/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/030701.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, July 1, 2003, Vol. 7, No. 128 Headlines ALLEGHENY ENERGY: Unit Closes $51MM Asset Sale Deal with UGI ALLEGIANCE TELECOM: Court Okays BMC Appointment as Claims Agent AMERCO: Can't Timely Deliver 2002 Annual Report to SEC AMERCO: Has Until Month-End to File Schedules and Statements AMES DEPT.: Proposes Uniform Admin Claims Allowance Procedures BALTIMORE MARINE: Sec. 341(a) Meeting to Convene on July 23 BETHLEHEM STEEL: Resolves SSM Coal's Valid Reclamation Claims BION ENVIRONMENTAL: Receives $600K Bridge Loan from Bright Cap. BMC INDUSTRIES: Taps William Blair to Evaluate Strategic Options CABLE SATISFACTION: Obtains Court Nod to Postpone Annual Meeting CALYPTE BIOMEDICAL: Nancy Katz Steps Down as President and CEO CASCADES INC: Commences Partial Redemption of Class A Preferreds CHILDTIME LEARNING: March 28 Working Capital Deficit Tops $13MM CLAYTON HOMES: Will Proceed with Annual Meeting on July 16, 2003 COGENTRIX ENERGY: Auditors Express Going Concern Uncertainty COLE NATIONAL: Bank Lenders Amend and Extend Credit Agreement COMM'L MONEY: Court Clears Settlement with Lakeland Bank et al. CONEXANT SYSTEMS: Completes Mindspeed Technologies Spin-Off CONSECO FINANCE: Wants Nod to Sell Credit Accounts to EMCC Inc. CROSS MEDIA: Look for Schedules and Statements by Month-End CROWN CASTLE INT'L: Prices $200 Million Convertible Senior Notes CROWN PACIFIC: Files for Chapter 11 Reorganization in Arizona CROWN PACIFIC PARTNERS: Case Summary & Largest Unsec. Creditors CWMBS INC: Fitch Rates Class B-3 and B-4 P-T Certs. at BB/B DENALI CAPITAL: S&P Assigns Prelim. BB Rating to Cl. B-2L Notes DOMAN INDUSTRIES: Chester Johnson Steps Down from Board of Dir. DVI CORP: S&P Junks Counterparty Rating to CCC after SEC Ruling EISBERG FINANCE: Fitch Drops Class D Floating-Rate Notes to DD EL PASO: Settlement Participants Complete Final Procedural Step ENCOMPASS SERVICES: Asks Court to Clear Liberty Settlement Pact ENRON CORP: Secures Court Approval of Qwest Settlement Pact ENRON: Asia Pacific's Case Summary & 18 Unsecured Creditors ENRON: Atlantic Commercial's Case Summary & 3 Unsec. Creditors ENRON: Development Corp.'s Case Summary & Unsecured Creditor ENRON: ET Power 3 LLC's Voluntary Chapter 11 Case Summary ENRON: Global Power's Voluntary Chapter 11 Case Summary ENRON: Nowa Sarzyna Holding's Case Summary & Unsecured Creditor ENRON: Portland General's Voluntary Chapter 11 Case Summary ENRON: Portland Transition's Voluntary Chapter 11 Case Summary ENRON: Protane Corp.'s Case Summary & 20 Unsecured Creditors ENRON: South America LLC's Case Summary & 16 Unsec. Creditors FLEMING COMPANIES: Selling Grocery Wholesale Business to C&S FLEMING COMPANIES: Court Directs DIP Agents to Allow GOB Sales GENTEK INC: Files Plan of Reorganization & Disclosure Statement GLOBAL LEARNING: Asks Court to Extend Schedules Filing Deadline GOODYEAR TIRE: USWA Nixes Company's Proposal and Talks Break Off GRUPO IUSACELL: Seeks Further Extension of Loan Default Waiver HAWK CORP: Offering Employees Stock Option Cancellation Option HAYES LEMMERZ: Battle Over Mexican Joint Venture Continues IMMTECH INT'L: Chan Kon Fung Discloses 15.232% Equity Stake LARRY'S STANDARD: Court Okays Forshey & Prostol as Attorneys LEAP WIRELESS: Court Extends Lease Decision Time Until Sept. 10 LENNAR CORPORATION: Declares Quarterly Cash Dividends LIBERTY TAX CREDIT: Trien Rosenberg Airs Going Concern Doubt LNR PROPERTY: Completes $350MM Senior Subordinated Note Offering LUBY'S INC: Elects Gasper Mir as Company's New Board Chairman MANDALAY RESORT: Files SEC Form S-3 re Conv. Debenture Resales MERRILL CORP: S&P Revises Outlook on Low-B and Junk Ratings METRIS COMPANIES: Funds 1-Year $125 Million Term Loan Agreement MIDWEST AIRLINES: Gov. Jim Doyle Proposes Financing Agreement MISSISSIPPI CHEMICAL: Court Approves KPMG LLP as Accountants MOHEGAN TRIBAL: Modifies Tender Offer for 8.75% Senior Sub Notes NATIONAL STEEL: Joint Plan's Claim Classification and Treatment NEW WORLD RESTAURANT: Inks Equity Restructuring Agreement NEXMED INC: Regains Compliance with Nasdaq Listing Requirements ONE PRICE CLOTHING: Completes Equity Investment by Sun Cap. Unit OWENS CORNING: Selling Hebron, Ohio Property for about $1 Mill. PROCOM TECHNOLOGY: Fails to Meet Nasdaq Listing Requirement RAVEN MOON ENTERTAINMENT: Initiates Capital Restructuring Plan RELIANT RESOURCES: Fitch Rates $1.1B Senior Secured Notes at B+ RESIDENTIAL ACCREDIT: Fitch Rates Class B-1 & B-2 Notes at BB/B SECURITY ASSET: Liquidity Issues Raise Going Concern Uncertainty SHAW COMMS: Net Loss Narrows to $13 Million in Third Quarter SHAW COMMS: Provides Guidance for Fiscal 2003 and Fiscal 2004 SLMSOFT INC: Canadian Court Extends CCAA Protection Until Aug. 8 SPARTAN STORES: Sells 17 Food Town Stores for $30 Million Cash SPECIAL METALS: Reaches Tentative Labor Agreements with USWA SPIEGEL GROUP: Committee Turns to FTI for Financial Advice STILLWATER MINING: Robert M. Taylor Resigns as VP Operations SURGICARE INC: Forbearance Agreement Extended for 60 Days TELESYSTEM INT'L: Unit Closes $225 Million Senior Debt Offering TERADYNE INC: Will Publish Second Quarter Results on July 15 TOP-FLITE GOLF: Files for Chapter 11 Protection in Delaware TOP-FLITE: Case Summary & 20 Largest Unsecured Creditors TOUCH AMERICA: WLR Recovery Extends $5 Million of DIP Financing UNITED AIRLINES: Operating Loss Totals $155 Million in May UNITED AIRLINES: L.A. Airport Demands $1.3MM Stub Rent Payment UNOVA INC: Reaches Settlement of Patent Dispute with Fujitsu U.S. ENERGY: Receives $1.9 Million from Carrizo Oil Subsidiary WEIRTON STEEL: Alliance Wants Relief from Utility Injunction WELLMAN INC: Completes $126M Equity Investment & $275M Revolver WINFIELD CAPITAL: Reports $6MM Net Loss for Year Ended March 31 WINSTAR: Ch. 7 Trustee Asks Court to Clear Stratex Settlement WORLDCOM INC: Court Fixes May 28 as Record Date for Plan Voting W.R. GRACE: Summit Wants Prompt Decision on Land Option Pact * Ernst & Young Merges with Synergy Partners in Canada * Large Companies with Insolvent Balance Sheets ********* ALLEGHENY ENERGY: Unit Closes $51MM Asset Sale Deal with UGI ------------------------------------------------------------ Allegheny Energy, Inc. (NYSE: AYE) announced that Allegheny Energy Supply Conemaugh, LLC, a subsidiary of Allegheny Energy Supply Company, LLC, has completed the previously announced sale of its 83-megawatt (MW) share of the coal-fired Conemaugh Generating Station, located near Johnstown, Pa., to UGI Development Company, an indirect, wholly owned subsidiary of UGI Corp. (NYSE: UGI), for approximately $51.25 million, which includes a contingent amount of $5 million. This contingent amount could be received by Allegheny Energy Supply Conemaugh, LLC, in full, in part, or not at all, depending upon Allegheny Energy Supply's performance of certain post-closing obligations. The sale will result in an estimated pre-tax loss for Allegheny Energy of approximately $29 million, which has been calculated excluding the contingent amount. Allegheny Energy Supply Conemaugh announced the agreement to sell its interest in Conemaugh in late February 2003. Allegheny acquired the 4.86-percent interest in the 1,711-MW Conemaugh Generating Station in January 2001. With headquarters in Hagerstown, Md., Allegheny Energy is an integrated energy company with a balanced portfolio of businesses, including Allegheny Energy Supply, which owns and operates electric generating facilities and supplies energy and energy- related commodities, and Allegheny Power, which delivers low-cost, reliable electric and natural gas service to about three million people in Maryland, Ohio, Pennsylvania, Virginia, and West Virginia. More information about the Company is available at http://www.alleghenyenergy.com As reported in Troubled Company Reporter's Friday Edition, shares of U.S. power company Allegheny Energy Inc. fell as much as 13.7 percent on June 24, one day after the Company issued a statement that it might seek bankruptcy protection if it could not raise new capital. ALLEGIANCE TELECOM: Court Okays BMC Appointment as Claims Agent --------------------------------------------------------------- Allegiance Telecom, Inc., and its debtor-affiliates sought and obtained approval from the U.S. Bankruptcy Court for the Southern District of New York to tap the services of Bankruptcy Management Corporation as the official Noticing, Claims and Balloting Agent in the company's chapter 11 restructuring. In its capacity, BMC will: 1) prepare and serve all notices required in the bankruptcy cases; 2) maintain copies of all proofs of claim and proofs of interest filed in the bankruptcy cases; 3) maintain the official claims register(s); 4) receive and record all transfers of claims pursuant to Bankruptcy Rule 30o1(e); 5) maintain an up-to-date mailing list for all entities who have filed