's obligations under the Prepetition Credit Agreement The Prepetition Credit Agreement consists of approximately $585.0 million in U.S. term loans, a $175 million revolving credit facility that includes $35 million for letters of credit and a EUR100 million letter of credit that secures repayment of a EUR108,375,000 German Term Loan provided to Acterna International GmbH. The obligations under the Prepetition Credit Agreement are secured by liens on substantially all of the assets of Acterna LLC and the Guarantors, including (i) cash, (ii) accounts and accounts receivable, (iii) inventory, (iv) 100% of the equity of Acterna LLC, Acterna Business Trust, da Vinci Systems, Inc., Itronix Corporation, and TTC Federal Systems, Inc., (v) 65% of the equity of certain other subsidiaries of Acterna Corporation, including Acterna World Holdings GmbH (Germany), Acterna WG International Holdings LLC, TTC International Holdings, Inc., and Applied Digital Access Canada Holding Company, Inc. (Canada), (vi) chattel paper, (vii) contracts, (viii) documents, (ix) equipment, (x), general intangibles, (xi) instruments, (xii) intellectual property, (xiii) all books and records pertaining to the forgoing, (xiv) the Collateral Proceeds Account (as defined in the Prepetition Credit Documents, and (xv) all proceeds and products of the foregoing. As of the Petition Date, under the Prepetition Credit Facility, Acterna LLC has loans outstanding of approximately $584.1 million and approximately $17.3 million in letters of credit issued and outstanding, plus accrued, but unpaid, interest of approximately $6.7 million. Due to the commencement of these cases, it is anticipated that the German Term Loan lenders will draw on the Prepetition Letter of Credit, thereby increasing Acterna LLC's obligations under the Prepetition Credit Facility by approximately EUR83 million. The Debtors' Need the DIP Financing "The Debtors require working capital to continue their operations," Paul M. Basta, Esq., at Weil, Gotshal & Manges LLP tells the Court. Acterna has experienced and continues to experience financial difficulties due primarily to the dramatic downturn in the communications industry and the decline in the network expansion activity and capital spending generally by Acterna's communication and networking customers. The economic downturn has impaired Acterna's large communication and networking customer base and has resulted in diminished product demand, excess manufacturing capacity and erosion of average selling prices. In response to the continuing decline in product demand, commencing in 2001, Acterna has, among other things, initiated aggressive cost reduction and head count reduction programs aimed at aligning its ongoing operating costs with its expected revenues and sought to divest unprofitable and/or non- core business units and utilize net proceeds to pay down long- term debt. Acterna anticipates that it will need to continue its downsizing efforts through these chapter 11 cases and believes that it requires additional incremental liquidity to effectuate such cost-saving initiatives to shrink into a profitable stand- alone enterprise. Mr. Basta says that the uncertainty concerning the Debtors' financial condition could greatly reduce their ability to procure goods and services from vendors critical to the successful operation of their business. Furthermore, Mr. Basta says, this financial uncertainty weighs heavily upon the approximately 1,500 dedicated employees of the Debtors and the approximately 1,350 dedicated employees of the Debtors' affiliates throughout the world. The Debtors' inability to obtain sufficient operating liquidity to meet their postpetition obligations on a timely basis may result in immediate and irreparable harm to their business and their estates. Accordingly, Mr. Basta argues, timely approval of the DIP Financing Facility is imperative. The Debtors ask Judge Lifland to approve the facility and permit borrowing on an interim basis immediately as necessary to fund projected losses. The Debtors will then return to court in about a month's time seeking final and permanent approval of the DIP Facility and giving creditors time to study the DIP Loan Documents, raise any objections and to allow the Court ample time to consider any objections creditors may interpose. (Acterna Bankruptcy News, Issue No. 1; Bankruptcy Creditors' Service, Inc., 609/392-0900) AIR CANADA: Urging Court to Approve New CIBC Aerogold Agreement --------------------------------------------------------------- For more than 10 years, Air Canada and Canadian Imperial Bank of Commerce have enjoyed a mutually beneficial relationship governed by a series of agreements and amendments providing for the co-branding of financial products. In essence, the parties' existing credit card agreements permit CIBC to purchase Aeroplan Program points to offer to its customers in connection with the use of designated financial products that CIBC offers, the best known of which is the Aerogold credit card. The success of the Existing Credit Card Agreements is reflected in the Aerogold credit card's strong position among other Canadian premium credit cards. Aerogold cardholders receive one Aeroplan point for each dollar spent using the Aerogold card. Air Canada issues Aeroplan points to CIBC's customers and receives payment from CIBC on a price per point issued basis. The wide use of the Aerogold card and other financial products CIBC offers under the Existing Agreements has resulted in very substantial on- going revenues for Air Canada. On October 18, 1999, CIBC and Air Canada amended the Existing Credit Card Agreements to extend their term until December 31, 2009. In consideration for the extension and Air Canada's agreement to perform its obligations under the Existing Agreements, CIBC paid Air Canada a $200,000,000 service fee at that time. Air Canada Decides to End Existing Agreements Aeroplan grew in size and reputation and Air Canada wanted to negotiate an increase in the cash price Aeroplan charged for the points purchased by its customers, including CIBC. Aeroplan also wanted to expand its reach to include retailers across Canada that wished to participate in the widely known and popular customer loyalty program. However, the Existing Agreements restricted Air Canada's ability to seek an increase in the cash price CIBC paid for points. Because of the restrictive nature of the Existing Agreements' provisions, Aeroplan was unable to expand meaningfully in the retail sector. Immediately before the CCAA Petition Date, Air Canada proposed to CIBC various amendments to the Existing Credit Card Agreements. Air Canada entered into a letter of intent with Onex Corporation under which Onex would acquire a 35% interest in Aeroplan as a business separate from Air Canada. As part of that transaction, Onex requested changes to some provisions of the Existing Credit Card Agreements, including changes that would relax some of the exclusivity provisions in CIBC's favor. Air Canada also requested certain changes under the Existing Agreements that would facilitate a financing based on its rights under the Agreements. Air Canada also wanted to increase the price CIBC was paying per Aeroplan point. Changes to CIBC Aerogold Agreement After extensive negotiations, Air Canada and CIBC reached new agreement terms on April 17, 2003. Pursuant to the New Aerogold Agreement: (1) CIBC will make a $350,000,000 miles prepayment to Air Canada; and (2) CIBC will pay a higher price per Aeroplan Mile acquired. Specifically, but without disclosing the per-mile rate, retroactive to April 1, 2003, CIBC will pay 19% more for every point it purchased from Air Canada, resulting in an immediate cash benefit to Aeroplan and Air Canada. CIBC is required to pay for the points purchased on a monthly basis in arrears. The first scheduled payment is on May 30, 2003 with respect to the points purchased in April 2003. The new price CIBC will pay for the points is either the same or within 2% of the current price being paid by the next two largest Aeroplan customers. Aeroplan will also be allowed to offer points to retailers and in connection with specified types of insurance products. The New Agreement contemplates the transfer and assignment of Air Canada's rights in the New Agreement to Aeroplan Limited Partnership. This flexibility increases Aeroplan LP's value as a stand-alone entity and facilitates the realization of additional value from its proposed sale of a partial interest. Air Canada will still retain certain obligations, including, co- marketing within its current marketing plans and providing lounge access to qualified CIBC customers upon the assignment of the New Agreement to Aeroplan LP. The New Aerogold Agreement will govern the co-branding arrangement between CIBC and Air Canada. The term of the New Contract is extended to 2013. The parties will terminate the Existing Credit Card Agreements and any resulting damages to CIBC will be treated as an unsecured claim. CIBC's unsecured claim will include the unamortized balance of the Additional Service Fee CIBC paid. Air Canada's management believes that the unamortized balance owed to CIBC is $209,000,000. New Contract Filed Under Seal Due to its confidential nature, the Applicants sought and obtained Mr. Justice Farley's permission to file the New Aerogold Agreement under seal. Best Interest Robert M. Patterson, Executive Vice-President and Chief Financial Officer of Air Canada, tells Mr. Justice Farley that the New Contract represents a significant improvement on the Existing Agreements. The New Aerogold Agreement will generate substantial additional revenue for Air Canada while solidifying and extending a strong business relationship with CIBC. In a press release, Calin Rovinescu, Air Canada's Chief Restructuring Officer, indicates that the New Aerogold Agreement reaffirms the value of the longstanding relationship between Air Canada and CIBC and the value of Aeroplan as one of North America's leading loyalty programs. "The new agreement will provide Air Canada with additional liquidity during the next phase of our restructuring process and enhance Aeroplan's revenue base for the next ten years. The agreement will also enable Aeroplan to further pursue its retail strategy," Mr. Rovinescu says. By this motion, the Applicants ask the Court to approve the New Aerogold Agreement with CIBC. (Air Canada Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) AK STEEL: S&P Cuts Corp Rating to BB- Due to Rising Legacy Costs ---------------------------------------------------------------- Standard & Poor's Ratings Services said that it has lowered its corporate credit rating on integrated steel producer AK Steel Corp. and its parent, AK Steel Holding Corp. to 'BB-' from 'BB' and removed the ratings from CreditWatch with negative implications based on concerns regarding its legacy (pension and retiree medical benefits) costs. Middleton, Ohio-based AK Steel has about $1.3 billion in total debt. The current outlook is negative. "The rating actions reflect AK's weakening financial profile resulting from its substantial and growing legacy liabilities and concerns about the company's competitive position versus its main rivals who have shed significant legacy liabilities and obtained union agreements that provide labor cost savings," said Standard & Poor's credit analyst Paul Vastola. Standard & Poor's said that its ratings on AK Steel reflect its challenged business position as a mid-size, value-added, integrated steelmaker, with high exposure to the automotive market, and burdensome legacy costs. AK Steel competes in cyclical, capital-intensive markets with a focus on the manufacture of flat-rolled carbon, stainless, and electrical steel. AK benefits from a higher value-added product mix than many of its peers, and has only minimal exposure to commodity- steel markets. ALAMO GROUP: Lenders Waive Technical Default Under Credit Pact -------------------------------------------------------------- Alamo Group Inc. (NYSE: ALG) reported results for the first quarter ended March 31, 2003. Net sales for the first quarter increased 4% to $67.4 million compared to $64.8 million for the same period last year. Net income for the quarter was $0.7 million, compared with $2.5 million in the prior year period. Net sales for the first quarter of 2003 include the contributions of Valu-Bilt Tractor Parts, acquired in April 2002 and Faucheux Industries SA, acquired in November 2002. Excluding these sales, net sales for the first quarter of 2003 would have been $62.1 million, or 4% below the prior year, reflecting the continued weakness in the Industrial and Agricultural segments, partially offset by continued growth within the Company's European Division. North American Agricultural Division sales decreased 9% to $26.4 million from $29.1 million for the first quarter of 2002. The Division continues to be affected by poor market conditions such as declining net farm incomes, and less than anticipated results of the Farm Bill passed in 2002, which have resulted in decreased demand. North American Industrial Division sales of $25.8 million were flat versus a year ago. Schwarze Industries street sweeper sales were up 23% in the first quarter compared to last year, reflecting sales increases of new products and expanded market coverage in the United States, as well as growth in Australia. Industrial mower sales in 2003 were 15% below the first quarter of 2002 primarily due to state budget constraints and, to a lesser extent, city and county budget issues. Alamo's European Division sales for the quarter were up 49% to $15.2 million from $10.2 million in the first quarter of 2002. The acquisition of Faucheux accounted for approximately 30% of the increase, with the balance from improved sales in the Company's other European operations. At March 31, 2003 the Company was in technical default with one of its financial covenants under its $70 million Revolving Credit Agreement. The Company's lenders have waived this default until June 15, 2003, during which time the Company and its lenders will work toward an amendment to the Revolving Credit Agreement to revise the covenant to cure the default. Ron Robinson, President and Chief Executive Officer of Alamo Group, commented, "Our first quarter results are indicative of the ongoing difficult conditions that are affecting the entire marketplace. We continued to be hurt by weak U.S. agricultural conditions and the slowdown in government spending in our Industrial sector that began to effect us in the second quarter of 2002. In the Industrial and Agricultural sectors where our equipment sales have declined, results have been further affected by increased levels of discounts and incentives and lower manufacturing utilization rates. The gains we have made in our European and sweeper operations, while encouraging, have not been enough to offset these declines. We are responding to these conditions by improving operational efficiencies and initiating more aggressive marketing campaigns. Also, we continue to manage our assets in a disciplined manner which has allowed us to maintain a strong balance sheet. The uncertain market conditions make it difficult to predict future results; however, with our focus on cost control and marketing initiatives, we still believe 2003 earnings will end up above 2002, and that we are well positioned to benefit from any improvements in the market as and when they occur." Alamo Group is a leader in the design, manufacture, distribution and service of high quality equipment for right-of-way maintenance and agriculture. Our products include tractor- mounted mowing and other vegetation maintenance equipment, street sweepers, agricultural implements and related after market parts and services. The Company, founded in 1969, has over 1,600 employees and operates thirteen plants in North America and Europe as of March 2003. The corporate offices of Alamo Group Inc. are located in Seguin, Texas and the headquarters for the Company's European operations are located in Salford Priors, England. This release contains forward- looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. ALTERRA HEALTHCARE: Court Fixes July 10 General Claims Bar Date --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware fixes July 10 as the Claims Bar Date -- the deadline by which all creditors of Alterra Healthcare Corporation, who wish to assert a claim against the Debtor's estate, must file their proofs of claim or be forever barred from asserting that claim. The Debtor will serve a Bar Date Notice no later than May 11, 2003. Exemptions from the General Bar Date are provided to: a) any entity that already has properly filed a proof of claim against the Debtor; b) any entity whose claim is not listed in the Schedules as disputed, contingent, or unliquidated; c) any entity whose claim against the Debtor previously has been allowed by, or paid pursuant to an order of the Court; d) any subsidiary or affiliate of the Debtor that holds claims against the Debtor; and e) any Interest Holder whose interest is based on the ownership of common or preferred stock in a corporation. Alterra Healthcare Corporation, one of the nation's largest and most experienced healthcare providers operating assisted living residences, filed for chapter 11 protection on January 22, 2003, (Bankr. Del. Case No. 03-10254). James L. Patton, Esq., Edmon L. Morton, Esq.. Joseph A. Malfitano, Esq., and Robert S. Brady, Esq., at Young, Conaway, Stargatt & Taylor LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $735,788,000 in assets and $1,173,346,000 in total debts. ALTRIA GROUP: Fitch Downgrades Ratings with Negative Outlook ------------------------------------------------------------ Fitch Ratings has downgraded the ratings of Altria Group, Inc. and its consolidated subsidiaries including Kraft Foods Inc. Fitch has also downgraded R.J. Reynolds Tobacco Holdings, Inc. (RJR) and the tobacco industry rating. Ratings on the tobacco settlement securitizations are lowered one to two notches and continue to reflect Fitch's overall assessment of the tobacco industry. The current rating actions with regard to Altria and the industry assume Philip Morris USA's (PM USA) reduced $6.8 billion bond in the Price case will not be increased or materially altered as a result of any challenge by the plaintiffs. If the plaintiffs are successful with their challenge to the bonding requirement, Fitch will review the rating levels of Altria and its subsidiaries and the industry for appropriateness. A summary of Fitch's rating actions and current tobacco industry-related ratings are as follows: The following ratings have been downgraded and removed from Rating Watch Negative. The Rating Outlook is Negative: Domestic tobacco industry --Rating to 'BBB-' from 'BBB+'. Altria Group, Inc. --Senior unsecured debt to 'BBB' from 'BBB+'. Philip Morris Capital Corp. (PMCC) --Senior unsecured debt to 'BBB' from 'BBB+'. The following ratings have been affirmed and removed from Rating Watch Negative. The Rating Outlook is Negative: Altria Group, Inc. --Commercial paper 'F2'. Philip Morris Capital Corp. (PMCC) --Commercial paper 'F2'. Altria Finance (Cayman Islands) Ltd. --Commercial paper 'F2'. The following rating has been downgraded and removed from Rating Watch Negative. The Rating Outlook is Stable: Kraft Foods Inc. (Kraft) --Senior unsecured debt to 'BBB' from 'BBB+'. The following rating has been affirmed and removed from Rating Watch Negative. The Rating Outlook is Stable: Kraft Foods Inc. (Kraft) --Commercial paper 'F2'. The following ratings have been downgraded and remain on Rating Watch Negative. R.J. Reynolds Tobacco Holdings, Inc. (RJR): --Guaranteed notes to 'BBB-' from 'BBB+'; --Bank Credit facility to 'BBB-' from 'BBB+'; --Senior unsecured debt to 'BB+' from 'BBB'. The Rating Outlook is Negative for the following Ratings: Loews Corp. --Senior unsecured debt 'A'; --Senior debt shelf 'A'; --Subordinated exchange notes 'A-'. British American Tobacco Plc --Senior unsecured debt 'A'; --Short-term 'F1'. Fitch's downgrade of the tobacco industry reflects the financial distress caused by heightened liquidity risk, as a result of the Price decision, its associated bonding requirement and the possibility of greater litigation risk going forward. The accelerated decline in volumes, revenues and operating earnings during the first quarter of 2003 also contributed to the downgrade. Event risk has increased due to the potential that a domestic tobacco subsidiary might file for bankruptcy protection, or use the threat of bankruptcy in negotiations, if bonding requirements are severe. Although PM USA was able to avoid bankruptcy by negotiating a reduced $6.8 billion bond, the solution has resulted in significantly less financial flexibility for PM USA and its parent Altria. Furthermore, the resolution of the bonding issue could not be duplicated by PM USA in a future case, nor would it be feasible for most of the other major domestic tobacco subsidiaries to fund a proportional bond in a similar situation. Although some of the 'lights' consumer fraud cases filed have been dismissed, the potential for tobacco-related consumer fraud cases in other jurisdictions (including those known to be hostile toward tobacco companies) has increased. While tobacco firms have been largely successful in avoiding liability in fully litigated tobacco cases to date, Fitch remains concerned with the precedent the Price case may establish using a different theory of liability, particularly given the magnitude of potential damages and bonding costs. There is an enormous unquantifiable risk if the tobacco companies incur adverse verdicts in any states that do not have caps on bonding requirements. Currently over 60% of states do not have caps on bonding requirements. In the re-evaluation of parent/subsidiary relationships, Fitch concluded that parent companies may not provide financial support to domestic tobacco subsidiaries that face burdensome litigation costs, including bonding requirements. Altria's unwillingness and/or inability to contribute financial support to PM USA was a critical issue in this analysis. Without parental support, onerous bonding requirements will increase the risk of default and may limit an individual tobacco subsidiary's ability to stay execution of the judgment throughout the appeal process. As a result, Fitch's tobacco industry assessment will no longer consider parental financial support and will analyze the domestic tobacco subsidiaries on a stand-alone basis. Fitch's analysis also included an assessment of the overall decline in profitability of the domestic tobacco companies, which resulted from a convergence of a multitude of negative factors. The marketplace dynamics of the domestic tobacco industry have been severely impacted by state excise tax increases, growth of low-end discount brands and high levels of competitive promotional activity. Increased restrictions on indoor smoking and lack of control over cigarette sales via the Internet have also had an adverse affect on sales by the major tobacco firms. Consumers are more sensitive to cigarette price increases at current levels so the tobacco companies' ability to raise prices to offset lower volumes has been curtailed, at least in the near-term. Margins and operating earnings sharply declined in the first quarter of 2003. Domestic tobacco subsidiaries who have reported so far have had declines in operating earnings of 40% or more versus the first quarter of 2002. Volumes and consumption also showed a precipitous drop-off since the beginning of 2003. First-quarter industry volume was off 12.9%, with some of the major firms reporting even steeper declines. Although the declines were partially due to accelerated shipments in the first quarter of 2002, this does not fully account for such a steep fall-off in volume. The industry consumption decrease for the quarter, estimated to be 5-10%, was also sharply weaker than the 2-3% decline Fitch had expected. This is an unexpected shift from the low single-digit consumption declines seen historically. The Outlook for the industry will remain Negative until a clearer picture for consumption, volumes, pricing capabilities and operating earnings develop. In addition to the increased event risk caused by the bonding requirement of the Miles case, the ratings of Altria and its consolidated subsidiaries have also been downgraded due to the changing tobacco industry dynamics discussed above. PM USA incurred accelerated volume declines of 16.1% in the first quarter of 2003, a 23.9% decline in revenues and a 40.6% reduction in operating companies income. Altria as a whole, due to its diversification through more stable food and international tobacco businesses, fared much better, with a 7.4% decline in operating income. The weak performance of domestic tobacco was attributed to lower volumes, higher promotional spending and an expanded sales force. The promotional strategies achieved their intended affect to maintain and grow market share, which resulted in PM USA's retail share for the first quarter increasing 0.2 share points to 48.3%, from the fourth quarter of 2002. Although it is unclear what the magnitude of future consumption and volume declines will be, Fitch assumes that the acceleration of these declines from historical norms will continue due to the negative industry factors discussed above. Altria has discontinued share repurchases and will instead use those funds to pay down short-term debt until it regains access to the capital markets. Currently Altria and Kraft credit ratings are the same. If Altria and PM USA experience severe financial strain due to tobacco litigation costs, Fitch believes Kraft may have difficulty financing itself, or at a minimum, face higher financing costs, as a result of its association with Altria and PM USA. Fitch has considered separating the Kraft and Altria ratings at lower rating levels, when the probability of default is higher and recovery is weighted more heavily. Thus, the Rating Outlook for Kraft has changed to Stable, reflecting its substantial cash flow generation, its diverse portfolio of branded packaged food and beverage products and its leading market share positions in many categories. As noted previously, Fitch will monitor PM USA's appeal process in the Price case. A reversal or large reduction of the judgment may discourage future similar cases from being filed. A loss on appeal, or a refusal by a higher court to review the case, is subject to increase the likelihood of future litigation. In that event, Fitch will again review the ratings of the tobacco companies. Furthermore, there may be a decision in the near term with regard to the November 2002 oral argument in the Engle case. This decision may have rating implications for the major tobacco companies. The original judgment against the industry participants is $145 billion. Fitch's downgrade of RJR's ratings reflects the accelerating negative trends outlined above. Sales, earnings and volume declines, combined with the possibility of heightened litigation risk, a highly promotional environment and competition from deep discount brands are the basis for the downgrade. Since RJR's business is primarily domestic tobacco, it does not have stronger unrelated businesses to offset the weak domestic results. RJR's domestic tobacco subsidiary, R.J. Reynolds Tobacco Company's first-quarter 2003 volume declined 14.2%. Also, RJR revised its earning outlook for the year based on projected 8-10% consumption declines throughout 2003. These consumption declines were significantly worse than the company's previous guidance of 2-3% declines. Lower volumes, coupled with high levels of promotional spending to maintain market shares, resulted in a 55% operating earnings reduction for the quarter and a projection of a 50% operating earning decline for the year. RJR Tobacco faces a similar 'light' cigarettes trial in the same jurisdiction as the Price case, scheduled for October 2003. RJR hopes to have this case, known as Turner, stayed through PM USA's appeals process so that the case would only go to trial if the Price verdict is upheld. RJR is also working with the Illinois legislature to pass a bond cap. However, if these efforts are unsuccessful and RJR Tobacco incurs a material adverse judgment, the company may face severe financial strain and the event risk of being unable to post the bond. The Rating Watch Negative will remain until the Turner case is resolved. If the Turner case is stayed through the appeals process of the Price case, the Rating Watch Negative may be removed. RJR expects to maintain significant cash balances, with approximately $1.6 billion projected at the end of 2003. Debt is expected to be about $1.8 billion at year-end, after paying off $740 million of maturing debt in 2003. Furthermore, the company is planning to realign its cost structure to match the challenging industry environment. RJR has also announced that it has halted share repurchases to improve its financial flexibility. AMRESCO INC: Moody's Withdraws Junk Senior Debt Ratings ------------------------------------------------------- Moody's Investors Service has withdrawn all its ratings on Amresco, Inc. The bankrupt company finalized its Liquidating Chapter 11 Plan last August. Amresco targets to file articles of dissolution shortly after the final distribution is made. Withdrawn Ratings * (P)Caa3 - Senior Unsecured Shelf * Caa3 - Senior Subordinate The First Amended Joint Plan of Liquidation of the Amresco, Inc. and several of the Company's subsidiaries was confirmed by the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division, on July 23, 2002. AMRESCO filed for Chapter 11 bankruptcy protection in July 2001, (Bankr. N.D. Tex. Case no. 01-35327). DebtTraders says that Amresco Inc.'s 10% bonds due 2004 (AMMB04USR1) are trading at about 21 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AMMB04USR1 for real-time bond pricing. ANC RENTAL: Wants Approval to Issue Additional Medium-Term Notes ---------------------------------------------------------------- William J. Burnett, Esq., at Blank Rome LLP, in Wilmington, Delaware, relates that prior to the Petition Date, ANC Rental Corporation and debtor-affiliates financed their vehicle fleet primarily by leasing vehicles from certain wholly owned indirect non-debtor subsidiaries of ANC, which financed the acquisition of the vehicle fleet through the issuance of asset-backed commercial paper, asset-backed medium-term notes and asset- backed auction rate notes, arranged by certain special purpose subsidiaries of ANC. These programs were financed through ARG Funding Corp., a non-debtor special purpose entity and a wholly owned direct subsidiary of ANC, which issued medium term "Rental Car Asset Backed Notes," auction rate notes to the public through private placements, variable funding notes funded by ANC Rental Funding Corp., and various bank multi-seller conduits through the issuance of commercial paper to the public. ARG Funding loaned the proceeds of these issuances to three special purpose entities for the purpose of purchasing vehicles: 1. Alamo Financing L.P.; 2. National Car Rental Financing Limited Partnership; and 3. CarTemps Financing L.P. In exchange for the funds advanced by ARG Funding to each Lessor SPE, each Lessor SPE issued "Variable Funding Notes" to ARG Funding. Each of these Lessor SPE used these proceeds and a portion of its partnership capital to purchase and finance vehicles. The Lessor SPEs, in turn, leased the vehicles to ANC's three operating companies: 1. Alamo Rent-A-Car, LLC; 2. National Car Rental System, Inc.; and 3. Spirit Rent-A-Car, Inc., d/b/a Alamo Local These leasing arrangements between each Operating Company and each Lessor SPE are governed by certain Amended and Restated Master Lease Agreements, each dated as of June 30, 2000. ANC is a guarantor under the Existing Master Lease Agreements. Mr. Burnett informs the Court that the Operating Companies rent the vehicles to the public as part of their car rental businesses. Each Operating Company use the cash generated from its rental operations to make the lease payments due to its Lessor SPE under the Existing Master Lease Agreements. Each Lessor SPE, in turn, uses the lease payments to make payments due on the Existing Leasing Company Notes issued to ARG Funding. ARG Funding then uses these payments to make payments due to the holders of the medium term notes, the variable funding notes, and the auction rate notes. The New Securities Transaction On April 4, 2002, Mr. Burnett reminds the Court that it authorized the Debtors to enter into New Master Lease Agreements and related operating leases, guarantee the obligations of each lessee under the New Master Lease Agreements, pay certain fees associated with the transaction and enter into other agreements and documents necessary to consummate the transaction. This order was amended on June 28, 2002. On August 23, 2002, this Court also approved the amendment of a term sheet with Deutsche Bank Securities inc. relating to issuance of medium term notes. Pursuant to these Deutsche Bank Orders, among other things: 1. the Debtors were authorized to enter into the New Master Lease Agreements; 2. it was contemplated that ARG Funding, Inc. II would: a. issue the 2002-1 Variable Funding Note to an affiliate of DB Securities up to $575,000,000; and b. issue Medium Term Notes, placed with certain investors by DB Securities, up to $750,000,000; 3. DB Securities, Inc. obtained the right to act as the Debtors' structuring and placement agent with respect to one or more financings up to the MTN Notional Amount; and 4. the Debtors were authorized to pay the Additional Fees to DB Securities on the closing of any additional financing transactions between the Debtors and DB Securities, which consists of a placement fee equal to 0.50% on the first $750,000,000 of the financings and a placement fee equal to 1% on the remaining notional amount of the financings. In May 2002, ARG II issued the Variable Funding Notes amounting to $275,000,000. In June 2002, ARG II increased the maximum invested amount of the VFN from $275,000,000 to $575,000,000. In August 2002, ARG II refinanced the VFN with the issuance of the MTNs amounting to $600,000,000. As of April 17, 2003, all of the MTNs remain outstanding. The Term Sheet Mr. Burnett reports that although the Debtors do not intend to immediately issue the Additional MTNs, it is anticipated that the issuance of Additional MTNs will be necessary in the near term to enable the Debtors to meet their increased fleet needs, which historically increase during the summer months and decrease during winter months. In that regard, ARG II may, from time to time, issue Additional MTNs placed with the investors by DB Securities in an aggregate amount up to the MTN Notional Amount of $1,050,000,000 as market conditions warrant. Although the June 28, 2002 DB Order contemplated that DB Securities would act as the Debtors' structuring and placement agent with respect to one or more additional financings up to the MTN Notional Amount of $1,050,000,000, the Initial DB Motion filed on March 8, 2002, only sought authorization for the issuance of MTNs up to $750,000,000. By this motion, the Debtors seek Court authorization to enter into agreements and issue guarantees to consummate the issuance of Additional MTNs up to the full MTN Notional Amount of $1,050,000,000. DB Securities has agreed to provide the Debtors with the Additional MTNs on the same terms and conditions as applied to the MTNs. In addition, if market conditions dictate, additional financing may be provided through the issuance of an additional variable funding note by ARG II to DB Securities, rather than through the issuance of Additional MTNs. To the extent that it becomes necessary to obtain the financing needed through the issuance of the Additional VFN, the Debtors will supplement this request. More specifically, the Debtors seek authorization to: 1. increase the property leased under the New Master Lease Agreements to give effect to the issuance of the Additional MTNs; 2. expand the unconditional unsecured guarantee of the obligations of each lessee under the New Master Lease Agreements to give effect to the increase in the leased property and amounts due in respect thereof under the New Master Lease Agreements; 3. amend, supplement or modify the New Transaction Documents; 4. pay the Additional Fees associated with the issuance of the Additional MTNs and the MTN Documents; and 5. enter into other agreements and documents necessary to consummate transactions contemplated by the Additional MTNs and the MTN Documents. Mr. Burnett believes that the Additional MTNs to be issued pursuant to the terms and conditions of the New Securities Transaction may be necessary to enable the Debtors to meet their incremental fleet needs. In that connection, the Additional MTNs will provide for the liquidity needed, as market conditions dictate, for the vehicle ramp up necessary for the Debtors' seasonally strong summer period. In addition, the Debtors have investigated the possibility of obtaining fleet financing from alternative sources and have determined that the alternative financing arrangements of a similar size and all-in cost are not currently available to meet their immediate fleet financing needs. (ANC Rental Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) ARMSTRONG: AWI Files Third Amended Plan and Disclosure Statement ---------------------------------------------------------------- On May 1, 2003, Armstrong World Industries filed its Third Amended Plan of Reorganization and Disclosure Statement with the Bankruptcy Court. A free copy of the Third Amended Plan is available at: http://www.sec.gov/Archives/edgar/data/7431/000090951803000242/jd4-30_reorg. txt and a free copy of the Third Amended Disclosure Statement is available at: http://www.sec.gov/Archives/edgar/data/7431/000090951803000242/jd4-30_disclo sure.txt The amendments to the Second Amended Plan of Reorganization set forth in the Third Amended Plan of Reorganization have been agreed upon by certain parties-in-interest in the Chapter 11 Case, and include, among other things: (i) modifications to conditions to confirmation of the Plan regarding the findings to be made by the Court regarding insurance coverage matters in connection with confirmation of the Plan; (ii) the addition of an undertaking on the reorganized AWI's part to the effect that, to the extent that any transfer of insurance rights applicable to Asbestos Personal Injury Claims or Asbestos Property Damage Claims to the Trusts to be established under the Plan in connection with such Claims is determined to be invalid by a court or arbitrator of competent jurisdiction, Reorganized AWI will pursue any rights to that insurance for the benefit of the applicable Trust and immediately transfer any amounts recovered to the Trust; however, the Trusts will be obligated to reimburse reorganized AWI for all costs reasonably incurred in connection with this obligation; (iii) modification of the provisions regarding rejection of executory contracts in relation to certain insurance policies so that, to the extent that insurance contracts and related settlement agreements are not executory, the Plan will provide for assumption of such insurance policies and settlement agreements anyway; (iv) a change in the time during which AWI is required to maintain insurance for the benefit of certain directors, officers, and employees from a period of at least three years following the Effective Date of the Plan to a period of at least four years following the Effective Date of the Plan; (v) elimination of the approval of Holdings' shareholders to the proposed Plan of Dissolution, winding up and distribution of Holdings as a condition to the issuance under the Plan of warrants for the New Common Shares of Reorganized AWI to the holder of AWI's existing equity interest -- expected to be Holdings or its wholly owned subsidiary Armstrong Worldwide, Inc., known in the Plan as "AWWD"; and (vi) a revision in reorganized AWI's obligation to bear costs and expenses of Holdings, so that Reorganized AWI will bear the costs and expenses relating to the vote of Holdings' shareholders on the Plan of Distribution -- to be undertaken as soon as reasonably practicable -- and all other operating expenses of Holdings and AWWD until the time of the Holdings vote -- and for a reasonable time after the vote to permit orderly transition of the administration of Holdings' affairs -- and, if the Plan of Distribution is approved, the costs and expenses of administering the implementation and completion of the Holdings Plan of Distribution, including any taxes incurred in that connection, but, if the Plan of Distribution is not approved by Holdings' shareholders, Reorganized AWI will have no further responsibility for Holdings' expenses -- after the transitional period. Current Status of Disclosure Statement Hearing On May 2, 2003, the Court held a hearing regarding the disclosure statement with respect to the Third Amended Plan. At the hearing, Stephen Karotkin, Esq., at Weil, Gotshal & Manges LLP, in New York, AWI's lead bankruptcy counsel, told Judge Newsome that revisions to the Projected Financial Information for Reorganized AWI are necessary. In light of developments regarding AWI's business since December 2002 and current economic and financial conditions, Mr. Karotkin informs the Court that AWI is now undertaking to revise and update this projected financial information. The Debtors promise to file the revised Projected Financial Information with the Court "as soon as practicable". AWI did not indicate the substance of the revisions that would be made but did indicate that the differences in the revised projected financial performance of reorganized AWI from that presented in the previously submitted information would be adverse and that the magnitude of the difference would not be immaterial. In addition, AWI indicated that it expected that, based on the revised projected financial information, the estimated range of reorganization value of reorganized AWI discussed in the Disclosure Statement with respect to the Third Amended Plan of Reorganization would be reduced to a degree that would not be immaterial and that, correspondingly, under the Plan, the expected recoveries that would be achieved by creditors of AWI and expected value of distributions in respect of AWI's equity would be reduced. At the hearing, Judge Newsome took approval of the Disclosure Statement for the Third Amended Plan of Reorganization under advisement, pending AWI's filing of the revised projected financial information. The Disclosure Statement with respect to the Third Amended Plan of Reorganization will be circulated to AWI's creditors to solicit votes on whether to approve the Third Amended Plan of Reorganization. The Disclosure Statement will also be sent to Holdings' shareholders, although they will not be entitled to vote on the Third Amended Plan of Reorganization. The Structural Changes The structural changes implement the enhanced roles played by the Asbestos PI Claimants' Committee, the Future Claimants' Representative and, if Class 6 votes to accept the Plan, the Unsecured Creditors' Committee. No mention