proofs of claim and/or requests for notices in the bankruptcy cases; 6) assist Customer with the management, reconciliation and resolution of claims; 7) mail and tabulate ballots for purposes of plan voting; 8) assist Customer with the preparation and maintenance of its Schedules of Assets and Liabilities, Statements of Financial Affairs and other master lists and databases of creditors, assets and liabilities, 9) assist Customer with the production of reports, exhibits and schedules of information or use by the Customer or to be delivered the Court, the Clerk's Office, the U.S. Trustee or other third parties; 10) provide other technical and document management services of a similar nature requested by Customer or the Clerk's office; and 11) facilitate or perform distributions. Tinamarie Feil leads the team in this engagement. Ms. Feil relates that BMC's hourly rates currently range from: Principals $200 to $275 per hour Consultants $95 to $200 per hour Case Support $75 to $150 per hour Technology Services $125 to $175 per hour Information Services $40 to $75 per hour Allegiance Telecom, Inc., is a holding company with subsidiaries operating in 36 major metropolitan areas in the U.S. who provide a package of telecommunications services, including local, long distance, international calling, high-speed data transmission and Internet services and customer premise communications equipment sales and maintenance services. The Debtors filed for chapter 11 protection on May 14, 2003 (Bankr. S.D.N.Y. Case No. 03-13057). Jonathan S. Henes, Esq., and Matthew Allen Cantor, Esq., at Kirkland & Ellis represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,441,218,000 in total assets and $1,397,494,000 in total debts. AMERCO: Can't Timely Deliver 2002 Annual Report to SEC ------------------------------------------------------ AMERCO (Nasdaq: UHALQ) has filed a Form 12b-25 providing for a 15- day extension for submitting its Form 10-K for the fiscal year ended March 31, 2003, to the Securities and Exchange Commission. The Company said that it has requested this extension because of additional time needed to internally verify data from the Company's books and records, as well as delays resulting from the voluntary Chapter 11 filing of June 20, 2003 and the previously announced re-audit of the financial statements of AMERCO for fiscal years ended March 31, 2001 and 2002. For more information about AMERCO, visit http://www.amerco.com AMERCO: Has Until Month-End to File Schedules and Statements ------------------------------------------------------------ At AMERCO's request, U.S. Bankruptcy Court Judge Zive gave the Debtors until July 31, 2003, to file their Schedules of Assets and Liabilities and Statement of Financial Affairs required of all debtors under 11 U.S.C. Sec. 521(1). Bruce T. Beesley, Esq., at Beesley, Peck & Matteoni, Ltd., in Reno, Nevada, told Judge Zive that the 15-day period afforded under Rule 1007(c) of the Federal Rules of Bankruptcy Procedure isn't sufficient. To prepare the Schedules and Statements, AMERCO must gather information from books, records and documents relating to thousands of transactions. The collection of information necessary to complete the Statement and Schedules will require an expenditure of substantial time and effort on the party of AMERCO's employees. Mr. Beesley indicates that in the days and weeks leading to the Chapter 11 filing, AMERCO's key management has been entirely occupied in negotiating agreements to assist in AMERCO's reorganization and preparing information and documents necessary to prepare the Chapter 11 filing. In the early days of this case, AMERCO anticipates that its key management and other employees will have many competing demands assisting in efforts to implement AMERCO's restructuring efforts while also addressing myriad employee, customer and vendor issues. (AMERCO Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392- 0900) AMES DEPT.: Proposes Uniform Admin Claims Allowance Procedures -------------------------------------------------------------- Ames Department Stores, Inc., and its debtor-affiliates propose uniform procedures to streamline the allowance of administrative expense claims against their estates. The Procedures will allow the Debtors to fix the allowed amount of administrative expense claims by a letter signed by an Ames officer, without the need for further application to or order from the Court. The Administrative Expense Letter will then preclude the Debtors from disputing the fixing of the allowed administrative expense claim amount. The administrative expense claims will be entitled to the priority of an administrative expense allowed under Section 503(b) of the Bankruptcy Code. The Debtors are already authorized to pay administrative expense claims incurred in the ordinary course. Accordingly, Ames argues, the Debtors should have the lesser-included power to fix the amount of the administrative expense claims. Martin J. Bienenstock, Esq., at Weil, Gotshal & Manges LLP, in New York, tells the Court that if the Debtors and the administrative expense claimant agree on the claim amount, there is no conceivable benefit to the Debtors' estates in expending time and resources drafting and filing a reply or stipulation and attending hearings before the Court. Mr. Bienenstock says that the Debtors are mindful of the substantial costs they would incur to prepare individual replies or stipulations and orders for each administrative expense claimant. The Administrative Claims Procedures, the Debtors believe, will promote efficiency, both in terms of their limited resources and the management of the Court's docket. The Debtors are in the process of reconciling their administrative expense claims and avoidance actions. The Debtors project administrative expenses total $115,000,000 to $120,000,000, and indicate that many of these claims still need to be reconciled. Since the start of the wind down process, the Debtors have tried to maximize value for the creditors by: -- selling all inventory; -- fully satisfying their obligations under their postpetition financing facilities; -- rejecting or assuming and assigning all their Unexpired Leases in accordance with Section 365 of the Bankruptcy Code; -- undertaking the analysis of potential avoidance actions; and -- reconciling creditors' claims. Aside from fixing the administrative expense claim amount, the Administrative Expense Letter will also indicate that: (a) the Claim will have administrative expense priority under Section 507(a)(1) of the Bankruptcy Code, (b) the claim will be paid at the same time as similarly situated administrative expenses, and (c) if the Debtors are unable to pay the claims in full, the claimant will receive the same dividend as other similarly situated administrative expense claimants. The statutory creditors' committee supports the proposed Procedures. (AMES Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) BALTIMORE MARINE: Sec. 341(a) Meeting to Convene on July 23 ----------------------------------------------------------- The United States Trustee will convene a meeting of Baltimore Marine Industries, Inc., and its debtor-affiliates' creditors on July 23, 2003, at 11:00 a.m., at 300 W. Pratt, No. 375, Baltimore, Maryland 21201. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Baltimore Marine Industries, Inc.'s main line of business is ship repair. The Company filed for chapter 11 protection on June 11, 2003 (Bankr. Md. Case No. 03-80215). Martin T. Fletcher, Esq., Cameron J. Macdonald, Esq., and Dennis J. Shaffer, Esq., at Whiteford Taylor & Preston L.L.P., represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $10 million each. BETHLEHEM STEEL: Resolves SSM Coal's Valid Reclamation Claims ------------------------------------------------------------- Pursuant to an Agreement between the Bethlehem Steel Debtors and SSM Coal LLC, 41,133 natural metric tons of furnace coke were sold on credit and delivered to the Debtors' Sparrows Point Facility on October 5, 2001 through October 11, 2001. On the Petition Date, SSM Coal made a written demand under Section 2-702 of the Uniform Commercial Code and Section 546(c) of the Bankruptcy Code for the return of the October Delivery. In the period between the unloading of the October Delivery and the Debtors' receipt of the Notice of Reclamation, the Debtors commingled and burned 14,780 natural metric tons of the October Delivery so that only 26,353 natural metric tons remained. On October 17, 2001, SSM Coal commenced an adversary proceeding against the Debtors seeking: -- reclamation of the October Delivery; or -- an administrative expense claim; in the alternative, -- a security interest in the October Delivery or any proceeds; or -- a Court order directing the Debtors to segregate, secure and protect the October Delivery; -- an order preliminarily enjoining Bethlehem from transferring or otherwise processing the October Delivery; and -- SSM Coal's reasonable attorneys' fees and costs. However, the Court denied SSM Coal's request for reclamation and segregation of the October Delivery. To protect their interest under the Agreement, SSM Coal requested adequate protection from the Debtors. Pursuant to a Stipulation and Order Regarding Reclamation Dispute Among the Debtors and SSM Coal LLC, approved by the Court on May 9, 2002, the Agreement was rejected pursuant to Section 365(a) of the Bankruptcy Code. Under the Stipulation, the Parties agreed that the Notice of Reclamation constituted a valid and timely reclamation demand under Section 2-702 of the Uniform Commercial Code and Section 546(c) of the Bankruptcy Code with respect to the 26,353 natural metric tons of coke remaining at the time the Notice of Reclamation was served on the Debtors. SSM Coal filed a $4,105,073 proof of claim in the Debtors' Chapter 11 case on September 27, 2002. Now, the Debtors and SSM further agree and stipulate that: (a) In full satisfaction of the valid reclamation claim, the Debtors will pay SSM Coal $1,315,015; (b) SSM Coal's Proof of Claim is modified and reduced by $2,630,029, so that the remaining $1,475,044 will be deemed an allowed general unsecured claim; (c) Except as provided, SSM Coal releases any and all other claims it has or may have against the Debtors and its subsidiaries and their directors, officers or agents, whether known or unknown; and (d) These provisions will be binding on any Chapter 11 trustee appointed in these Chapter 11 cases, and in the event of a conversion to a Chapter 7 case, on the Chapter 7 trustee. (Bethlehem Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service, Inc., 609/392-0900) BION ENVIRONMENTAL: Receives $600K Bridge Loan from Bright Cap. --------------------------------------------------------------- During the period from April 12, 2003 through June 6, 2003, Bright Capital, Ltd., an entity owned and controlled by Dominic Bassani, a consultant whose services were provided to Bion Environmental Technologies as part of its management agreement with D2CO, LLC, made further advances to Bion pursuant to a letter agreement. These advances to Bion total approximately $445,000 as of June 6, 2003 and were made for the purpose of providing funds to allow the Company to be able to pay operating expenses that are critical to its operations, primarily consisting of salaries paid to retain critical personnel (which now consists of six employees), to take actions to protect and expand its intellectual property and to commence work on a system installation in Texas. Brightcap has agreed to lend Bion the money that it needs (up to an amount not to exceed approximately $600,000, unless agreed otherwise) to pay these expenses as an additional loan on an as-needed basis, and to convert all of the amounts due under the Brightcap Bridge Loan to amounts that will become due under the same identical terms that the investors will receive in the first of a series of anticipated financings consisting of mandatorily convertible debt which are intended to be accomplished in 2003 through Bion Dairy Corporation, one of Bion's wholly-owned subsidiaries. Brightcap had lent Bion money in the past pursuant to a Secured Promissory Note dated March 28, 2003, and in connection with that loan Bion had granted Brightcap a security interest in certain of its tangible assets pursuant to a related Security Agreement. The Secured Note bears interest on the unpaid principal at the simple rate of six percent (6%) per annum, and all principal and accrued interest becomes payable on March 28, 2004. All of the amounts provided to Bion under the Brightcap Bridge Loan (plus prior advances from Brightcap, directly and/or indirectly through D2, since January 1, 2003 which had not been previously included in the Secured Note) were added as principal due under the existing Secured Note. All of the obligations due under the Secured Note will automatically and mandatorily convert to being an obligation under the Bion Dairy Financing contemporaneously with the issuance of the first convertible note under the Bion Dairy Financing; provided, however, that to the extent any funds are realized from the disposition of tangible assets under the existing Security Agreement, all of such funds will be utilized to reduce the amount due under the Secured Note and will not be converted (or, if received after the Secured Note has already been converted, such funds will be paid to Brightcap and applied to reduce the principal of the convertible notes received in the Bion Dairy Financing despite any prohibition on prepayment). As collateral for the Brightcap Bridge Loan, Bion and its subsidiaries have now granted Brightcap an additional security interest in all of their intellectual property, including without limitation, patents, patent applications, trade secrets and technical know-how pursuant to an amendment to the existing Security Agreement. Brightcap has acknowledged that the Intellectual Property Collateral is exactly the same collateral that Bion plans to grant as security to note holders in connection with the Bion Dairy Financing. Accordingly, Brightcap has agreed that: (a) even though Brightcap was granted a security interest in the Intellectual Property Collateral under the Brightcap Bridge Loan, Brightcap specifically consented to the anticipated granting of a security interest in the same collateral to the holders of notes under the Bion Dairy Financing after the date of the Brightcap Bridge Loan; (b) Brightcap will share its security interest in the Intellectual Property Collateral in pari pasu with the holders of any notes that are issued in the future pursuant to the Bion Dairy Financing; (c) Brightcap's security interest in the Intellectual Property Collateral will not be senior to the security interest granted to the holders of the notes under the Bion Dairy Financing, irrespective of the date(s) on which such security interests were granted; and (d) Brightcap will execute and deliver any documents reasonably requested by Bion and/or participants in the Bion Dairy Financing in that regard. Also, as of June 6, 2003, Bion owes approximately $900,000 to unsecured creditors in addition to the amounts that it currently owes to Brightcap, as discussed above, and $487,500 that it currently owes to The Trust Under Deferred Compensation Plan for D2CO, LLC for past management services. It should be noted, however, that the amounts currently owed by Bion to the D2 Trust will be converted into shares of the Company's common stock (unless otherwise agreed in writing) upon the earlier to occur of: (a) a $5 million or greater equity financing(s) by Bion, in which case the amount payable will be converted into shares of Bion common stock at the equity price of the financing (or, in the event that the $5 million in equity financing is obtained in a series of more than one financing, the price of the equity financing which pushes the aggregate total of the financings above $5 million), or (b) March 31, 2005, at the then current market price of Bion's common stock. Although Bion is currently seeking other outside sources of capital, currently it has not been able to secure financing that is necessary for its current and future operations and there can be no assurance that sufficient funds will be available from external sources. Further, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significantly dilutive effect on Bion's existing shareholders. Since Bion does not yet have the ability to generate cash flow from operations, it has substantially curtailed its current business activities and may need to cease operations if unable to immediately raise capital from outside sources. This would have a material adverse effect on Bion's business and its shareholders. Bion designs and operates advanced waste and wastewater treatment systems for a variety of industrial and agricultural applications. * * * As previously reported, there is substantial doubt about the Company's ability to continue as a going concern. In connection with their report on Bion's Consolidated Financial Statements as of, and for the year ended, June 30, 2002, BDO Seidman, LLP, the Company's independent certified public accountants, expressed substantial doubt about the ability of Bion to continue as a going concern because of recurring net losses and negative cash flow from operations. BMC INDUSTRIES: Taps William Blair to Evaluate Strategic Options ---------------------------------------------------------------- BMC Industries, Inc. (NYSE:BMM) is responding to the intensely competitive market conditions in its aperture mask business by taking immediate action to contract the operations of its Buckbee- Mears group into its existing Cortland, NY facility. "We are taking decisive action to restructure our operations in order to compete head-to-head in our markets," said Douglas C. Hepper, chairman