is made of any role for the Asbestos PD Committee. These changes are an outgrowth of the distribution scheme in the Plan by which the Asbestos PI Trust will own, or by the exercise of rights granted under the Plan would be entitled to own, a majority of the voting shares of AWI. Exit Financing & an IRS Ruling AWI says that it expects to enter into a $300 million syndicated bank credit facility and have that working capital facility in place on the Effective Date. AWI must also obtain either an IRS private letter ruling or an opinion of counsel to the effect that the two asbestos-related Trusts are qualified settlement trusts for tax purposes. There is no indication about whether a private letter ruling has been requested to date. (Armstrong Bankruptcy News, Issue No. 40; Bankruptcy Creditors' Service, Inc., 609/392-0900) AT&T CANADA: Reports Q1 2003 Financial and Operating Results ------------------------------------------------------------ AT&T Canada Inc. (TSX: TEL.A, TEL.B; NASDAQ: ATTC, ATTCZ), Canada's largest competitor to the incumbent telecom companies, reported financial and operating results for the first quarter 2003. Q1 Financial and Operating Results Revenues for the three months ended March 31, 2003, were $353.3 million, compared to $383.8 million in the first quarter of 2002. Revenues from Local, Data, Internet, IT Services and Other represent 62% of total revenue versus 60% in first quarter 2002. Long Distance revenues represent 38% of revenue down from 40% in the same period last year. Local access lines in service decreased by 22,108 year over year to 530,692, reflecting the strategic re-positioning of the Company's local services business to focus on profitable local line growth. The percentage of these lines that are either on- net or on-switch increased to 55% from 51% in the same period last year. Total revenue from Data and Internet declined by 4% from the same quarter in 2002, primarily the result of industry- wide weakness in enterprise demand and pricing pressures in certain product categories. Revenue from long distance services declined by 13% from the same period last year, the result of a 4% reduction in average price per minute and a 9% decrease in minute volume. The Company's earnings before interest, taxes, depreciation and amortization, totaled $66.3 million, representing an improvement of $28.3 million from the first quarter of 2002. This increase was the result of lower SG&A expenses of $19.7 million, as initiatives to streamline the business improved SG&A efficiency to 20.1% of revenue, a reduction of 350 basis points. In addition, the gross margin improvement of 530 basis points to 38.8% of revenue contributed $8.6 million to the increase in EBITDA. This change in Gross Margin was due to lower service costs from operating efficiency gains, and to savings from recent regulatory changes, offset in part by lower revenues as discussed above. Income from operations for the quarter totaled $36.5 million, compared to a loss from operations of $53.0 million in the first quarter of 2002. This $89.5 million improvement was due to lower depreciation and amortization costs of $49.4 million associated with the write-down in the carrying value of property plant and equipment and goodwill in the second quarter of 2002, from increased EBITDA of $28.3 million, and from an $11.8 million partial reversal of the 2002 restructuring provision for workforce reductions and facility closures. The Company's Net Income for the quarter totaled $229.8 million, compared to a Net Loss of $157.6 million in the same period last year. This $387.4 million improvement was primarily the result of an increase in the non-cash foreign currency translation gain of $322.8 million, the result of an appreciation in the value of the Canadian dollar relative to the U.S. dollar on the Company's un-hedged U.S. dollar debt. Also contributing to the improvement in Net Income was increased income from operations of $89.5 million, partially offset by reorganization costs of $26.3 million. The Company's cash flow from operating activities less capital expenditures was negative $11.9 million. After excluding one- time costs under the restructuring of $29.0 million, the Company generated positive free cash flow of $17.1 million in the quarter. This represents the second consecutive quarter the Company has generated positive free cash flow after adjusting for restructuring items. Fresh Start Accounting Due to the realignment in equity interest and capital structure of AT&T Canada under the Restructuring Plan, the Company was required to perform as at April 1, 2003, a comprehensive revaluation of its balance sheet referred to as 'fresh start accounting' which included the following significant adjustments. The Company has adjusted the historical carrying value of its assets and liabilities to fair value reflecting the allocation of the Company's reorganization equity value of $581 million. As a result, the carrying value of Property Plant and Equipment has been reduced to $574.7 million. In addition, under 'fresh start accounting' the Company was required to record a deferred pension liability in the amount of $120.2 million, representing a deficiency in the market value of the assets under its defined benefit pension plan versus obligations to plan members. This liability will be funded over a five-year period, including approximately $35 million in 2003. "We have fulfilled exactly what we set out to achieve in positioning our Company for long-term success in the Canadian telecom marketplace," said John McLennan, Vice Chairman and CEO. "We have considerably improved our operating and capital efficiency, we have established a sustainable capital structure, and we continue to make incremental gains in pursuit of a balanced regulatory framework. With the completion of our restructuring we have a strong financial foundation, with no long-term debt, $175 million in cash, and a business that is generating positive cash flow and net income. And we have greatly strengthened our business through a strategic re- focusing that significantly improved our operating profile, while at the same time achieving dramatic increases in customer satisfaction levels." Mr. McLennan continued, "The revenue and operating profit generated in the first quarter confirm we are executing on our business plan. During the quarter we continued to win new business and renew existing relationships with our customers, while completing our restructuring. And we are on track with our transitional arrangements with AT&T that will see us establish a new brand identity in the coming months." John MacDonald, President and Chief Operating Officer, added, "This Company is financially and operationally strong, and has a tremendous platform upon which to build. We possess advanced technology, a blue chip customer base, and sophisticated managed service offerings. We have the support of our customers who want us to succeed because we're a Company that acts differently. Our customers tell us that it is our solutions orientation and the agility with which we respond to their complex telecom needs that sets us apart. We will build on these strengths to enhance our position as one of North America's most competitive telecom enterprises." Outlook Mr. McLennan made the following remarks with respect to financial guidance for the balance of the year, "I am pleased with our first quarter financial performance and like our prospects for continued success for the balance of the year. However, pricing in the Canadian telecommunications marketplace remains competitive across all of our major product lines and the transition of our relationship with AT&T needs to be considered as we look forward. In this environment we are maintaining our revenue, EBITDA and capital expenditure guidance for the year of $1,337, $163 and $140 million respectively. Also, while the divestiture of our Contour/Argos business unit will have no appreciable impact on our 2003 EBITDA, it will result in the loss of revenue of approximately $15 million per quarter starting in Q3 of this year". Other Developments New Customer Contracts During the quarter the Company announced it had entered into a three year, $7 million contract with 7-Eleven Inc. of Dallas Texas. The agreement involves the implementation of a high-speed cross-border Frame Relay network, connecting 7-Eleven's 500 Canadian stores to their headquarters in Dallas. In addition to providing complete geographic network redundancy for all of its retail locations across Canada, 7-Eleven will be able to launch new applications in their retail outlets, including an advanced retail information system. This system will allow 7-Eleven to more effectively manage their business, due to the rapid and reliable transfer of essential sales, inventory and operational data. Also during the quarter the Company announced that it had expanded its already significant relationship with Transat AT Inc. Based in Montreal, Transat AT specializes in the distribution of holiday travel, including air transportation and value added services at travel destinations that support tour operators in both Canada and France. The new $6 million three year agreement involves the implementation and management of an advanced Global Data Network, including Toll-free, Long Distance and Local services. This integrated international telecommunications solution allowed Transat AT to realize considerable cost savings by centralizing telecom services for all its subsidiaries and affiliated companies located across Canada, in the United States and France. Regulatory On March 26, 2003 the Company responded to the federal Cabinet's dismissal of its appeal of the CRTC's Price Cap ruling of May 30, 2002. The Company is encouraged by the Government's recognition that the regulatory and policy framework are crucial to fostering competition in the Canadian telecommunications industry. AT&T Canada's goal in launching its appeal was to focus the attention of the Government and the Regulator on the concerns of competitors, and in this the Company has succeeded. The Industry Minister expressed the Government's commitment to competition in the industry. Specifically, he expressed his expectation that the CRTC would continue its recent 'pro- competitive momentum', and that the Government would be monitoring developments in the coming months. AT&T Canada will continue its pursuit of regulatory reform, and believes that opportunity exists for further reductions in regulated costs. Additional relief would be upside to the Company's current business plan. On April 28, 2003 the Standing Committee for Industry, Science and Technology tabled a report before Parliament recommending the removal of foreign investment restrictions in the Canadian telecommunications industry. The Company welcomes these recommendations and is encouraged that the Committee has clearly recognized that foreign investment restrictions have had a disproportionately negative impact on new entrants. Implementing the Committee's recommendations and removing the restrictions will significantly improve the ability of competitive entrants to pursue sources of investment capital they cannot access under the current rules. The Company encourages the Government to move quickly to introduce the legislative and regulatory measures that are necessary to remove the restrictions. Canadians and the Canadian economy will be the ultimate winners under a liberalized foreign investment climate. Liquidity At April 1, 2003 the Company had cash on hand of $175.2 million. While the Company had estimated that it would have cash on hand of $140 million upon the completion of its restructuring, the difference is due to operating cash flow generated during the month of March, and advisory fees related to its restructuring to be paid in April. Restructuring Plan Complete On April 1, 2003 the Company successfully completed its restructuring, and distributed approximately CDN$233 million in cash and 100% of the Company's equity to bondholders and other affected creditors, in the form of 1,043,119 Class A Voting Shares and 18,956,881 Class B Limited Voting Shares. In compliance with the Canadian Telecommunications Act, Canadian resident bondholders and other affected creditors received, in the aggregate, 66-2/3 % of the Class A Voting Shares and other bondholders and affected creditors received 33-1/3 % of the Class A Voting Shares, and 100% of the Class B Limited Voting Shares. In accordance with the restructuring plan, no one creditor received greater than 10% of the Class A Voting Shares. For each CDN$1,000 in established claims value, resident Canadian bondholders or other affected creditors received CDN$49.24 in cash plus 4.227 Class A Voting Shares. For each CDN$1,000 in established claims value, non-Canadian resident bondholders or other affected creditors received CDN$49.24 in cash, plus 0.077 Class A Voting Shares and 4.150 Class B Limited Voting Shares. The Company's escrow agent has a reserve of approximately CDN$2.8 million of cash and 241,395 Class B Limited Voting Shares for distributions to affected creditors with disputed claims that have not been settled. On April 1, 2003 the Company's Class A Voting Shares and Class B Limited Voting Shares began trading on the Toronto Stock Exchange under the stock trading symbols TEL.A and TEL.B respectively, and on NASDAQ under the stock trading symbols ATTC and ATTCZ respectively. New Stock Option and Ownership Plan As outlined in the Management Information Circular, two million shares have been reserved for issuance under the Company's management incentive plan. With the Company's public listing on the TSX and NASDAQ, the use of equity-based compensation provides additional performance based incentives and assists in the retention of qualified management employees. On April 17, the Company's Board of Directors approved the granting of a total of 629,000 stock options in respect of Class A voting shares, and 230,000 Restricted Share Units to management. The stock options have an exercise price of $36.05 and vest in equal annual amounts over three years from the date of grant. The RSUs will vest three years from the date of grant, and are performance based in that they are tied to the Company's performance over the three years. AT&T Canada is the country's largest competitor to the incumbent telecom companies. With over 18,800 route kilometers of local and long haul broadband fiber optic network, world class managed service offerings in data, Internet, voice and IT Services, AT&T Canada provides a full range of integrated communications products and services to help Canadian businesses communicate locally, nationally and globally. AT&T Canada Inc. is a public company with its stock traded on the Toronto Stock Exchange under the symbols TEL.A and TEL.B, and the NASDAQ National Market System under the symbols ATTC and ATTCZ. Visit AT&T Canada's Web site, http://www.attcanada.comfor more information about the company. AT&T CANADA: Selling Contour and Argos Telecom to YAK Comms. ------------------------------------------------------------ AT&T Canada Inc. (TSX:TEL.A, TEL.B; NASDAQ: ATTC, ATTCZ), Canada's largest competitor to the incumbent telecom companies, and YAK Communications (Canada) Inc., a wholly-owned subsidiary of YAK Communications (USA) Inc. (NASDAQ:YAKC), and a provider of international long distance discount services to residential and business customers, announced an agreement by which AT&T Canada will sell Contour Telecom Inc. and Argos Telecom Inc. to YAK Communications (Canada) Inc. YAK Communications (Canada) Inc., is acquiring Contour and Argos as complete operating units. AT&T Canada will receive cash with respect to the transaction, which is expected to close on July 2, 2003, subject to the satisfaction of certain conditions. "[Tues]day's announcement is consistent with our overall strategy to focus on our core operations in support of strengthening our ability to provide a full suite of communications capabilities across our broad portfolio of connectivity, infrastructure management, and solutions capabilities," said John MacDonald, President and COO, AT&T Canada. "This agreement to acquire Contour and Argos will allow YAK to expand both its customer and product base," said Charles Zwebner, President and CEO of YAK. "We will now be able to offer a wider range of managed telecommunication solutions and bundled services to small and medium enterprise clients. For the fiscal year ended December 31, 2002, Contour and Argos reported annual consolidated revenues in excess of CDN$60 million (approximately USD$40 million)." Contour Telecom is a provider of telecom vendor management services as well as a reseller of telecommunications services to medium to large business customers. Contour, a wholly-owned subsidiary of AT&T Canada, owns 100 per cent of Argos Telecom, a reseller of telecom services to small and medium sized enterprises and residential customers. Visit http://www.contour.caand http://www.argos.ca YAK Communications (USA), Inc. (NASDAQ: YAKC) was incorporated in December 1998 in Florida with the objective of providing international long distance discount services to both business and residential customers. The Company specializes in offering these services to consumers by way of a dial-around (known as "10-10"). The Company is a facilities based reseller which utilizes its own switching systems. For more information about YAK Communications, visit http://www.yak.com AT&T Canada is the country's largest competitor to the incumbent telecom companies. With over 18,800 route kilometres of local and long haul broadband fiber optic network, world class managed service offerings in data, Internet, voice and IT Services, AT&T Canada provides a full range of integrated communications products and services to help Canadian businesses communicate locally, nationally and globally. Visit AT&T Canada's Web site, http://www.attcanada.comfor more information about the Company. AT&T Canada Inc.'s 7.650% bonds due 2006 (ATTC06CAR1) are trading at about 21 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ATTC06CAR1 for real-time bond pricing. AVADO BRANDS: Reports Full Compliance with All Debt Covenants ------------------------------------------------------------- Avado Brands, Inc. ,(OTC Bulletin Board: AVDO) announced that it was in full compliance with all of its debt covenants. In a press release issued on May 5, certain holders of Avado's 9-3/4% Senior Notes asserted that Avado was in technical violation of the terms of the Note Indenture. The release, however, acknowledged that Avado is current on all its principal and interest obligations under the notes. "Avado is in full compliance with all the terms and covenants of its secured and unsecured debt," said Louis J. (Dusty) Profumo, Avado Brands Chief Financial Officer and Treasurer. "As we announced yesterday in our earnings conference call, Avado fully expects to pay the next interest obligations on its notes due in June 2003, and further expects to remain in full compliance with all other terms and covenants of our secured and unsecured debt." The noteholders' press release acknowledged that certain loans to the Chairman have been fully disclosed in the Company's securities filings. Furthermore, all current loans and loan amendments were carefully considered, reviewed and approved by an independent Special Committee of outside Directors of the Board. The Special Committee also received independent outside legal counsel regarding the agreements and amendments and determined their actions to be in the best interests of all stakeholders. "It is unfortunate that the noteholders referred to in the press release misconstrued what occurred," Profumo added. "We regret that this group of noteholders declined our suggestion to meet following our shareholders' meeting and the filing of our first quarter 10-Q, a time when we could have a full discussion on information disclosed publicly to all our stakeholders." The company will hold its Annual Meeting of Shareholders on May 7. "We are encouraged by the stability of Don Pablo's, improving sales trends at our Hops restaurants and the results of our debt reduction program, which give clear reasons for our enthusiasm about Avado's future," said Tom E. DuPree, Jr., Avado Brands Chairman and Chief Executive Officer. Avado Brands owns and operates two proprietary brands, comprised of 111 Don Pablo's Mexican Kitchens and 65 Hops Restaurant Bar Breweries. Additionally, the Company operates two Canyon Cafe restaurants, which are held for sale. As reported in Troubled Company Reporter's January 14, 2003 edition, Standard & Poor's revised its corporate credit rating to 'SD' (selective default) from 'D' on casual dining restaurant operator Avado Brands Inc., and raised its senior unsecured debt rating on the company to 'CC' from 'D'. At the same time, Standard & Poor's affirmed its 'D' rating on Avado Brands' subordinated notes. The rating actions were the result of the company's payment of interest to holders of its 9.75% senior unsecured notes. The interest payment was originally due on Dec. 1, 2002. AVAYA INC: Prices $200 Million of 11-1/8% Senior Secured Notes -------------------------------------------------------------- Avaya Inc. (NYSE: AV), a leading global provider of communications networks and services for businesses, has priced an aggregate principal amount of $200 million of 11-1/8 percent senior secured notes due April 1, 2009. The issue price is 108 percent to yield 9.06 percent, resulting in net proceeds of approximately $211 million. The notes will form a single series with the company's outstanding 11-1/8 percent senior secured notes due 2009 (CUSIP: 053499AB5) and will have the same terms and conditions as those outstanding notes. The company plans to use the net proceeds for general corporate purposes including, but not limited to, the repurchase of the company's Liquid Yield Option(TM) Notes due 2021. Citigroup and Credit Suisse First Boston acted as joint book- running managers for the offering. Avaya Inc., whose March 31, 2003 balance sheet shows a total shareholders' equity deficit of about $25 million, designs, builds and managers communications networks for more than one million businesses around the world, including 90 percent of the Fortune 500(R). A world leader in secure and reliable Internet Protocol telephony systems, communications software applications and services, Avaya is driving the convergence of voice and data application across IT networks, enabling businesses large and small to leverage existing and new networks to enhance value, improve productivity and gain competitive advantage. For more information visit the Avaya Web site: http://www.Avaya.com DebtTraders reports that Avaya Inc.'s 11.125% bonds due 2009 (AV09USR1) are trading slightly above par at 108. Go to http://www.debttraders.com/price.cfm?dt_sec_ticker=AV09USR1for real-time bond pricing. BASIS100 INC: Will Host Q1 2003 Earnings Conference Call Today -------------------------------------------------------------- Notification of 2003 First Quarter Results Conference Call event: Basis100 Inc. (TSX: BAS.) 2003 First Quarter Results Conference Call May 8, 2003, 11:00 AM ET To listen to this event, just click http://www.newswire.ca/webcast/viewEventCNW.html?eventID=530200 Basis100 (TSX: BAS) is a business solutions provider that fuses mortgage processing knowledge and experience with proprietary technology to deliver exceptional services. The company's delivery platform defines industry-class best execution strategies that streamline processes and creates new value in the mortgage lending markets. For more information about Basis100, visit http://www.Basis100.com At December 31, 2002, the Company's balance sheet shows a working capital deficit of about $2.4 million. The Company's total shareholders' equity has further diminished to about $11 million, from about $40 million recorded a year earlier. BAYOU STEEL: Continues Employing Ordinary Course Professionals -------------------------------------------------------------- Bayou Steel Corporation and its debtor-affiliates sought and obtained approval from the U.S. Bankruptcy Court for the Northern District of Texas to continue the employment of the professionals they utilize in the ordinary course of their businesses, without having to file formal retention or fee applications for each of the Ordinary Course Professionals. On account of the number of Ordinary Course Professionals normally engaged by the Debtors, it would be unduly burdensome to require each individual Ordinary Course Professional and the Debtors to require separate application to this Court for approval of the Ordinary Course Professional's retention and compensation. The Debtors are now authorized to pay, without formal application to the Court by any Ordinary Course Professional, 100% of the fees and disbursements to each of the Ordinary Course Professionals upon the submission to the Debtors an appropriate invoice setting forth in reasonable detail the nature of the services rendered, provided that such fees and disbursements do not exceed a total of $25,000 per month per Ordinary Course Professional, and no more than $300,000 per Ordinary Course Professional for the entire case. Bayou Steel Corp., a producer of light structural shapes and merchant bar steel products, filed for chapter 11 protection on January 22, 2003. Patrick J. Neligan, Jr., Esq., at Neligan, Tarpley, Andrews & Foley, LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $176,113,143 in total assets and $163,402,260 in total debts. BERTHEL: Balance-Sheet Insolvency Raises Going Concern Doubt ------------------------------------------------------------ Berthel Growth & Income Trust 1 continues to have a deficiency in net assets, as well as net losses and negative cash flow from operations. In addition, Berthel SBIC, LLC, a wholly owned subsidiary of the Trust, was in violation of the maximum capital impairment percentage permitted by the SBA. The SBIC received notice of default from the Small Business Administration advising that the SBIC must cure its default on the outstanding debentures prior to March 22, 2002. Since that time, the capital impairment violation has not been cured. On August 22, 2002, the SBA notified the SBIC that all debentures, accrued interest and fees were immediately due and payable. The SBIC was transferred into the Liquidation Office of the SBA effective August 22, 2002. The SBIC submitted a plan of debt and interest repayment to the SBA on January 31, 2003 and received a response dated February 21, 2003. Management intends to continue negotiations with the SBA regarding the interest rate and 1% SBA loan fees on the debentures that have been called. The assets and liabilities of the SBIC are $9,045,855 and $9,610,190, respectively as of March 31, 2003. These factors raise substantial doubt about the ability of the Trust to continue as a going concern. No assurance can be given that the SBIC will be successful in negotiating the terms of the debentures with the SBA. If the terms are successfully negotiated, no assurance can be given that the Trust will have sufficient cash flow to repay the debt or that the Trust will be financially viable. BIO-RAD LAB: S&P Upgrades Low-B Ratings with Stable Outlook ----------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit rating on life science supplier Bio-Rad Laboratories Inc. to 'BB+' from 'BB-', its senior secured rating to 'BBB-' from 'BB- ', and its subordinated debt rating to 'BB-' from 'B'. The outlook is stable. The rating action reflects Bio-Rad's success with integrating the 1999 acquisition of Pasteur Sanofi Diagnostics, more than doubling EBITDA and extending its well-established positions in competitive niche markets. "The current rating provides considerable financial cushion for debt-financed acquisitions, considering that the company's cash flow protection measures are well in excess of parameters typical for the rating category," said Standard & Poor's credit analyst David Lugg. During the past three years, sales of Hercules, Calif.-based Bio-Rad's products and services to the life science laboratory and clinical diagnostics markets have almost doubled. Its defensible positions in each market reflect longstanding customer relationships and its history of successful product introduction. In the life sciences markets, it has particular strengths in electrophoresis and gene transfer products. Results have particularly benefited from the company's position as the sole supplier of tests for Bovine Spongiform Encephalitis (BSE), a.k.a. mad cow disease. Diagnostic products include products for quality controls, autoimmune testing, and diabetes monitoring. In both markets, sales of reagents and consumable products impart predictability to Bio-Rad's revenues. In addition, Bio- Rad's R&D spending in genomics, proteomics, and drug discovery offers significant potential. Despite the company's defensible positions in the markets of in vitro diagnostics and life sciences, Bio-Rad Labs remains a relatively small player in each, competing with significantly larger companies that are more diversified and have greater financial resources. Moreover, Bio-Rad's heavy international presence, which accounts for about 65% of sales, subjects its revenues to swings in exchange rates and ongoing changes in global economic conditions. Bio-Rad's life science business is also vulnerable to reductions in government funding for life science research and changes in biopharmaceutical companies' R&D spending. BURLINGTON: Urges Court to Allow RLI Insurance Bonding Program -------------------------------------------------------------- Kimberly D. Newmarch, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, relates that on February 28, 2002, Burlington Industries, Inc. and its debtor-affiliates, and RLI Insurance Company entered into a DIP Indemnity Agreement. Under the DIP Indemnity Agreement, RLI agrees to undertake certain contractual obligations for the Debtors, as principals by posting one of two types of Bonds for the Debtors, wherein: (a) RLI may post a performance bond, based on the length of the contract and, generally, when the time of performance is less than one year, requires a one-time, up-front payment by the Debtors to RLI -- the Performance Bond Premium. However, if the time of performance exceeds one year, the Debtors are obligated to pay an additional Performance Bond Premium for each renewal year; and (b) RLI may also post a continuous bond that needs to be renewed each year and requires up-front payments when the bond is posted and upon each renewal. In exchange for RLI becoming a surety for the Debtors, the Debtors agree to: (a) pay the Premiums; (b) post letter of credit, as required by RLI; and (c) indemnify RLI from, among others, all costs, expenses, premiums due, damages, attorney's fees and losses that arise in connection with the Bonds. In accordance with the terms of the DIP Indemnity Agreement, RLI may require Burlington to post letters of credit to secure the Bonds. Currently, Ms. Newmarch notes, the Debtors have posted one $850,000 letter of credit -- approximately 50% of the aggregate face amount of the outstanding Bonds -- to secure Burlington's obligations under the Bonding Program. To date, the aggregate face amount of the Outstanding Bonds is approximately $1,600,000. Accordingly, pursuant to Section 364(b) of the Bankruptcy Code, the Debtors ask the Court to: (a) approve their continued participation in, and performance of their obligations under, the Bonding Program; and (b) grant administrative expense priority to their postpetition obligations under the Bonding Program. Although the Debtors believe that their participation in, and performance of their obligations under, the Bonding Program is in the ordinary course of their business operations, RLI has indicated that it will neither renew existing Bonds nor issue new Bonds without the Debtors obtaining Court approval of the Bonding Program. Ms. Newmarch contends that the Debtors' continued performance under the Bonding Agreement is warranted because: (a) no other surety is willing to issue surety bonds on the Debtors' behalf on terms and conditions as favorable as RLI; (b) the continuation of the Bonding Program is critical to the Debtors' continued business operations; and (c) the Bonding Program, is in the best interests of, and a necessary expense to preserving their estates. (Burlington Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) CALPINE CORP: Initiates 2003 Liquidity Enhancing Program -------------------------------------------------------- Calpine Corporation (NYSE: CPN), a leading North American power company, is providing a pre-earnings update on several items, including liquidity, refinancing and first quarter and full-year 2003 earnings. The company has scheduled its first quarter earnings conference call for Tuesday, May 13, 2003, at 8:30 a.m. PDT, to discuss these items in further detail. Liquidity and Refinancing As previously announced, Calpine has identified three major components of its 2003 liquidity enhancing program: the monetization of certain of its power sales contracts, the potential sale of certain power generating facilities and the financing for its California peaking facilities. These transactions are expected to generate net proceeds of approximately $1.7 billion that will be used to fund capital requirements for its existing construction program, refinancing and general corporate purposes. Progress towards the completion of these transactions continues as planned. Last week, the company announced the sale of an interest in the 115-megawatt King City Power Plant for approximately $82 million and is nearing the completion of monetizing several power sales contracts. At the end of the first quarter, liquidity totaled approximately $615 million. This was comprised of approximately $524 million of cash (cash and equivalents and current portion of restricted cash) and $91 million of borrowing capacity under the company's various credit facilities. Calpine continues to work closely with its lenders on a two-year refinancing of its $400 million and $600 million working capital facilities. The company expects to complete this refinancing in the near term. First Quarter Earnings Update and 2003 Guidance Operating income for the quarter was in-line with the company's expectations before certain non-cash charges. On-peak spark spreads were slightly ahead of plan in certain markets, but were offset by unscheduled outages and non-cash charges. These non- cash charges include reserves for equipment repairs totaling approximately $25 million, for which the company is pursuing warranty claims, and approximately $22 million of foreign exchange translation losses-representing a loss per share of $0.05 and $0.04, respectively. The foreign exchange translation losses recognized into income were transaction-related and were due mainly to a strong Canadian dollar in the quarter. As a result of this strong foreign currency, the recorded book value of the company's net foreign assets increased by approximately $78 million, generating unrealized gains that were recorded in equity on the balance sheet. For the quarter, the company expects to record a loss of approximately $0.12 per share. Calpine stated that it remains comfortable with the current 2003 full-year earnings consensus of $0.41 per share. On April 17, 2003, the company reported to the Securities and Exchange Commission that PricewaterhouseCoopers LLC (PwC) would serve as the company's independent public accountants for 2003. As a result of this change in auditors, the company has asked PwC to undertake the review of its first quarter for 2003. Consequently, the company will not be able to file its Quarterly Report on Form 10-Q for the First Quarter 2003 by the May 15, 2003 filing deadline, but will file the report following the completion of PwC's review. Conference Call Information Calpine will host a conference call at 8:30 a.m. PDT on Tuesday, May 13, to discuss in further detail the financial and operating results for the quarter ended March 31, 2003. To participate in the teleconference, in a listen-only mode, dial 1-888-603-6685 at least five minutes before the start of the conference call. In addition, Calpine will simulcast the conference call live via the Internet. The web cast can be accessed and will be available for 30 days on the Investor Relations page of Calpine's Web site at http://www.calpine.com Based in San Jose, Calif., Calpine Corporation is a leading North American power company that is dedicated to providing wholesale and industrial customers with clean, efficient, natural gas-fired power generation. It generates and markets power from plants it develops, owns, leases and operates in 23 states in the United States, three provinces in Canada and in the United Kingdom. Calpine is also the world's largest producer of renewable geothermal energy, and it owns approximately one trillion cubic feet equivalent of proved natural gas reserves in Canada and the United States. The company was founded in 1984 and is publicly traded on the New York Stock Exchange under the symbol CPN. For more information about Calpine, visit its Web site at http://www.calpine.com * * * As previously reported in Troubled Company Reporter, Calpine Corp.'s senior unsecured debt rating was downgraded to 'B+' from 'BB' by Fitch Ratings. In addition, CPN's outstanding convertible trust preferred securities and High TIDES were lowered to 'B-' from 'B'. The Rating Outlook was Stable. Approximately $9.3 billion of securities were affected. CELLULAR TECHNICAL: Fails to Meet Nasdaq Listing Requirements ------------------------------------------------------------- Cellular Technical Services Company, Inc. (Nasdaq SC:CTSC) announced that on May 1, 2003, it received a notice from the Nasdaq Stock Market that since CTS has not regained compliance with the minimum $1.00 closing bid price per share requirement as set forth in Marketplace Rule 4310(C)(4) that its securities will be delisted from the Nasdaq SmallCap Market at the opening of business on May 12, 2003. Nasdaq additionally noted that its Staff may otherwise determine to delist CTS' shares under Marketplace Rules 4300 and 4330(a)(3) since CTS is currently in the process of winding down its previous businesses and has de minimis other operations. After reviewing its options, CTS has determined that it will not seek a hearing to appeal this determination nor seek a reverse stock split of its shares at this time. It is anticipated that CTS' shares will become over the counter securities trading on the Pink Sheets Electronic Quotation Service and will retain the symbol CTSC. * * * In the Company's 2002 Annual Report on SEC Form 10-K, the Company stated: "As a result, as of December 31, 2002 CTS has no current business other than to complete the wind down of the operations of Isis. Management anticipates that all remaining assets of Isis will be realized, and liabilities settled, by approximately March 31, 2003. Management currently has no plan to liquidate the Company and distribute the remaining assets, after settling the liabilities, to stockholders. During 2002 and 2003, management has been and will be evaluating alternative businesses and acquisitions. There is no assurance that such alternative businesses and acquisitions can be accomplished before CTS spends all of its remaining cash balances, that CTS will be able to raise money at acceptable terms, if at all, to fund the acquisitions and/or the operating activities of the businesses it may acquire, and that the acquired businesses will represent viable business strategies and/or will be consistent with the expectations and risk profiles of CTS' stockholders. "Management expects that during 2003 the Company will incur costs of approximately $1.2 million, primarily related to remaining non-cancelable office leases, employee compensation, costs of maintaining the business as a public entity, and insurance. The Company does not expect to have any current source of revenues and has de minimis operations. Accordingly, management believes that its cash balances as of December 31, 2002 of approximately $3.3 million are sufficient to fund its current cash flow requirements through at least the next twelve months. "Based on management plans, these financial statements have been prepared under the "going concern" assumption which presumes that the Company will continue its existence." CELLULAR TECHNICAL: Reports Weaker Operating Results for Q1 2003 ---------------------------------------------------------------- Cellular Technical Services Company, Inc. (NasdaqSC:CTSC), reported its first quarter financial results for 2003. Three months Three months ended ended March 31, 2003 March 31, 2002 (in '000) (in '000) -------------- -------------- Revenue $158 $2,358 Net Loss ($ 375) ($ 983) Net Loss Per Share (basic and diluted) ($0.16) ($0.43) Revenue decreased 93% to $158,000 in the first quarter of 2003 from $2.4 million in the first quarter of 2002. CTS reported a quarterly net loss of $375,000 compared to $983,000 in the prior year period. The $0.6 million reduction in the net loss is primarily due to across-the-board operating expense reductions resulting from the cessation of expenses related to prior Neumobility R&D efforts and ISIS phonecard operations, both of which were closed in late 2002. Steve Katz, CTS Chairman and CEO noted: "At March 31, 2003 we had $2.9 million in working capital and no debt. We have continued to reduce staffing and have retained only minimal personnel levels. We have signed an agreement with GTS Prepaid, Inc. formalizing a loan agreement and repayment schedule relating to the transfer of certain assets of our Isis business. We are continuing to evaluate business alternatives including several investment opportunities. For the remaining nine months of 2003, we forecast incurring a total of approximately $0.8 million in expenses including remaining non-cancelable office leases, depreciation, employee compensation, costs of maintaining the business as a public entity and insurance." CHAMPIONLYTE: Unit's New Sports Drink to be Shipped Next Week ------------------------------------------------------------- ChampionLyte Beverages, Inc., a wholly owned subsidiary of ChampionLyte Holdings, Inc. (OTC Bulletin Board: CPLY) announced that the inaugural production run of the reformulated ChampionLyte(R) will be shipped the week of May 12. ChampionLyte(R), the first completely sugar-free entry into the multi- billion dollar isotonic sports drink market, is the only sports drink with no sugar, calories, sorbitol, saccharin, aspartame, caffeine or carbonation. The reformulated product is now sweetened with Splenda(R), the trade name for Sucralose produced by McNeil Nutritionals, a Johnson & Johnson company. It has no label warnings. "Candidly, the original ChampionLyte(R) did not meet the superior quality taste profile we demand," said Donna Bimbo, president of ChampionLyte Beverages, Inc. "We did extensive research and found that Sucralose, while the most expensive artificial sweetener, was the best tasting and safest. "Because Splenda(R) is made from sugar, tastes like sugar, has no calories and is safe for diabetics, it