and chief executive officer of BMC. "BMC's board has acted to protect the company's financial position in response to projections of significant negative cash flow from the German mask operations. In taking these actions, we remain committed to meeting the needs of our customers and are putting into place a new organization within Europe to service customers of both the Mask and Optical Products businesses. This was a necessary but difficult decision, and we will work hard to make the transition as seamless as possible for our customers." BMC also plans to conduct a structured shutdown of its facility in Tatabanya, Hungary, which currently performs inspection and other services for the Buckbee-Mears group and the company's Optical Products group. In support of BMC's decision to house its Buckbee-Mears operations in Cortland, BMC will receive an economic incentive package from a combination of federal, New York State and local sources. This package was developed through the joint efforts of New York Governor George Pataki, U.S. Senator Charles Schumer and U.S. Congressman Sherwood Boehlert, New York State Senator James Seward, New York State Assemblywoman Barbara Lifton, the Cortland County Industrial Agency, the Cortland County Business Development Corporation, Niagara Mohawk and the City of Cortland. The realignment of business operations will affect the Optical Products group in Europe due to BMC's current holding company structure in Europe. The Optical Products group expects this realignment to have minimal impact on its ability to service lens customers. The group's US-based operations will not be affected by the realignment. Approximately 375 salaried and hourly employees of the Buckbee- Mears group in Europe will be impacted by the actions announced today. BMC is working closely with its advisors and appropriate governmental authorities in Germany and Hungary to operate strictly in compliance with its obligations to employees and others during this process. The company expects to take an estimated pre-tax restructuring charge in the range of $22 million to $27 million in the second quarter of 2003. The company continues to expect a loss from consolidated operations for the fiscal year ending December 31, 2003. Dramatic changes in the market dynamics of the global mask market, in particular a shifting of production to Asia from the company's home markets in the U.S. and Europe, have intensified competition. This weakness in the mask market, together with general market softness in the lens industry, will likely affect the company's ability to achieve compliance with certain covenants under its credit facility. BMC is in discussions with its banks in order to obtain a waiver or other relief from any resulting default. BMC also announced that its board of directors has retained William Blair & Company, LLC, to assist the board in the evaluation of all available strategic alternatives, including new financing alternatives, potential asset sales, and opportunities for raising additional capital. Additionally, BMC announced that it has been advised by the New York Stock Exchange that the company has fallen below the NYSE's continued listing criteria relating to minimum share price. The NYSE requires that the company's stock trade at an average minimum share price of $1.00 over a 30-day-trading period. The company is in discussions with the NYSE to obtain a period of time of up to six months to bring its average share price back above $1.00. BMC Industries, founded in 1907, comprises two business segments: Buckbee-Mears and Optical Products. The Buckbee-Mears group offers a range of services and manufacturing capabilities to meet the most demanding precision metal manufacturing needs. The group is a leading producer of a variety of precision photo-etched and electroformed components that require fine features and tight tolerances. The group is also the only North American manufacturer of aperture masks, a key component in color television picture tubes. The Optical Products group, operating under the Vision-Ease Lens trade name, is a leading designer, manufacturer and distributor of polycarbonate, glass and plastic eyewear lenses. Vision-Ease is a technology and a market share leader in the polycarbonate lens segment of the market. Polycarbonate lenses are thinner and lighter than lenses made of other materials, while providing inherent ultraviolet (UV) filtering and impact resistant characteristics. BMC Industries, Inc. is listed on the New York Stock Exchange under the ticker symbol "BMM." For more information about BMC Industries, Inc., visit the Company's Web site at http://www.bmcind.com CABLE SATISFACTION: Obtains Court Nod to Postpone Annual Meeting ---------------------------------------------------------------- Cable Satisfaction International Inc. (TSX: CSQ.A) has voluntarily filed for and obtained an order from Quebec Superior Court for protection under the Companies' Creditors Arrangement Act. This step will facilitate the orderly consideration and implementation of the proposed recapitalization and restructuring plan announced by the Company on June 13, 2003. While Csii is under court protection, the Company's subsidiary in Portugal, Cabovisao - Televisao por Cabo, S.A., is not subject to this court order and will continue to provide normal service to customers and pay employees under usual conditions. As part of the court order, the Company's annual meeting scheduled for June 30, 2003 has been postponed up to November 30, 2003. In order for a recapitalization plan to become effective, a court- supervised vote will be required to obtain consent from Csii's unsecured creditors as prescribed by Canadian law. In addition, implementation of any court-sanctioned plan will require or be subject to the approval of the Cabovisao's bank syndicate, satisfactory agreements with Cabovisao's trade creditors, the execution of definitive documentation and the satisfaction of other customary conditions. There can be no assurance that the recapitalization plan announced on June 13, 2003 will be completed successfully or on the terms announced. The Company will communicate material changes as they arise. Csii builds and operates large bandwidth (750 Mhz) hybrid fibre coaxial (HFC) networks and, through its subsidiary Cabovisao - Televisao por Cabo, S.A. provides cable television services, high- speed Internet access, telephony and high-speed data transmission services to homes and businesses in Portugal through a single network connection. The subordinate voting shares of Csii are listed on the Toronto Stock Exchange (TSX) under the trading symbol "CSQ.A". CALYPTE BIOMEDICAL: Nancy Katz Steps Down as President and CEO -------------------------------------------------------------- Calypte Biomedical Corporation (OTCBB:CYPT), the developer and marketer of the only two FDA approved HIV-1 antibody tests that can be used on urine samples, as well as an FDA approved serum HIV-1 antibody Western blot supplemental test, announced that effective immediately Nancy Katz will leave the company. "We appreciate Nancy's contributions and dedication during her tenure as Calypte's President and CEO for the past three years," said Anthony Cataldo, Executive Chairman of Calypte Biomedical. "Nancy is leaving to pursue other interests." Ms. Katz has elected to give up her seat on the company's Board. Calypte Biomedical Corporation headquartered in Alameda, California, is a public healthcare company dedicated to the development and commercialization of urine-based diagnostic products and services for Human Immunodeficiency Virus Type 1 (HIV-1), sexually transmitted diseases and other infectious diseases. Calypte's tests include the screening EIA and supplemental Western Blot tests, the only two FDA-approved HIV-1 antibody tests that can be used on urine samples. The company believes that accurate, non-invasive urine-based testing methods for HIV and other infectious diseases may make important contributions to public health by helping to foster an environment in which testing may be done safely, economically, and painlessly. Calypte markets its products in countries worldwide through international distributors and strategic partners. Current product labeling including specific product performance claims can be found at http://www.calypte.com At March 31, 2003, the Company's balance sheet shows a working capital deficit of about $6 million, and a total shareholders' equity deficit of about $8 million. CASCADES INC: Commences Partial Redemption of Class A Preferreds ---------------------------------------------------------------- Cascades Inc. announced that, as at June 27, 2003, its subsidiary, Cascades Boxboard Group Inc., had redeemed a net amount of $18.4 million of its Class A Preferred Shares. Cascades Inc. and Cascades Boxboard Group Inc. have reached an agreement with the holders of the remaining $35 million Class A