was the perfect ingredient for ChampionLyte(R)," said Ms. Bimbo. "Splenda(R) has given ChampionLyte(R) a great taste without the ultra-sweet or bitter aftertaste sometimes associated with no-calorie sweeteners." Ms. Bimbo said that reaction to the newly formulated drink has been outstanding. "The results of both formal and informal taste tests have been exceptional," said Ms. Bimbo. "What's particularly gratifying is when individuals who said they didn't like the taste of the old product rave about the new ChampionLyter," she said. "The progress that's been made in the last five months has been nothing short of incredible," said David Goldberg, president of ChampionLyte Holdings, Inc. "This company was on the verge of bankruptcy and now it has completed a major restructuring and is positioned to re-launch a superior product to a vast marketplace." "For consumers who are conscientious about diet and exercise, ChampionLyte(R) is a great tasting thirst-quenching beverage which replaces electrolytes without the negatives of sugar sweetened drinks," added Ms. Bimbo. Ms. Bimbo added that a vast majority of the first production run has been pre-sold. With the Centers for Disease Control reporting nearly 20 million diabetics in the United States and childhood obesity being linked to sugar-sweetened drinks, sugar- free ChampionLyte(R) is the healthy choice. "ChampionLyte(R) has all of the good and none of the bad," said Ms. Bimbo. "Our product is no guilt. It's a unique alternative to sugar sweetened drinks." ChampionLyte(R) is available in five flavors; orange, fruit punch and lemon-lime, pink lemonade and blue raspberry. Ms. Bimbo said that grape, which had been available in the original formulation, has been dropped because of inconsistency of the flavor. The major advantage of ChampionLyte(R) is that it replaces electrolytes, especially after exercise, without the ingredients which would cause weight gain -- particularly sugar. For example: if a man or woman runs on a treadmill for 30 minutes they would burn about 150 calories. By drinking one of the popular major brand sports drinks that contain 33 to 37 grams of sugar (that's 33 to 37 individual one-gram packs of sugar) after working out on the treadmill, they would either cancel out the calories they just burned off, or actually gain more calories than burned during the workout. ChampionLyte Holdings, Inc. is a fully reporting public company whose shares are quoted on the OTC Bulletin Board under the trading symbol CPLY. Its recently formed beverage division, ChampionLyte Beverages, Inc., a Florida corporation, manufactures, markets and sells ChampionLyte(R), the first completely sugar-free entry into the multi-billion dollar isotonic sports drink market. At September 30, 2002, Championlyte Products' balance sheet shows a working capital deficit of about $1 million and a total shareholders' equity deficit of about $9 million. CORNING: Launches Debt Reduction & Modified Dutch Auction Tender ---------------------------------------------------------------- Corning Incorporated (NYSE:GLW) commenced a modified Dutch auction tender to purchase up to $800 million aggregate principal amount at maturity of its outstanding zero coupon convertible debentures. The tender commenced yesterday and will expire at midnight, Eastern Time, on June 4, 2003 unless extended or earlier terminated. Tendered debentures may be withdrawn at any time prior to the expiration date. Corning is offering to purchase the debentures, which were issued in November 2000 and are due Nov. 8, 2015 (CUSIP 219350 AJ 4), for a cash price ranging from $725 to $750 per $1,000 principal amount at maturity. James B. Flaws, vice chairman and chief financial officer, said, "The approximately $600 million of cash we are dedicating to this offer is coming from the proceeds of our successful equity offering last week, plus a portion of our cash on hand. This action to further reduce our debt, combined with our stated objective of returning the company to profitability later this year, is all part of our plan to regain investment grade ratings." On Mar. 31, 2003, Corning had approximately $1.85 billion in cash and short-term investments. Over the past 16 months, Corning has reduced its debt by approximately $1.3 billion. Under the modified Dutch auction procedure, holders of Corning's zero coupon convertible debentures are invited to respond with indications of their willingness to sell their debentures within the price range indicated. Based upon the number of debentures validly tendered, Corning will determine a final purchase price that is the lowest price in the range enabling it to purchase up to the amount sought by this offer. This purchase price will apply for all zero coupon convertible debentures purchased in the tender offer. If the amount tendered exceeds $800 million principal amount at maturity, Corning will accept tendered debentures on a prorated basis. Debentures tendered at prices above the final purchase price or otherwise not purchased will be returned to tendering holders. The terms and conditions of the tender appear in Corning's Offer to Purchase, dated May 7, 2003 and the related Letter of Transmittal. Copies of these and other related documents will be mailed to all holders of the zero coupon convertible debentures. The tender is not conditioned on a minimum amount of zero coupon convertible debentures being tendered. The consummation of the tender for the zero coupon convertible debentures is subject to certain other conditions described in the Offer to Purchase. Subject to applicable law, Corning may, in its sole discretion, waive any condition applicable to the tender and may extend, terminate, or otherwise amend the tender. J.P. Morgan Securities Inc. and Banc of America Securities LLC are acting as joint dealer managers for the tender. Georgeson Shareholder Communications Inc. is the information agent and Alpine Fiduciary Services, Inc. is the depositary. Holders of the zero coupon convertible debentures should read the Offer to Purchase, Letter of Transmittal and related documents because they contain important information about the tender. Copies of the Offer to Purchase, Letter of Transmittal and related documents may be obtained at no charge from the information agent at 17 State Street, New York, NY 10004 or from the Securities and Exchange Commission's web site at www.sec.gov. Additional information concerning the terms of the tender, including all questions relating to the mechanics of the tender, may be obtained by contacting the information agent at (800) 849-4134; or J.P. Morgan Securities Inc. at (866) 834-4666; or Banc of America Securities LLC at (888) 583-8900 ext. 2200. Established in 1851, Corning Incorporated creates leading-edge technologies that offer growth opportunities in markets that fuel the world's economy. Corning manufactures optical fiber, cable and photonic products in its Telecommunications segment. Corning's Technologies segment manufactures high-performance display glass, and products for the environmental, life sciences, and semiconductor markets. COX COMMS: Commences Tender Offer for Prizes & Phones Securities ---------------------------------------------------------------- Cox Communications, Inc. (NYSE: COX) is commencing cash tender offers to purchase any and all of its outstanding 2% Exchangeable Subordinated Debentures due 2029 (the "PRIZES") and 3% Exchangeable Subordinated Debentures due 2030 (the "Premium PHONES"). The tender offers are being made in connection with Cox's continuing efforts to reduce its long-term obligations and simplify its balance sheet. These offers are being made upon the terms and are subject to the conditions set forth in an Offer to Purchase dated May 6, 2003. The Subordinated Debentures will be purchased at a price of $39.50 for each $88.50 original principal amount of the PRIZES and $581.25 for each $1,000 original principal amount of the Premium PHONES, if validly tendered before 5:00 p.m., New York City time, on May 19, 2003. After May 19, 2003, but before the expiration of the offers at 5:00 p.m., New York City time, on June 4, 2003, unless extended by Cox, the Subordinated Debentures will be purchased at a price of $37.50 per PRIZES and $561.25 per Premium PHONES. In either case, holders of the Subordinated Debentures who tender their securities will receive accrued and unpaid interest and dividends up to but excluding the settlement date. In addition, pursuant to the terms of the PRIZES, each holder of record of the PRIZES on May 1, 2003 will receive a regularly scheduled quarterly interest payment on May 15, 2003, regardless of whether such holder has tendered PRIZES pursuant to the Offer to Purchase. A more comprehensive description of the tender offers can be found in the Offer to Purchase. Morgan Stanley and Merrill Lynch & Co. are acting as dealer managers and Georgeson Shareholder Communications Inc. is acting as information agent in connection with the tender offers. Morgan Stanley's Liability Management desk can be contacted at (800) 624-1808 and Merrill Lynch's Liability Management desk can be contacted at (888) 654-8637. For additional information regarding the tender offers, reference should be made to the Offer to Purchase and related Letter of Transmittal, copies of which can be obtained from the information agent at (800) 813- 3269. Banc of America Securities LLC and SunTrust Robinson Humphrey are serving as co-managers for the tender offers. Neither Cox nor any of the dealer managers, the co-managers, or the information agent makes any recommendation as to whether or not holders should tender their Subordinated Debentures pursuant to the offers. Cox Communications, whose December 31, 2002 balance sheet shows a working capital deficit of about $110 million, is a full-service telecommunications provider, serving 537,000 customers and employing 2,400 individuals throughout San Diego County. The company offers an array of services, including Cox Cable, Cox Digital Cable, Cox High Speed Internet, local and long distance telephone through Cox Digital Telephone, Entertainment on Demand, Cox High Definition Cable, Home Networking, and Cox Business Services. Cox Communications also owns and operates Channel 4 San Diego, the television home of the Padres and award-winning local programming. To date, the company has deployed more than 70,000 glass miles of fiber optic cable. The nation's fourth-largest cable television company, Cox Communications serves approximately 6.3 million customers nationwide. It has been operating in San Diego County since 1961. CRESCENT REAL: Achieves Q1 2003 Results Within Expected Range ------------------------------------------------------------- Crescent Real Estate Equities Company (NYSE:CEI) announced results for the first quarter 2003. Funds from operations for the three months ended March 31, 2003 was $41.4 million. These compare to FFO of $64.1 million for the three months ended March 31, 2002. FFO is a supplemental non-GAAP financial measurement used in the real estate industry to measure and compare the operating performance of real estate companies. A reconciliation of FFO to GAAP net income for the Company is included in the financial statements accompanying this press release. Net loss available to common shareholders for the three months ended March 31, 2003 was $19.3 million. This compares to net income of $10.6 million for the three months ended March 31, 2002. According to John C. Goff, Chief Executive Officer, "We have achieved first quarter results within our expected range. As we monitor the impact of domestic and foreign affairs on the economy and our business, we continue to believe that our markets will be among the first to benefit when a recovery starts to take shape. Currently, we are projecting job growth, the major driver of office demand, to show some positive signs at the end of 2003 or beginning of 2004. Until then, we believe we remain well positioned to weather the current economic environment." On April 15, 2003, Crescent announced that its Board of Trust Managers had declared cash dividends of $.375 per share for Common, $.421875 per share for Series A Convertible Preferred, and $.59375 per share for Series B Redeemable Preferred. The dividends are payable May 15, 2003, to shareholders of record on May 1, 2003. BUSINESS SECTOR REVIEW Office Sector (67% of Gross Book Value of Real Estate Assets as of March 31, 2003) Operating Results Office property same-store net operating income declined 10.1% for the three months ended March 31, 2003 over the same period in 2002 for the 25.0 million square feet of office property space owned during both periods. Average occupancy for these properties for the three months ended March 31, 2003 was 84.9% compared to 90.4% for the same period in 2002. As of March 31, 2003, the overall office portfolio's leased occupancy was 87.0%, and its economic occupancy was 85.7%. During the three months ended March 31, 2003 and 2002, Crescent received $2.0 million and $1.2 million, respectively, of lease termination fees. Crescent's policy is to exclude lease termination fees from its same-store NOI calculation. The Company leased 939,000 net rentable square feet during the three months ended March 31, 2003, of which 598,000 square feet were renewed or re-leased. The weighted average full service rental rate (which includes expense reimbursements) decreased 10% over the expiring rates for the leases of the renewed or re- leased space. All of these leases have commenced or will commence within the next twelve months. Tenant improvements related to these leases were $1.94 per square foot per year and leasing costs were $1.00 per square foot per year. Denny Alberts, President and Chief Operating Officer, commented, "As expected in the first quarter, our total office economic occupancy declined by 1.5 points, down to 85.7% from 87.2% at year end. This was primarily due to three significant lease expirations - Northern Telecom, Inc. with 147,000 square feet and AmCareco, Inc. with 63,000 square feet, both in Dallas, and Burlington Northern Railroad with 66,000 square feet in Fort Worth. In the first quarter, we signed leases for 939,000 square feet which brings our total leases signed that will commence in 2003 to 2.8 million square feet. The weighted average full service rental rate of these signed leases is $21.77 per square foot. Further, we have approximately 3.1 million square feet of gross leases expiring by the end of the year (as indicated in our first quarter supplemental operating and financial data report). To date, 67% of that expiring space has been addressed - 46% by signed leases and 21% by leases in final negotiation. The weighted average full service rental rate for those expirations is $20.35 per square foot." Resort and Residential Development Sector (22% of Gross Book Value of Real Estate Assets as of March 31, 2003) Destination Resort Properties Same-store NOI for Crescent's five resort properties declined 15% for the three months ended March 31, 2003 over the same period in 2002. The average daily rate increased 4% and revenue per available room declined 2% for the three months ended March 31, 2003 compared to the same period in 2002. Weighted average occupancy was 71% for the three months ended March 31, 2003 compared to 75% for the three months ended March 31 2002. Upscale Residential Development Properties Crescent's overall residential investment generated $5.3 million in FFO for the three months ended March 31, 2003. This compares to $15.6 million in FFO generated for the three months ended March 31, 2002. According to Alberts, "The $5.3 million in FFO in the first quarter of 2003 was in line with our plan. The first quarter 2002 FFO results were exceptionally high as a result of 158 condominium closings in Colorado as well as unusually strong commercial land sales at The Woodlands." Investment Sector (11% of Gross Book Value of Real Estate Assets as of March 31, 2003) Business-Class Hotel Properties Same-store NOI for Crescent's four business-class hotel properties increased 18% for the three months ended March 31, 2003 over the same period in 2002. The average daily rate increased 1% and revenue per available room increased 16% for the three months ended March 31 2003 compared to the same period in 2002. Weighted average occupancy was 75% for the three months ended March 31, 2003 compared to 65% for the three months ended March 31, 2002. Temperature-Controlled Facilities Investment Crescent's investment in temperature-controlled facilities generated $7.0 million in FFO for the three months ended March 31, 2003. This compares to $5.4 million of FFO generated for the three months ended March 31, 2002. Crescent Real Estate Equities Company (NYSE: CEI) is one of the largest publicly held real estate investment trusts in the nation. Through its subsidiaries and joint ventures, Crescent owned and managed, as of March 31, 2003, a portfolio of 73 premier office properties totaling 29.5 million square feet located primarily in the Southwestern United States, with major concentrations in Dallas, Houston, Austin and Denver. In addition, the Company has investments in world-class resorts and spas and upscale residential developments. * * * As previously reported in Troubled Company Reporter, Standard & Poor's affirmed its ratings on Crescent Real Estate Equities Co., and Crescent Real Estate Equities L.P., and removed them from CreditWatch, where they were placed on Jan. 23, 2002. The outlook remains negative. Ratings Affirmed And Removed From CreditWatch Issue To From Crescent Real Estate Equities Co. Corporate credit rating BB BB/Watch Neg $200 million 6-3/4% preferred stock B B/Watch Neg $1.5 billion mixed shelf prelim B/B+ prelim B/B+/Watch Neg Crescent Real Estate Equities L.P. Corporate credit rating BB BB/Watch Neg $150 million 6 5/8% senior unsecured notes due 2002 B+ B+/Watch Neg $250 million 7 1/8% senior unsecured notes due 2007 B+ B+/Watch Neg CUMULUS MEDIA: First-Quarter 2003 Results Reflect Strong Growth --------------------------------------------------------------- Cumulus Media Inc. (NASDAQ: CMLS) reported financial results for the three months ended March 31, 2003. Lew Dickey, Chairman, President and Chief Executive Officer, commented, "This quarter was marked by key accomplishments including: an optimization of our capital structure, important strategic acquisitions, and strong operating performance in a difficult environment. We are building a strong platform that generates tremendous free cash flow and are well-positioned to continue to consolidate our space." Results of Operations Three Months Ended March 31, 2003 Compared to the Three Months Ended March 31, 2002 Net revenues for the first quarter of 2003 increased from $45.1 million to $58.0 million, a 28.5% increase from the first quarter of 2002, primarily as a result of acquisitions completed in the first quarter of 2002 combined with increases in local and national revenues over the prior year period. Station operating expenses increased from $33.6 million to $41.1 million, an increase of 22.2% over the first quarter of 2002, primarily as a result of acquisitions completed in the first quarter of 2002. Station operating income (defined as operating income before depreciation and amortization, LMA fees, corporate general and administrative expenses, non-cash stock compensation and restructuring charges) increased from $11.5 million to $16.9 million, an increase of 46.9% from the first quarter of 2002. On a pro forma basis, which includes the results of all transactions completed during the three month period as if each were consummated at the beginning of the earliest periods presented, net revenues for the first quarter of 2003 increased from $57.0 million to $57.6 million, an increase of 1.1% from the first quarter of 2002. Pro forma station operating income (defined as operating income (loss) before depreciation, amortization, LMA fees, corporate general and administrative expense, non-cash stock compensation, restructuring charges; and excluding the results of Broadcast Software International) increased from $16.2 million to $16.9 million, an increase of 4.5% from the first quarter of 2002. Pro forma station operating income margin (defined as pro forma station operating income as a percentage of pro forma net revenues) increased to 29.3% for the first quarter of 2003 from 28.4% for the first quarter of 2002. Interest expense decreased by $0.7 million to $6.3 million as compared with $7.0 million during the prior year. This decrease was primarily due to lower interest expense associated with lower outstanding levels of the Company's 10-3/8% Senior Subordinated Notes and a gain realized in connection with adjusting the fair market value of certain derivative instruments. Losses on early extinguishments of debt were $3.1 million for the quarter as compared with $6.3 million during the prior year. Losses during the current year were the result of premiums paid in connection with the repurchase of $30.1 million in aggregate principal of the Notes. Losses during the prior year were the result of the retirement of the Company's then existing credit facility and the write-off of previously capitalized debt issuance costs. Income tax expense decreased $56.6 million to $5.8 million compared to $62.4 million during the first quarter of 2002. Tax expense incurred in the current year, comprised entirely of deferred tax expense, was recorded to establish valuation allowances against net operating loss carry-forwards generated during the quarter. We expect tax expense for the second quarter of 2003 to be consistent with the first quarter. Tax expense in the prior year was comprised primarily of a non cash charge recognized to establish a valuation allowance against the Company's deferred tax assets upon the adoption of SFAS No. 142, "Goodwill and Other Intangible Assets." Net loss for the quarter decreased to $6.3 million for the quarter for the reasons discussed above and due to a $41.7 million after-tax loss incurred in the prior year related to the cumulative effect of a change in accounting principle as a result of adopting SFAS No. 142. Preferred stock dividends and redemption premiums for the first quarter of 2003 decreased $3.7 million to $0.9 million compared to $4.6 million in the prior year, primarily as a result of lower accrued dividends in the current quarter attributable to fewer outstanding shares of its 13-3/4% Series A Cumulative Exchangeable Redeemable Preferred Stock due 2009. During the third and fourth quarters of 2002, the Company repurchased 120,321 shares of the Series A Preferred Stock. This decrease was partially offset by $0.6 million in redemption premiums paid during the first quarter of 2003 associated with the repurchase of 4,900 shares of the issue. As of March 31, 2003, there were 9,268 shares of Series A Preferred Stock outstanding, valued at $9.3 million. Basic and diluted loss per share was $0.12 per common share for the first quarter as compared with $3.28 in the prior year. Excluding losses on early extinguishments of debt, premiums paid on the redemption of Series A Preferred Stock, the $41.7 million cumulative effect of a change in accounting principle, net of tax (incurred in 2002) and the $57.9 million non cash deferred tax charge (incurred in 2002), the Company's basic and diluted loss per share would have been $0.06 versus a loss of $0.37 in the prior year. Leverage and Financial Position Capital expenditures for the first quarter of 2003 totaled $1.6 million. Leverage, defined under the terms of the Company's credit facility as total indebtedness divided by trailing 12-month EBITDA as adjusted for certain non-recurring expenses, was 4.9x at March 31, 2003. In March 2003, the Company entered into a fixed-rate swap agreement to reduce interest rate fluctuations on the interest rate payment stream of its floating rate bank borrowings. The interest rate swap agreement, which has a notional amount of $300.0 million and a fixed rate of 2.0%, expires in March 2006. This swap is accounted for as a qualifying cash flow hedge of the interest payments on the Company's term loan borrowings in accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." In securing the fixed-rate swap agreement, the Company also sold an option to the counter party to the swap which allows the counter party to extend the terms of the swap agreement for an additional two years beyond the three year term of the swap agreement. On April 30, 2003, the Company announced the successful completion of a tender offer and consent solicitation relating to its outstanding Notes. In the tender, $88.8 million in principal amount of the Notes were repurchased by the Company and canceled, leaving $13.7 million of the Notes outstanding. Pursuant to the consent solicitation, substantially all of the restrictive covenants in the indenture governing the Notes were eliminated. The outstanding Notes may be called for redemption by the Company at any time after July 1, 2003. Concurrently with the completion of the tender offer and consent solicitation, the Company received financing in the form of a new $325.0 million Tranche C term loan under its existing credit agreement. Cumulus used the proceeds from the Tranche C term loan to pay the consideration for the tendered Notes and the consents that were delivered, and to repay the $175.0 million Tranche B term loan outstanding, and $30 million in outstanding revolving loan borrowings, under its existing credit agreement. For the second quarter of 2003, the Company will record losses on the early extinguishment of debt of approximately $11.1 million related to the refinancing and Notes repurchases. Including the results of all pending acquisitions operated as of March 31, 2003, the ratio of net long-term debt and preferred stock (pro forma for the April repurchases of the Notes pursuant to the tender offer and related refinancing) to trailing 12- month pro forma EBITDA as of March 31, 2003 is approximately 5.2x. Acquisitions and Dispositions On January 31, 2003, the Company completed the acquisition of WDDO-AM, WDEN-AM, WAYS-FM, WMAC-AM, WDEN-FM, WPEZ-FM, WMKS-FM and WMGB-FM serving the Macon, Georgia market (Arbitron market rank #154) from U.S. Broadcasting Limited Partnership, for approximately $35.5 million in cash. This eight-station cluster has been operated by the Company under the terms of a local marketing agreement since October 1, 2002. On January 10, 2003, the Company completed the acquisition of WKSM-FM, WNCV-FM, WYZB-FM, WZNS-FM and WFTW-AM serving the Ft. Walton Beach, Florida market (Arbitron market rank # 217) from East Mississippi Broadcasters, Inc. In connection with the acquisition the Company paid approximately $28.5 million in cash and 95,938 shares of Class A Common Stock. This five-station cluster has been operated by the Company under the terms of a local marketing agreement since October 1, 2002. Cumulus Media Inc. is the second largest radio company in the United States based on station count. Giving effect to the completion of all announced pending acquisitions and divestitures, Cumulus Media Inc. will own and operate 268 radio stations in 55 mid-size and smaller U.S. media markets. The Company's headquarters are in Atlanta, Georgia, and its web site is http://www.cumulus.com Cumulus Media Inc. shares are traded on the NASDAQ National Market under the symbol CMLS. As reported in Troubled Company Reporter's April 04, 2003 edition, Standard & Poor's Ratings Services assigned its 'B+' rating to Cumulus Media, Inc.'s $325 million senior secured term loan C due 2008. Proceeds were used to refinance existing debt and fund the company's tender offer for its 10.375% senior subordinated notes due 2008. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating on the company. The outlook is stable. Atlanta, Ga.-based radio operator Cumulus had total debt outstanding of approximately $433.7 million at Dec. 31, 2002. DAISYTEK INT'L: 400 Layoffs & Two Distribution Center Closings -------------------------------------------------------------- Daisytek International Corp. (Nasdaq:DZTK) continues to restructure portions of its United States operations in an ongoing effort to improve the company's financial situation and ease the liquidity constraints currently impacting some of the company's U.S. business units. Daisytek announced the following developments: -- On Monday, May 5, 2003, the company carried out a significant reduction in the U.S. workforce at Daisytek's headquarters in Allen, including both parent company and U.S. supplies operations employees, as well as in its warehouse distribution facility in Memphis. Combined with additional cuts within recent weeks in Allen, Memphis and satellite distribution centers in Albany, NY and Bakersfield, Calif., the total number of employees recently released is approximately 400. -- The Albany and Bakersfield distribution centers of the company's U.S. supplies business are no longer operational; the Memphis facility is operating with a significantly reduced staff and has ceased order shipment. Employees and services at Daisytek subsidiaries Arlington Industries, Digital Storage and The Tape Company and foreign subsidiaries were not affected. -- Customer orders received at the Allen facility are being diverted to Daisytek's subsidiaries, including Arlington Industries and Digital Storage. Customers may call 1-800-887-3040 to place an order with Arlington or 1-800-232-3475 to place an order with Digital Storage. Daisytek continues to pursue financial alternatives that would allow the company to continue to meet its obligations. These options include but are not limited to negotiating with parties interested in purchasing portions of the company's assets and, if necessary, voluntary filing to reorganize certain aspects of its U.S. business under Chapter 11 of the U.S. Bankruptcy Code. If the company were to elect this course of action, management anticipates that its foreign subsidiaries in Europe, Australia, Mexico, Canada and Argentina would not be included in any bankruptcy filing in the United States. Daisytek's foreign subsidiaries utilize separate foreign credit facilities and are continuing to operate in normal course. The company believes that a "wall of separation" exists around the foreign subsidiaries. The foreign credit facilities have a perfected lien on inventory and accounts receivable. Further, the underlying inventory within the foreign subsidiaries is subject to the claims of vendors under retention of title statutes in the various countries. The company believes that the underlying assets and operations of the foreign subsidiaries are not subject to the jurisdiction of the U.S. Bankruptcy Courts, and that the underlying assets are not subject to liens of the U.S. lending syndicate. Daisytek is a global distributor of computer supplies, office products and accessories and professional tape media. Daisytek sells its products and services in North America, South America, Europe and Australia. Daisytek is a registered trademark of Daisytek, Incorporated. DENNY'S CORP: Same-Store Sales & Guest Count Fall in April 2003 --------------------------------------------------------------- Denny's Corporation (OTCBB: DNYY) (formerly, Advantica Restaurant Group) reported same-store sales for its company- owned Denny's restaurants during the four-week period ended April 23, 2003, compared with the same period in fiscal year 2002. Four Weeks Sales: April 2003 --------------------------- ------------ Same-Store Sales (1.7%) Guest Check Average 3.4% Guest Counts (4.9%) Restaurant Counts: 4/23/03 12/25/02 --------------------------- ------------ ----------- Company-owned 563 566 Franchised 1,091 1,095 Licensed 15 15 ------------ ------------ 1,669 1,676 Denny's is America's largest full-service family restaurant chain, operating directly and through franchisees 1,669 Denny's restaurants in the United States, Canada, Costa Rica, Guam, Mexico, New Zealand and Puerto Rico. For further information on the Company, including news releases, links to SEC filings and other financial information, please visit the Denny's Web site at http://www.dennys.com At December 25, 2002, the Company's balance sheet shows a total shareholders' equity deficit of about $280 million. DIGITAL FUSION: Nasdaq to Delist Shares Effective Tomorrow ---------------------------------------------------------- Digital Fusion, Inc. (Nasdaq:DIGF), a business and information technology (IT) services provider, has received notice from The Nasdaq Stock Market of the determination by the Nasdaq Listing Qualifications Panel that the Company's common stock will no longer be listed by The Nasdaq SmallCap Market effective at the opening of business Friday, May 9, 2003. Digital Fusion's common stock will be eligible for trading on the Over-the-Counter Bulletin Board effective with the opening of business Friday, May 9, 2003. The OTC Bulletin Board(R) is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter equity securities. Information regarding the OTC Bulletin Board, including stock quotations, can be found at http://www.otcbb.com Digital Fusion's ticker symbol will remain "DIGF" on the OTC Bulletin Board. However, some Internet quotation services add an "OB" to the end of the symbol and will use "DIGF.OB" for the purpose of providing stock quotes. "This decision by Nasdaq was anticipated and does not affect our day-to-day operations," said Roy E. Crippen, III, Digital Fusion's president and CEO. "Our primary focus is on building our business toward growth and profitability. We are continuing to make progress toward those goals this quarter, and ultimately the company's value will reflect what we build more than where our stock is listed." Digital Fusion is a business and information technology consulting company helping its customers make the most of technology to access business information, enhance the performance of their human resources and meet their business needs. Digital Fusion provides a range of services in business process and application strategy and development, including Enterprise Application Solutions, IT Consulting and IT Support and Integration. Based in the eastern U.S., Digital Fusion has offices in New York, Washington D.C., Philadelphia, Orlando, Huntsville, and New Jersey. For additional information about Digital Fusion visit http://www.digitalfusion.com * * * As previously reported, IBS Interactive d.b.a. Digital Fusion incurred losses of $11,412,000 and $18,062,000 in 2001 and 2000, respectively and cash flow deficiencies from operations of $513,000 and $6,837,000 in 2001 and 2000, respectively. The losses and cash flow deficiencies in 2000 and prior years caused the Company to receive an unqualified opinion with an explanatory paragraph for a going concern in its December 31, 2000 consolidated financial statements. During late 2000 and early 2001, the Company restructured its operations. This included selling or shutting down unprofitable business units/division, streamlining its continuing business units and settling its debts associated with business units/division that were shut down or sold. EATERIES INC: Red Ink Flows in First Quarter 2003 ------------------------------------------------- Vincent F. Orza, Jr., Chairman and Chief Executive Officer of Eateries, Inc. (OTC Bulletin Board: EATS), announced the results for the first quarter ended March 30, 2003. As a result of the sale of 13 Garcia's Mexican Restaurants in 2002, the Company's revenues for the first quarter of 2003 were $19,413,000, a decrease of 24.8% over the $25,808,000 realized in the same quarter of 2002. The Company reported a loss of $336,000 for the first quarter 2003 compared to net income of $242,000 for the first quarter 2002. EBITDA decreased to $474,000 for the first quarter 2003 versus $1,585,000 for the same period in 2002. "Company revenues have declined due to the sale of Garcia's in 2002 as well as a 3.3% decline in Garfield's Restaurant & Pub's same store sales. The sales decline at Garfield's was primarily due to adverse economic conditions and the war in Iraq which severely impacted traffic in our mall stores across the U.S. Consequently, earnings were adversely affected as well. Garfield's System-wide sales increased 5.2% to $21,174,000 in 2003 from $20,122,000 in 2002. This increase was primarily due to growth in our franchise program," said Orza. "Having disposed of 13 of its 17 Garcia's in 2002, the Company can now focus on Garfield's. Food and labor costs were over budget during the first quarter. We are focusing on stabilizing those problem areas as well as increasing our advertising budget to regain sales momentum. Additionally, we signed one new franchise group in the first quarter," stated Orza. Eateries, Inc. owns, operates, franchises and licenses 63 restaurants under the names of Garfield's Restaurant and Pub, Garcia's Mexican Restaurants and Pepperoni Grill and Italian Bistro Restaurants in 20 states. Eateries Inc.'s Year-End 2002 balance sheet shows a working capital deficit of about $2.7 million, while its total shareholders' equity further dwindled to about $960,000 from about $7 million recorded a year ago. ENCOMPASS SERVICES: Court to Consider Plan on May 21, 2003 ---------------------------------------------------------- On April 9, 2003, the U.S. Bankruptcy Court for the Southern District of Texas, approved the Second Amended Disclosure Statement prepared by Encompass Services Corporation and its debtor-affiliates to explain their Reorganization Plan. Judge Greendyke found that the Disclosure Statement contains the right kind of information within the meaning of Sec. 1125 of the Bankruptcy Code to allow creditors to make informed decisions whether to approve or reject the plan. Subsequently, the Court fixes May 21, 2003 at 11:00 a.m. Central Time, as the date and time for the proposed confirmation of the Debtors' Plan. Objections, if any, to the confirmation of the Debtors' Plan must be received by the Bankruptcy Court on or before May 15, with copies also sent to: 1. The Debtors Encompass Services Corp. 3 Greenway Plaza, Suite 2000 Houston, TX 77046 Attn: Gray Muzzy 2. Counsel for the Debtors Weil, Gotshal & Manges LLP 700 Louisiana, Suite 1600 Houston, TX 77002 Attn: Alfredo R. Perez, Esq. 3. Counsel for the Unsecured Creditors' Committee Andrews & Kurth LLP 600 Travis Street, Suite 4200 Houston, TX 77002 Attn: Hugh M. Ray, Esq. 4. Counsel for the Secured Lenders Winstead Sechrest & Minick P.C. 1201 Elm Street, Suite 5400 Dallas, Texas 75270-2199 Attn: R. Michael Farquhar, Esq. 5. Office of the U.S. Trustee (Region 7) 515 Rusk Street, Suite 3516 Houston, Texas 77002 Attn: Hector Duran 6. Counsel for the Debtors' Surety Providers Manier & Herod One Nasville Place, Suite 2200 150 Fourth Avenue North Nashville, TN 37219 Attn: Thomas T. Pennington, Esq. Encompass Services Corp. and its debtor-affiliates filed for Chapter 11 relief on Nov. 19, 2002, (Bankr. S.D. Tex. Case No. 02-43582). Alfredo R. Perez, Esq., at Weil, Gotshal & Manges LLP represents the Debtors in their restructuring efforts. ENRON CORP: Woos Court to Clear Master Definitive Agreement ----------------------------------------------------------- Pursuant to Section 363 of the Bankruptcy Code and Rule 9019 of the Federal Rules of Bankruptcy Procedure, Enron Wind System, LLC, Enron Wind LLC and ZWHC LLC -- the Wind Debtors -- ask the Court to approve the execution, delivery and performance of: (a) a Master Definitive Agreement; (b) Power Purchase Agreements Amendments; (c) a Payment and Release Agreement; and (d) certain related Agreements in connection therewith, including, without limitation, the Promissory Notes and the Escrow Agreements. The Enron Parties, including Enron Wind Systems, ZWHC and certain non-debtors, including Cabazon Power Partners LLC, Zond Windsystem Partners, Ltd. Series 85-A and Zond Windsystem Partners, Ltd. Series 85-B -- the Project Parties -- own or manage wind power projects with an aggregate capacity of approximately 227 megawatts. Enron Wind indirectly owns interests in each of these projects ranging from 1% to 100%, including a 50% interest in each of the Sky River project and the Victory Garden Phase IV project. All of the power produced by these projects is sold to Edison under the PPAs. Martin A. Sosland, Esq., at Weil, Gotshal & Manges LLP, in New York, relates that in May 2001, certain of the Project Companies brought claims against Southern California Edison Company in the California State Court as a result of Edison's failure to make payments for energy delivered by certain of the Project Companies during the period of November 1, 2000 through March 26, 2001. Edison is the regulated investor-owned utility serving much of Southern California. Edison purchases all of the power generated by the projects pursuant to the PPAs. In June 2001, certain of the Project Companies each entered into agreements with Edison resolving the disputes and the Project Companies stayed the state court action for a period of time. However, Mr. Sosland notes that Edison failed to make the payments to certain of the Project Companies required under the June 2001 agreements and, once the stay expired, certain of the Project Companies recommenced the state court action against Edison to collect amounts due to them under the PPAs. This case remains pending in the California state court -- the "Cabazon Litigation". In April 2000, Enron filed an application with the SEC, in which Enron claimed exemptions under Sections 3(a)(3) and 3(a)(5) of the PUHCA. These exemptions are available to a company that is only "incidentally" a holding company by virtue of being primarily engaged in other businesses or which does not derive a "material part" of its income from public utility subsidiaries. Based on Enron's operations at the time of the 2000 Application and recent SEC precedent, Enron believed that it was entitled to claim these exemptions. On March 26, 2002, Edison filed a Motion to Intervene and Opposition to Enron's 2000 Application, asserting that the 2000 Application should be denied on various grounds. The SEC held a hearing on December 5, 2002 with respect to the 2000 Application and another exemption application. On February 6, 2003, the Chief Administrative Law Judge of the SEC issued an initial decision denying the exemptions. Although Enron intends to file a petition for review of the SEC Order with the full SEC, if Enron loses its exempt status under Sections 3(a)(3) and 3(a)(5), it will jeopardize the QF status of the projects in which Enron indirectly owns more than 50% of the equity interests. On the other hand, Mr. Sosland says that on October 24, 2002, the Federal Energy Regulatory Commission initiated an investigation and hearing into whether certain of the Project Companies' projects satisfied the statutory and regulatory requirements for QF status following a transfer of ownership in the facilities by Enron in 1997 to RADR ZWS LLC. The order initiating the investigation states that allegations in certain criminal and civil proceedings involving Enron initiated by the United States Department of Justice and the SEC raised questions as to whether this transfer of ownership may have been fraudulent. The basic issue before FERC with respect to these projects is whether