Preferred Shares that are presently outstanding to redeem all of the remaining Class A Preferred Shares by the end of the year. Cascades Inc. is a leader in the manufacturing of packaging products, tissue paper and specialized fine papers. Internationally, Cascades employs nearly 14,000 people and operates close to 150 modern and versatile operating units located in Canada, the United States, Mexico, France, England, Germany and Sweden. Cascades recycles more than two million tons of paper and board annually, supplying the majority of its fibre requirements. Leading edge de-inking technology, sustained research and development, and 39 years of experience in recycling are all distinctive strengths that enable Cascades to manufacture innovative value-added products. Cascades' common shares are traded on the Toronto Stock Exchange under the ticker symbol CAS. * * * As reported in Troubled Company Reporter's February 7, 2003 edition, Standard & Poor's Ratings Services raised its rating on Cascades Inc.'s US$450 million senior unsecured notes to 'BB+' from 'BB'. At the same time, the 'BB+' long-term corporate credit rating and 'BBB-' senior secured debt rating on the diversified paper and packaging producer were affirmed. The outlook is stable. The rating change stems from the redemption of the US$125 million 8.375% senior notes outstanding of Cascades' operating subsidiary, Cascades Boxboard Group Inc. This redemption will be financed by the senior unsecured notes offering, which was increased to US$450 million from the proposed US$325 million. CHILDTIME LEARNING: March 28 Working Capital Deficit Tops $13MM --------------------------------------------------------------- Childtime Learning Centers, Inc. (Nasdaq: CTIM) announced operating results for the fiscal year ended March 28, 2003, which reflect a substantial increase in revenues over last year, largely resulting from the July 2002 acquisition of Tutor Time Learning Systems, Inc. During the fourth quarter of fiscal 2003 (12 weeks ended March 28, 2003), the Company generated an operating income for the first time this fiscal year. For the fourth quarter of fiscal 2003, the Company's revenues increased by 40.9% to $45.8 million from $32.5 million for the same period last year. For the fiscal year ended March 28, 2003, the Company's revenues increased to $177.4 million, as compared to last year's revenues of $141.4 million, a 25.5% increase. The increases were primarily attributable to the acquisition of Tutor Time, which generated revenues of $12.6 million for the quarter and $36.0 million for the fiscal year. Gross profit for the fourth quarter of fiscal 2003 was $6.3 million, as compared to $3.6 million for the same period last year. The increase was attributable to the acquisition of Tutor Time, which contributed $1.4 million and improved Childtime center operations, which contributed $1.3 million. Gross profit for fiscal 2003 increased to $19.7 million from $16.8 million in fiscal 2002. The increase was attributable to the acquisition of Tutor Time, which contributed $3.5 million, partially offset by a decline in Childtime center operations of $0.6 million. For the fourth quarter of fiscal 2003, the Company generated operating income of $0.7 million as compared to an operating loss of $3.6 million for same period last year, which included impairment charges of $1.9 million under SFAS No. 142, Goodwill and Other Intangible Assets. Fiscal 2003 operating loss was $10.3 million, as compared to an operating loss of $5.7 million for fiscal 2002. Fiscal 2003 included a $7.6 million charge for goodwill and fixed asset impairment under SFAS No. 142 and SFAS No. 144, Accounting For The Impairment or Disposal of Long-Lived Assets, compared to a $1.9 million charge for these items in fiscal 2002. Net loss for the fourth quarter of fiscal 2003 was $0.3 million, as compared to a net loss of $2.5 million for the same period last year. Net loss for fiscal 2003 was $18.2 million, including an adjustment of $5.0 million (net of taxes) for the cumulative effect of goodwill impairment under SFAS 142, as compared to a net loss of $4.0 million for fiscal 2002. "We have made significant and measurable improvements in this last year despite the difficult economy," said Bill Davis, the Company's President and CEO. "The improvements were particularly evident in the last half of the year. This resulted in our achieving an operating income in the fourth quarter, the first time we have done so this year. Our progress reflects the successful integration of Tutor Time, the cohesion of our new management team and the implementation of business processes to improve revenues and reduce costs." "In addition, the completion of our rights offering last month -- which retired $12.3 million in subordinated notes and related accrued and unpaid interest, and therefore reduced annual interest expense by more than $1.8 million -- has significantly strengthened our balance sheet and enabled the Company to invest in future growth," Davis added. "We look forward to a return to profitability in the coming fiscal year." As previously reported, the Company received notification on May 12, 2003, from Nasdaq Listing Qualifications that, for 30 consecutive trading days, the bid price of the Company's Common Stock had closed below the minimum $1.00 per share requirement for continued inclusion on The Nasdaq SmallCap Market under Marketplace Rule 4310(C)(4). Therefore, in accordance with Marketplace Rule 4310(C)(8)(D), the Company was provided 180 calendar days, or until November 10, 2003, to regain compliance or be subject to possible delisting. By letter dated June 19, 2003, the Company was notified by Nasdaq that the bid price of the Company's Common Stock had closed at or above $1.00 per share for a minimum of ten consecutive trading days and, thus, the Company had regained compliance with Marketplace Rule 4301(C)(4) and avoided delisting. At March 28, 2003, the Company's balance sheet shows that its total current liabilities outweighed its total current assets by about $13 million. Childtime Learning Centers, Inc. -- http://www.childtime.com-- of Novi, MI acquired Tutor Time Learning Systems, Inc., -- http://www.tutortime.com-- on July 19, 2002, and is one of the nation's largest publicly-traded child care providers with operations in 30 states, the District of Columbia and internationally. Childtime Learning Centers, Inc. has over 7,500 employees and licensed capacity to provide education and care for over 50,000 children daily in over 470 corporate and franchise centers worldwide. * * * As previously reported, the Company maintains a $17.5 million secured revolving line of credit facility entered into on January 31, 2002, as amended. Outstanding letters of credit reduced the availability under the line of credit in the amount of $2.6 million at January 3, 2003 and $1.8 million at March 29, 2002. Under this agreement, the Company is required to maintain certain financial ratios and other financial conditions. In addition, there are restrictions on the incurrence of additional indebtedness, disposition of assets and transactions with affiliates. At July 19, 2002 and at October 11, 2002, the Company had not maintained minimum consolidated EBITDA levels and had not provided timely reporting as required by the Amended and Restated Credit Agreement. The Company's lender approved waivers to the Amended and Restated Credit Agreement for financial results for the quarter ended October 11, 2002. The Company's noncompliance with the required consolidated EBITDA levels continued as of January 3, 2003. In February 2003, the Amended and Restated Credit Agreement was further amended, among other things, to revise the financial covenants for the quarters ended January 3 and March 28, 2003 and to shorten the maturity of the line of credit to July 31, 2003. The Company is in compliance with the agreement, as amended. The Company intends to extend and further amend this agreement prior to the maturity date, but no assurance can be given that the Company will be successful in doing so. Should the Company be unsuccessful in amending this agreement, the Company would be in default of the agreement, unless alternative financing could be obtained, and would not have sufficient funds to meet operating obligations. CLAYTON HOMES: Will Proceed with Annual Meeting on July 16, 2003 ---------------------------------------------------------------- Clayton Homes, Inc. (NYSE:CMH) announced that the Delaware Chancery Court entered an order rejecting the request by Orbis Investment Management Limited that the Company hold an annual meeting of stockholders in advance of the July 16 special meeting of the Company's stockholders to vote on a proposal to adopt the Agreement and Plan of Merger, dated as of April 1, 2003, among the Company, Berkshire Hathaway Inc. and a subsidiary of Berkshire Hathaway. The Company issued the following statement