the transfers of ownership were bona fide or in fact allowed Enron to retain control over or receive economic benefits from the projects in a way that would violate PURPA or FERC's regulations promulgated thereunder that limit ownership by a "public utility" to more than 50%. On October 28, 2002, Edison filed a separate Petition for Declaratory Order and Revocation of Qualifying Facility Status and related papers at FERC seeking to have the QF status of the projects named in the FERC investigation revoked and adding the projects owned by three other Project Companies. This action was recently consolidated by FERC with its own investigation. Edison's allegations are generally similar to the issues raised by FERC but add certain other allegations, particularly with respect to the additional Project Companies, which were not the subjects of the ownership transfers being questioned by FERC. Edison alleges that it is entitled to refunds from the Project Companies aggregating over $150,000,000, based on the assertion that, if the projects were not in fact QFs during the applicable time periods, Edison should have paid a significantly lower rate for the power it purchased. Furthermore, FPL Energy, LLC affiliates, which own 50% interests in each of the Sky River project and the VGIV project, assert that, pursuant to certain indemnification and other agreements, the Enron Parties must indemnify them for any losses incurred by Sky River and VGIV on account of any loss of QF status resulting from the issues pending before the SEC and FERC. The Enron Parties believe that they have meritorious defenses to the allegations raised by Edison at the SEC and FERC and have presented those defenses in responsive papers at FERC and at an administrative hearing before the SEC. Although the initial decision issued by the SEC's administrative law judge denies Enron's exemption applications, Enron intends to file a petition for review of such decision, and the Wind Debtors continue to believe that their projects at all times complied with the QF Requirements set forth in PURPA and FERC's implementing regulations. Should their defenses ultimately prove unsuccessful, the Enron Parties and the Enron Wind estates face substantial exposure to Edison's claims and FPLE's indemnification claims. However, Mr. Sosland points out that a significant obstacle facing the Enron Parties is that certain of the allegations raised at FERC result from statements contained in a criminal plea agreement between Michael Kopper, a former Enron executive, and the Department of Justice. Moreover, the presence of criminal charges makes doubtful the availability of testimony from key individuals that otherwise would likely challenge or rebut allegations and assertions of the adverse parties and support the projects' compliance with PURPA and FERC's regulations. Thus, while Enron believes that it has strong arguments for prevailing at both the SEC and FERC, there can be no assurance that this will be the case, and the estates face significant financial risks and legal costs that can be avoided, in major part, through the proposed settlement with Edison. Accordingly, the parties underwent extensive and complex multilateral negotiations. The negotiation resulted in the proposed settlement. A. The Master Definitive Agreement The Master Definition Agreement has these salient terms: -- Edison will receive a capacity price reduction under each of the PPAs identified in the MDA for the remainder of the current term; -- The amounts due to the sellers under the MDA PPAs that Edison has not paid will be forgiven; -- The QF issue for the Project Companies is resolved under the MDA PPAs; -- The parties will mutually release each other from the claims encompassed in the disputes; and -- All litigation among the parties with respect to the foregoing will be withdrawn or dismissed. According to Mr. Sosland, certain provisions of the MDA are conditioned on approval by this Court, the FERC and the California Public Utilities Commission, and the parties have agreed to seek a stay of litigation pending receipt of these approvals. B. The Payment and Release Agreement The PRA is between the FPLE Parties and Enron Wind Systems, Sky River LLC and Victory Garden LLC, the latter two entities being the Enron Wind affiliates that own the 50% partnership interests in Sky River and VGIV. The PRA provides in pertinent part that: -- The FPLE Parties will pay Enron Wind Systems $5,000,000 to balance the economic impact of the settlement with Edison as proposed in the MDA as between Sky River, VGIV and the other Project Companies owned and/or managed by affiliates of the Wind Debtors; and -- The FPLE Parties release the Enron Parties from all claims arising from: (a) a breach of the Sky River and VGIV partnership agreements and certain related agreements with respect to the status of Sky River and VGIV as QFs; (b) any matter asserted in the FERC proceedings; and (c) any failure of Sky River or VGIV to maintain QF status as a result of the action or inaction of any Enron Party. The PRA is subject to Court approval and the satisfaction of the conditions to the MDA's full effectiveness. C. "Make-Whole" Transactions, Promissory Notes, and Escrow Arrangement With respect to those Project Companies and certain other entities that sell power under the MDA PPAs that were not the subject of the allegations arising from alleged wrongful conduct at Enron relating to the RADR Transactions, Enron Wind Systems proposes these transactions through which it will make up the difference between the estimated amount the Subject Project Companies would have received had the price reduction and debt forgiveness not been agreed to with Edison and the estimated amount the Subject Project Companies will receive from Edison as a result of the proposed settlement. For its own business reasons, Mr. Sosland explains that Edison was unwilling to consider a settlement that was not identical for all the Subject Project Companies from which it purchased power under the MDA PPAs. Because the Subject Project Companies are, arguably, not affected by the allegations of wrongdoing the Wind Debtors believe that the "make-whole" structure and transactions for these parties is a necessary and appropriate part of the proposed settlement. To evidence the "make-whole" structure, Enron Wind Systems will issue promissory notes payable to the partnerships and other entities affiliated with each of the Subject Project Companies and having an aggregate original principal amount of $9,323,412. The Promissory Notes will become effective upon the satisfaction of the conditions to the MDA's full effectiveness. Promissory Notes having an original principal amount equal to $3,667,423 will be issued to 85-A and 85- B. Enron Wind Systems' obligations under the 85-A and B Notes will be set off against current outstanding obligations owed by 85-A and 85-B to Enron Wind Systems. The remaining Promissory Notes will have an original principal amount equal to $5,655,989. The original principal amount of each of the Promissory Notes will equal, on a net- present value basis, the amount estimated by Enron Wind Systems to be the shortfall between the estimated revenue received from Edison under the PPA Amendments and the estimated revenue that would have been received had the PPAs not been amended including any waived accounts receivable. Interest on the Promissory Notes will accrue at a rate per annum equal to 3.46%, or the LIBOR Rate as of February 3, 2003, plus 2%. Principal and interest under the Promissory Notes will be payable on a quarterly basis, with final payments with respect to each Promissory Note to be made in full at or prior to the time the final payments under the applicable PPA would have become due had they not been amended. To support the payment of principal and interest under the Promissory Notes, Enron Wind Systems will place into an escrow account to be maintained by JPMorgan Chase Bank an amount equal to at least the Original Principal Amount. The cash to be placed into the Escrow Account will be loaned to Enron Wind Systems by Enron Wind and will be evidenced by an inter-company note. In the event Enron Wind Systems fails to pay any principal or interest under the Promissory Notes when due, the Subject Project Companies will be able to seek a disbursement of such amounts from the Escrow Account. As principal under the Promissory Notes is paid to the Subject Project Companies, a corresponding amount will be reduced from the Escrow Account and disbursed to Enron Wind Systems. Mr. Sosland contends that the Debtors' request is warranted because: (a) without the Settlement Agreements, the Wind Debtors risk becoming subject to greater potential claims or obligations, or bear disproportionate burden; and (b) the Settlement Agreement will result in the final satisfaction of all claims between the Parties and substantial savings in administrative expenses and preservation the assets of the Wind Debtors' estates. (Enron Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Enron Corp.'s 9.875% bonds due 2003 (ENRN03USR3) are trading at about 18 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR3 for real-time bond pricing. EVERGREEN INT'L: S&P Junks Rating Over Potential Debt Default ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Evergreen International Aviation Inc. to 'CCC' from 'B+'. Ratings remain on CreditWatch, where they were placed June 21, 2002, due to concerns over access to sources of funding and near-term liquidity. However, implications have been revised to developing from negative. Evergreen is in the process of refinancing its existing credit agreement facility, which expires on May 7, 2003. About $265 million of bank debt is currently outstanding. Because the refinancing may not be completed by the May 7 maturity date, Evergreen is seeking a 30-day waiver or forbearance agreement from its lenders while it pursues its new financing initiatives. If the company does not obtain a waiver, this would represent a payment default but lenders could agree not to pursue remedies during a specified period under a forbearance agreement. The rating action reflects the potential for a near-term default if a waiver is not granted and refinancing plans are not finalized within the next 30 days. If the company does not receive a waiver before the facility expires, ratings are likely to be lowered further. If the company does not successfully refinance its bank debt, ratings are likely to be lowered to 'D'. If the refinancing is completed as proposed, Standard & Poor's will raise the corporate credit rating on Evergreen to 'B' and remove the rating from CreditWatch. In addition, Standard & Poor's would assign a 'B+' rating to the company's proposed $100 million bank credit facility due 2006 and a 'B-' rating to the company's proposed $225 million senior second secured notes due 2010. The successful completion of the $225 million notes offering is a condition precedent to the proposed bank financing. The notes will be fully and unconditionally guaranteed on a senior basis by Evergreen Holdings Inc. (the parent company) and by all subsidiaries except Evergreen Agricultural Enterprises Inc. and its subsidiaries and foreign subsidiaries. The bank agreement is expected to have the same guarantors. Guarantor subsidiaries represented 98.9% of operating revenues, 99% of net income, and 94.6% of assets in fiscal 2003 (fiscal year ended Feb. 28, 2003.) "Current ratings reflect the potential for a near-term debt default if waiver requests and refinancing plans are unsuccessful," said Standard & Poor's credit analyst Lisa Jenkins. "If the company successfully refinances its outstanding debt as proposed, new ratings will be assigned, reflecting the cyclical and competitive nature of Evergreen's airfreight transportation business and its significant, albeit declining, debt burden," the analyst continued. McMinnville, Ore.-based Evergreen derives the majority of its revenues and operating profits from Evergreen International Airlines, its airfreight transportation subsidiary, which operates a fleet of older B-747-100 and -200 widebody freighters and smaller DC-9 freighter aircraft. The company also provides ground logistics services; aircraft maintenance and repair services; helicopter and small aircraft services; and aviation sales and leasing. EXIDE TECH.: Sues Arthur Hawkins, et. al. to Recover Transfers -------------------------------------------------------------- Exide Technologies seeks to avoid fraudulent transfers pursuant Section 548 of the Bankruptcy Court, and the turnover of property pursuant to Section 542 of the Bankruptcy Code, against defendants Arthur M. Hawkins, Douglas N. Pearson and Alan Gauthier. Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub P.C., in Wilmington, Delaware, informs the Court that the Debtors employed Mr. Hawkins until October 1998. Mr. Hawkins held the titles of Chairman, President and Chief Executive Officer. Mr. Pearson was also employed by the Debtors until October 1998. Mr. Pearson was President of Exide's North American Operations. The Debtors employed Mr. Gauthier until August 1998 as Chief Financial Officer. On March 22, 2001, Messrs. Hawkins, Pearson and Gauthier were each indicted in the United States District Court for the Southern District of Illinois on charges of conspiracy to commit wire fraud and wire fraud. After they were no longer employed by the Debtors, through various state court litigation proceedings, the Defendants compelled the Debtors to fund certain of their litigation expenses under the theory that they were entitled to indemnification under Delaware law. Ms. Jones reports that the Debtors made indemnification payments to, on behalf of, or for the benefit of, the Defendants within one year prior to the Petition Date in these amounts: Arthur Hawkins $735,363.08 Douglas Pearson $1,787,159.18 Alan Gauthier $661,298.87 The Defendants promised to repay all indemnification payments in the event they were later found to be not entitled to indemnification. Subsequent to the receipt of the indemnification payments, Messrs. Hawkins and Pearson have been convicted of wire fraud and conspiracy to commit wire fraud, while Mr. Gauthier pled guilty to making false and misleading statements in violation of federal law. Ms. Jones relates that the Payments were collectively, and each individually, made on behalf of and to or for the benefit of, the Defendants, who are alleged creditors of the Debtors. The Debtors received less than a reasonable equivalent value in exchange for the Payments collectively, and each individually, as the Defendants are not and were not entitled to indemnification under Delaware law. The Payments were collectively, and each individually, made while the Debtors were insolvent. The Payments were collectively, and each individually, made within the one-year period prior to the Petition Date. The Debtors are entitled to avoid the Payments collectively, and each individually, pursuant to Section 548(a) of the Bankruptcy Code. The Debtors are entitled to recover the full amount of the Payments collectively, and each individually, from the Defendants pursuant to Section 550(a) of the Bankruptcy Code. The Hawkins Payments, Pearson Payments and Gauthier Payments were compelled under and paid pursuant to Title 8, Section 145 of the Delaware Code. Title 8, Section 145(e) of the Delaware Code provides that Delaware Corporations may advance legal fees to former officers only "upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as a result of this section." Title 8, Section 145(4) of the Delaware Code further provides that a corporation has the power to indemnify officers and directors "if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful . . ." Prosecuted for actions committed while an officer of the Debtors, the Defendants have been convicted of wire fraud and conspiracy to commit wire fraud in the United States District Court for the Southern District of Illinois. The Defendants did not act in good faith, did not reasonably believe their actions were in the best interests of the corporation, and had reasonable cause to believe that their conduct was unlawful. The Defendants were not and are not entitled to indemnification under Title 8, Section 145 of the Delaware Code. Pursuant to their undertaking, and pursuant to Title 8, Section 145(e) of the Delaware Code, the Defendants are required to repay the Payments to the Debtors. The Payments are not of inconsequential value or benefit to the Debtors' estate. The Payments constitute property of the Debtors' estate that must be turned over pursuant to Section 542(a) of the Bankruptcy Code and represent a debt that is payable pursuant to Section 542(6) of the Bankruptcy Code. Accordingly, the Debtors ask the Court to enter an order: A. avoiding the Indemnification Payments as fraudulent transfers under Section 548(a) of the Bankruptcy Code and requiring the immediate repayment thereof; B. requiring the immediate turnover of the Indemnification Payments to the Debtors under Sections 542 and 550 of the Bankruptcy Code; C. disallowing any claims of the Defendants if they fail or refuse to turn over any avoided transfers to the Debtors; D. awarding the Debtors interest after judgment on account of the Indemnification Payments at the highest legal rate until the judgment is paid; and E. awarding the Debtors reasonable and necessary attorneys' fees through trial on this matter and for any subsequent appeals. (Exide Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) FLEETWOOD ENTERPRISES: Names Chris Braun as SVP for RV Group ------------------------------------------------------------ Fleetwood Enterprises, Inc. (NYSE: FLE), the nation's leader in recreational vehicle sales and a leading producer and retailer of manufactured housing, announced the appointment of Christopher J. Braun to senior vice president -- RV Group. Braun will be responsible for all functions of the Company's recreational vehicle business, including operations, sales, product development and marketing. The position had been vacant for 20 months while Chuck Wilkinson, Fleetwood's chief operating officer, had these functions reporting directly to him. Braun will now report to Wilkinson. Braun has 16 years of experience at PACCAR, most recently serving as second-in-command for the Kenworth Truck Division, which has over $2 billion in annual revenue. His responsibilities included sales and marketing for the North American organization, as well as operations. He served as the director of operations for the group for four years, with full responsibility for four Kenworth Truck manufacturing plants in North America. He joined PACCAR in 1987 as an accounting supervisor and financial planner in the Peterbilt Truck Division, and worked his way up to division controller for Kenworth, a position he held for two years before moving into operations. Prior to joining PACCAR, Braun held various financial positions with Outboard Marine Corporation. Braun holds a bachelor's degree in accounting from the University of Wisconsin, Eau Claire, and completed the Executive Development Program at Northwestern University. He is also a certified public accountant. "I worked closely with Chris for 14 years at PACCAR, and found him to be an excellent executive," Edward B. Caudill, president and CEO, said. "We are excited to have Chris join us, and I know that he will bring a lot of strength to the organization." As reported in Troubled Company Reporter's March 28, 2003 edition, Fleetwood Enterprises' lenders in its syndicated revolving line of credit agreed to restate the financial covenant relating to earnings before interest, taxes, depreciation and amortization (EBITDA). The Company had previously indicated that it did not expect to meet that covenant following its fourth fiscal quarter ending April 27, 2003. Fleetwood now anticipates that it will meet the revised covenant through the remaining term of the credit facility, which is scheduled to expire in July 2004. Fleetwood also amended its inventory financing agreement with Textron Financial, which incorporated the same covenant. FLEMING COS.: Court Approves $150MM DIP Financing on Final Basis ---------------------------------------------------------------- Fleming Companies, Inc., reported that it made significant progress in its Chapter 11 reorganization. The company has received final approval from the U.S. Bankruptcy Court for its $150 million secured debtor-in-possession financing package and its junior trade lien program. Fleming also received court approval for its critical trade vendor program, which is expected to contribute to the resumption of normalized business relationships with vendors. In addition, Fleming has announced the appointment of Ted Stenger of AlixPartners, an international leader in corporate restructuring and turnaround services, as Chief Restructuring Officer. Fleming is seeking to retain the Blackstone Group, a leading investment bank, as financial advisors in Fleming's restructuring. Part of its responsibilities will be to respond to expressions of interests related to the possible acquisition of certain Fleming operations, and to help ensure Fleming maximizes the value of its assets and its business through the company's restructuring. Pete Willmott, Interim President and Chief Executive Officer, said, "With our financing approved and a new leadership team that combines restructuring and operating expertise, we have crossed very important milestones in our reorganization process." Fleming (OTC Pink Sheets: FLMIQ) is a leading supplier of consumer package goods to independent supermarkets, convenience- oriented retailers and other retail formats around the country. To learn more about Fleming, visit the Company's Web site at http://www.fleming.com FLEMING COS.: Confirms Regular Quarterly Dividends Suspended ------------------------------------------------------------ Fleming Companies, Inc. announced that, as a result of the company's recent filing for reorganization under Chapter 11 of the U.S. Bankruptcy Code, the Board of Directors has indefinitely suspended the payment of future dividends on its common stock. Further, the Board has rescinded the previously declared but unpaid quarterly dividend scheduled for payment on June 10, 2003. Fleming (OTC Pink Sheets: FLMIQ) is a leading supplier of consumer package goods to independent supermarkets, convenience- oriented retailers and other retail formats around the country. To learn more about Fleming, visit the Company's Web site at http://www.fleming.com FLEMING COS.: Signing-Up Ernst & Young as Internal Auditor ---------------------------------------------------------- Fleming Companies, Inc., and its debtor-affiliates ask the Court to approve their employment and retention of Ernst & Young as their inside auditor and tax accountants. Scotta E. McFarland, Esq., at Pachuksi Stang Ziehl Young Jones & Weintraub, P.C., in Wilmington, Delaware, tells the Court that E&Y has a wealth of experience in providing tax and internal audit services to debtors and creditors in restructurings and reorganizations and has developed an excellent reputation for the services it has rendered in Chapter 11 cases on behalf of debtors and creditors throughout the United States. The Debtors' management believes that E&Y is well qualified to act on their behalf, given their extensive knowledge and expertise as internal auditors and tax accountants. These tax and internal audit services are necessary to enable the Debtors to maximize the value of their estates and to reorganize successfully. E&Y is familiar with the Debtors' operations and has indicated that it is willing to act on the Debtors' behalf and to subject itself to the Court's jurisdiction and supervision. E&Y Partner Lisa P. Shield assures the Court that: (a) E&Y is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code and as required by Section 327(a) of the Bankruptcy Code and holds no interest adverse to the Debtors or their estates for the matters for which E&Y is to be employed; and (b) E&Y has no connection to the Debtors, their creditors or their related parties. E&Y will conduct an ongoing review of its files to ensure that no conflicts or other disqualifying circumstances exist or arise. If any new facts or relationships are discovered, E&Y will supplement its disclosure to the Court. Pursuant to the E&Y engagement letter, E&Y will provide tax and internal audit services as E&Y and the Debtors will deem appropriate and feasible in order to advise the Debtors in the ordinary course of performing the Debtor's tax function, and in the course of the Chapter 11 Case, including but not limited to: A. Federal, And State Income Tax Compliance, Consulting And Administration; B. Property Tax Services; C. Sales & Use Tax Services; D. Bankruptcy Tax Services; and E. Internal Auditing Services. Ms. Shield relates that E&Y, at the request of the Debtors, also may render additional general internal audit and tax accounting support deemed appropriate and necessary to the benefits of the Debtors' estates. E&Y currently serves as the Debtor's internal tax function, performing all services related to tax matters and filings on behalf of the Debtor. The tax and internal audit services enumerated above are necessary to enable the Debtors to maximize the value of their estates, to timely file all necessary tax returns on behalf of the Debtor, and to reorganize successfully. The Debtors believe that E&Y's tax and internal audit services will not duplicate the services that, subject to this Court entering or having entered appropriate orders, other Professionals may provide to the Debtors in the Chapter 11 Cases. E&Y will use reasonable efforts to coordinate with the Debtors' other retained Professionals to avoid unnecessary duplication of services. Ms. Shield states that E&Y has agreed to represent the Debtors and charge its normal hourly rates for its services. E&Y fees in connection with this engagement will be based upon the time that E&Y necessarily spent in providing its tax and audit services to the Debtors, multiplied by its hourly rates. E&Y normally charges these hourly rates charged by E&Y personnel: A. Audit Services Partners and Principals $425-663 Senior Manager $318-496 Manager $279-435 Senior Staff $150-234 Staff $107-167 B. Tax Advisory and Tax Outsourcing Advisory Fees Partners arid Principals $425-750 Senior Manager $370-540 Manager $250-490 Senior Staff $180-375 Staff $130-240 In addition to the fees, E&Y will bill the Debtors for reasonable expenses which are likely to include long distance telephone charges, hand delivery and other delivery charges, travel expenses, computerized research, transcription costs, and third-party photocopying charges. Prior to the petition date, Ms. Shield reports that E&Y received a $600,000 retainer from the Debtors. During the 90 days immediately preceding the petition date, the Debtors made payments to E&Y LLP aggregating $3,999,259 in the ordinary course of business pursuant to ordinary business terms between the Debtors and E&Y LLP. The Debtors have agreed that any portion of the Retainer not used to compensate E&Y for its prepetition services and expenses ultimately will he used by E&Y to apply against its postpetition billings and will not be placed in a separate account. (Fleming Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) FREESTAR: Files $54-Mill. Fraud Claim vs. vFinance & Affiliates --------------------------------------------------------------- FreeStar Technology Corporation (OTC Bulletin Board: FSRC), a global technology company committed to setting the next generation standard for secure Internet commerce, has filed an answer and substantial counter claim in the vFinance et al vs. FreeStar Technology Corporation et al action. The filing, which took place Tuesday in United States District Court, Southern District Of New York, states, in part, that FreeStar retained "vFinance Investments, Inc., a national publicly-traded broker-dealer ... with self-proclaimed 'expertise and superior service required to address the special needs of small and medium sized public companies' ... as the exclusive financial advisor for Freestar." The filing further states, "vFinance recommended and assisted Claimants to negotiate, draft and execute convertible debt financing through 'floorless' convertible notes with lenders controlled by vFinance, vFinance's own Chief Executive Officer, employees and affiliates. These notes and related transactions are referred to in the financial community as 'toxic convertibles' or 'death spiral convertibles' ... vFinance and Plaintiffs charged Freestar gigantic fees and otherwise ensured profits of multiples of their original investment by setting out to destroy vFinance's customer, Freestar." In addition, the filing states, "The dispute here arises because Freestar survived the 'death spiral' and vFinance's and Plaintiffs' expectation of gigantic gains was foiled ... Freestar and Paul Egan, in turn, file these Counterclaims to recover from vFinance and Plaintiffs damages suffered as a result of their 'death spiral' strategy, violations of the federal securities laws, breach of contracts, including over-conversion of the pledged securities, market manipulation, breach of fiduciary duty and fraud." Paul Egan, President and Chief Executive Officer of FreeStar, stated, "We want to be absolutely clear we believe that the actions of David Stefansky, Richard Rosenblum, Marc Siegel and their affiliated corporate entities were unconscionable and violated virtually every actual and implied legal and moral obligation of a financial advisor. We believe the litigation process will reveal that they perpetrated a massive fraud on our emerging company and its shareholders, while supposedly acting in a fiduciary capacity. Although there are always substantial risks in litigation, we are confident that we will prevail in the action. Mr. Egan went on to note, "This is not some frivolous action which will quietly be settled and forgotten. We are deadly serious in pursing our claims and in holding those so-called 'financial professionals' responsible for their conduct." Litigation Background This litigation has been initiated by vFinance Investments, Inc., Boat Basin Investors, LLC, Papell Holdings, Ltd., Marc Siegel, David Stefansky, Richard Rosenblum against FreeStar Technology Corporation, First American Stock Transfer, Inc., Paul Egan, Ciaran Egan, Phillip Young, and Margaux Investment Management Group, S.A. The Chapter 7 Petition for involuntary bankruptcy filed against FreeStar in January by vFinance, Inc., David Stefansky, Richard Rosenblum, Marc Siegel, Papell Holdings LLC and Boat Basin Investors Ltd. in the United States Bankruptcy Court for the Southern District of New York was dismissed pursuant to a ruling by Honorable Judge Allan L. Gropper. As contended in FreeStar's Motion to Dismiss of February 4, 2003, the Petitioners held no claims against FreeStar that were not the subject of a bona fide dispute. FreeStar is of the opinion that the Chapter 7 Petition was filed in bad faith in order to depress FreeStar's share price and thus allow the Petitioners to cover a substantial naked short position in FSRC stock. In connection with the bankruptcy filing Petitioners paid $40,000 in FreeStar's attorneys' fees. The 88 page answer and counter-claim filed by FreeStar can be viewed in its entirety by visiting FreeStar's corporate Web site at http://www.freestartech.com FreeStar Technology is a global technology force focused on exploiting a first-to-market advantage for enabling ATM and debit card transactions on the Internet and high-margin credit card processing. FreeStar Technology's Enhanced Transactional Secure Software is a proprietary software package that empowers consumers to consummate e-commerce transactions on the Internet with a high level of security using credit, debit, ATM (with PIN) or smart cards. It sends an authorization number to the e- commerce merchant, rather than the consumer's credit card information, to provide a high level of security. The company maintains its corporate headquarters in Santo Domingo, Dominican Republic, and offices in Dublin, Ireland, and Helsinki, Finland. For more information, please visit the Company's Web sites at http://www.freestartech.com http://www.rahaxi.comand http://www.epaylatina.com On April 24, 2003 the company announced that its Board of Directors accepted in principle a $74,480,000 non-binding letter of intent received from a privately held company, FreeStar Acquisition Corporation, to acquire all of FreeStar Technology Corporation's outstanding capital stock. Based on the number of FSRC shares currently issued and outstanding, the proposed letter of interest is valued at approximately $.49 per share (after payment of existing indebtedness, but excluding conversion of outstanding preferred stock and exercise of in- the-money stock options), would represent a 158% premium over the closing price of FreeStar's common stock on April 23, 2003. That offer is subject to various conditions including buyer's obtaining of financing and satisfactory due diligence. GLIMCHER REALTY: Consummates Sale of Former Kmart Anchor Store -------------------------------------------------------------- Glimcher Realty Trust, (NYSE: GRT), one of the country's premier retail REITs, reported the sale of a portion of a community center asset, in keeping with its strategy to reduce debt through non-strategic asset sales. On May 6, 2003, the Company sold the vacant former Kmart location consisting of 117,162 square feet at Canal Place Plaza in Rome, NY for $6.2 million. The Company will retain ownership of the 32,800 square feet of small shop retail space at this center. The property was unencumbered at the time of the sale and net proceeds were used to repay short-term borrowings under the Company's line of credit. Together with the sale of this former Kmart location and the sale Monday of the vacant Ames location at Sunbury Plaza, the Company continues to be successful in its program to retenant or sell the vacant anchor locations in its community center portfolio. As of May 5, 2003, the Company's 23 regional malls represent 19.8 million square feet of gross leasable area and the Company's total portfolio includes 70 properties consisting of 25.1 million square feet of GLA. Glimcher Realty Trust -- a real estate investment trust whose corporate credit and preferred stock ratings are rated by Standard & Poor's at BB and B, respectively -- is a recognized leader in the ownership, management, acquisition and development of enclosed regional and super-regional malls, and community shopping centers. Glimcher Realty Trust's common shares are listed on the New York Stock Exchange under the symbol "GRT." Glimcher Realty Trust is a component of both the Russell 2000(R) Index, representing small cap stocks, and the Russell 3000(R) Index, representing the broader market. GLOBAL CROSSING: Unveils Redesigned Two-Tier Agent Program ---------------------------------------------------------- Global Crossing announced the introduction of its enhanced, two- tier agent program, which was redesigned with extensive input from the agent community, and the launch of its state-of-the-art partner support center. The agent program serves as a strategic distribution channel for Global Crossing's core network services in the United States and offers qualified master and branch agents attractive opportunities. "This partnership program plays a critical role in deepening our market penetration, and we've designed it to attract aggressive, talented and experienced agents by offering them tremendous opportunities and a full-blown support organization," said Dave Carey, Global Crossing's executive vice- president of enterprise sales. "We're committed to helping our agents drive revenue, and ensuring their success through our comprehensive set of offerings." Global Crossing's agent partners leverage the following unique assets: * Global Crossing's IP-based fiber optic network, connecting 200 cities in 27 countries, and operating at 99.999 percent availability, the highest industry standard. * A full suite of competitively priced voice and data offerings aligned with the needs of the retail marketplace. * uCommand, Global Crossing's unique self-service online account management tool. * A marketing strategy that is keenly focused on customer satisfaction. * Monthly compensation packages with accurate and timely reporting. Located in Rochester, NY, the partner support center offers master agent partners exclusive on-demand support. Each master agent is assigned a sales engineer and an account manager who function as a full-service inbound help desk team, offering network design services, solution sales, and market intelligence. Master agents also receive product and process training, and assistance in targeting opportunities with sales packages, programs and customer incentives. The center is supplemented by an easy-to-use partner Web site. In addition to the partner support center and access privileges to the agent extranet, Global Crossing offers master agents an aggressive commission program. In order to qualify, master agents must meet the following criteria: * Experienced back-office personnel to handle customer on- boarding and day-to-day account management. * A proven business model as a master agent. * The capacity to commit to a $200,000 monthly recurring revenue minimum over a 12-month ramp-up period. Branch agents enjoy direct support from Global Crossing professionals within their communities. System integrators, consultants, value-added resellers and other entrepreneurs who possess strong customer relationships without the back-office support required for master agent status can profit from unmatched sales and engineering support locally, regionally and nationally. Potential agents eager to capitalize on Global Crossing's unique assets may get more information and apply at Global Crossing's online partner page at www.globalcrossing.com/xml/global/gl_com_partners.xml or call +1 877-263-1993 during normal business hours. "We're reaching out to potential partners because we're confident about our future and committed to success," added Dave Carey. "Global Crossing is ideally positioned to take advantage of market opportunities, and bringing qualified agents on board will enable us to add and grow new revenue streams. This program is truly a win-win situation for all involved." Global Crossing provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. On January 28, 2002, Global Crossing Ltd. and certain of its subsidiaries (excluding Asia Global Crossing and its subsidiaries) commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) and coordinated proceedings in the Supreme Court of Bermuda (Bermuda Court). On the same date, the Bermuda Court granted an order appointing joint provisional liquidators with the power to oversee the continuation and reorganization of the Bermuda-incorporated companies' businesses under the control of their boards of directors and under the supervision of the Bankruptcy Court and the Bermuda Court. Additional Global Crossing subsidiaries commenced Chapter 11 cases on April 23, August 4 and August 30, 2002, with the Bermuda incorporated subsidiaries filing coordinated insolvency proceedings in the Bermuda Court. The administration of all the cases filed subsequent to Global Crossing's initial filing on January 28, 2002 has been consolidated with that of the cases commenced on January 28, 2002. Global Crossing's Plan of Reorganization, which was confirmed by the Bankruptcy Court on December 26, 2002, does not include a capital structure in which existing common or preferred equity will retain any value. On November 18, 2002, Asia Global Crossing Ltd., a majority- owned subsidiary of Global Crossing, and its subsidiary, Asia Global Crossing Development Co., commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York and coordinated proceedings in the Supreme Court of Bermuda, both of which are separate from the cases of Global Crossing. Asia Global Crossing has announced that no recovery is expected for Asia Global Crossing's shareholders. Asia Netcom, a company organized by China Netcom Corporation (Hong Kong) on behalf of a consortium of investors, has acquired substantially all of Asia Global Crossing's operating subsidiaries except Pacific Crossing Ltd., a majority-owned subsidiary of Asia Global Crossing that filed separate bankruptcy proceedings on July 19, 2002. Global Crossing no longer has control of or effective ownership in any of the assets formerly operated by Asia Global Crossing. Please visit http://www.globalcrossing.comfor more information about Global Crossing. GMAC MORTGAGE: Fitch Takes Rating Action on 4 Securitizations ------------------------------------------------------------- Fitch Ratings has taken rating actions on the following GMAC Mortgage Corp. mortgage pass-through certificates: GMAC Mortgage Corporation Mortgage Pass-Through Certificates, Series 2000-J2 --Class M1 affirmed at 'AAA'; --Class M2 to 'AAA' from 'AA+'; --Class M3 to 'AAA' from 'AA'; --Class B1 to 'A' from 'BBB'; --Class B2 rated 'B' placed on Rating Watch Negative. GMAC Mortgage Corporation Mortgage Pass-Through Certificates, Series 2000-J3 --Class M1 affirmed at 'AAA'; --Class M2 affirmed at 'AAA'; --Class M3 to 'AAA' from 'AA+'; --Class B1 to 'AA+' from 'A'; --Class B2 to 'BB+' from 'B'. GMAC Mortgage Corporation Mortgage Pass-Through Certificates, Series 2000-J4 --Class M1 affirmed at 'AAA'; --Class M2 affirmed at 'AAA'; --Class M3 to 'AAA' from 'AA'; --Class B1 to 'AA+' from 'BBB'; --Class B2 to 'BBB+' from 'BB-'. GMAC Mortgage Corporation Mortgage Pass-Through Certificates, Series 2000-J6 --Class M1 affirmed at 'AAA'; --Class M2 affirmed at 'AAA'; --Class M3 to 'AAA' from 'AA'; --Class B1 to 'AA-' from 'A'; --Class B2 affirmed at 'BB'. These rating actions are being taken as a result of low delinquencies and losses, as well as increased credit support. IMC GLOBAL: Schedules Annual Shareholders' Meeting for May 16 ------------------------------------------------------------- IMC Global Inc., (NYSE: IGL) announced that its 2003 Annual Meeting of Stockholders on Friday, May 16 at 1:00 p.m. Eastern Daylight Time (12 noon Central Daylight Time) will be Webcast both live and via replay through the IMC Global Web site at http://www.imcglobal.com Interested individuals should click on the Webcast announcement on the home page of IMC Global's Web site to be linked to the Annual Meeting of Stockholders Web site section. The Annual Meeting of Stockholders will include a business update slide presentation from IMC Global Chairman and Chief Executive Officer Douglas A. Pertz. This slide presentation can be accessed as part of the overall Annual Meeting Webcast. Questions about the Webcast may be directed to IMC Global's Investor Relations department at 847.739.1817 or vbunker@imcglobal.com With 2002 revenues of $2.1 billion, IMC Global is the world's largest producer and marketer of concentrated phosphates and potash crop nutrients for the agricultural industry and a leading global provider of feed ingredients for the animal nutrition industry. For more information, visit IMC Global's Web site at http://www.imcglobal.com As