in response to Friday's decision by the Delaware Chancery Court: "We are pleased with the Court's decision. We will proceed with the July 16 special meeting of the Company's stockholders to vote on the proposed merger. In the event that the merger is not completed, we will, consistent with the Court's order, hold an annual meeting of stockholders as soon as reasonably practicable after the July 16 special meeting." The Company also announced that its fourth quarter earnings per share will likely be 5 to 7 cents below last year's 25 cents per share for the same period. A combination of industry shipments decreasing 26% year to date, the continuing unfavorable interest rate differential between site built housing rates and manufactured housing rates, the double digit declines reported in manufacturing and retail business quarter to date, and a challenging asset backed securitization market that led to no securitizations during the fourth quarter have contributed to the decline. Clayton Homes, Inc. (Fitch/BB+ Senior Unsecured Rating/Positive) is a vertically integrated manufactured housing company with 20 manufacturing plants, 296 Company owned stores, 611 independent retailers, 86 manufactured housing communities, and financial services operations that provide mortgage services for 168,000 customers and insurance protection for 100,000 families. COGENTRIX ENERGY: Auditors Express Going Concern Uncertainty ------------------------------------------------------------ Cogentrix of Oklahoma, Inc., an indirect, wholly-owned subsidiary of Cogentrix Energy, Inc., was formed to own and hold 100% of the membership interest in Green Country Energy, LLC. Green Country is the owner of an approximate 810-megawatt combined-cycle, natural gas-fired electric generating facility located in Jenks, Oklahoma. On June 10, 2003, COK sold 100% of its direct membership interest in Green Country to a newly formed limited liability company, Green Country Holding LLC formed by affiliates of General Electric Structured Finance, Inc. in exchange for cash consideration and a 10% interest in the Purchaser. As a result of the transaction, Green Country is now wholly-owned by the Purchaser, and the Purchaser is 90% owned by GESF and 10% owned by COK. COK remains an indirect, wholly-owned subsidiary of CEI. The purchase was effected pursuant to a purchase agreement dated April 11, 2003. The sale to the Purchaser was consummated in connection with a refinancing of the Green Country bank loan which refinancing required additional equity contributions from GESF and COK. GESF contributed the entire cash consideration for the sale and a capital contribution to the Purchaser as required under the refinancing of the Green Country bank loan. In connection with the refinancing and sale of the Green Country interest, GESF and the financial institutions providing the refinancing required that CEI and COK provide certain guarantees and indemnities pursuant to the Purchase Agreement and other related transaction agreements. These guarantees and indemnities are related to any claims, costs or expenses arising from: (1) certain litigation to which Green Country is a party, (2) a performance guarantee for services provided to Green Country by a CEI affiliate, and (3) any claim arising out of a breach of representations and warranties made under the Purchase Agreement. In connection with the refinancing, COK agreed to escrow a portion of the sale proceeds until final and non-appealable resolution of the litigation has been reached. The sale proceeds received by CEI, net of the Litigation Escrow, COK capital contribution required upon refinancing, and transaction costs were approximately $72 million. CEI utilized $50 million of these proceeds to repay borrowings outstanding under the CEI corporate credit facility. As a result of the maturity of $247.5 million in obligations outstanding under the CEI corporate credit facility in October 2003, CEI's independent auditors expressed a going concern uncertainty in their report on CEI's consolidated financial statements for the year ended December 31, 2002, which triggered an event of default under the corporate credit facility. On May 29, 2003, CEI executed a forbearance agreement with the lenders to the corporate credit facility pursuant to which the lenders agreed to forbear through July 31, 2003 from terminating their commitments or accelerating the outstanding obligations and demanding payment. Additionally, the lenders agreed to allow CEI to continue to convert to borrowings, drawings under outstanding letters of credit issued under the corporate credit facility during this forbearance period. In consideration of the aforementioned forbearance, CEI agreed to: (1) utilize $50 million of the Green Country sale proceeds to repay borrowings outstanding under the corporate credit facility, (2) utilize any net proceeds of the Litigation Escrow received by CEI to repay borrowings outstanding under the corporate credit facility, (3) restrict any CEI subsidiaries from modifying or terminating any letter of credit issued under the corporate credit facility, and (4) reduce the lenders' commitment under the corporate credit facility from $250 million to $225 million upon receipt of the $50 million repayment related to the Green Country sale proceeds. COLE NATIONAL: Bank Lenders Amend and Extend Credit Agreement ------------------------------------------------------------- Cole National Corporation (NYSE: CNJ) (S&P/BB- Corporate Credit Rating/Negative) has amended, restated and extended its Credit Agreement with its bank lenders. The maturity date of the credit facility was extended to February 1, 2007 from May 31, 2006. The size of the facility was adjusted to $60 million from $75 million. In addition, certain financial covenants, including the maximum leverage coverage test, were amended. As of May 3, 2003, the end of the Company's first quarter for fiscal 2003, commitments outstanding under Cole National's letters of credit totaled $11.5 million. There were no working capital borrowings outstanding at any time during the first quarter. Cole National Corporation's vision business, together with Pearle franchisees, has 2,180 locations in the U.S., Canada, Puerto Rico and the Virgin Islands, and includes Cole Managed Vision, one of the largest managed vision care benefit providers with multiple provider panels and nearly 20,000 practitioners. Cole's personalized gift business, Things Remembered, serves customers through 761 locations nationwide, catalogs, and the Internet at http://www.thingsremembered.com Cole also has a 21% interest in Pearle Europe, which has 1,166 optical stores in Austria, Belgium, Estonia, Finland, Germany, Italy, the Netherlands, Poland, Portugal, Russia and Sweden. COMM'L MONEY: Court Clears Settlement with Lakeland Bank et al. --------------------------------------------------------------- The following discussion updates prior disclosures relating to the pending bankruptcy proceedings of Commercial Money Center, Inc. and Commercial Servicing Corporation, Case No. 02-09721-H, (United States Bankruptcy Court, Southern District of California), as well as the proceedings in and related cases now pending in In re Commercial Money Center, Inc. Equipment Lease Litigation in the United States District Court for the Northern District of Ohio, Eastern Division, MDL Case No. 1:02-CV-16000. The Bankruptcy Proceedings are related to, but distinct from, the MDL Proceedings. On June 11, 2003, the California Bankruptcy Court approved a settlement agreement among Lakeland Bank, NetBank and the chapter 7 bankruptcy trustee. The Amended Lakeland Agreement resolves all claims of the Trustee with respect to the leases that were guaranteed by surety bonds issued by RLI Insurance Company and American Motorists Insurance Company, as well as all claims related to the surety bonds. The Amended Lakeland Agreement did not settle the Trustee's alleged claims related to the leases guaranteed with surety bonds issued by Royal Indemnity Company or its claims related to those surety bonds. Lakeland believes that the approval of the Amended Lakeland Agreement enhances its position in the separate MDL Proceedings since the agreement resolves any conflicts previously presented by the Trustee's assertion of claims relating to the RLI and AMICO leases and surety bonds. Lakeland intends to seek recovery against RLI, AMICO and Royal for the amounts paid pursuant to this settlement. The Trustee's claims against Lakeland concern the leases and related surety bonds that Lakeland purchased from Commercial Money Center, Inc. These claims are based on the Trustee's assertion that Lakeland's interests in the leases were not properly perfected and that he could avoid those interests, as well as Lakeland's interests in the related surety bonds, under the Bankruptcy Code. Lakeland disputes these claims, but contends that, in any event, it was the responsibility of CMC, as well as all of the Sureties who issued surety bonds guaranteeing payment of Lakeland's interests in the leases purchased from CMC, to make sure that Lakeland's interests were properly perfected. In addition to approving the Amended Lakeland Agreement, the California Bankruptcy Court approved a settlement agreement between the Trustee and one of the Sureties, Royal Indemnity Company. Under the Amended Royal Agreement, Royal has agreed, among other things, to fund litigation by the Trustee against Lakeland to avoid its interests in the leases that were guaranteed by surety bonds issued by Royal, as well as Lakeland's interests in the surety bonds themselves. Lakeland intends to vigorously defend these claims and to pursue recovery from Royal for all damages suffered and costs incurred as a result of Royal's financing of these claims. As has been reported in prior filings, CMC, the originator, seller and subservicer of certain leases purchased by Lakeland, filed for bankruptcy protection on May 30, 2002 with the United States Bankruptcy Court for the Southern District of Florida. The Florida Bankruptcy Court ordered that all collections by the servicers and sub-servicers under the leases be paid in escrow to the bankruptcy trustee pending final resolution of rights to those collections. On September 18, 2002, the bankruptcy action was transferred to the United States Bankruptcy Court for the Southern District of California. On February 5, 2003, Lakeland and the Trustee entered into a proposed settlement agreement, subject to the California Bankruptcy Court's approval, that would have settled and resolved all of the CMC bankruptcy estate's claims against Lakeland. These claims, which are strongly contested by Lakeland, are based on the Trustee's assertion that Lakeland's interests in the leases were not perfected and that he could avoid those interests, as well as Lakeland's interests in the surety bonds and insurance policies that guarantee the income stream from the leases, under Section 544 of the United States Bankruptcy Code. On February 19, 2003, the Trustee filed a motion with the California Bankruptcy Court requesting approval of the Lakeland Settlement. A hearing on the Trustee's motion to approve the Lakeland Settlement was set for April 2, 2003. At the hearing, the Trustee requested a continuance on his motion and announced that he had entered into a separate proposed agreement with Royal Indemnity Company, one of the sureties who issued surety bonds guaranteeing the payments from leases that Lakeland purchased from CMC. The Trustee indicated that the California Bankruptcy Court should not consider the proposed Lakeland Settlement without also considering the proposed Royal Agreement and determining which settlement would provide greater benefit to the bankruptcy estate. The Trustee also stated that his preliminary review indicated that the Royal Agreement provided greater benefits to the bankruptcy estate than the Lakeland Settlement. The California Bankruptcy Court scheduled a status conference for May 22, 2003, and an evidentiary hearing for June 4-5, 2003. On May 22, 2003, the Trustee and Lakeland informed the California Bankruptcy Court that they had entered into a revised settlement that, according to the Trustee, yielded greater benefits to the bankruptcy estate than the benefits offered by the Royal Agreement. The California Bankruptcy Court ordered that Royal would be given the opportunity to increase its offer to the Trustee at the hearing on June 4-5, 2003. On June 4-5, 2003, Royal increased its offer to the Trustee, which in turn was countered by Lakeland. After a series of competing offers, the California Bankruptcy Court adjourned on June 5, 2003 to allow the parties to attempt to negotiate a settlement. The following is a summary of the Amended Lakeland Agreement: The Trustee assigns to Lakeland any interest the bankruptcy estate may have in the leases that Lakeland purchased from CMC that were guaranteed by surety bonds issued by RLI and AMICO. The Trustee assigns to Lakeland any interest the estate may have in the RLI and AMICO Bonds and releases any claims the Trustee may have against Lakeland relating to the RLI and AMICO Leases and the RLI and AMICO Bonds. Lakeland will pay the bankruptcy estate $700,980 in cash. Lakeland will also pay the bankruptcy estate an amount equal to 14.17% of its recovery from RLI and AMICO in the MDL Proceedings, in an amount not to exceed $851,190. Lakeland will pay to the Trustee an amount equal to 38% of all future income derived from the RLI and AMICO Leases and related collateral. The Trustee has agreed that Lakeland may retain its security interest in the collateral in the RLI and AMICO Leases. In return, however, Lakeland has acknowledged that its security interests secured the right to collect on a lease-by-lease basis and was not cross-collateralized between leases in lease pools. The net effect of this arrangement is that Lakeland will recognize the value of repossessed equipment under defaulted leases, but the bankruptcy estate will receive the value of any residual payments under leases that fully perform. The following is a summary of the Amended Royal Agreement: Royal will pay to the Trustee the sum of $3,000,000 in cash out of its own funds. Royal will pay to the Trustee the sum of up to $500,000 (plus additional amounts in the sole discretion of Royal) to fund the legal expenses and costs of the Trustee in pursuing claims against NetBank and Lakeland to set aside or avoid NetBank and Lakeland's interests in the lease pools that Lakeland purchased from CMC and that were guaranteed by surety bonds issued by Royal, collection accounts containing the income stream from the Royal Leases, reserves to secure payment of the Royal Leases, and the surety bonds issued by Royal guaranteeing payment of the income stream from the Royal Leases. Collections from the Royal Leases shall remain in escrow with the Trustee until final resolution of the avoidance claims. If Lakeland prevails on the avoidance claims, collections on the Royal Leases should be remitted to Lakeland. If the Trustee recovers any amounts against NetBank and Lakeland on its avoidance claims, the Trustee shall first reimburse Royal for $2 million of the amount paid to the Trustee. Then, the Trustee shall receive 95% and Royal shall receive 5% of any recoveries until the Trustee has received a total of $3,420,000. Thereafter, Royal shall receive the next $1 million plus any amounts paid to or on behalf of the Trustee for the Litigation Expenses. Finally, the Trustee and Royal will share equally in any additional recoveries from NetBank and Lakeland. If the Trustee is successful in avoiding NetBank and Lakeland's interests in the Royal Bonds, the Trustee has agreed to the rescission of the Royal Bonds. Upon final resolution of NetBank and Lakeland's claims in the MDL Proceedings, Royal will pay to the Trustee an amount equal to 4% of the difference between $40 million and the total amount that Royal is required to pay NetBank and Lakeland under the Royal Bonds, not to exceed $800,000. The Trustee transfers to Royal an undivided 10% interest in any residual rights that the Trustee has in the equipment that is part of the collateral for the lease streams. Royal shall have an allowed unsecured claim in the amount of Royal's Proof of Claim, which shall be reduced by: (1) any payments received by Royal under the Amended Royal Agreement in excess of what Royal pays under the Amended Royal Agreement, (2) the amount of any premiums received (if the bonds are rescinded); (3) the amount of any cash reserves retained by Royal; and (4) the amount that the Proof of Claim exceeds amounts paid by Royal under the Royal Bonds. Lakeland intends to vigorously pursue its claims against the Sureties in the MDL Proceedings and has filed a Motion for Leave to Supplement its Complaint in the MDL Proceedings to allege additional claims relating to Royal's actions in connection with the Bankruptcy Proceedings. CONEXANT SYSTEMS: Completes Mindspeed Technologies Spin-Off ----------------------------------------------------------- Conexant Systems, Inc. (Nasdaq:CNXT), a worldwide leader in semiconductor system solutions for communications applications, completed the tax-free spin-off to its shareowners of Mindspeed Technologies, Inc. after market close Friday. Mindspeed began regular trading of its shares on the American Stock Exchange under the ticker symbol "MND" on June 30. Conexant's shares will continue to trade on the Nasdaq exchange under the ticker symbol "CNXT." Conexant Systems, Inc., a worldwide leader in semiconductor system solutions for communications applications, leverages its expertise in mixed-signal processing to deliver integrated systems and semiconductor products through two separate businesses. The Broadband Communications business develops and delivers integrated