previously reported, Fitch Ratings assigned a 'BB' rating to IMC Global Inc.'s new 11.25% senior unsecured notes due June 1, 2011. Fitch has affirmed the 'BB+' rating on the senior secured credit facility, the 'BB' rating on the existing senior unsecured notes with subsidiary guarantees and the 'B+' rating on the senior unsecured notes with no subsidiary guarantees. The Rating Outlook has been changed to Negative from Stable. INSIGHT COMMS: March 31 Working Capital Deficit Tops $49 Million ---------------------------------------------------------------- Insight Communications Company (Nasdaq:ICCI) announced financial results for the three months ended March 31, 2003. Revenue for the three months ended March 31, 2003 totaled $215.0 million, an increase of 12% over the prior year, due primarily to customer gains in high-speed data and digital services and increased basic rates. Operating cash flow increased to $90.1 million for the three months ended March 31, 2003 from $77.6 million for the three months ended March 31, 2002, an increase of 16%. The operating cash flow reported for March 31, 2002 excludes a previously reported $4.1 million adjustment related to high-speed data charges, which, if included, would result in 10% operating cash flow growth. A reconciliation of operating cash flow to operating income appears below in the discussion of operating data results. During the quarter, the company concluded a swap with its partner, Comcast, trading its Griffin, GA system, serving approximately 11,800 customers, plus $25 million, for Comcast's systems in the Louisville ADI, serving approximately 23,400 customers. The company had previously managed the Louisville ADI systems under contract with Comcast. The financial results reported for the quarter reflect the transaction as of its closing date of February 28, 2003. "I'm excited to report that we have started the year with a strong showing in Revenue Generating Unit (RGU) growth across all of our services," said Michael S. Willner, Vice Chairman and Chief Executive Officer. "Each of our products - basic, digital, data, and telephone - posted solid gains this quarter, further evidence that customers find our robust product offering to be highly compelling." As of March 31, 2003, RGUs, representing the sum of basic, digital, high-speed data and telephone customers, as defined by the NCTA Standard Reporting Categories, totaled 1,870,000 compared to 1,689,900 as of March 31, 2002, representing an 11% growth rate. On a same-store basis, RGUs increased 10% after giving effect to the swap of the Griffin, GA system for the Louisville ADI systems. On a same-store basis, net RGU additions in the first quarter totaled 58,900. Of this total, 8,300 were basic additions, resulting in 1,308,700 basic customers as of March 31, 2003 and a penetration of 57% of homes passed. Net digital additions were 20,000, for a quarter-ending total of 355,400 digital customers and a penetration of 28% of digital homes passed. High-speed data net additions were 23,500 for the quarter, reaching a total of 168,300 high-speed data customers as of March 31, 2003 and a penetration of 8% of modem homes passed. Net telephone additions totaled 7,100, resulting in 37,700 telephone customers as of March 31, 2003 and a penetration of 7% of marketable, telephony- enabled homes. "On a same-store basis, net RGU additions were up 18% over the first quarter of 2002, while capital expenditures were down 19%. Indeed, net RGU additions were up 20% over the fourth quarter," said Kim D. Kelly, President and Chief Operating Officer. "These results highlight our key positive financial metrics - revenue growth from new products combined with significant reductions in capital spending. The upgraded infrastructure we've built is a platform for continuous revenue opportunity." First quarter average monthly revenue per basic customer totaled approximately $55.34, a $5.74 or 12% increase over the prior year quarter, driven by growth in new services and basic rate increases. New services caused substantial increases in average monthly revenue per basic customer, with average monthly digital revenue per basic customer up $0.95 or 24%, and average monthly high-speed data revenue per basic customer up $2.21 or 74% over the prior year's quarter. Basic rates increased $2.20 on average, up 7.0% over the prior year's quarter. Capital expenditures totaled $40.5 million for the three months ended March 31, 2003. Of the total, approximately 57% was for Customer Premise Equipment and 20% was for Upgrade/Rebuild costs as defined by the NCTA Standard Reporting Categories. For the three months ended March 31, 2003, capital expenditures per customer totaled approximately $30.98. As of March 31, 2003, including Illinois, an estimated 94% of Insight's customers were passed by upgraded network. Capital was funded through cash generated from operations as well as through bank borrowings. "This quarter we have, once again, shown solid revenue and cash flow growth, further proof that we continue to deliver on our promise to investors," said Dinesh C. Jain, Senior Vice President and Chief Financial Officer. "We reiterate our plan to be free cash flow positive for the second half of the year." Monthly operating cash flow margin per basic customer increased to 42% for the quarter ended March 31, 2003, up from 40% for the prior year's quarter. Operating Data Results Revenue increased $22.3 million or 12% to $215.0 million for the three months ended March 31, 2003 from $192.7 million for the three months ended March 31, 2002. The increase in revenue was primarily the result of gains in our high-speed data and digital services with revenue increases over the prior year's quarter of 74% and 24%. In addition, our basic cable service revenue increased 7% primarily due to basic rate increases. Average monthly revenue per basic customer, including management fee revenue and SourceSuite revenue, was $55.34 for the three months ended March 31, 2003, compared to $49.60 for the three months ended March 31, 2002 primarily reflecting the continued successful rollout of new product offerings in all markets. Average monthly revenue per basic customer for high-speed data and digital service increased to $10.13 for the three months ended March 31, 2003, up from $6.97 for the three months ended March 31, 2002. Programming and other operating costs increased $9.7 million or 14% to $79.9 million for the three months ended March 31, 2003, from $70.1 million for the three months ended March 31, 2002. The increase in programming and other operating costs was primarily the result of increased programming costs for our classic, digital and high-speed data services due to increased programming rates and customers served as well as additional programming added in our newly rebuilt systems. Programming costs increased 10% for the three months ended March 31, 2003 from the three months ended March 31, 2002. Selling, general and administrative expenses increased $4.2 million or 10% to $45.1 million for the three months ended March 31, 2003, from $40.9 million for the three months ended March 31, 2002. The increase in selling, general and administrative expenses was primarily the result of increased costs related to salaries and benefits due to increased headcount in our telephone and customer service groups. Additionally, the increase is related to a decrease in funds received for marketing support (recorded as a reduction to selling, general & administrative expenses) for the three months ended March 31, 2003 compared to the three months ended March 31, 2002. High-speed data service charges were incurred through February 28, 2002 as a result of payments made to At Home Corporation, the former provider of high-speed data services for all of our systems, except for those located in Ohio. On September 28, 2001, @Home filed for protection under Chapter 11 of the Bankruptcy Code. For the purpose of continuing service to existing customers and to resume the provisioning of service to new customers, we entered into an interim service arrangement that required us to pay $10.0 million to @Home to extend service for three months through February 28, 2002. As a result of this arrangement we incurred approximately $4.1 million in excess of our original agreed-to cost for such services rendered through February 28, 2002. Depreciation and amortization expense increased $6.6 million or 14% to $55.0 million for the three months ended March 31, 2003, from $48.4 million for the three months ended March 31, 2002. The increase in depreciation and amortization expense was primarily the result of additional capital expenditures through March 31, 2003 to support the continued rebuild of our Illinois systems and the rollout of new digital, high-speed data and telephone services to existing rebuilt systems. Operating Cash Flow increased $12.5 million or 16% to $90.1 million for the three months ended March 31, 2003, from $77.6 million for the three months ended March 31, 2002. The increase is primarily due to increased basic, digital and high-speed data revenue, partially offset by increases in programming and other operating costs and selling, general and administrative costs. In addition, the increase in OCF is also attributable to the absence of high-speed data service charges to @Home for the three months ended March 31, 2003 that were previously included in the adjustments to OCF during the three months ended March 31, 2002. Interest expense remained relatively flat for the three months ended March 31, 2003 compared to the three months ended March 31, 2002. Interest expense decreased $489,000 or 1% primarily as a result of lower interest rates, which averaged 7.79% for the three months ended March 31, 2003, versus 7.88% for the three months ended March 31, 2002. Partially offsetting this decrease was higher outstanding debt, which averaged $2.60 billion for the three months ended March 31, 2003, versus $2.56 billion for the three months ended March 31, 2002. For the three months ended March 31, 2003, net income was $4.3 million. At March 31, 2003, the Company's balance sheet shows that its total current liabilities exceeded its total current assets by about $49 million. Insight Communications (NASDAQ:ICCI) is the 9th largest cable operator in the United States, serving approximately 1.4 million customers in the four contiguous states of Illinois, Kentucky, Indiana and Ohio. Insight specializes in offering bundled, state-of-the-art services in mid-sized communities, delivering basic and digital video, high-speed data and the recent deployment of voice telephony in selected markets to its customers. INTERFACE: Ratings Slide to Low-B/Junk Levels with Neg. Outlook --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term corporate credit and senior unsecured debt ratings on Atlanta, Ga.-based carpet manufacturer Interface Inc. to 'B' from 'B+'. At the same time, the subordinated debt rating was lowered to 'CCC+' from 'B-'. The mixed shelf registration rating was also lowered to a preliminary B/CCC+ from a preliminary B+/B-. The outlook is negative. The company's total debt outstanding at Dec. 29, 2002, was about $445 million. The downgrade follows continued weakness in the commercial sector and weaker than expected results for the first quarter ended March 2003, resulting in further volume declines and operating losses in several of Interface's business segments. "Weaker than expected revenue and margin pressures across all business segments, particularly the commercial interiors and office furniture markets, have hurt operating results and further weakened credit measures," said Standard & Poor's credit analyst Susan Ding. "Interface continues to be highly dependent on the corporate sector, deriving about 65% of total revenues from this segment." The lower sales volume and resulting unabsorbed overhead costs for the March 2003 quarter hurt margins and caused credit measures to deteriorate further from already weak levels. KAISER ALUMINUM: Court Approves Goodmans LLP as Canadian Counsel ---------------------------------------------------------------- Kaiser Aluminum Corporation and its debtor-affiliates obtained the Court's permission to employ Goodmans LLP as their Canadian counsel nunc pro tunc to January 14, 2003, in view of the proceedings of three Kaiser affiliates under the Canadian Companies' Creditors Arrangement Act, R.S.C. 1985 c. C-36 as amended. Goodmans will render general legal services as needed throughout the ancillary proceedings of Kaiser Aluminum and Chemical Canada Investment Limited, Kaiser Aluminum & Chemical Canada Limited and Texada Mines Ltd. In particular, Goodmans will: (a) advise the Canadian Debtors of their rights, powers and duties in connection with the Ancillary Proceedings; (b) prepare, on the Canadian Debtors' behalf, all necessary and appropriate applications, motions, draft orders, other pleadings, notices and other documents and review all financial and other reports to be filed in the Ancillary Proceedings; (c) advise the Canadian Debtors concerning, and prepare responses to, motions, pleadings, notices and other papers that may be filed and served in the Ancillary Proceedings; (d) advise and assist the Canadian Debtors in connection with any potential property dispositions; (e) commence and conduct any and all litigation in Canada necessary or appropriate to assert rights held by the Canadian Debtors; (f) provide corporate governance, litigation, tax and other general Canadian legal services for the Debtors; and (g) perform all other necessary or appropriate legal services in connection with the Ancillary Proceedings. The Debtors will compensate Goodmans in accordance with its standard hourly rates plus reimbursement of expenses. Goodmans' professionals and their hourly rates are: Name Position Rate ---- -------- ---- Jay A. Carfagnini Partner CND$700 Candy S. Schaffel Partner 625 Carrie Smit Partner 625 Brian F. Empey Partner 590 Mark A. Surchin Partner 590 Susan Zimmerman Partner 550 David Poore Associate 425 Scott Bell Associate 310 Nick Diksic Associate 290 Maureen Bellmore Associate 285 Joel Guralnick Associate (Vancouver) 260 Piran Thillainathan Articling Student 140 Mary Saulig Librarian 130 Diane Haist Librarian 110 Diane Rooke Librarian 70 Overtime, Secretary 50 (Kaiser Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service, Inc., 609/392-0900) KLEINERT'S INC: Voluntary Chapter 11 Case Summary ------------------------------------------------- Lead Debtor: Kleinert's Inc. 120 W. Germantown Pike Suite 100 Plymouth Meeting, Pennsylvania 19462 Bankruptcy Case No.: 03-41140 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Kleinert's, Inc. of Delaware 03-41141 Kleinert's Retail, Inc. 03-41142 Kleinert's, Inc. of Alabama 03-41143 Kleinert's, Inc. of New York 03-41144 Type of Business: Clothing manufacturers and distributors. Chapter 11 Petition Date: May 7, 2003 Court: Southern District of New York (Manhattan) Judge: Burton R. Lifland Debtors' Counsel: Wendy S. Walker, Esq. Morgan, Lewis & Bockius, LLP 101 Park Avenue New York, NY 10178-0060 Tel: (212) 309-6306 Fax : (212) 309-6273 Estimated Assets: $50 Million to $100 Million Estimated Debts: $50 Million to $100 Million KMART CORP: GE Group Serves as Lead Agent for $2B Exit Financing ---------------------------------------------------------------- GE Corporate Financial Services' Retail and Restructuring Group is the lead administrative agent for $2 billion in exit financing being provided to Kmart Corp. in connection with the company's emergence today from bankruptcy protection. Kmart will use the exit financing to fund its reorganized business. A syndication group of approximately 30 institutions is participating in the transaction. Kmart originally filed for bankruptcy protection on January 22, 2002. The Retail and Restructuring Group, headed by Stuart Armstrong, is part of the Corporate Lending Group, under GE Corporate Financial Services. The retail and restructuring group underwrites each retail relationship with accounts managed by professionals working only with retail customers. The group arranges working capital financing including asset-based loans, term loans, and revolving credit facilities, and also acts as agent for lending syndicates. The group leverages GE's demonstrated retail industry knowledge based on its long established retail "franchise," which incorporates consumer products and retail consumer finance services as well as corporate finance products and services for leading retailers. GE Corporate Lending Group offers financing to clients with more than $50 million in revenues from middle-market companies to large corporations. Products and services include asset-based financing, cash flow lending, corporate restructuring, equity investing, junior capital and trade receivables securitization. GE Corporate Lending is a part of GE Corporate Financial Services, a leading global provider of financing solutions for investment and non-investment grade companies - committed to supporting clients at all stages of the business cycle. For more information on the businesses and products of GE Corporate Financial Services, please visit http://www.gelending.com KMART CORP: Edward S. Lampert Appointed Chairman of the Board ------------------------------------------------------------- Kmart Holding Corporation (OTC Bulletin Board: KMRTV) announced that the Board of Directors of the Company has appointed Edward S. Lampert, Chairman and Chief Executive Officer of ESL Investments, as Chairman of the Board. Kmart emerged from bankruptcy court protection Tuesday. Edward S. Lampert said, "Going forward, Kmart will be led by a Board that has a substantial investment in the Company. This will ensure that decisions will be made by investors who have something to lose, as well as gain. Over the past year I have had the opportunity to get to know many Kmart associates. They are good, hard-working people who deserve leadership committed to creating value. Our Board of Directors intends to provide that leadership and to participate very actively in a future dedicated to making Kmart a success." Julian C. Day, Kmart President and Chief Executive Officer, said, "Eddie Lampert has a stellar reputation for building long- term value, based on solid business fundamentals. This Company, its associates and many stakeholders are very fortunate to have him as Chairman. Truly an independent thinker, he challenges individuals to be certain that decisions are based on what really makes sense for the Company. With Eddie's guidance, I am confident that the Company is poised for a profitable and successful future." ESL and its affiliates expect to beneficially own over 50 percent of the common stock of the Company, including the shares obtainable upon exercise of options and conversion of the $60 million convertible note issued to ESL and affiliates and assuming that the Class 5 Claims are reconciled at $4.3 billion. The total shares beneficially owned by ESL and its affiliates, ESL's co-investor in Kmart, and Third Avenue Management LLC, which invested in common shares of the Company at a closing held earlier today, aggregate over 62 percent of the shares of the Company -- and each of these investors is represented on the Company's Board of Directors. Mr. Lampert is the Chairman and Chief Executive Officer of ESL Investments, based in Greenwich, Connecticut, a firm he founded in April 1988. After graduating from Yale University in 1984 with a bachelor's degree in economics, Mr. Lampert worked in the risk arbitrage department of Goldman, Sachs & Co. for a number of years. He is on the boards of AutoNation, Inc. and AutoZone, Inc. In addition to Mr. Lampert, members of the Board of Directors of Kmart Holding Corporation include: E. David Coolidge III, William C. Crowley, Julian C. Day, William Foss, Steven T. Mnuchin, Anne Reese, Brandon Stranzl and Thomas J. Tisch. Kmart and 37 of its domestic subsidiaries and affiliates, officially concluded its fast-track reorganization today after completing all required actions and satisfying all remaining conditions to its First Amended Plan of Reorganization, as modified, which was confirmed by the U.S. Bankruptcy Court for the Northern District of Illinois by order dated April 23, 2003. In accordance with the Plan of Reorganization, which became effective today, the Company completed an internal corporate restructuring in which Kmart became an indirect subsidiary of a newly formed corporation, Kmart Holding Corporation. The Company's publicly traded shares will be shares of common stock of Kmart Holding Corporation. Kmart Corporation is a mass merchandising company that serves America through its Kmart and Kmart SuperCenter retail outlets. KMART CORP: Court OKs Sale of Store No. 3166 to Burlington Coat --------------------------------------------------------------- Kmart Corporation and its debtor-affiliates sought and obtained the Court's permission to assume and assign the lease for Store No. 3166 located at Austell, Georgia to Burlington Coat Factory Warehouse of Austell Inc. The Austell Store Lease is among the 54 leases subject to a Designation Rights Agreement between the Debtors and KIMART LP. KIMART LP, the successor to the joint venture comprised of Kimco Realty Corporation, Schottenstein Stores Corporation and Klaff Realty LP, purchased the Debtors' designation rights with respect to the Austell Store. Burlington Coat Factory of Austell is KIMART's designee. The Debtors lease the Store Premises from Developers Diversified Services pursuant to a December 28, 1973 agreement. As part of the Assignment, the Debtors will satisfy monetary obligations due Developers Diversified under the Lease. The Debtors estimate that the amount necessary to cure the defaults is $16,908. By agreeing to enter into the Assignment Agreement, the Debtors will receive $43,000,000 from KIMART pursuant to the Designation Rights Agreement. Of equal importance, the Debtors avoid continuing obligations under the lease and significant rejection claims against the estate. The Debtors may also receive additional future benefits. Under the Designation Rights Agreement, the net aggregate consideration KIMART received for the Lease is subject to profit sharing. Burlington Coat Factory of Austell is a Minnesota Corporation and intends to use the Premises as a Burlington Coat Factory Store. The Debtors relate that Burlington Coat Factory of Austell's future obligations under the Lease will be guaranteed by its parent company, Burlington Coat Factory Warehouse Corporation, a publicly traded entity with significant financial assets. Given this, the Debtors believe that there is adequate assurance that Burlington Coat Factory of Austell will perform under the Lease's terms. (Kmart Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 609/392-0900) LEAP WIRELESS: Wants Court Approval for Employee Retention Plan --------------------------------------------------------------- Robert A. Klyman, Esq., at Latham & Watkins, in Los Angeles, California, informs the Court that Leap Wireless International Inc., and its debtor-affiliates developed a key employee retention plan to induce certain of their key employees to continue their employment with Cricket pending confirmation and completion of Cricket's plan of reorganization. The Retention Plan does not provide retention bonuses to Cricket's Senior Vice Presidents, Chief Operating Officer or Chief Executive Officer. The Retention Plan provides that Covered Employees will be paid a bonus installment on the earlier of May 1, 2003 or the date two weeks after the announcement of an agreement with its creditors for restructuring. Another bonus installment will be paid to Covered Employees 60 days following the Effective Date of the Plan. If a Covered Employee voluntary terminates his or her employment at any time within 90 days of the date he or she received a payment under the Retention Plan, the Covered Employee will be required to repay that payment. The Debtors estimate that the total amount payable in the future under the Retention Plan is $1,836,000. Mr. Klyman states that the Covered Employees are a significant asset of this estate and their continued employment is essential in order to affect a reorganization on the best terms possible. The Covered Employees are highly talented individuals who contribute specialized knowledge and skill in their areas of responsibility. In many instances, the Covered Employees are among the best in their industry. More importantly, these individuals are intimately familiar with the Debtors' cost- efficient, differentiated business model and have the experience and knowledge necessary to maintain operations and thus preserve the value of the Debtors' assets. As a result of their experience and familiarity with the Debtors' business, these employees cannot be replaced easily by other employees with general telecommunications experience. Consequently, retaining the Covered Employees is critical in ensuring a successful reorganization and maximizing the recovery to creditors and other interested parties. Due to the inherent risks and uncertainty associated with chapter 11 proceedings, Mr. Klyman relates that the Covered Employees understandably have significant concerns about their long-term futures. The telecommunications industry has been extremely volatile recently with a number of major companies experiencing financial difficulties. Although the Debtors intend to reorganize and continue its business, the Covered Employees may view these Chapter 11 proceedings with apprehension and may already be seeking new career opportunities with their competitors. Additionally, as a result of these Chapter 11 cases, many of the Covered Employees are subject to employment demands and burdens that persons in comparable positions at other companies are not. Thus far, Mr. Klyman tells the Court that the Debtors have been able to forestall numerous departures of Covered Employees by explaining the Retention Plan and even implementing certain aspects prior to the Petition Date. Postpetition, if the Covered Employees are lost at high rates, not only will valuable experience and expertise be lost, but the prospect of a successful reorganization would also be severely compromised. Given its present circumstances, the Debtors do not have the time or resources to recruit, hire or train new employees. Even if the Debtors did have these resources, any new employee would, as a result of the Debtors' present condition and the uncertainty surrounding any Chapter 11 case, likely demand wages significantly greater than those presently being paid to the Covered Employees. Moreover, any new employee -- regardless of how skilled or dedicated -- would lack the institutional knowledge that the Covered Employees have. Mr. Klyman explains that the Debtors and UBS Warburg designed the Retention Plan based on an evaluation of its compensation requirements in light of its existing financial circumstances. The basic structure and expenses associated with these programs were also reviewed prior to adoption by an informal steering committee of the Debtors' Senior Secured Lenders and by their financial advisor. As a result, the Debtors believe that the Retention Plan balances their need to retain the Covered Employees with the creditors' desire to maximize their recovery in these Chapter 11 cases. The Retention Plan is also designed to encourage all Covered Employees to assume the additional administrative and operational burdens imposed on the Debtors by these Chapter 11 cases, and to use their best efforts to improve the Debtors' financial performance and facilitate a successful emergence from Chapter 11. During this Chapter 11 case, Mr. Klyman reports that the Debtors will continue to pay the Covered Employees the same salaries that these employees earned prepetition. Under the Retention Plan, each Covered Employee who continues his or her employment during and after the Debtors' Chapter 11 case will be paid a retention bonus equal to a percentage of the employee's current base salary. For example: -- Each Covered Employee with title of Directors and below will receive a Retention Bonus equal to 15% of his or her current base salary. The Retention Bonus is payable in two postpetition installments. The first installment, equal to 33% of the Retention Bonus, will be paid 90 days following the Petition Date. The second installment, equal to the remaining 67% of the Retention Bonus, will be paid 60 days following the Effective Date of the Debtor's plan of reorganization. -- Each Covered Employee with the title of Vice President will receive a Retention Bonus equal to 18.75% of the Salary. The Retention Bonus is payable in two postpetition installments. The first installment, equal to 33% of the Retention Bonus, will be paid 90 days following the Petition Date. The second installment, equal to the remaining 67% of the Retention Bonus, will be paid 60 days following the Effective Date of the Debtor's plan of reorganization. According to Mr. Klyman, a Covered Employee must be an active employee of the Debtors, in good standing and not on a leave of absence at the time of payment to receive any payment. If a Covered Employee is placed on a performance improvement plan at any time before the date of a payment, the Covered Employee will cease to be a Covered Employee and will not be entitled to obtain any additional payments thereafter. In addition, if a Covered Employee voluntary leaves the employment of the Debtors at any time within 90 days of the date the Covered Employee received a payment, the Covered Employee will be required to repay that payment. In light of the critical role that the Covered Employees will need to play in this Chapter 11 case and the substantial value that the continued loyalty and efforts of the Covered Employees will provide, Cricket believes that the implementation of the Retention Plan will be beneficial to its estate and essential to maximizing creditors' recoveries. Thus, the Debtors seek the Court's authority to implement the key employee retention plan. Mr. Klyman believes that the implementation of the Retention Plan will accomplish a "sound business purpose" and aid the Debtors' reorganization efforts. The Debtors determined that the measures proposed will achieve their intended purpose of keeping the Covered Employees employed and focused on the goals of preserving, protecting and marshaling their assets and reorganizing their business in an orderly manner. Based on information available, the Debtors believe that the retention incentives offer incentives comparable to: (a) those provided to employees with similar positions and experience at the Debtors' competitors in similar industries; and (b) similar arrangements that have been approved for employees of comparable Chapter 11 debtors. The Debtors do not believe that there are any other options available that will improve retention of their current employees. Management Severance Program The Debtors have also developed a senior management severance agreement to encourage the Senior Vice Presidents, the Chief Operating Officer and the Chief Executive Officer to focus all of their collective efforts on the proposed reorganization. The Severance Agreements provide each member of the Senior Management with these severance benefits: (a) at least 6 months of the employee's current base salary; (b) one half of the employee's current annual target bonus; and (c) COBRA benefits paid by the Debtors for six months if, within one year after the Petition Date or one year after the Effective Date of a Plan, he or she loses his or her employment without cause, or his or her employment duties with the company are substantially changed, in each case as provided in greater detail in the Severance Agreements. Accordingly, the Debtors also ask Judge Adler to approve the severance benefits in the Severance Agreements provided to the Senior Management. (Leap Wireless Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) LIN TV: Unit Selling 6.5% Senior Sub. Notes and 2.5% Debentures --------------------------------------------------------------- LIN TV Corp. (NYSE: TVL) announced that its wholly owned subsidiary LIN Television Corporation has entered into an agreement to sell $200 million aggregate principal amount of 6.5% Senior Subordinated Notes due 2013 and $100 million aggregate principal amount of 2.5% Exchangeable Senior Subordinated Debentures due 2033. The Debentures will be exchangeable for shares of LIN TV Corp. class A common stock based on an initial exchange price of $37.28, subject to adjustment. In addition, up to $25 million of Debentures are issuable upon any exercise of the initial purchasers' option. The proceeds from the sale of the Notes and the Debentures will be used to redeem LIN Television Corporation's existing 8-3/8% Senior Subordinated Notes due 2008. The offerings are expected to close on May 12, 2003, subject to customary closing conditions. These Notes and Debentures will be guaranteed by LIN TV Corp. The Notes and the Debentures will be issued in private placements and are expected to be resold by the initial purchasers to qualified institutional buyers under Rule 144A under the Securities Act of 1933, and the Notes may be sold outside of the United States in accordance with Regulation S under the Securities Act of 1933. None of the Notes, Debentures nor the LIN TV Corp. shares of class A common stock issuable upon exchange of the Debentures have been registered under the Securities Act of 1933 or any state securities laws, and until so registered, may not be offered or sold in the United States or any state absent registration or an applicable exemption from registration requirements. As reported in Troubled Company Reporter's Wednesday Edition, Standard & Poor's Ratings Services assigned its 'B' rating to LIN Television Corporation's proposed $200 million senior subordinated note issue due 2013. In addition, Standard & Poor's assigned its 'B' rating to the company's proposed $100 million exchangeable senior subordinated note issue due 2033. Proceeds are expected to be used to refinance existing debt. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit rating on LIN Television, an operating subsidiary of LIN Holdings Corp. The outlook is stable. The Providence, R.I.-based television owner and operator had approximately $754.0 million of debt outstanding on March 31, 2003. LOUDEYE: Achieves Key Milestones in Restructuring Initiatives ------------------------------------------------------------- Loudeye Corp. (Nasdaq: LOUD), a leader in managing, promoting and distributing digital media, announced significant progress in its restructuring efforts. In the last 45 days, the company has achieved these key milestones: -- More than $7 million reduction in annual cash expenditures; and -- More than $5 million reduction in real estate obligations. In March 2003 Loudeye implemented a restructuring program that included a reorganization of its operations. As part of this program, Loudeye commenced negotiations and subsequently completed agreements to terminate or amend a significant portion of its facility lease obligations. The lease termination agreements and amendments pertain to facilities and office space in Seattle, New York and Washington D.C., a large portion of which was unoccupied. These actions will reduce Loudeye's ongoing monthly rent obligations by over 75%. In addition to the lease terminations and amendments, there are further negotiations underway to restructure all remaining real estate obligations. Loudeye now maintains operating facilities in New York, Hollywood, Washington D.C. and Seattle. As consideration to landlords to terminate, amend or modify the effected leases, Loudeye made cash payments in the amount of approximately $650,000 in addition to cash being held by landlords as deposits. The company has currently vacated all unused facility space. "The terminations and amendments of our real estate obligations combined with other cost savings measures we've enacted over the past 45 days have substantially improved our overall cost structure," said Jeff Cavins, Loudeye's president and chief executive officer. "As a result of the restructuring, the company has been able to achieve greater operational efficiencies. We continue to aggressively attack our cost structure and have thus far achieved marked success." "The lease agreements enable our former landlords to lease their space to new tenants," continued Cavins. "We are appreciative of our landlords' willingness to work with us. It was with their collaborative efforts that we have achieved real progress in the reduction of our operating costs." Loudeye provides the business infrastructure and services for managing, promoting and distributing digital media for the entertainment and corporate markets. For more information, visit http://www.loudeye.com As reported in Troubled Company Reporter's April 16, 2003 edition, the company's independent auditors issued in connection with the company's audited financial statements for the year ended December 31, 2002 contains a statement expressing substantial doubt regarding the company's ability to continue as a going concern. While the company took a number of steps in 2002 to reduce its operating expenditures and conserve cash, the company has suffered recurring losses and negative cash flows, and has an accumulated deficit. The company is currently pursuing efforts to increase revenue, reduce expenses and conserve cash in the near future, however can provide no assurances that these efforts will be successful. MCDERMOTT INT'L: Reports Improved Results for First Quarter 2003 ---------------------------------------------------------------- McDermott International Inc. (NYSE:MDR) reported income before cumulative effect of an accounting change of $31.8 million on revenues of $523.4 million for the 2003 first quarter, compared to a net loss of $0.6 million on revenues of $399.2 million for the 2002 first quarter. "I am pleased with the recent operational performance of our two business units - Marine Construction Services and Government Operations. While it is too soon to declare a turnaround at J. Ray, the progress made in the first quarter is encouraging. With increased emphasis on national security, BWXT continues to produce strong operational and financial results. The focus for 2003 continues to be successful execution of our record backlog, as well as stabilization of J. Ray's operations," said Bruce W. Wilkinson, chairman of the board and chief executive officer of McDermott. Management believes that the non-GAAP presentation of the Company's financial results set forth below provides investors with useful information to evaluate the financial results of the Company's ongoing operations for the 2003 first quarter and to compare those results with the Company's historical results. Further information with respect to the revaluation of the estimated B&W settlement cost is included in the following section of this release. Marine Construction Services Segment Revenues from the Marine Construction Services segment, which consists of J. Ray McDermott and its subsidiaries, increased 54% to $405.8 million in the 2003 first quarter. The revenue increase resulted from execution of fabrication and installation projects primarily in the Caspian Sea region, the Middle East and Southeast Asia, as well as topsides fabrication at the Morgan City, La., facility. Offsetting this revenue increase was reduced activity primarily for Gulf of Mexico projects. Operating income improved $27.5 million from an operating loss of $8.5 million in the 2002 first quarter to operating income of $19.0 million in the 2003 first quarter, primarily due to operating income from the projects mentioned above and customer acceptance of change orders on a deck fabrication project in the Middle East of approximately $11 million. During the 2003 first quarter, the delay in marine mobilization for a South American project and the continued underutilization of marine equipment in the Gulf of Mexico partially offset the improvement to operating income. The 2003 first quarter included no additional losses on the three EPIC spar projects, while the 2002 first quarter included losses on J. Ray's first EPIC spar project of $9.5 million and other Gulf of Mexico projects. At March 31, 2003, J. Ray's backlog was $2.0 billion and included $281 million related to three EPIC spar projects and $257 million related to other contracts in loss positions. Backlog at Dec. 31, 2002 was $2.1 billion. Government Operations Segment The Government Operations segment consists primarily of BWX Technologies Inc. Revenues in this segment decreased $4.1 million to $117.7 million in the 2003 first quarter primarily due to BWXT recording its fees from a management services contract as revenues rather than recording the full amount of revenues from the contract. In addition, BWXT generated lower revenues from contract research activities and other government manufacturing operations. Higher volumes from the manufacture of nuclear components for certain U.S. Government programs partially offset these decreases. Operating income increased $5.9 million to $23.6 million in the 2003 first quarter, primarily due to higher volumes from the manufacture of nuclear components for certain U.S. Government programs resulting from higher earned engineering hours, favorable resolution on a contract dispute of $3.3 million and improved operating results from BWXT's joint ventures operating in Idaho, Texas and Tennessee. These increases were partially offset by lower volumes and margins from other government manufacturing operations. At March 31, 2003, BWXT's backlog was $1.6 billion, compared to backlog of $1.7 billion at Dec. 31, 2002. Corporate Corporate expenses increased $15.7 million to $26.4 million in the 2003 first quarter compared to the 2002 first quarter, primarily due to higher non-cash qualified pension plan expenses as a result of changes in the discount rate and plan asset performance. Other Income and Expense Interest income decreased $2.5 million to $1 million in the 2003 first quarter compared to the 2002 first quarter, primarily due to decreases in investments and prevailing interest rates. Interest expense decreased $3.5 million to $3.7 million in the 2003 first quarter, primarily due to the repayment of MI's remaining 9.375% Notes in March 2002. Other income decreased $0.8 million to $1.4 million in the 2003 first quarter, primarily due to foreign currency transaction losses. During the 2003 first quarter, the Company revalued certain components of the estimated settlement cost related to the Chapter 11 proceedings involving The Babcock & Wilcox Company ("B&W"), which resulted in a decrease of the liability to $86.4 million and recognition of other income of $24.1 million ($23.6 million net of tax). The consideration to be provided in the proposed settlement includes, among other things, McDermott common stock, a price share guaranty obligation and a promissory note. The decrease is primarily due to a decrease in the price of McDermott's common stock from Dec. 31, 2002 to March 31, 2003. The Company is required to revalue certain components of the estimated settlement cost quarterly and at the time the securities are issued. Upon issuance of the debt and equity securities, the Company will record such amounts as liabilities or stockholders' equity based on the nature of the individual securities. For the 2003 first quarter, the effective tax rate was 18.7% due to non-taxable income associated with the revaluation of the estimated cost of settlement of the B&W Chapter 11 proceedings, an increase in the valuation allowance for the realization of deferred tax assets and the mix of income and losses from various tax jurisdictions in which the Company operates. Cumulative Effect of an Accounting Change Effective Jan. 1, 2003, the Company adopted SFAS No. 143, "Accounting for Asset Retirement Obligations," and recorded income of $3.7 million, or $0.6 per diluted share, as the cumulative effect of an accounting change, which is net of tax expense of $2.2 million. Substantially all of the asset retirement obligations relate to the remediation of BWXT's Nuclear Analytical Laboratory in Lynchburg, Va. THE BABCOCK & WILCOX COMPANY The Company wrote off its investment in B&W during the second quarter of 2002 and has not consolidated B&W with its financial results since the Chapter 11 bankruptcy filing on Feb. 22, 2000. B&W's revenues increased $2.0 million to $381.0 million in the 2003 first quarter, compared to $379.0 million in the 2002 first quarter. Net income increased to $13.5 million in the 2003 first quarter, compared to $10.5 million in the 2002 first quarter. GUIDANCE As a result of the improved earnings for the 2003 first quarter, the Company is revising its 2003 non-GAAP earnings guidance upwards to a range of $0.08 to $0.13 per diluted share. The 2003 guidance includes $87 million of pension expense. The 2003 guidance excludes those items that management believes are important to exclude for the purpose of understanding the financial results of the ongoing operations of the Company. Items excluded from the 2003 guidance are as follows: -- Revaluation of estimated after-tax B&W settlement cost -- Impact of a potential spin-off of the B&W portion of McDermott Incorporated's qualified pension plan (See Item 7 of McDermott's 2002 Form 10-K for additional information.) LIQUIDITY Due primarily to cost overruns on the spar projects, the Company experienced negative cash flows for the 2003 first quarter and expects to experience negative cash flows for the second and third quarters of 2003. For the 2003 year, the Company anticipates negative operating cash flows before capital expenditures of between $100 million and $120 million. Completion of the spar projects has and will continue to put a strain on the Company's liquidity. J. Ray intends to fund its negative cash flow through borrowings under the credit facility, intercompany loans from McDermott and sales of non-strategic assets including certain marine vessels. At May 1, 2003, the Company had liquidity of $177 million, which included unrestricted cash of $128 million and availability under its credit facility of $49 million. McDermott International Inc. is a leading worldwide energy services company. The Company's subsidiaries provide engineering, fabrication, installation, procurement, research, manufacturing, environmental systems, project management and facility management services to a variety of customers in the energy and power industries, including the U.S. Department of Energy. Additional information concerning the Company can be found in its Form 10-Q for the quarter ended March 31, 2003 and its Form 10-K for the year ended Dec. 31, 2002. As reported in Troubled Company Reporter's April 9, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit rating on McDermott International Inc., and its subsidiary, McDermott Inc., to 'CCC+' from 'B'. The rating on McDermott Inc.'s senior unsecured debt was lowered to 'CCC-' from 'B', and was rated two notches below the corporate credit rating, reflecting a subordinated position to secured bank debt and other priority liabilities. All ratings were removed from CreditWatch where they were first placed on Nov. 7, 2002. "The downgrade reflects erosion of the firm's balance sheet, concern regarding operating issues, and expected negative cash flow generation in 2003 that will result in heightened liquidity concerns in the last half of the year," said Standard & Poor's credit analyst Daniel DiSenso. The outlook on the New Orleans, Louisiana-based marine construction and government services company is negative. Outstanding debt totaled about $140 million at year-end 2002. MTR GAMING: Q1 Results Show Margin Improvement over Dec. Quarter ---------------------------------------------------------------- MTR Gaming Group, Inc. (Nasdaq National Market:MNTG) announced financial results for the first quarter ended March 31, 2003. Total revenues for the quarter increased 7% to $63.6 million, and the Company reported EBITDA (earnings before interest, taxes, depreciation and amortization) of $10.9 million and net income of $3.3 million. Gaming revenues at the Company's Mountaineer Race Track & Gaming Resort rose 6% to $54.6 million, producing net win-per-day-per-machine of $202 based on an average of 3,000 machines for the current quarter, compared to $236 based on an average of 2,418 machines in the first quarter of 2002. Harsh weather conditions in January and February impacted patronage at the Company's Mountaineer Race Track & Gaming Resort, while expense levels were considerably higher than in last year's first quarter due to the expansion of Mountaineer, including the hotel that opened in May 2002. Additionally, interest expense was higher in the current quarter due to increased borrowing levels and, to a lesser extent, the issuance of $130 million of 9.75% Senior Notes near the end of the quarter. Edson R. (Ted) Arneault, President and CEO of MTR Gaming Group, stated, "We are pleased with the modest revenue increase despite the severe weather we experienced and 14 fewer race days as compared to the first quarter of last year. Of note, average daily export simulcasting handle rose 13% to $1.3 million due to our continuing efforts to add outlets, which now number approximately 615. Gaming revenues at Mountaineer did rebound in March, and have continued at attractive levels thus far in the second quarter, with April gaming revenue topping $20.1 million, versus $18.3 million in April of 2002. After David Hughes joined the Company as COO of Mountaineer on January 1st of this year, he began implementing cost savings and efficiencies to improve margins, primarily focusing on marketing and labor." Mr. Hughes added, "A key initiative we carried out was aligning staffing with revenue production and utilizing automation wherever possible. With regard to promotions, we are more prudently allocating our expenses while maintaining an aggressive program. Due to the significant expansion of Mountaineer's infrastructure last year, we believe that comparisons to fourth quarter 2002 margins present a more meaningful measure of our efforts to reduce expenses than would comparisons to the first quarter of 2002. We are pleased with the margin improvements over the fourth quarter of 2002, especially considering the poor weather conditions. EBITDA was 17.1% of revenues in the first quarter, compared to 15.3% in the fourth quarter of 2002. Labor and promotions expense controls are in place and cost containment efforts continue." Mr. Arneault continued, "The Grande Hotel at Mountaineer produced lodging revenues that surpassed our expectations for the quarter. Bookings for the convention center are strong, thus far generating group hotel reservations in excess of 15,300 room nights for the balance of 2003. "Revenues at our Speedway Property in North Las Vegas were $2.4 million in the first quarter and the property generated $63,000 in EBITDA. The Reno facility, which we sold in mid-March for an amount that approximated its carrying value, negatively impacted EBITDA by $249,000 in the first quarter, but will not be a factor in future periods." Mr. Arneault further stated, "We remain enthusiastic about our pending acquisition of Scioto Downs, which we now expect to complete in the third quarter of this year. This transaction fits well with our strategy to diversify and leverage our expertise by building or acquiring other middle-market gaming and/or parimutuel businesses in states that border West Virginia. Also in line with this strategy is our planned development of Presque Isle Downs, a thoroughbred horse racing and parimutuel wagering facility in Erie, PA. The Commonwealth Court of Pennsylvania is scheduled to hear on May 7 an appeal filed by affiliates of Penn National Gaming and Magna Entertainment challenging the Pennsylvania Racing Commission's unanimous grant of our license. We have been proceeding with our design, engineering and permitting efforts and plan to break ground as soon as possible in the event the appeal is concluded favorably." Financial Guidance The Company also provided financial guidance for fiscal 2003, anticipating total revenues of approximately $292 million, EBITDA of approximately $50 million and net income of approximately $12.5 million. This guidance reflects higher gaming taxes at Mountaineer (a greater percentage of revenue will be subject to the State's surcharge) and approximately $8 million of additional interest expense compared to 2002 due to additional borrowings (for the acquisition of Scioto Downs, development of Presque Isle Downs, and repurchases of the Company's common stock) and higher interest rates, as well as increases in property and health insurance costs, real estate taxes and depreciation. Earnings per share will be influenced by the number of shares repurchased by the Company during the year. Since closing its Senior Notes offering on March 25, 2003, the Company has repurchased 170,900 shares of its common stock at an average price of $6.83 per share. Additional repurchases will be made at management's discretion without prior notice from time to time in the open market or through privately negotiated transactions with third parties in compliance with applicable laws and depending on market conditions. The Company's guidance assumes that (i) the acquisition of Scioto Downs will not have a material impact on the Company's financial results in 2003; (ii) the Company's investment in Presque Isle Downs will not be impaired; (iii) no other acquisitions or dispositions; and (iv) no material changes in economic conditions, West Virginia gaming laws or world events. Mr. Arneault concluded, "While we are optimistic about MTR's prospects for 2003 and beyond, we feel it is prudent to be conservative with our financial guidance until the full effect of our cost savings initiatives is realized. We are also being conservative due to the higher gaming taxes, interest expense, insurance costs, real estate taxes and depreciation we are experiencing. We will update guidance as we see fit as the year progresses." MTR Gaming Group, Inc. owns and operates the Mountaineer Race Track & Gaming Resort in Chester, West Virginia, which currently encompasses a thoroughbred racetrack with off-track betting and export simulcasting, 3,000 slot machines, 359 hotel rooms, golf course, spa & fitness center, theater and events center, convention center and fine dining and entertainment. The Company also owns and operates the Ramada Inn and Speedway Casino in North Las Vegas. MTR recently obtained a license to build a new thoroughbred racetrack with parimutuel wagering in Erie, Pennsylvania (judicial review pending), and signed a Merger Agreement with Scioto Downs, Inc. for Scioto to become a wholly owned subsidiary of MTR (subject to various customary conditions as reported on Forms 8-K filed with the Securities and Exchange Commission on December 24, 2002 and March 5, 2003). MTR is included on the Russell 2000(R) and Russell(R) 3000 Indexes. For more information, please visit http://www.mtrgaming.com As reported in Troubled Company Reporter's March 14, 2003 edition, Standard & Poor's Ratings Services assigned its 'B+' rating to MTR Gaming Group Inc.'s $130 million senior unsecured notes due 2010. In addition, Standard & Poor's assigned its 'B+' corporate credit rating to Chester, West Virginia-based MTR. Pro forma for the offering, MTR will have approximately $147 million in total debt outstanding. The outlook is stable. MUZAK LLC: S&P Assigns BB- Ratings to Proposed $60MM Facility ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' rating to business music services provider Muzak LLC's proposed $60 million senior secured revolving credit facility. At the same time, Standard & Poor's assigned its 'B' rating to its proposed $200 million Rule 144A senior unsecured notes. In addition, Standard & Poor's affirmed its 'B+' corporate credit rating on Muzak and its parent company, Muzak Holdings LLC, which are analyzed on a consolidated basis. The outlook remains negative. Proceeds from the new notes and about $10 million in revolving credit borrowings will be used to refinance Muzak's existing bank debt and about $12 million in sponsor notes. After the offering, the Fort Mill, S.C.-based firm will have about $390 million in debt and $124 million in debt-like preferred stock outstanding. "The proposed refinancing will improve Muzak's maturity structure by postponing until 2009 debt maturities that had been scheduled to escalate in 2004," according to Standard & Poor's credit analyst Steve Wilkinson. He added, "Even so, financial risk remains high and Muzak will need to continue to grow its operating cash flow and reduce consolidated leverage to preserve its credit profile. The proposed transaction will modestly increase interest expense because bank debt will be replaced with higher rate notes. In addition, Muzak's senior discount notes require cash interest payments starting in September 2004." The ratings reflect Muzak's high financial risk due to its reliance on debt and debt-like preferred stock to fund its growth. The ratings also reflect business risk due to Muzak's lack of operating diversity and the limited demand for its products, evidenced by its limited target market penetration despite its long operating history. The ratings could be lowered if Muzak does not demonstrate steady progress in lowering its consolidated leverage and increasing its discretionary cash flow despite moderately growing cash interest costs. NEXTEL PARTNERS: Selling $100 Million Convertible Senior Notes -------------------------------------------------------------- Nextel Partners, Inc. (Nasdaq:NXTP) intends to sell $100 million of Convertible Senior Notes due 2008 to qualified institutional buyers in an unregistered offering pursuant to Rule 144A under the Securities Act of 1933. In addition, Nextel Partners will grant the initial purchasers an overallotment option to purchase up to an additional $25 million principal amount of the notes. The notes will be convertible into Nextel Partners Class A common stock. The net proceeds of the offering will be used for general corporate purposes, including potential opportunistic purchases of currently outstanding debt obligations.The notes to be offered and the common stock issuable upon conversion of the notes have not been registered under the Securities Act, or any state securities laws, and may not be offered or sold in the United States absent registration under, or an applicable exemption from, the registration requirements of the Securities Act and applicable state securities laws. Nextel Partners Inc.'s 14% bonds due 2009 (NXTP09USR1) are trading at about 95 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NXTP09USR1 for real-time bond pricing. NORTHWEST AIRLINES: Reports 13.1% Traffic Decrease in April 2003 ---------------------------------------------------------------- Northwest Airlines (Nasdaq: NWAC) announced a systemwide April load factor of 71.9 percent, 4.4 points below April 2002. Systemwide, Northwest flew 5.04 billion revenue passenger miles and 7.01 billion available seat miles in April 2003, a traffic decrease of 13.1 percent on a 7.8 percent decrease in capacity versus April 2002. April traffic results were negatively impacted by the Iraq war and concerns over SARS (Severe Acute Respiratory Syndrome). Northwest Airlines is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,500 daily departures. With its travel partners, Northwest serves nearly 750 cities in almost 120 countries on six continents. In 2002, consumers from throughout the world recognized Northwest's efforts to make travel easier. A 2002 J.D. Power and Associates study ranked airports at Detroit and Minneapolis/St. Paul, home to Northwest's two largest hubs, tied for second place among large domestic airports in overall customer satisfaction. Business travelers who subscribe to OAG print and electronic flight guides rated nwa.com as the best airline Web site. Readers of TTG Asia and TTG China named Northwest "Best North American airline." Visit http://www.nwa.comfor more information on the Company. Northwest Airlines' 10.150% ETC due 2005 (NWAC05USR2) are trading at about 85 cents-on-the-dollar, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NWAC05USR2 for real-time bond pricing. OLYMPIC PIPE LINE: Taps Sidley Austin as FERC and WUTC Counsel -------------------------------------------------------------- Olympic Pipe Line Company asks for approval from the U.S. Bankruptcy Court for the Western District of Washington to employ Sidley Austin Brown & Wood LLP as its Special Counsel. Prior to filing for bankruptcy protection, Olympic Pipe turned to Sidley Austin for: a) representation of the debtor before the Federal Energy Regulatory Commission in connection with Debtor's 2001 rate increase filing; b) assisting in representing the debtor before the Washington Utilities and Transportation Commission in connection with Debtor's 2001 rate increase filing; c) representation before the FERC and the D.C. Circuit Court of Appeals in connection with Debtor's appeal from the FERC order denying the 2001 rate increase; and d) representation in the preparation of a new rate increase filing with FERC. The Debtor wishes to continue Sidley Austin's engagement in the same areas the firm represented the Debtor prepetition. The Debtor submits that it's for the best interest of the estate, the creditors and the parties-in-interests. Lawrence A. Miller, Esq., a partner in Sidley Austin will lead the engagement team. His hourly billing rate is $450. The hourly billing rates of the other individuals who will be doing work on behalf of the debtor range from $225 to $450. Mr. Miller tells the Court that these rates represent a 10% discount from the normal hourly rates of Sidley Austin personnel, negotiated with Olympic prior to the petition. Olympic Pipe Line Company, owns and operates a pipeline system transporting finished Petroleum products. The Company filed for chapter 11 protection on March 27, 2003 (Bankr. W.D. Wash. Case No. 03-14059). Edwin K. Sato, Esq., and Thomas N. Bucknell, Esq., at Bucknell Stehlik Sato & Stubner, LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $105,961,773 in total assets and $401,856,113 in total debts. OWENS-BROCKWAY: Closes Sale of $450 Million Senior Secured Notes ---------------------------------------------------------------- Owens-Brockway Glass Container Inc., an indirect wholly owned subsidiary of Owens-Illinois, Inc. (NYSE: OI), has closed on the sale of $450 million aggregate principal amount of its 7-3/4% senior secured notes due 2011 and $450 million aggregate principal amount of its 8-1/4% senior notes due 2013 in a private offering. The net proceeds from these notes will be used to purchase in the tender offer commenced on April 28, 2003, and/or otherwise repurchase, all of Owens-Illinois Inc.'s $300 million aggregate principal amount of 7.85% Senior Notes due 2004 and permanently reduce the revolving loan portion of the secured credit agreement, which matures on March 31, 2004. The senior secured notes and senior notes have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws. Unless so registered, the senior secured notes and senior notes may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws. As previously reported in Troubled Company Reporter, Standard & Poor's Ratings Services assigned its 'BB' rating to Owens-Brockway Glass Container Inc.'s $450 million senior secured notes due 2011. At the same time, Standard & Poor's assigned its 'B+' rating to Owens-Brockway Glass Container Inc.'s $350 million senior unsecured notes due 2013. Standard & Poor's said that it has affirmed its ratings, including its 'BB' corporate credit rating, on Owens-Illinois Inc. and its related entities. The outlook remains negative. Proceeds of the proposed notes offerings will be used to permanently reduce the company's revolving credit facility and repurchase Owens-Illinois Inc.'s $300 million senior notes due March 2004. Total debt outstanding was about $5.4 billion as at Dec. 31, 2002. "The ratings on Owens-Illinois Inc. and its related entities reflect the company's aggressive financial profile and meaningful concerns regarding its asbestos liability, offset by an above-average business position and strong EBITDA generation," said Standard & Poor's credit analyst Paul Vastola. Owens-Illinois' above-average business risk profile incorporates the company's preeminent market positions, which are bolstered by superior production technology, operating efficiency, and the relatively recession-resistant nature of many of its packaging products. PIONEER-STANDARD: KeyLink Forges Distribution Pact with Oracle -------------------------------------------------------------- Pioneer-Standard Electronics, Inc. (Nasdaq: PIOS), a leading distributor and reseller of enterprise computing systems, services and storage solutions, announced that its distribution arm, KeyLink Systems(R) and Oracle Corporation Canada Inc., a subsidiary of Oracle Corporation (Nasdaq: ORCL), the world's largest enterprise software company, have reached an agreement for KeyLink Systems to distribute and resell Oracle products in Canada. The agreement establishes Pioneer-Standard's KeyLink Systems as a preferred Oracle partner authorized to distribute Oracle's industry-leading Oracle9i Database, Oracle9i Application Server and Oracle Collaboration Suite in Canada. This agreement allows KeyLink Systems' existing Oracle resellers to extend their market reach into Canada. In addition, KeyLink Systems will be able to provide its Canadian resellers with an expanded product line offering. As the distributor, KeyLink Systems will provide expertise to architect solutions, deliver technical pre-sales and configuration support, as well as education and implementation guidance. "Oracle has been a long-time strategic partner with KeyLink Systems. We have built our business and success around being the best in the marketplace and are thrilled to expand our Oracle offering into the Canadian marketplace," said Bob Bailey, executive vice president, Pioneer-Standard. "This partnership extends the reach of two great leaders by combining KeyLink Systems' enterprise solution strengths with Oracle's world-class enterprise software products." "KeyLink Systems has a solid reputation as a top performing enterprise computer distributor and is one of Oracle's oldest partners. Working together, KeyLink Systems and Oracle have been successfully providing resellers and end users in the U.S. with effective IT solutions to help them manage critical information," stated Rick Terry, director, partners and alliances, Oracle Corporation Canada Inc. "Today's announcement further solidifies this relationship and allows the two companies to work together to replicate this success in Canada." Pioneer-Standard Electronics, Inc. is one of the foremost distributors and premier resellers of leading enterprise computer technology solutions from HP and IBM as well as other top manufacturers. The Company has a proven track record of delivering complex servers, software, storage and services to resellers and corporate end-user customers across a diverse set of industries. Headquartered in Cleveland, OH, Pioneer-Standard has sales offices throughout the U.S. and Canada. For more information, visit http://www.pioneer-standard.com KeyLink Systems is the distribution channel of Pioneer-Standard Electronics, Inc. that markets and sells innovative enterprise- level computer products, services and solutions to its network of resellers located throughout the U.S. and Canada. Oracle is the world's largest enterprise software company. For more information about Oracle visit http://www.oracle.com * * * As reported in the Troubled Company Reporter's January 17, 2003 edition, Standard & Poor's Ratings Services placed its 'BB-' corporate credit and its other ratings for Pioneer-Standard Electronics Inc. on CreditWatch with a negative implication. PPM AMERICA: Fitch Downgrades 2 Classes of Notes to BB/CCC- ----------------------------------------------------------- Fitch Ratings affirms three classes of notes and downgrades two classes of notes issued by PPM America High Grade CBO I, Ltd (PPM High Grade). The following rating actions are effective immediately: --$297,778,938 class A-1 senior secured REMARCS affirmed at 'F1+'/'AAA'; --$584,043,756 class A-2 senior secured notes affirmed at 'AAA'; --$23,585,181 class A-3 variable interest participating notes affirmed at 'AAA'; --$58,000,000 class B senior subordinated notes downgraded to 'BB' from 'BBB-'; --$17,850,000 class C structured equity notes downgraded to 'CCC-' from 'B-'. PPM High Grade is a collateralized bond obligation composed of primarily investment grade bonds, managed by PPM America, Inc. Due to the increased levels of defaults and deteriorating credit quality of a portion of the portfolio assets, Fitch has reviewed in detail the portfolio performance of PPM High Grade. In conjunction with this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. At this time, PPM High Grade is failing its total overcollateralization test, weighted average rating test and weighted average coupon test. Since August 2, 2002, PPM High Grade began to fail its total OC test and on the January 15, 2003 payment date, a portion of the class A-1, class A-2 and class A-3 senior notes were redeemed due to the failure of this test. The redemption of the class A-1, class A-2 and class A-3 notes was not sufficient to cure the OC test failure. As of April 2, 2003, the latest trustee report available, the total OC test was 100.92 compared to 103.25. As of April 2, 2003, defaulted assets represented 2.2% of the total collateral. PPM America has been actively trading the portfolio and opportunistically selling out of defaulted securities. The portfolio at close targeted 80% investment grade securities and as of April 2, 2003 only 67% were investment grade. Fitch's weighted average rating factor has deteriorated from an initial value of 17.5 ('BBB'/'BBB-'), as defined by the trustee report, to 22.5 ('BBB-'/'BB+'). Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates the structure can withstand going forward relative to the minimum cumulative default rates for the rated liabilities. As a result of this analysis, Fitch has determined that the original ratings assigned to the class B and C notes no longer reflect the current risk to noteholders. Fitch did not incorporate into its cash flow modeling the portfolio assets trading above par, which if sold may yield gains to the portfolio and build par. The class C notes are rated to the ultimate return of principal. Since the closing date, the class C notes have received $2,950,636 of distributions leaving a remaining rated balance of $14,899,364. Fitch will continue to monitor and review this transaction for future rating adjustments. PRIMEDIA INC: Commences Private Offering of $300MM Senior Notes --------------------------------------------------------------- PRIMEDIA Inc. (NYSE: PRM) commenced a private offering of $300 million principal amount of its Senior Notes due 2013. The proceeds of the offering will be used to redeem PRIMEDIA's 8- 1/2% Senior Notes due 2006 and for general corporate purposes. The notes will not be registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration. PRIMEDIA is the largest targeted media company with leading positions in consumer and business-to-business markets. Our properties deliver content via print, along with video, the Internet and live events and offer highly effective advertising and marketing solutions in some of the most sought after niche markets. With 2002 sales from continuing businesses of $1.6 billion, PRIMEDIA is the #1 special interest magazine publisher in the U.S. with more than 250 titles. Our well known brands include Motor Trend, Automobile, New York, Fly Fisherman, Power & Motoryacht, Ward's Auto World, and Registered Rep. The company is also the #1 producer and distributor of free consumer guides, including Apartment Guides. PRIMEDIA Television's leading brand is the Channel One Network and About is one of the largest sources of original content on the Internet. PRIMEDIA's stock symbol is: NYSE: PRM. More information about the company can be found at http://www.primedia.com As previously reported, Standard & Poor's Ratings Services affirmed its single-'B' corporate credit rating on publisher PRIMEDIA Inc., and removed the rating from CreditWatch (where it was placed on Sept. 26, 2001). PRIMUS TELECOMMS: Board Okays Stockholders Rights Plan Amendment ---------------------------------------------------------------- On April 30, 2003, Primus Telecommunications Group Inc.'s Board of Directors approved an amendment to the Company's Stockholder Rights Plan as adopted on December 16, 1998, and subsequently modified. The amendment provides that if the rights issued to stockholders under the Rights Plan are triggered, the Company may exchange for each right one share of Company common stock (or 1/1000 of a share of Class B Company Preferred Stock). No other material changes were made to the Rights Plan. The amendment is not in response to any known take over efforts, but is intended to protect stockholders from coercive or unfair takeover tactics. PRIMUS Telecommunications Group, Incorporated (NASDAQ: PRTL) is a global telecommunications services provider offering bundled voice, data, Internet, digital subscriber line (DSL), Web hosting, enhanced application, virtual private network (VPN), and other value-added services. PRIMUS owns and operates an extensive global backbone network of owned and leased transmission facilities, including approximately 250 points-of- presence throughout the world, ownership interests in over 23 undersea fiber optic cable systems, 19 international gateway and domestic switches, a satellite earth station and a variety of operating relationships that allow it to deliver traffic worldwide. PRIMUS also has deployed a global state-of- the-art broadband fiber optic ATM+IP network and data centers to offer customer Internet, data, hosting and e-commerce services. Founded in 1994 and based in McLean, VA, PRIMUS serves corporate, small- and medium-sized businesses, residential and data, ISP and telecommunication carrier customers primarily located in the North America, Europe and Asia Pacific regions of the world. News and information are available at PRIMUS's Web site at http://www.primustel.com At December 31, 2002, Primus Telecommunications' balance sheet shows a working capital deficit of about $73 million, and a total shareholders' equity deficit of about $200 million. Primus Telecomms.' 12.75% bonds due 2009 (PRTL09USR2) are trading at about 95 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=PRTL09USR2 for real-time bond pricing. REGUS: Committee Turns to Ernst & Young for Restructuring Advice ---------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in the Chapter 11 case of Regus Business Centre Corp., wants to employ Ernst & Young Corporate Finance LLC as its Restructuring Advisors. The Committee asserts that it is necessary and appropriate for it to employ and retain Ernst & Young to: a) analyze the current financial position of the Debtors and non-Debtors; b) analyze the Debtors' and non-Debtors' business plans, cash flow projections, restructuring programs, and other reports or analyses prepared by the Debtors and non- Debtors or its professionals in order to advise the Committee on the viability of the continuing operations and the reasonableness of projections and underlying assumptions; c) analyze the financial ramifications of proposed transactions for which the Debtors seek Bankruptcy Court approval, including, but not limited to, debtor in possession financing and cash management, assumption/rejection of real property leases and other contracts, asset sales, management compensation and/or retention and severance plans; d) analyze the Debtors' and non-Debtors' internally prepared financial statements and related documentation, in order to evaluate the performance of the Debtors and non-Debtors' as compared to projected results on an ongoing basis; e) attend and advise at meetings with the Committee, its counsel, other financial advisors and representatives of the Debtors; f) assist and advise the Committee and its counsel in the development, evaluation and documentation of any plan(s) of reorganization or strategic transaction(s), including developing, structuring and negotiating the terms and conditions of potential plan(s) or strategic transaction(s) and the consideration that is to be provided to unsecured creditors; g) prepare hypothetical liquidation analyses; h) render testimony in connection with its rendered services, as required, on behalf of the Committee; and i) provide such other services, as requested by the Committee and agreed by Ernst & Young. The Committee believes that Ernst & Young possesses extensive knowledge and expertise in the areas of restructuring advisory services relevant to these cases, including the areas of corporate restructurings and reorganizations, and that Ernst & Young is well qualified to represent the Committee in these cases. Ernst & Young will charge for its restructuring advisory services on an hourly basis in accordance with its ordinary and customary hourly rates: Managing Directors/Principals $550 - 595 Directors $475 - 545 Vice Presidents $375 - 440 Associates $320 - 340 Analysts $275 Client Service Associates $140 Regus Business Centre Corp., filed for chapter 11 protection on January 14, 2003 (Bankr. S.D.N.Y. Case No. 03-20026). Karen Dine, Esq., at Pillsbury Winthrop LLP represents the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed debts and assets of: Total Assets: Total Debts: ------------- ------------ Regus Business Centre Corp. $161,619,000 $277,559,000 Regus Business Centre BV $157,292,000 $160,193,000 Regus PLC $568,383,000 $27,961,000 Stratis Business Centers Inc. $245,000 $2,327,000 R.H. DONNELLEY: Appoints Jenny L. Apker as VP and Treasurer ----------------------------------------------------------- R.H. Donnelley Corporation (NYSE:RHD), a leading publisher of yellow page directories, announced that Jenny L. Apker has been appointed Vice President and Treasurer, effective May 26, 2003. Apker will replace Frank M. Colarusso, who will be leaving the Company to pursue other opportunities, following an orderly transition. Apker was previously Assistant Treasurer at Allied Waste Industries, the second largest waste services company in the U.S. Most recently, she was responsible for coordinating Allied Waste's $3.7 billion debt and equity financings. Before joining Allied Waste in 1988, Apker was Vice President at First Interstate Bank of Arizona, which was subsequently acquired by Wells Fargo. Previously Apker spent 11 years at Greyhound Financial Corporation, achieving the title of Vice President, Corporate Finance. "We are thrilled to add Jenny to our senior leadership team," said Steven M. Blondy, Senior Vice President and CFO of Donnelley. "Jenny brings a sophisticated approach to treasury activity that will benefit us greatly, especially given our current leverage position. She also has very relevant experience working with consolidating industries and brings valuable expertise to help integrate the Sprint directory publishing business." Blondy added, "We would also like to recognize Frank for his commitment and many contributions to R.H. Donnelley. Frank has added immeasurably to the Company's success during his five-year tenure and during his 12 years with Dun & Bradstreet before that. We wish him all the best in his new pursuits." Apker said "I am very excited to join the team at R.H. Donnelley, a well respected, industry leader in yellow pages. I look forward to leveraging my experience in debt portfolio management, acquisition integration and enterprise risk management to build on Donnelley's strong platform for future growth." R.H. Donnelley --- whose senior secured $1.5 billion facility has been rated by Standard & Poor's at BB -- is a leading publisher of yellow pages directories which publishes 260 directories under the Sprint Yellow Pages(R) brand in 18 states, with major markets including Las Vegas, Orlando and Lee County, Florida. The Company also serves as the exclusive sales agent for 129 SBC directories under the SBC Smart Yellow Pages brand in Illinois and northwest Indiana through DonTech, its perpetual partnership with SBC. In total, R.H. Donnelley serves more than 250,000 local and national advertisers. For more information, please visit R.H. Donnelley at http://www.rhd.com ROYAL CARIBBEAN: S&P Rates Proposed $250MM Senior Notes at BB+ -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB+' rating to Royal Caribbean Cruises Ltd.'s proposed $250 million senior notes due 2010. The notes are expected to rank equally with the company's other senior unsecured notes. Proceeds will be used for general corporate purposes, including capital expenditures. The notes are being offered as part of a shelf registration statement. At the same time, Standard & Poor's affirmed its 'BB+' corporate credit rating. The outlook is negative. At the end of Dec. 31, 2002, RCL, the world's second largest cruise company, had approximately $5.4 billion in debt. RCL will add three remaining ships to its fleet by the second quarter of 2004. One in each of the third and fourth quarters of 2003, and one in the second quarter of 2004. Capital spending in 2003 is now expected to amount to $1.1 billion, declining to $.5 billion in 2004. "Based on our expectations for cash flow, debt levels are expected to grow by $300 million - $400 million in 2003 to fund the new ships," said Standard & Poor's credit analyst Craig Parmelee. "Debt leverage, however, is expected remain in the present range due to growth in cash flow spurred by the new capacity," Mr. Parmelee added. Standard & Poor's expects that RCL will generate substantial discretionary cash flow in 2004 and 2005, and that these funds will be applied to debt reduction. Standard & Poor's is also somewhat concerned about industry capacity growth, particularly if the economic environment does not improve beyond 2003. Net capacity growth in the cruise industry remains substantial during the next couple of years, averaging about 10% per year. Standard & Poor's expects that this will continue to put pressure on pricing and margins while the economy remains soft. RCL's credit measures have been significantly weak for the ratings for several quarters. This issue is mitigated by the company's adequate liquidity position, the expectation for meaningful de-leveraging beginning in 2004, and the company's solid position in an industry that has high barriers to entry. RCL is a significant player in the cruise industry, and has good prospects for the future. SALOMON BROTHERS: S&P Cuts Ratings on Ser. 2000-C3 Note Classes --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on classes K, L, M, and N of Salomon Brothers Commercial Mortgage Trust 2000-C3's commercial mortgage pass-through certificates series 2000-C3. At the same time, the ratings on classes A-1, A- 2, X, B, C, D, E, F, G, H, and J from the same transaction are affirmed. The lowered ratings reflect anticipated credit support erosion upon the eventual disposition of some of the specially serviced assets, particularly those secured by office properties, and concerns regarding some of the watchlist loans. The affirmed ratings reflect credit enhancement levels that adequately support the existing ratings, after taking into account expected losses and the steady to improved performance of the top 10 loans in the pool. As of April 2003, the trust collateral consisted of 180 commercial mortgages with an outstanding balance of $888.3 million, hardly changed from 181 loans totaling $892.6 million at issuance. The master servicer, Midland Loan Services Inc., reported either full or partial year 2002 net cash flow debt service coverage ratios for 86% of the loans. Based on this information, Standard & Poor's calculated the DSCR for the pool at 1.45x for the 2002 data, up from 1.35x at issuance. The current weighted average DSCR for the 10 largest loans totaling $303.4 million, or 34.2% of the pool, is 1.48x for the 2002 data, compared to 1.39x at issuance. The pool has geographic concentrations greater than 5% in the states of Illinois (26%), California (17%), and Michigan (6%). The pool has property type concentrations greater than 5% in office (49%), retail (17%), multifamily (11%), mixed use (7%), and industrial (6%). There are seven specially serviced assets with a current combined balance of $31.6 million, or 3.56% of the pool. Four of the loans totaling $22.05 million or 2.48% are real estate owned. The largest specially serviced loan, 29200 Northwestern Highway, is REO and has a balance of $10.1 million, or 1.1% of the pool. It is secured by an 111,542-square-foot (sq. ft.) office property located in Southfield, Mich., just northwest of Detroit. With two recently signed leases, current occupancy is 51%, and the most recent DSCR (as of Sept. 30, 2002) is negative 0.06x. A recent appraisal (September 2002) valued the property as is at $7 million and stabilized at $9.4 million. Outstanding advances total approximately $1.46 million. A loss is expected upon disposition. The second largest specially serviced loan, Hamlin Court, has a current balance of $6.7 million (0.75% of the pool). It is secured by a 42,868-sq. ft. office building located in Sunnyvale, Calif. that has lost its only two technology tenants and became REO in late March. It is listed for sale for $6.45 million. Another specially serviced loan of concern, the K-Mart Shopping Center-Savannah loan, has a balance of $3.98 million, or 0.45% of the pool. The single-tenant property located in Savannah, Ga., is 111,043 sq. ft., but has gone dark. Another two specially serviced loans consist of an industrial and a self- storage property totaling $5.25 million or 0.59%. The industrial property is now REO after a six-month redemption period and will be marketed for sale. The self storage property, which is REO, has a signed letter of intent to purchase for $2.05 million but such letter is still subject to a due diligence period. There is outstanding advancing on both assets. Of less concern are the last two specially serviced assets: a lodging and an office property totaling $5.56 million or 0.63% that are both expected to be returned to the servicer after successful completion of their respective assumptions. The servicer's current watchlist notes seven loans totaling $35.5 million (4.0% of the pool). The largest loan on the watchlist, Four Points Hotel by Sheraton, for $9.3 million (1.0%), has a DSCR of 0.75x as of Dec. 31, 2002, down from 0.88x in 2001. While occupancy improved to 66.8% in 2002 from 59.6% in 2001, it did so at the expense of the average daily rate, which has fallen to $88.11 for 2002. The property is a 127-room full service hotel located in Norwalk, Conn. In addition, there is a troubled office property that appears on the watchlist, for $5.6 million, or 0.63% of the pool. Based on discussions with Midland and Lennar Partners Inc., Standard & Poor's stressed various loans in the mortgage pool as part of its analysis. The expected losses and resultant credit levels adequately support the rating actions. RATINGS LOWERED Salomon Brothers Commercial Mortgage Trust 2000-C3 Commercial mortgage pass-thru certs series 2000-C3 Rating Class To From Credit enhancement(%) K B+ BB- 3.99 L B B+ 2.83 M B- B 2.32 N CCC+ B- 1.93 RATINGS AFFIRMED Salomon Brothers Commercial Mortgage Trust 2000-C3 Commercial mortgage pass-thru certs series 2000-C3 Class Rating Credit enhancement(%) A-1 AAA 23.68 A-2 AAA 23.68 B AA 18.79 C A 14.67 D A- 13.13 E BBB+ 11.58 F BBB 10.04 G BBB- 8.49 H BB+ 5.41 J BB 4.63 X AAA N.A. SAMSONITE: S&P Changes Ratings Outlook After Refinancing Pact ------------------------------------------------------------- Standard & Poor's Ratings Services revised its ratings on luggage maker Samsonite Corp. to CreditWatch with developing implications from CreditWatch negative. The ratings were originally placed on CreditWatch Oct. 7, 2002. The action follows Samsonite's May 1, 2003, announcement that it had entered into a recapitalization agreement. Developing implications means that the ratings could be lowered, affirmed, or raised following Standard & Poor's review of the company and its ability to address its upcoming financial obligations. "The proposed transaction will not only improve the company's financial profile by lowering total debt and its preferred stock burden but will also eliminate near-term term bank debt maturities," said Standard & Poor's credit analyst David Kang. Under the agreement, the company will refinance its term bank debt with $106 million of new preferred stock at an initial dividend rate of 8%. The company will also replace its existing credit facility with a new $60 million revolving credit facility. Furthermore, the company will retire all of the outstanding shares of its 13-7/8% senior redeemable preferred stock. This will be exchanged for either new preferred stock and common stock or common stock and warrants to purchase additional common stock. However, the amount and timing of any transaction is uncertain because it is subject to several conditions. These include the company's entering into a new credit facility and reaching an agreement with the Pension Benefit Guaranty Corporation satisfactory to the new investors with respect to the company's ability to refinance the new credit facility in the future. Upon closing of the proposed transaction, based on current terms and conditions, Standard & Poor's expects to raise Samsonite's ratings one notch. This would reflect the company's improved liquidity position and expectations that its improved financial performance will be sustainable. In addition, Standard & Poor's will reassess the recovery prospects of the proposed new revolving credit facility under a default scenario. Samsonite's ratings could still be lowered at least one notch in the near term if the company is unable to complete the proposed recapitalization or satisfactorily address its upcoming financial obligations. These include interest payments on its subordinated debt, bank debt maturities, required pension plan contributions, and a growing preferred stock liability, which becomes cash pay after June 15, 2003, otherwise the dividend rate increases by 2%. Denver, Colo.-based Samsonite, a leading global provider of luggage and travel-related products, had about $427 million of debt outstanding at Oct. 31, 2002. Standard & Poor's will continue to monitor developments and will meet with management to discuss the company's future capital structure and financial policies before resolving the CreditWatch listing. SAMSONITE CORP: Delays Filing of Annual Report on Form 10-K ----------------------------------------------------------- The annual report of Samsonite Corporation on Form 10-K will not be filed within the prescribed time period. During the past several weeks, the Company has been actively involved in negotiating and documenting a possible recapitalization transaction designed to deleverage the Company. On May 1, 2003 the Company executed a recapitalization agreement with a group of private investors and an amendment to its existing senior credit facility that will extend the maturity date of its revolving credit and European term loans thereunder from June 24, 2003 to June 24, 2004. These transactions will materially affect the disclosures in its annual report on Form 10-K and the financial statements included therein. The recapitalization agreement and the amendment to the senior credit facility are subject to numerous conditions precedent, including a condition that the Company reach an agreement with the Pension Benefit Guaranty Corporation with respect to, among other things, the new credit facility and the Company's ability to refinance such facility in the future. If the Company were to file its Annual Report on Form 10-K on the May 1 due date, absent satisfaction of the PBGC Condition, the Company believes that the report of the Company's independent auditors on the Company's financial statements as of and for the fiscal year ended January 31, 2003 would contain a qualification regarding the Company's ability to continue as a going concern. The Company is in the process of negotiating satisfactory arrangements with the PBGC in an effort to satisfy the PBGC Condition. If a satisfactory agreement with the PBGC is not reached by the date on which the Company files its Annual Report on Form 10-K with the SEC, the Company believes that the report from its independent auditors contained therein will contain a "going concern" qualification. The Company believes that having an extended maturity date for its credit facilities is necessary for the Company to have non-current debt and to receive an unqualified report on its 2003 financial statements from its auditors. There can be no assurances that such a report will be received. In addition, if the PBGC Condition is not satisfied, it is uncertain whether a recapitalization will be consummated, in which case the Company will need to consider other possible alternatives available to it. Samsonite Corp.'s 10.750% bonds due 2008 (SAMC08USR1) are trading at about 79 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=SAMC08USR1 for real-time bond pricing. SAMSONITE CORP: Moody's Affirms Low-B and Junk Ratings ------------------------------------------------------ The ratings of Samsonite Corporation were affirmed by Moody's Investors Service. Outlook for the ratings was changed to developing from negative due to the company's planned recapitalization pact that could sizably reduce the company's debts and refinance its current debt facility. Affirmed Ratings * B3 - Senior implied rating; * B2 - $70.0 million senior secured revolving credit facility due in June 2004; * B2 - $35.2 million senior secured European term loan facility due June 2004; * B2 - $46.2 million senior secured U.S. term loan facility due June 2005; * Caa2 - $322.8 million 10-3/4% senior subordinated notes due June 2008; * C - $309.1 million 13-7/8% senior redeemable preferred stock due June 2010; * Caa1 - Senior unsecured issuer rating. Samsonite's brand recognition and ample market share supports the ratings. The ratings also reflect the challenges Samsonite encounters in the luggage industry as intensified price competition in the company's core Asian and European markets could have a large impact on the company's consolidated operating results. Samsonite Corporation, based in Denver, Colorado, is one of the world's largest manufacturers and distributors of luggage and travel-related products. SAMSONITE: Inks 4th Amendment to Rights Pact with BankBoston ------------------------------------------------------------ Samsonite Corporation and Equiserve Trust Company, N.A. entered into an Amendment to the Rights Agreement dated May 1, 2003 amending the Rights Agreement between the Company and BankBoston, N.A., dated May 12, 1998, as amended on April 7, 1999, as further amended on July 13, 1999, and as further amended on September 27, 1999 in order, among other things, to: 1. amend Section 1(a) of the Rights Agreement to provide that none of ACOF Management, L.P., Bain Capital (Europe) LLC, Ontario Teachers Pension Plan Board, or any other person who is a party to the Recapitalization Agreement, dated May 1, 2003, between the Company, Ares, Bain and certain of its Affiliates and Ontario, or any voting, stockholder or other agreement referred to therein, nor any of their respective Affiliates (as defined in the Rights Agreement), will become an Acquiring Person (as defined in the Rights Agreement) or otherwise cause a triggering event to occur as a result of the execution of the Recapitalization Agreement and/or the Ancillary Agreements, or consummation of the transactions contemplated in the Recapitalization Agreement and/or the Ancillary Agreements; 2. amend Section 7(a) of the Rights Agreement to provide for the expiration of the Rights Agreement on the Closing Date (as defined in the Recapitalization Agreement); 3. amend Section 21 of the Rights Agreement to provide for the automatic resignation of the Rights Agent upon the termination of the transfer agency relationship; and 4. add a new Section 34 to the Rights Agreement to provide that the Rights Agent will not be liable for any failures resulting from acts beyond its reasonable control. SERVICE MERCHANDISE: Challenging US Bank and Trust's $7MM+ Claim ---------------------------------------------------------------- US Bank and Trust National Association filed multiple proofs of claim relating to certain real property that the Service Merchandise Debtors lease from a third-party landlord. The alleged secured claims are: Claim No. Amount --------- ------ 3796 $2,338,158 3797 1,104,336 3798 278,888 1503 $278,888 1504 2,338,158 1505 1,104,336 2209 5,000 Each of the claims relates to a principal and interest owed by the landlord under certain loans or financing agreements between them and US Bank. These loans are purportedly secured by leasehold mortgages granted by the Landlord to US Bank, which in turn grants US Bank an interest in the Landlord's interest in its leases with the Debtors. However, Paul G. Jennings, Esq., at Bass, Berry & Sims PLC, in Nashville, Tennessee, argues that since the Debtors are not parties to the Loans or any leasehold mortgages, US Bank does not have a claim against them. The claims are not enforceable against the Debtors under any agreement or applicable law. Furthermore, Claim Nos. 3796, 3797 and 3798 assert a basis for liability that is duplicative of Claim Nos. 1504, 1505 and 1503. "US Bank, if at all, is entitled only to a single satisfaction of any particular claim of liability against the Debtors," Mr. Jennings asserts. By allowing US Bank to assert its claims of liability under the multiple Proofs of Claim, the Debtors and their estates risk the imposition of inconsistent liability and multiple recoveries for a single claim or liability. The Bankruptcy Code grants an allowed secured claim to a claimant only if the claimant has an allowed claim against the Debtors that is secured by a valid lien against property of the estate. In this case, Mr. Jennings says, US Bank does not have any interest in any property of the estate. Moreover, even if US Bank had a valid interest in the property of these estates, the interest does not secure any allowable claim against the Debtors. Therefore, US Bank is not entitled to any secured claim against the Debtors. Thus, to confirm that US Bank has only a single claim of liability, to clarify the claims register in these cases, and to simplify the claims allowance or disallowance process, the Debtors ask the Court to disallow the duplicative claims filed and allow, if at all, only one claim that encompasses the Debtors' entire liability, if any, to the Claimant. (Service Merchandise Bankruptcy News, Issue No. 48; Bankruptcy Creditors' Service, Inc., 609/392-0900) SIERRA PACIFIC: S&P Raises Refunding Revenue Bonds Rating to BB --------------------------------------------------------------- Standard & Poor's Ratings Services said that it raised its rating on Sierra Pacific Power Co.'s (SPP; B+/Neg/--) $80 million Washoe County water facilities refunding revenue bonds to 'BB' from 'B-'. "The upgrade reflects the backing of the previously unsecured bonds by SPP's general and refunding bonds as part of the current remarketing," said credit analyst Swami Venkataraman. The tax-exempt bonds, for which SPP is the obligor, mature in 2036 but are remarketed periodically to reset interest rates. The company will set rates for only one year, since SPP has only short-term authority to issue general and refunding bonds. Reno, Nevada-based SPP had $1.02 billion in debt outstanding as of Dec. 31, 2002. Its 'B+' corporate credit rating reflects the consolidated credit profile of Sierra Pacific Resources and its utility subsidiaries, Nevada Power and SPP, and factors in the adverse regulatory environment in Nevada; operating risk arising from Nevada Power's dependence on wholesale markets for over 50% of its energy requirements; and the substantially weakened financial profile resulting from the disallowance in 2002 by the Public Utility Commission of Nevada of $434 million in deferred power costs for Nevada Power and $56 million for SPP. The recent federal court decision denying Nevada Power's request to recover the $437 million disallowed by the PUCN did not affect ratings, since Standard & Poor's had not factored into the current ratings any positive outcome from the litigation. The negative outlook reflects the risk of an adverse ruling either by the PUCN on Nevada Power's pending deferred cost recovery case or by the court on the Enron lawsuit. Enron is demanding payment of about $300 million in marked-to-market profits on power supply contracts with Nevada Power that Enron terminated following Nevada Power's downgrade in April 2002. STARWOOD HOTELS: S&P Yanks Corporate Credit Rating to BB+ --------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings for Starwood Hotels & Resorts Worldwide Inc., including its corporate credit rating to 'BB+' from 'BBB-'. At the same time, the ratings were removed from CreditWatch where they were placed on Dec. 20, 2002. The outlook is stable. Total debt outstanding as of March 31, 2003, was $5.5 billion. "The rating actions stem from Starwood's lack of progress in improving credit measures during the last several quarters amid a challenging lodging operating environment," said Standard & Poor's credit analyst Craig Parmelee. "In addition, our expectations are that credit measures will not improve to levels more consistent with the ratings in the near term, despite significant planned asset sales," added Mr. Parmelee. Performance of U.S. travel and leisure companies continues to be affected by such factors as a weak economy and an unstable global political environment. Revenue per available room (RevPAR) for the U.S. lodging industry declined for a second consecutive year in 2002, and was down again in the first quarter of 2003. In addition, higher expenses in areas such as insurance, energy, health care costs, and property taxes, have squeezed margins resulting in declining EBITDA for most companies. In line with these trends, Starwood provided guidance on April 29, 2003, that RevPAR for its same-store owned hotels in North America would likely decline about 4% in its second quarter ended June 30, 2003, and that EBITDA would likely be in the $230 million - $240 million range. In addition, Starwood cited its expectation that full 2003 RevPAR will decline by 1%-2% resulting in EBITDA of $930 million - $950 million. These results are below the previous expectations of Standard & Poor's. The company has moved forward on a plan to sell assets in order to reduce debt, and has announced that it has entered into agreements to sell certain assets for ?565 million, or about $617 million based on exchange rates as of March 31, 2003. These transactions are expected to close in mid-2003. The company also announced its intention to sell an 18-hotel portfolio in North America. While no agreement has been consummated relative to this portfolio, the company expects to enter into an agreement in the coming months and to close these sales in the second half of 2003. If Starwood successfully closes each of the transactions, it will generate total proceeds of about $1.1 billion, most of which are expected to be used to reduce debt. Although this level of asset sales would achieve Standard & Poor's prior expectations, the operating environment has weakened further than expected in the first quarter, and only a modest improvement is anticipated in the remainder of 2003. A large cause of Starwood's EBITDA decline stems from a significant economy related fall-off in business travel during the past two years. The composition of Starwood's portfolio typically helps the company to grow faster than the sector during healthy economic environments, but underperforms the industry during weak periods. Therefore, Standard & Poor's expects that Starwood will experience solid internal growth once the economy begins to grow more quickly, particularly given a very modest anticipated increase in hotel supply in the next few years. However, Standard & Poor's does not foresee the lodging industry to begin to grow quickly again before 2004, as there are few catalysts to spur a quick positive turnaround. This is expected to limit Starwood's ability to materially improve credit measures through internally generated cash flow in the near term. SYSTECH RETAIL: Wants Lease Decision Period Extended to July 14 --------------------------------------------------------------- Systech Retail Systems (U.S.A.), Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Eastern District of North Carolina to extend the time within which they must decide whether to assume, assume and assign, or reject their unexpired nonresidential real property leases. Since the Petition Date, the Debtors say they've worked hard to: i) stabilize their business operations; ii) identify opportunities to reduce costs in their business operations; iii) review and evaluate all of their executory contracts, including Leases; iv) negotiate with various landlords and lessors for the purpose of determining whether certain of such contracts can be re-negotiated; and v) develop the structure and terms of a plan of reorganization with their secured creditors. Notwithstanding this progress, the Debtors submit that they are not yet in a position to make decisions about whether to assume or reject their leases. The Debtors believe ask for an extension of their Lease Decision Period through July 14, 2003 . . . affording them enough time to arrive at crucial decisions regarding their unexpired leases. Systech Retail Systems (USA) Inc., along with two other affiliates filed for chapter 11 protection on January 13, 2003, (Bankr. E.D.N.C. Case No. 03-00142). Systech is an independent developer and integrator of retail technology, including software, systems and services to supermarket, general retail and hospitality chains throughout North America. N. Hunter Wyche, Esq., at Smith Debnam Narron Wyche & Story represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $50 million. TANGER FACTORY: First-Quarter Results Show Continued Improvement ---------------------------------------------------------------- Tanger Factory Outlet Centers, Inc. (NYSE: SKT) reported net income for the first quarter of 2003 was $2.2 million, as compared to net income of $1.4 million for the first quarter of 2002, representing a 58.3% per share increase. For the three months ended March 31, 2003, funds from operations, a widely accepted measure of REIT performance, was $10.3 million as compared to FFO of $8.9 million for the three months ended March 31, 2002, representing a 15.1% increase in total FFO and a 2.6% per share increase. First Quarter Highlights * 95% period-end portfolio occupancy rate * 152 leases signed, totaling 677,000 square feet with respect to re-tenanting and renewal activity, including 50.4% of the square footage scheduled to expire during 2003 * $293 per square foot in reported same-space tenant sales for the rolling twelve months ended March 31, 2003 * 7.2% occupancy cost per square foot for the rolling twelve months ended March 31, 2003 * 99,000 square feet of development/expansion space underway and scheduled to open in third quarter of 2003 * 45.8% debt-to-total market capitalization ratio, 2.62 times interest coverage ratio * $0.615 per share in common dividends declared, $2.46 per share annualized, representing 10th consecutive year of increased dividends Stanley K. Tanger, Chairman of the Board and Chief Executive Officer, commented, "Our portfolio and tenants continued to perform well and post solid results, despite being faced with numerous challenges in the first quarter, including unusually harsh winter conditions and the shift in the Easter holiday to the second quarter of 2003. Our portfolio occupancy held firm again at a strong 95%, equaling our first-quarter occupancy rate for the past four consecutive years. Importantly, we continued to operate our centers in a cost efficient manner, as was evidenced by our low occupancy cost of 7.2%." Mr. Tanger continued, "During the first three months we have already released or renewed approximately 50% of the space scheduled to expire during the entire year. We are on track with our development and expansion activities, which may have a positive impact on our earnings in the second half of the year. Overall, we remain well-positioned to achieve our stated growth objectives for the year." Portfolio Operating Results During the first quarter of 2003, Tanger executed 152 leases, totaling approximately 677,000 square feet, including approximately 539,000 square feet, representing 50.4%, of the 1,070,000 square feet originally scheduled to expire during 2003. Tanger achieved a 1.7% increase in base rental revenue per square foot, on a cash basis, with respect to this re-tenanting and renewal activity. Additionally, the average initial cash base rent for new stores opened during the first quarter of 2003 was $19.01, representing an increase of $1.43 or 8.1% above the average base rent for stores closed during the first quarter of 2003. Reported same-space sales per square foot for the rolling twelve months ended March 31, 2003 were $293 per square foot. This represents a 0.3% decrease compared to $294 per square foot for the rolling twelve months ended March 31, 2002. For the first quarter of 2003, same-space sales decreased by 6.1%, as compared to the record high first quarter sales for the same period in 2002. Same-space sales is defined as the weighted average sales per square foot reported in space open for the full duration of the comparative periods. The sales results are due, in part, to the severe winter during the first quarter of 2003 and the shift in the Easter holiday to the second quarter of 2003. Investment Activities In January 2003, Tanger acquired a 29,000 square foot, 100% leased expansion located contiguous with its existing factory outlet center in Sevierville, Tennessee. The purchase price was $4.7 million with an expected return of 10%. Construction of an additional 35,000 square foot expansion of the center is currently under way, with stores expected to open during the summer of 2003. The cost of expansion is estimated to be $4.0 million with an expected return in excess of 13%. Upon completion of the expansion, the Sevierville center will total approximately 418,000 square feet. Tanger is currently underway with constructing the second phase of our newly opened, 100% leased center in Myrtle Beach, SC. The second phase totals 64,000 square feet and stores are expected to open during the summer of 2003. The center, which was developed and is managed and leased by the Company, is owned through a joint venture of which the Company owns a 50% interest. Accordingly, the Company's capital investment for the second phase will be approximately $1.1 million with an expected return in excess of 20%. Balance Sheet Summary As of March 31, 2003, Tanger had a total market capitalization of approximately $744 million, with $341 million of debt outstanding, equating to a 45.8% debt-to-total market capitalization ratio. This compares favorably to a total market capitalization of approximately $674 million with $360 million of debt outstanding on March 31, 2002. The Company had a 53.3% debt-to-total market capitalization ratio as of March 31, 2002. During the first quarter Tanger reduced its debt outstanding by $3.9 million. As of March 31, 2003, the Company had $19.3 million outstanding with $65.7 million available on its lines of credit. The Company continues to improve its interest coverage ratio, which was 2.62 times for the first quarter of 2003, as compared to 2.35 times interest coverage in the same period last year. On May 2, 2003, Tanger announced it would call for redemption all of its outstanding Depositary Shares representing Series A Cumulative Convertible Redeemable Preferred Shares (NYSE: SKT-A) on June 20, 2003. The redemption price will be $25.00 per Depositary Share, plus accrued and unpaid dividends, if any, to, but not including, the redemption date. Prior to redemption, each Depositary Share may be converted to .901 common shares at the option of the Depositary Share holder until 5:00 p.m., Eastern Time, on June 17, 2003. 2003 FFO Per Share Guidance Based on current market conditions, the strength and stability of its core portfolio and the Company's ongoing development, expansion and acquisition pipeline, Tanger currently believes its FFO for 2003 will range between $3.44 and $3.50 per share. Tanger currently expects 2003 FFO to range between $0.81 to $0.83 per share for the second quarter, $0.87 to $0.89 per share for the third quarter and $0.98 to $1.00 per share for the fourth quarter. Tanger Factory Outlet Centers, Inc. (NYSE: SKT), a fully integrated, self- administered and self-managed publicly traded REIT, presently operates 34 centers in 21 states coast to coast, totaling approximately 6.2 million square feet of gross leasable area. We are filing a Form 8-K with the Securities and Exchange Commission that includes a supplemental information package for the quarter ended December 31, 2002. For more information on Tanger Outlet Centers, visit the Company's Wweb site at http://www.tangeroutlet.com * * * As previously reported in Troubled Company Reporter, Standard & Poor's affirmed its double-'B'-plus corporate credit rating on Tanger Factory Outlet Centers Inc., and its operating partnership, Tanger Properties L.P. At the same time, the double-'B'-plus senior unsecured rating and the double-'B'-minus preferred stock rating were affirmed. The outlook is stable. The ratings acknowledge Tanger's success to date in repositioning its portfolio toward a more upscale tenancy base, and reflect the company's established business position, solid operating profitability, and improving same-space sales performance. These strengths are offset by the company's lower debt coverage measures, moderate encumbrance levels, and relatively small (and highly concentrated) portfolio. TDC ENERGY LLC: Successfully Emerges from Bankruptcy Proceeding --------------------------------------------------------------- TDC Energy LLC's Plan of Reorganization was confirmed by the United States Bankruptcy Court for the Eastern District of Louisiana on April 17, 2003. On May 2, 2003, the effective date of the Plan of Reorganization occurred and TDC entered into a new credit facility with an affiliate of Macquarie Energy Capital. As part of the plan of reorganization TDC resolved all litigation and claims pending between it and Mirant Americas Energy Capital, LP. Jefferies & Company, Inc., acted as financial advisor to TDC in connection with resolution of the issues involving Mirant. In accordance with the Plan of Reorganization, TDC will pay all of its pre-bankruptcy unsecured creditors the full amount of their claims over a period of twelve months. Payments will begin August 1, 2003, to these creditors. Creditors holding secured claims will be paid in full on July 1, 2003. TDC is a closely-held exploration and production company based in New Orleans, Louisiana. TDC is focused on acquiring, developing, and producing oil and gas properties in the Gulf of Mexico. TDC has operated in the Gulf since 1991 and continues to explore new offshore opportunities. With its bankruptcy case concluded, TDC is well positioned for growth and expects substantial revenue increases for the remainder of 2003 and into 2004. TENFOLD CORP: Q1 Results Reflect Sequential-Quarter Improvement --------------------------------------------------------------- TenFold(R) Corporation (OTC Bulletin Board: TENF), provider of the Universal Application(TM) platform for building and implementing enterprise applications, announced its financial results for its first quarter of 2003 ended March 31, 2003. For the first quarter, TenFold reported revenues of $9.4 million, an operating profit of $4.7 million, and net income of $7.0 million. These financial results reflect sequential- quarter increases from TenFold's fourth quarter of 2002 financial results, of 13% over revenues of $8.3 million, of 124% over an operating profit of $2.1 million, and of 63% over net income of $4.3 million. Net income for the first quarter of 2003 includes a non-recurring, non-operating gain of $2.2 million, resulting from the retirement of substantial leasing debt at a significant discount. At March 31, 2003, TenFold's cash position was $4.3 million as compared to $3.8 million at the beginning of the first quarter, reflecting a modest cash increase during the quarter. "We are pleased to have begun 2003 with a solid, profitable quarter," said Dr. Nancy Harvey, TenFold's President, CEO, and Chief Financial Officer. "Sequential quarter-to-quarter increases are affirmation of our far-reaching turnaround program and provide a sound foundation for our future growth. These results also demonstrate the value of focused execution by our staff and managers who are deeply committed to our technology, our customers, and our Company." As compared to the first quarter of the prior year, TenFold reported first quarter revenues of $9.4 million, a 68% increase over revenues of $5.6 million for the same period of 2002. A first quarter operating profit of $4.7 million compares with an operating loss of $3.5 million for the same period of 2002. Net income for the first quarter of 2003 of $7.0 million, compares with a net loss of $3.0 million during the same period of 2002. Q1 of 2003 was notable for a number of additional reasons: -- TenFold completed and announced a licensing agreement with NtelliApp Ltd., a developer of applications for small and mid-size manufacturing companies. -- TenFold announced and delivered support for both Sun and Microsoft Java Virtual Machines. -- TenFold released new technology features called HyperGrids and TransposeGrids. -- TenFold published applications development speed comparisons that explain the Universal Application development speed advantage over other applications development technologies. -- TenFold appointed Tanner + Co. as its new auditors and completed its 2002 year-end audit and subsequent Form 10-K filing. -- TenFold CardioTrac, a TenFold application used by over 20 hospitals, received high marks on a Vendor Data Quality Report from STS for data submitted by hospitals that use TenFold CardioTrac to report outcomes data to STS. -- TenFold retired substantial equipment leasing debt at significant savings to TenFold. -- TenFold received cash from a common stock equity investment from Robert Felton, a TenFold Director. (See -- TenFold completed the mutual termination of its financing agreement with Fusion Capital and obtained back all TenFold shares previously provided to Fusion Capital. -- TenFold completed and some customers are already using a new Universal Application release with many new features and other improvements. During the next week, TenFold anticipates filing its Form 10-Q for the quarter ended March 31, 2003 and hosting a conference call to discuss its financial results for the quarter. TenFold (OTC Bulletin Board: TENF) licenses its breakthrough, patented technology for applications development, the Universal Application(TM), to organizations that face the daunting task of replacing obsolete applications or building complex applications systems. Unlike traditional approaches, where business and technology requirements create difficult IT bottlenecks, Universal Application technology lets a small, business team design, build, deploy, maintain, and upgrade new or replacement applications with extraordinary speed and limited demand on scarce IT resources. For more information, visit http://www.10fold.com * * * On February 10, 2003, TenFold Corporation dismissed its independent accountant, KPMG LLP, and engaged the services of Tanner + Co., as the Company's new independent accountant for its last fiscal year ending December 31, 2002 and its current fiscal year ending December 31, 2003. The Audit Committee of the Company's Board of Directors approved the dismissal of KPMG and the appointment of Tanner as of February 10, 2003. KPMG's audit report on such financial statements as of and for the fiscal year ended December 31, 2001 contained a separate paragraph stating, in relevant part: "The accompanying consolidated financial statements and related financial statement schedule have been prepared assuming that the Company will continue as a going concern. The Company suffered a significant loss from operations during the year ended December 31, 2001, has a substantial deficit in working capital and stockholder's equity at December 31, 2001, had negative cash flow from operations for the year ended December 31, 2001 and is involved in significant legal proceedings that raise substantial doubt about its ability to continue as a going concern." TOUCHTUNES MUSIC: Ernst & Young Expresses Going Concern Doubt ------------------------------------------------------------- TouchTunes Music Corporation was a development-stage company until September 1998. Prior to September 1998, the Company's financial resources were used to finance the development of its Digital Jukeboxes. Revenues, since September 1998, have been generated from the sale and leasing of the Digital Jukeboxes to jukebox operators in the United States, as well as from the music service contracts associated with such sales and leases of the Digital Jukeboxes. At December 31, 2002, the Company had delivered a total of 6,050 Digital Jukeboxes, as compared with 4,493 units delivered as at December 31, 2001. Management plans to devote significant resources to continuing its aggressive sales and marketing efforts within the jukebox industry. Management also intends to continue its development activities to apply its technology to other music-on-demand products and applications in other industries. The Company plays approximately 12.5 million songs to an estimated audience of approximately three million people each month. Management expects the base of installed Digital Jukeboxes to continue to grow, thereby increasing the number of plays and the audience exposure. This growth is expected to establish the Digital Jukebox as a significant promotional medium for record labels and their artists. These factors should assist the Company in obtaining and/or renewing agreements with various record companies. Revenues from the Digital Jukeboxes amounted to approximately $23,759,000 for the year ended December 31, 2002, as compared with approximately $19,482,000 for the year ended December 31, 2001. Digital Jukebox sales, leasing and financing revenue amounted to approximately $16,068,000 for the year ended December 31, 2002, as compared with approximately $14,731,000 for the year ended December 31, 2001. Music service revenues amounted to approximately $7,690,000 for the year ended December 31, 2002, as compared with approximately $4,752,000 for the year ended December 31, 2001. The increase in jukebox sales was primarily a result of increased unit sales of Digital Jukeboxes in 2002 as compared to 2001. The Company generated a significant increase in music service revenue in 2002, as a result of the increase in the number of Digital Jukeboxes installed in the Company's digital jukebox network, which generate recurring music service revenues. The cost of Digital Jukebox revenues and direct operating costs increased by approximately $1,686,000 from $11,441,000 for the year ended December 31, 2001 to $13,127,000 for the year ended December 31, 2002. The overall increase in the unit sales of Digital Jukeboxes in 2002 resulted in an increase in the cost of Digital Jukebox revenues. Due to the increase in Digital Jukebox revenues, the number of songs played over the Company's digital jukebox network increased, thereby increasing the royalties paid to record labels and publishers. The commissions paid to the Company's distributors also increased as a consequence of the increase in the unit sales of Digital Jukeboxes. These increases were partially offset by reductions in communication costs due to the increased transition by operators from the use of telephone lines to the Internet and reductions in the overall cost of installation and maintenance of jukeboxes. The Company's funding has come principally from a group of three investors: Societe Innovatech du Grand Montreal, CDP Capital Technologies (formerly known as CDP Sofinov) and CDP Capital Communications (formerly known as Capital Communications CDPQ Inc.). To date, they have collectively invested approximately $43 million in the Company, which has provided the Company with sufficient capital resources to finance its start-up activities and to commence commercial operations. Financing arrangements with the National Bank of Canada are another significant source of funding for the Company's operations. In January 1999, TouchTunes Digital entered into the following loan facilities with the National Bank of Canada to finance the Company's equipment acquisitions, leasehold improvements, and research and development expenditures: (1) a small business loan under the Small Business Loans Program sponsored by the Government of Canada; (2) a general term loan; and (3) a term loan under the Loan Program for Technology Firms sponsored by the Canada Economic Development (the "CED TERM LOAN"). In August 2001, the Company repaid in full the total amount owed under the small business loan and the general term loan. As at December 31, 2002, approximately $123,000 was outstanding under the CED Term Loan. The CED Term Loan bears interest at the National Bank of Canada's Canadian prime rate plus 3.5%. Principal repayment of the loan is in equal payments of $8,790 over a 36-month period that will end in February 2004. In April 1999, TouchTunes Digital entered into a jukebox term loan facility providing for loans aggregating approximately $10.4 million with the National Bank of Canada to finance the cost of manufacturing the Digital Jukeboxes. The interest rate on the Jukebox Term Loan is priced at the National Bank of Canada's U.S. base rate, plus 2.55%. Additional compensation must be paid to the National Bank of Canada each year equal to 0.5% of the Company's annual gross revenues as defined under the Jukebox Term Loan. The Jukebox Term Loan must be repaid in full by November 2004. The CED Term Loan and Jukebox Term Loan are each secured by a lien on the past, present and future assets of TouchTunes Digital and the Company and a guarantee from the Company for the entire amount due under each of these financing arrangements. In May 2000, the Company issued an aggregate of 8,888,889 shares of Series B Preferred Stock to CDP Capital Technologies and CDP Capital Communications. Specifically, the Company issued 2,222,222 shares of Series B Preferred Stock to CDP Capital Technologies in exchange for the conversion of $5,000,000 in prior advances to the Company. The remaining 6,666,667 shares of Series B Preferred Stock were issued to CDP Capital Communications in exchange for proceeds consisting of (i) $14,000,000 in cash and (ii) $1,000,000 previously advanced by CDP Capital Communications to the Company. CDP Capital Communications received $136,370 as a fee for its financial services with respect to this transaction among the Company, CDP Capital Technologies and CDP Capital Communications. In May 2001, TouchTunes Digital obtained an operating line of credit from the National Bank of Canada in the amount of $500,000 bearing interest at the National Bank of Canada's U.S. base rate plus 1.25%, which was subsequently increased in September 2001 to $1 million. The Line of Credit is also secured with a lien on the past, present and future assets of TouchTunes Digital and the Company as well as a guarantee from the Company for the entire amount drawn down on the Line of Credit, and was renewable on April 30, 2003. In July 2001, the Company's Board of Directors approved the terms of an unsecured loan facility, from CDP Capital Communications and CDP Capital Technologies, for up to a maximum of $5 million. Under these terms, CDP Capital Communications and CDP Capital Technologies committed to lend up to $3 million and $2 million, respectively. As of December 31, 2002, $3.5 million had been advanced by CDP Capital Communications and CDP Capital Technologies in the form of promissory notes, excluding accrued interest of $0.8 million thereon, bearing interest at the rate of 20% per annum, repayable 30 days after issuance unless exchanged earlier for debentures issuable under the Unsecured Loan Facility. On December 20, 2002, the Company issued convertible debentures to two principal stockholders, namely CDP Capital Communications and CDP Capital Technologies, for a principal amount of $400,000 each, bearing interest at 20% per annum and maturing on June 30, 2003, provided the Company entered into a debenture subscription agreement by January 6, 2003. Unless repaid in full at maturity, or earlier upon the occurrence of an event of default, the Debentures are convertible at the option of CDP Capital Communications and CDP Capital Technologies into Series B preferred shares at a conversion price of $0.50 per share. As a result of on-going negotiations aimed at recapitalizing the Company by way of conversion of all of these principal stockholders' loans and the Company's retractable Series B Preferred Stock into permanent capital stock, the Unsecured Loan Facility agreement and the Debentures' subscription agreement had not been executed as initially contemplated by December 31, 2002 and January 6, 2003, respectively. On March 28, 2003, CDP Capital Communications and CDP Capital Technologies reconfirmed that the requirements to execute the Unsecured Loan Facility agreement in regard to the CDP Notes were effectively waived on a timely basis. Moreover, CDP Capital Communications and CDP Capital Technologies waived the requirement, under the Debentures, to execute the Debentures' subscription agreement by January 6, 2003 and the Company agreed to enter into a Debentures' subscription agreement on or before June 15, 2003, failure of which will provide CDP Capital Communications and CDP Capital Technologies with repayment and conversion rights. Furthermore, the maturity date under the CDP Notes and the Debentures were extended to April 1, 2004. The agreements as amended between the Company and the National Bank of Canada governing the CED Term Loan, the Jukebox Term Loan and the Line of Credit, each contain a covenant that requires the Company to maintain a minimum net stockholders' equity, as defined in the agreement, of $8,000,000 and a minimum debt to equity ratio of 1.5 to 1. If the Company fails to comply with these covenants, the National Bank of Canada has the right to demand full repayment of the loans outstanding under the CED Term Loan and the Jukebox Term Loan, as well as any funds drawn down on the Line of Credit. The Company was in compliance with its debt covenants as at December 31, 2002. The Company has contractual obligations totaling approximately $10,049,521. These relate to payments due under the Company's long-term debt obligations, capital lease obligations, and operating leases. The capital leases are principally for computer equipment, while the operating leases are primarily related to office space. Ernst & Young, LLP, Chartered Accountants of Montreal, Canada, and the independent auditors for TouchTunes Music has stated, in their Auditors Report dated March 14, 2002: "[T]he Company has incurred recurring operating losses since inception, generated negative cash flows from operations except for the year ended December 31, 2002 during which the Company generated positive cash flows from operations, and has required amendments to its debt covenants which raises substantial doubt about the Company's ability to continue as a going concern." TRICO MARINE: First Quarter 2003 Net Loss Widens to $13 Million --------------------------------------------------------------- Trico Marine Services, Inc. (Nasdaq: TMAR) reported a net loss for the quarter ended March 31, 2003, of $13.5 million on revenues of $29.0 million, compared to a net loss of $4.8 million on revenues of $32.1 million for the first quarter of 2002. The decline in revenues for the first quarter of 2003 was due to lower average day rates and utilization for some of the Company's vessel classes compared to the first quarter 2002. Supply boat day rates for the Gulf of Mexico averaged $5,277 for the quarter, compared to $6,050 for the first quarter 2002. The utilization rate for Gulf of Mexico supply boats was 47% for the first quarter 2003, compared to 53% for the year-ago period. Average day rates for the North Sea fleet were $10,459 for the most recent quarter, compared to $10,443 for the first quarter 2002. Utilization of the North Sea vessels was 80% in the most recent quarter, compared to 89% in the first quarter 2002. Dayrates for the crew and line-handling vessels averaged $2,762 for the first quarter 2003, compared to $2,729 for the first quarter 2002. Utilization in the first quarter of 2003 for the crew and line-handlers averaged 68% compared to 67% in the first quarter 2002. The Company reported its vessel operating expenses increased 6.1% to $20.5 million for the first quarter of 2003, compared to $19.3 million for the 2002 quarter, as a result of the addition of two new platform supply vessels and two new crew boats in the last half of 2002, and higher North Sea labor costs attributable principally to the strengthening of the Norwegian Kroner against the dollar. These increases in costs were offset in part by reduced U.S. vessel labor costs. Interest expense increased to $7.9 million during the first quarter of 2003, compared to $6.1 million in the 2002 first quarter, due to the additional borrowings associated with the construction of the two new North Sea platform supply vessels completed in 2002, additional borrowings and interest costs associated with the refinancing of the senior notes and the strengthening of the Norwegian Kroner against the dollar. "The most significant factors in our first quarter results were the seasonal downturn in activity in the North Sea market, which adversely affected utilization, and the decline in the rig count in the U.S. Gulf," said Thomas E. Fairley, Trico's President and Chief Executive Officer. "Due to the weak market conditions in the first quarter, we chose to dry dock two vessels in our North Sea fleet early which also affected our utilization. Since the first quarter, we have seen improvement in North Sea utilization and dayrates." Trico Marine provides a broad range of marine support services to the oil and gas industry, primarily in the Gulf of Mexico, the North Sea, Latin America and West Africa. The services provided by the Company's diversified fleet of vessels include the marine transportation of drilling materials, supplies and crews, and support for the construction, installation, maintenance and removal of offshore facilities. As previously reported, Standard & Poor's Ratings Services affirmed its 'B+' corporate credit rating on Trico Marine Services Inc. At the same time, Standard & Poor's revised the company's outlook to negative, following a review of 2002 results and expected 2003 earnings. The outlook revision reflects Standard & Poor's concerns that continued weakness in the company's primary offshore support markets could lead to additional financial deterioration. U.S. CELLULAR: March 31 Working Capital Deficit Stands at $540MM ---------------------------------------------------------------- United States Cellular Corporation (Amex: USM) reported service revenues of $564.6 million for the first quarter of 2003, up 22% from $461.1 million in the comparable period a year ago. The company recorded an operating loss of $6.2 million in the first quarter of 2003 compared to operating income of $79.7 million in the first quarter of 2002. Operating expenses include a $23.5 million loss related to the assets to be transferred to AT&T Wireless (NYSE: AWE) relating to the exchange transaction announced in March 2003. In addition, operating income in the first quarter of 2003 was impacted by higher expenses related to increased customer growth and minutes of use and a larger fixed asset base. Basic earnings per share were a loss of $.17 compared to $.56 in the first quarter a year ago. Basic earnings per share before cumulative effect of accounting change were a loss of $.17 compared to $.52 in the comparable period a year ago. The latter earnings per share measurement excludes the cumulative effect on years prior to 2002 of U.S. Cellular's decision to defer commissions expenses, equal to the amount of activation fee revenues deferred, pursuant to Staff Accounting Bulletin No. 101 beginning in 2002. The company's operating results do not treat the operations of the markets included in the exchange of assets with AWE as discontinued operations, as was disclosed in the company's 2002 annual report to shareholders. The company and its independent accountants worked very closely to ensure that the accounting for the markets being exchanged was both appropriate and accurate. After a thorough review, the company and its independent accountants concluded that the accounting for these operations should not be accounted for as discontinued operations. Service revenues from the markets to be transferred to AWE totaled approximately $29 million in the first quarter of 2003. In addition, the results for the first quarter of 2002 do not include any operating results from the company's Chicago operations, which were acquired in August 2002. First Quarter Highlights -- Customer units totaled 4,240,000, a 21% increase from 3,504,000 customers one year earlier. -- Net customer unit activations from distribution channels totaled 137,000 during the quarter, compared to 31,000 activations for the same quarter of 2002. -- For the quarter, the company recorded postpay churn of 1.6%, which is very favorable to industry averages. -- Monthly retail revenue per customer increased 4% year-over- year, to $37.05 in the quarter compared to $35.79 in the same period a year ago. At March 31, 2003, the Company's balance sheet shows that its total current liabilities exceeded its total current assets by about $540 million. "The first quarter was one of substantial growth for U.S. Cellular," said John E. Rooney, president and chief executive officer. "Net add growth of 137,000 for the quarter was pervasive, as all of our market areas grew year over year. We were particularly pleased to see strong growth from our recently acquired Chicago market, continuing the trend we have been experiencing since we launched the market last November. Much of the growth in Chicago and in our other markets is due to our intense focus on customer satisfaction and delivering the very best in customer service every day of the week. "However, operating expenses grew considerably in the quarter due to a variety of factors. First, we spent heavily in Chicago to support the market's fast pace of growth. This spending came mostly in the form of selling, marketing and advertising expenses. Secondly, with 21% more customers, 31% more cell sites and the ensuing steep uptick in minutes of use, systems operations expenses grew sharply. Third, our depreciation expense was up 45% due to the growth of the business and the conversion of our network to CDMA 1XRTT technology -- an upgrade that allows faster access to information, enhanced voice capacity, improved call coverage and clarity. Fourth, our marketing and retention costs grew as a result of our initiatives aimed at ensuring brand awareness and low customer churn. We continue to see the benefits of this spending, as postpay churn in the quarter totaled only 1.6% - once again, one of the lowest rates in the industry." During the quarter, U.S. Cellular included in operating expenses a pre-tax loss of $23.5 million ($17.7 million net of tax), related to the difference between the fair value of the assets being transferred to AWE and their book value. Because U.S. Cellular's tax basis in the assets to be transferred is lower than its book basis, the company anticipates that it will record an additional charge to the income statement of approximately $12 million for taxes and have a current tax liability of approximately $26 million related to the completion of the transaction, which is expected to close in the third quarter of 2003. U.S. Cellular recognized an investment loss of $3.5 million ($2.1 million net of tax) related to the writedown to fair value of certain intangible assets in the quarter. Also during the quarter, U.S. Cellular repurchased the remaining $45.2 million of 9% Series A Notes due 2032 with borrowings under its revolving credit facilities. These notes, originally issued for $175 million in conjunction with the completion of the Chicago MTA acquisition in August 2002, have now been retired. U.S. Cellular Corporation, the nation's eighth largest wireless service carrier, provides wireless service to more than 4.2 million customers in 149 markets throughout 25 states. The Chicago-based company operates on a customer satisfaction strategy, meeting customer needs by providing a comprehensive range of wireless products and services, superior customer support and a high-quality network. U.S. STEEL: Fitch Ratchets Low-B Ratings Down One Notch ------------------------------------------------------- Fitch Ratings has lowered the senior unsecured long-term debt ratings of U.S. Steel to 'BB-' from 'BB' and removed the company's ratings from Rating Watch Negative. Concurrently, the ratings of the company's senior secured bank debt and convertible preferred stock have been lowered to 'BB' and 'B', respectively, from 'BB+' and 'B+'. The Rating Outlook is Negative. This rating action considers the addition of approximately $650 million of debt in conjunction with the company's acquisition of certain assets from National Steel. Although the cost savings created from combining the operations of U.S. Steel and National together with the productivity achievements of a new labor agreement covering both enterprises is compelling, the combination requires an accommodative steel market to pay back front-end acquisition and labor reorganization costs. Fitch is not certain that the automotive, construction and tin plate markets will yield the sort of price increases in short order necessary to restore U.S. Steel to its financial health before the acquisition. Hot-rolled sheet prices have softened since the beginning of the year, and absent cost-push increases in plate, there is no evidence of a pick-up in demand in construction. More comforting, U.S. Steel's financial plans will provide increased liquidity as operations are integrated, and the new labor agreement stems the growth of aggregate under funded pension and retiree medical obligations. The only element missing is a sustainable demand for more product. U.S. STEEL: Commences Sr. Debt Offering & Consent Solicitation -------------------------------------------------------------- United States Steel Corporation (NYSE: X) announced that it intends to sell $350 million of Senior Notes. The offering is being made in connection with the proposed acquisition of substantially all of National Steel's integrated steel assets, which is expected to close later this month. The prospectus and prospectus supplement contain an updated outlook for U. S. Steel and additional details concerning the proposed acquisition. The notes will be registered under the Securities Act. JP Morgan Securities Inc. and Goldman, Sachs & Company will be joint book runners for this offering. Copies of the prospectus and prospectus supplement related to the public offering may be obtained from J.P. Morgan Securities Inc., Prospectus Department, One Chase Manhattan Plaza, New York, NY 10081 (Telephone Number 212-552-5121). U. S. Steel also announced that it will be seeking consent from holders of its 10.75% Senior Notes due August 1, 2008, to amend the Indenture governing such Notes. The proposed amendments are intended to conform certain provisions of the Indenture governing these notes to the indenture governing the new notes. The amendment contemplated by this consent is not necessary to the closing and financing of the National acquisition. The record date to determine note holders entitled to consent is May 6, 2003. The consent solicitations will expire on May 13, 2003, unless extended. U. S. Steel will pay a consent fee of $1.25 in cash for each $1,000 principal amount of notes for which a consent is validly delivered and not revoked. Payments for the consents will be conditioned upon, among other things, receiving consents from holders of a majority in principal amount of outstanding notes. Terms and conditions of the consent solicitations relating to the proposed amendments are contained in Consent Solicitation Statements that are being distributed to the holders of notes. Holders of notes may obtain copies of the relevant Consent Solicitation Statements and related material from the information agent, Georgeson Shareholder, at (212) 440-9800 or 1-800-790-4667. JP Morgan Securities Inc. and Goldman, Sachs & Company are joint solicitation agents for the consent solicitations. Questions regarding the consent solicitations may be directed to JPMorgan at (212) 270-7967 and Goldman Sachs at (212)-902-6351. USG CORP: Futures Rep. Earns Nod to Continue CIBC's Engagement -------------------------------------------------------------- The legal representative for future asbestos claimants, Dean M. Trafelet, Esq., in USG Corporation's bankruptcy proceedings, obtained permission from the Court to continue CIBC World Markets Corporation's retention beyond April 29, 2003, in accordance with a supplemental letter agreement. The legal representative for future asbestos claimants, Dean M. Trafelet, Esq., previously obtained the Court's authority to modify and extend the terms of CIBC World Markets Corporation's retention as his financial advisor and investment banker, in the bankruptcy proceeding involving USG Corporation and affiliated debtors. CIBC will continue to: (a) review and consult on the Debtors' financing options; (b) review and consult on the potential divestiture, acquisition and merger transactions for the Debtors; (c) review and consult on the capital structure issues for the reorganized Debtors; (d) review and consult on the Debtors' operating and business plans, including an analysis of the Debtors' long-term capital needs and changing competitive environment; (e) provide valuation of the Debtors as a going concern, in whole or part; (f) provide valuation analyses of the Debtors' asbestos exposure; (g) review and consult on the Debtors' debt capacity; (h) review and consult on the financial issues and options concerning potential reorganization plans, and coordinating negotiations; (i) provide general advice and consultation regarding the adequacy of the funding of any trust contemplated by Section 524(g) of the Bankruptcy Code; (j) provide testimony in court on Mr. Trafelet's behalf, if necessary; and (k) provide any other necessary services as Mr. Trafelet or his counsel may reasonably request from time to time with respect to the Debtors' financial, business and economic issues that may arise. The relevant provisions of the Supplemental Letter Agreement include: A. Term CIBC's retention commences from April 29, 2003 for six months. However, Mr. Trafelet has the right to continue CIBC's retention after the conclusion of the current period pursuant to a subsequent retention application and engagement letter to be negotiated. B. Fees CIBC will be compensated for its services through a $25,000 monthly fee within the six-month period. Additional services called upon by Mr. Trafelet will be charged at a different rate as mutually agreed by Mr. Trafelet and CIBC. C. Expenses The Debtors will be obligated to reimburse CIBC for any reasonable out-of-pocket expenses CIBC incurred in connection with any legal or administrative action commenced against any indemnified person. D. Key Persons CIBC will make available the services of Joseph J. Radecki, Jr. If Mr. Radecki ceases to be employed by CIBC, Mr. Trafelet is entitled to terminate the Agreement. E. Indemnity CIBC and its affiliates or an employee, agent, officer, director, attorney, shareholder or any person who controls CIBC are entitled to be indemnified from and against certain losses and liabilities arising out of or related to the performance of its services on Mr. Trafelet's behalf. (USG Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., 609/392-0900) WASTE CONNECTIONS: S&P Affirms BB Rating with Positive Outlook -------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Waste Connections Inc. to positive from stable. At the same time, Standard & Poor's affirmed its existing ratings, including the 'BB' corporate credit rating, on the company. Folsom, Calif.-based Waste Connections is a major regional solid waste management company with rated debt of about $525 million. "The outlook revision reflects improving business and financial profiles of Waste Connections," said Standard & Poor's credit analyst Roman Szuper. "Waste Connections' leading positions in most of its markets, combined with further gains in operating performance and appropriate capital allocation, could lead to a continued strengthening of the credit profile and a ratings upgrade over the intermediate term." Although the solid waste management industry is mature and competitive, earnings prospects for Waste Connections are enhanced by the essential nature of services, leading presence in a number of growth markets, and expected benefits from acquisitions. Concerns include management of a growth rate that is historically higher than the average for the industry, lower special waste and commercial construction-related volumes, pressure on certain costs, and reduced pricing flexibility. Waste Connections provides collection, recycling, transfer, and disposal services in secondary (nonurban) markets, primarily in the Western U.S. It serves more than 1 million residential, commercial, and industrial customers in 22 states. Some 50%-55% of revenues (goal is 60%) and a greater percentage of cash flows are generated under exclusive contract arrangements, with the balance derived from competitive markets. WELLFLEET CAPITAL: Chapter 11 Case Summary & Largest Creditor ------------------------------------------------------------- Debtor: Wellfleet Capital, LLC c/o Wellfleet Partners, Inc. 1 Penn Plaza Suite 2032 New York, New York 10119 Bankruptcy Case No.: 03-12864 Chapter 11 Petition Date: May 6, 2003 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtor's Counsel: Mark A. Frankel, Esq. Backenroth Frankel & Krinsky, LLP 489 Fifth Avenue New York, NY 10017 Tel: (212) 593-1100 Fax : (212) 644-0544 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's Largest Unsecured Creditor: Entity Claim Amount ------ ------------ ICC Performance, LP $3,600,000 c/o Ross Rock (300,000 150 E 52 Street secured) New York, NY 10022 WHEREHOUSE ENTERTAINMENT: Has Until June 30 to Decide on Leases --------------------------------------------------------------- By order of the U.S. Bankruptcy Court for the District of Delaware, Wherehouse Entertainment, Inc., and its debtor- affiliates secured an extension of their lease decision period. The Court gives the Debtors until June 30, 2003, to decide whether to assume, assume and assign, or reject their unexpired nonresidential real property leases. Wherehouse Entertainment, Inc., sells prerecorded music, videocassettes, DVDs, video games, personal electronics, blank audio cassettes and videocassettes, and accessories. The Company filed for chapter 11 protection on January 20, 2003, (Bankr. Del. Case No. 03-10224). Mark D. Collins, Esq., and Paul Noble Heath, Esq., at Richards Layton & Finger represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $227,957,000 in total assets and $222,530,000 in total debts. WINSTAR COMMS: Court Approves Trustee's Settlement Pact with PwC ---------------------------------------------------------------- Christine C. Shubert, the Chapter 7 Trustee for the estate of Winstar Communications, Inc. et al, obtained the Court's approval of a settlement agreement with PricewaterhouseCoopers. The salient terms of the settlement agreement are: A. in full satisfaction of the Claims, the Trustee will pay PwC $225,000; and B. the parties agree to mutually release each other from any and all claims. Backgrounder The Debtors' books and records indicate that PwC received total payments amounting to $1,334,100 within 90 days of the Petition Date. However, the Trustee's professionals acknowledged certain valid defenses that PwC asserted under Section 547 of the Bankruptcy Code, thereby reducing the amount of the potential preferential payments that PwC received to $442,000. Pursuant to Bankruptcy Code Section 547, if these payments were made on account of an antecedent debt, they were preferences, which were recoverable by the Debtors' estates, subject to possible defenses, which would prevent these payments from being recoverable. PwC had asserted various defenses to the Preference Claim. The Debtors' books and records also indicated that PwC was owed $614,000 for accounting services rendered to the Debtors during the pendency of the Debtors' Chapter 11 cases pursuant to the "carveout" of the DIP Lenders' superpriority claim as defined in the Debtors' Final Order authorizing the Debtors to enter into postpetition credit agreement and obtain postpetition financing, providing adequate protection and granting liens, security interests and superpriority claims. On November 27, 2002, the Trustee sought to make a distribution to professionals under "carveout" in the debtor-in-possession credit agreement and to settle preference claims against certain professionals. On December 13, 2002, the Court granted the Trustee's request. Pursuant to the Carveout Order, the Trustee was given authority to settle preference claims against professionals holding claims under the Carveout before paying any claims under the Carveout. The Trustee and PwC have engaged in good faith settlement negotiations pursuant to the Carveout Order. (Winstar Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM: MCI Bondholders Seek Chapter 11 Trustee Appointment ------------------------------------------------------------- Twelve institutions holding both MCI senior and subordinated bonds ask the Court to appoint a limited purpose Chapter 11 Trustee for MCI Communications Corporation and its debtor subsidiaries. Thomas Moers Mayer, Esq., at Kramer Levin Naftalis & Frankel LLP, in New York, alleges that the departed and disgraced management caused WorldCom and its subsidiaries to record in their general ledgers a trillion dollars of inexplicable and unsupported intercompany claims. WorldCom now argues that these claims justify a substantive consolidation plan that destroys MCI's value as a separate corporate entity to the detriment of both senior and subordinated MCI creditors -- creditors holding securities that were issued before WorldCom acquired MCI. The Plan transfers value from MCI creditors to WorldCom and Intermedia creditors on a massive scale: Creditor Recovery ---------------------------- Without With Class Consolidation Consolidation ---------------------------- ------------- ------------- WorldCom Senior Debt 23.7% 35.9% WorldCom General Unsecured 23.7% 35.9% MCI Senior Debt 100.0% 80.0% MCI Subordinated Debt 100.0% 0.0% MCI Trade Debt 100.0% 35.9% Intermedia Senior Debt 70.0% 93.5% Intermedia General Unsecured 55.0% 83.2% Intermedia Subordinated Debt 0.0% 46.4% Mr. Mayer argues that only the alleged existence of the unsupported intercompany claims justifies either substantive consolidation or the outrageous transfer of value to WorldCom and Intermedia creditors -- creditors who, according to every securities filing made by WorldCom, are structurally subordinated to the MCI creditors they now seek to impoverish. WorldCom's sole response to the assertion of inexplicable and unsupported claims against an otherwise solvent MCI and its subsidiaries is to cut a deal with a conflicted minority of the senior tranche of MCI debt and call it a day -- to the detriment of MCI's other creditors. Mr. Mayer states that WorldCom will not permit MCI to undertake an independent examination of the alleged intercompany claims, much less fight them. The Dissenting MCI Bondholders submit that these facts call for the appointment of a Chapter 11 trustee for the limited purpose of doing what WorldCom will not do -- fulfilling MCI's duty, under Sections 510(1), 704(5), 704(7), 1106(1), 1106(2) and 1106(4)(A)&(B) of the Bankruptcy Code, to examine, object to, and disclose the alleged intercompany claims, and to oppose any substantive consolidation that does not recognize the structural superiority of all MCI creditors. Section 1104(a)(1) of the Bankruptcy Code requires the appointment of a Trustee "for cause." Mr. Mayer contends that ample cause exists for the appointment of a trustee. MCI needs a trustee because it needs to defend itself against alleged intercompany claims appearing on fraudulently kept books, and WorldCom has done everything it can to strip MCI of its defenses. For MCI creditors, this is a "binary" case -- either the intercompany claims are valid, or they are not. If the intercompany claims are not valid, there is no ground for substantive consolidation, and all MCI creditors should be paid in full. From the beginning of this case, Mr. Mayer tells the Court that the MCI senior bondholders, with the MCI junior bondholders and MCI trade creditors in close support, have sought to vindicate MCI's rights as a separate entity. But on April 12, 2003, WorldCom bought off a conflicted minority of MCI senior bondholders. Holders of less than half the MCI senior bonds, many of whom held conflicting positions in Intermedia and WorldCom debt, agreed to support MCI's consolidation if their class got an 80% distribution. WorldCom insisted that MCI senior bondholders resign from all other MCI committees, throw their MCI junior notes away and preclude all other MCI creditors from obtaining access to any of the information developed in their fight against substantive consolidation. Mr. Mayer reports that the agreement not to fight the intercompany claims could not, and did not, bind the MCI junior bonds, who are entitled to 100% in a non-substantive consolidation plan. Nor could this agreement bind dissenting MCI senior bondholders -- three of whom have resigned in protest from the MCI senior bondholder committee to join the MCI Dissenting Bondholders. The 80% settlement by the conflicted minority of MCI senior bonds represents nothing more than their judgment that they had about a 90% chance of defeating substantive consolidation. Mr. Mayer points out that the agreement does nothing to the rights of MCI Dissenting Creditors -- other than strip MCI, their obligor, of its advocates two days before the filing of a plan whose essence is a substantive consolidation premised entirely on questionable, if not wholly bogus, intercompany claims. The pivotal but unexplained nature of these intercompany claims, WorldCom's effort to strip MCI of its advocates, and WorldCom's failure to administer MCI's Chapter 11 case in compliance with the Bankruptcy Code and Rules constitute grounds for appointment of a trustee for MCI. WorldCom has one and only one rationale for substantive consolidation -- "a trillion dollars" of supposed intercompany transfers among WorldCom and its subsidiaries. Mr. Mayer notes that these alleged claims exist nowhere except as internal accounting entries on WorldCom's general ledger. No further information appears on the Debtors' schedules. WorldCom has refused to file schedules for its individual subsidiaries -- as it is required to do under Section 521(1) of the Bankruptcy Code and Rule 1007(b) of the Federal Rules of Bankruptcy Procedures -- and its Disclosure Statement contains no information about which subsidiary is the victim, and which the beneficiary, of these ledger entries. Given the massive accounting fraud that forced WorldCom into Chapter 11, these ledger entries are entitled to no presumption of validity whatsoever. Mr. Mayer informs the Court that the Dissenting MCI Bondholders recognizes that WorldCom's new chief executive officer, Michael Capellas, had nothing to do with the fraud, and mean no disrespect to Mr. Capellas by supporting this request. The Dissenting MCI Bondholders understand that Mr. Capellas is focused on getting WorldCom out of bankruptcy at the earliest possible date. But for MCI creditors -- and especially the hundreds, if not thousands, of individual investors who bought their MCI subordinated notes in $25 denominations -- the curse of the accounting fraud remains. The case started with ledger entries and is ending in the same way. Mr. Mayer asserts that it is, and should be, WorldCom's burden to prove its intercompany claims -- to prove that the ledger entries are more than fabrications by WorldCom's departed and corrupt accounting department. Someone has to defend MCI against these claims. This someone should be a trustee -- a fiduciary accountable to the Court and funded by the estate he or she is appointed to protect. To do otherwise -- to foist the burden of defending MCI against WorldCom's claims on a creditor group such as the Dissenting MCI Bondholders -- is unfair. It is no answer that less than 50% of MCI senior bonds -- including major holders who are conflicted by substantial Intermedia holdings -- have agreed not to fight for MCI. (Worldcom Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) * Dewey Ballantine Adds 3 Corporate Partners to New York Office --------------------------------------------------------------- Dewey Ballantine LLP, a leading international law firm, announced that J. Anthony Terrell, Catherine C. Hood and Michael F. Fitzpatrick, Jr., have joined the Corporate Department as partners in the Firm's New York office. Mr. Terrell, Ms. Hood and Mr. Fitzpatrick, formerly of Thelen Reid & Priest LLP, together have extensive experience in a broad range of corporate, corporate finance and securities work, primarily representing diversified energy companies and electric and gas utilities and their underwriters in securities, and other financing transactions. These utilities include Avista Corporation, DQE, DTE Energy Company, PPL Corporation, Pepco Holdings, Inc., Public Service Company of Colorado, Sierra Pacific Resources and UniSource Energy Corporation. "By adding these practices to Dewey Ballantine, we are continuing a strategic growth initiative that adds talented attorneys from a range of disciplines worldwide," said Everett L. Jassy, chairman of Dewey Ballantine's Management Committee. "Tony, Cathy and Mike will add depth to our preeminent energy group, a sector of our business that has grown significantly in recent years." Mr. Terrell is a vice chairman of the Corporate Finance Committee of the Section of Public Utility, Communications and Transportation Law of the American Bar Association and is a member of the Section of Business Law. Mr. Terrell is also a member of the National Association of Bond Lawyers and the Section on Business Law of the International Bar Association. A graduate of Villanova University School of Law, Mr. Terrell holds a bachelor's degree and an LL.M. in Taxation from New York University. Ms. Hood is a member of the American Bar Association Sections of Public Utility, Communications and Transportation Law and Business Law, and the Bar Association of the City of New York. A cum laude graduate of Cornell Law School and a magna cum laude graduate of Harvard College, Ms. Hood has extensive experience in securities and asset-based finance work, corporate and financial restructuring and development of new financial products. Mr. Fitzpatrick is a member of the New York Bar and the American Institute of Certified Public Accountants. Mr. Fitzpatrick is also a member of the American Bar Association Section of Business Law. A graduate of Fordham University School of Law, Mr. Fitzpatrick graduated cum laude from Villanova University with a bachelor's degree in accounting. Dewey Ballantine LLP, founded in 1909, is an international law firm with more than 600 attorneys located in New York, Washington, D.C., Los Angeles, Palo Alto, Houston, Austin, London, Warsaw, Budapest, Prague and Frankfurt. Through its network of offices, the firm handles some of the largest, most complex corporate transactions and litigation in areas such as M&A, bankruptcy, capital markets, private equity, antitrust, intellectual property, structured finance, project finance, international trade and international tax. Industry specializations include banking, healthcare, insurance, energy and utilities, media, consumer and industrial goods, technology, telecommunications and transportation. * Jefferies Hires Samuel Pearlstein as Senior Aerospace Analyst --------------------------------------------------------------- Jefferies & Company, Inc., the principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF), announced the hiring of Samuel J. Pearlstein as a Managing Director and Senior Equity Research Analyst. Mr. Pearlstein will continue to follow the aerospace and defense sectors, areas in which he has been a leading analyst for the past nine years. Mr. Pearlstein is a three-time Wall Street Journal All-Star Analyst, having been selected in 1999 and 2002 for stock picking, and on the basis of earnings accuracy in 2000. "We are delighted to welcome Sam Pearlstein to Jefferies," commented Richard B. Handler, Chairman and Chief Executive Officer of Jefferies. "He is well known as a leading analyst in the global aerospace and defense sectors and will quickly add value for our institutional clients." "Jefferies' acquisition of Quarterdeck Investment Partners, a leading investment bank for aerospace and defense companies, has helped us focus on these sectors," added John C. Shaw, Jr., President of Jefferies. "We believe Jefferies' institutional clients will benefit from coverage of these areas by such an experienced and well-respected analyst." "I'm excited about joining Jefferies and look forward to leveraging the firm's significant trading capabilities and further enhancing my relationships with the institutional community," said Mr. Pearlstein. Mr. Pearlstein will report to Steven R. Black, Director of Equity Research, and will be based in the firm's Short Hills, New Jersey office. He was most recently a Managing Director and Senior Research Analyst at Wachovia Securities, Inc. for three years, and held a similar position while at ING Barings LLC for the three years previous to that. Mr. Pearlstein earned an MBA from The Stern School of Business at New York University and a BS, cum laude, at the University of Pennsylvania. He is President of the Aerospace Analyst Society. Jefferies & Company, Inc., the principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF), is a full-service investment bank and institutional securities firm focused on the middle market. Jefferies offers financial advisory, capital raising, mergers and acquisitions, and restructuring services to small and mid-cap companies. The firm provides outstanding trade execution in equity, high yield, convertible and international securities, as well as fundamental research and asset management capabilities, to institutional investors. Additional services include correspondent clearing, prime brokerage, private client services and securities lending. The firm's leadership in equity trading is recognized by numerous consulting and survey organizations, and Jefferies' affiliate, Helfant Group, Inc., executes approximately twelve percent of the daily reported volume on the NYSE. Through its subsidiaries, Jefferies Group, Inc. employs more than 1,350 people in 21 offices worldwide, including Atlanta, Boston, Chicago, Dallas, Hong Kong, London, Los Angeles, New York, Paris, San Francisco, Tokyo, Washington and Zurich. Further information about Jefferies, including a description of investment banking, trading, research and asset management services, can be found at http://www.jefco.com * Sheppard Mullin Welcomes Three Experienced Litigators ------------------------------------------------------- Sheppard, Mullin, Richter & Hampton LLP announced that John R. Fornaciari has joined the Firm as a partner, and Robert M. Disch and John J. Vecchione have each joined the Firm as senior attorneys. Fornaciari specializes in the trial of complex commercial cases, antitrust litigation and white-collar criminal defense. Disch focuses his practice on commercial litigation with a specialty in antitrust law. Vecchione practices general litigation, primarily in the context of commercial and employment law. "We are excited to add these three talented attorneys, with outstanding litigation capabilities and wide-ranging trial experience," said Guy Halgren, Chairman of the Firm's Executive Committee. Also commenting on the lateral additions, Administrative Partner of the Washington D.C. office Bob Magielnicki said, "Seasoned litigators are critical in order to properly serve clients. The integration of these three attorneys adds to the Firm's already formidable litigation resources across the country." Fornaciari has handled trials nationwide, involving antitrust claims, RICO claims, fraud, freeze-out mergers, breach of duty, conspiracy, mail fraud and wire fraud. Fornaciari received his law degree from Boston College in 1971, and his undergraduate degree from Providence College in 1968. He is a member of the American Bar Association, and is admitted to practice in the District of Columbia, the Commonwealth of Massachusetts; the U.S. Supreme Court; U.S. Courts of Appeals for the First, Second, Third, Fourth, Sixth, Seventh and Federal Circuits; the U.S. District Courts for the District of Columbia, Maryland, Massachusetts and Connecticut; and the U.S. Tax Court. Focusing on commercial litigation and antitrust law, Disch has handled complex commercial litigation matters arising from bank failure; defense of corporate officers and directors; defense of antitrust suits; defense and prosecution of defamation and trade libel suits; and white-collar criminal investigations and trials. Disch also specializes in matters relating to the Hart- Scott-Rodino Act. Disch received his law degree from Northwestern University in 1981, and his undergraduate degree from Carroll College in 1978. He is admitted to practice in the District of Columbia; the U.S. Supreme Court; U.S. Court of Appeals for the District of Columbia Circuit; and the U.S. District Court of Maryland. Vecchione has extensive experience litigating contract and commercial matters, and defending equal employment opportunity claims. His experience includes UCC check fraud cases, maritime torts, antitrust, white-collar and securities litigation. Vecchione received his law degree from Georgetown University Law Center in 1989, and his undergraduate degree from Hamilton College in 1986. He is admitted to practice in New York and the District of Columbia, as well as Maryland Federal District Court. Sheppard Mullin has more than 370 attorneys among its eight offices in Washington, D.C., Los Angeles, San Francisco, Orange County, San Diego, Santa Barbara, West Los Angeles, and Del Mar Heights. The full-service firm provides counsel in Antitrust & Trade Regulation; White Collar and Civil Fraud Defense; Business Litigation; Construction, Environmental, Real Estate & Land Use Litigation; Corporate; Entertainment, Media & Communications; Finance & Bankruptcy; Financial Institutions; Government Contracts & Regulated Industries; Healthcare; Intellectual Property; Labor & Employment; Real Estate, Land Use, Natural Resources & Environment; and Tax, Employee Benefits, Trusts & Estates. The Firm celebrated its 75th anniversary in 2002. * DebtTraders' Real-Time Bond Pricing ------------------------------------- Issuer Coupon Maturity Bid - Ask Weekly change ------ ------ -------- --------- ------------- Federal-Mogul 7.5% due 2004 15.0 - 17.0 0.0 Finova Group 7.5% due 2009 38.0 - 39.0 0.0 Freeport-McMoran 7.5% due 2006 102.5- 103.5 +0.5 Global Crossing Hldgs 9.5% due 2009 3.5 - 4.0 +0.5 Globalstar 11.375% due 2004 2.25 - 2.75 +0.25 Lucent Technologies 6.45% due 2029 73.0 - 74.0 +0.5 Polaroid Corporation 6.75% due 2002 6.75 - 7.25 +0.25 Terra Industries 10.5% due 2005 93.0 - 95.0 0.0 Westpoint Stevens 7.875% due 2005 23.0 - 24.0 +2.0 Xerox Corporation 8.0% due 2027 85.5- 87.5 +1.0 Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***