semiconductor solutions that enable digital entertainment and information networks for the home and small office. Its product portfolio includes the building blocks required for bridging cable, satellite, and terrestrial data and digital video networks. Mindspeed Technologies(TM), the company's Internet infrastructure business, designs, develops and sells semiconductor networking solutions for communications applications in enterprise, access, metropolitan and wide area networks. Conexant is headquartered in Newport Beach, Calif. To learn more, visit us at www.conexant.com or www.mindspeed.com. Conexant Systems' 4.000% bonds due 2007 are currently trading at about 60 cents-on-the-dollar. CONSECO FINANCE: Wants Nod to Sell Credit Accounts to EMCC Inc. --------------------------------------------------------------- The Conseco Finance Debtors have reached an Asset Sale Agreement with EMCC, Inc. The assets to be purchased are: -- manufactured home loan and credit accounts with unpaid balances that have been charged off by the CFC Debtors as uncollectible obligations; and -- manufactured home loan and credit accounts with unpaid deficiency balances remaining after repossession and sale of the collateral securing the account with outstanding balances that remain obligations of the defaulting customers. CFN Investment Holdings, proposed purchaser of the CFC Debtors' assets, has given its required consent to this Transaction. EMCC will pay the sum of: (i) 0.0489125% of the aggregate of the unpaid balances for the Accounts as of May, 20, 2003; minus (ii) 100% of the collections net of third party collection costs and expenses; and minus (iii) any adjustments. The CFC Debtors preliminarily estimate that the price for these assets will be $3,354,000. (Conseco Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) CROSS MEDIA: Look for Schedules and Statements by Month-End ----------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave Cross Media Marketing Corporation and its debtor-affiliates an extension of the deadline by which they must file their schedules of assets and liabilities, statements of financial affairs and lists of executory contracts and unexpired leases required under 11 U.S.C. Sec. 521(1). The Debtors have until July 31, 2003 to file these required documents. Cross Media Marketing Corporation is a direct marketer and seller of magazine subscriptions. The Company filed for chapter 11 protection on May 16, 2003 (Bankr. S.D.N.Y. Case No. 03-13901). Jack Hazan, Esq., and Kenneth H. Eckstein, Esq., at Kramer Levin Naftalis & Frankel LLP, represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $91,357,187 in total assets and $77,668,088 in total debts. CROWN CASTLE INT'L: Prices $200 Million Convertible Senior Notes ---------------------------------------------------------------- Crown Castle International Corp. (NYSE: CCI) announced the pricing of $200 million of Convertible Senior Notes due July 15, 2010. In addition, Crown Castle has granted the underwriters of the notes a 30-day option to purchase up to an additional $30 million principal amount of the notes. The notes will be convertible into shares of Crown Castle common stock at a conversion rate of 92.3361 shares of Crown Castle common stock per $1,000 principal amount of notes, representing a conversion price of $10.83 per common share. Interest on the notes will be payable in cash semi-annually at the rate of 4% per annum beginning January 15, 2004. Crown Castle has the option to redeem some or all of the notes for cash at any time on or after July 18, 2008 at a redemption price plus any accrued and unpaid interest to the redemption date. Crown Castle intends to use the net proceeds from this offering to fund a portion of the previously announced redemption on July 7, 2003 of its 10-5/8% Senior Discount Notes. This offering retains Crown Castle's flexibility to utilize a portion of its existing cash balances to purchase or redeem all of its outstanding 12-3/4% Senior Exchangeable Preferred Stock due 2010, which had an aggregate redemption value of $245.8 million as of March 31, 2003. Crown Castle currently expects to purchase or redeem the 12-3/4% Senior Exchangeable Preferred Stock no later than December 15, 2003, the first contractual optional redemption date for such securities. Crown Castle International Corp. (S&P/B-/Negative) engineers, deploys, owns and operates technologically advanced shared wireless infrastructure, including extensive networks of towers and rooftops as well as analog and digital audio and television broadcast transmission systems. Crown Castle offers near-universal broadcast coverage in the United Kingdom and significant wireless communications coverage to 68 of the top 100 United States markets, to more than 95 percent of the UK population and to more than 92 percent of the Australian population. Crown Castle owns, operates and manages over 15,500 wireless communication sites internationally. For more information on Crown Castle, visit: http://www.crowncastle.com CROWN PACIFIC: Files for Chapter 11 Reorganization in Arizona ------------------------------------------------------------- Crown Pacific Partners, L.P. (OTC Bulletin Board: CRPP), an integrated forest products company, has filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The Partnership will continue to operate its businesses during the period of the reorganization process. The filing includes the Partnership and its subsidiaries. The voluntary Chapter 11 petitions were filed in the U.S. Bankruptcy Court in Phoenix, Arizona. After several months of negotiations with its lenders, the Partnership has been unable to recapitalize outside the protection of the bankruptcy process. The previously announced forbearance with its lenders expired today, and Crown Pacific determined that Chapter 11 reorganization is in the best long-term interests of all of its stakeholders. The Partnership expects that its trade suppliers, unsecured trade creditors, employees and customers will not be materially adversely affected by the outcome of this process. As part of the Bankruptcy filing the Partnership has requested that the Court approve a debtor-in-possession (DIP) financing in the amount of $40 million the Partnership has arranged with CIT. "We expect to remain a reliable supplier of our products to our customers, and we do not expect any interruption to our operations as a result of the reorganization," said Peter W. Stott, President and CEO of Crown Pacific. "We will do all that we can to see that the restructuring goes as expeditiously as possible. We have a very dedicated workforce and some excellent operating assets. We expect to emerge from this process as a stronger, more flexible company with an ability to better focus our attention on the needs of our customers," Stott concluded. Crown has engaged The Blackstone Group, L.P. to assist it in exploring various financial restructuring alternatives, including stand-alone recapitalization and third-party investment scenarios. Crown Pacific Partners, L.P. (OTC Bulletin Board: CRPP) is an integrated forest products company. Crown Pacific owns and manages approximately 524,000 acres of timberland in Oregon and Washington, and uses modern forest practices to balance growth with environmental protection. Crown Pacific operates mills in Oregon and Washington, which produce dimension lumber, and also distributes lumber products though its Alliance Lumber operation. CROWN PACIFIC PARTNERS: Case Summary & Largest Unsec. Creditors --------------------------------------------------------------- Lead Debtor: Crown Pacific Partners L.P. 805 S.W. Broadway, Suite 1500 Portland, Oregon 97205-3339 Bankruptcy Case No.: 03-11260 Debtor Affiliates Filing Separate Chapter 11 Petitions: Entity Case No. ------ -------- CP Acquisition Co. 03-11258 Crown Pacific Limited Partnership 03-11259 CP Air Inc. 03-11261 CP Acquisition Ii Co. 03-11262 CP Acquisition Iii Co. 03-11263 Type Of Business: Integrated solid wood forest products producer, with operations in three primary segments - timberlands, lumber manufacturing and wholesale marketing and distribution of forest products Chapter 11 Petition Date: June 29, 2003 Court: District Of Arizona (Phoenix) Judge: Randolph J. Haines Debtors' Counsels: Alisa C. Lacey, Esq. C. Taylor Ashworth, Esq. Osborn Maledon, P.A. 2929 N. Central Avenue, Suite 2100 Phoenix, AZ 85012 Tel: 602-640-9330 Fax : 602-664-2054 -and- Hugh Ray, Esq. Andrews & Kurth LLP 600 Travis, Suite 4200 Houston, TX 77002-3090 Tel: 713-220-4200 Fax : 713-220-4285 Total Assets: $601,884,000 (as of March 31, 2003) Total Debts: $580,244,000 (as of March 31, 2003) Crown Pacific Ltd.'s 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Washington State Dept. of Fire Damage $1,016,550 Natural Resources PO Box 47017 Olympia, WA 98504 Tel: No. 360-664-8519 Michael J. Rollinger Asst. Atty. General Weyerhaeuser Company Trade Debt $75,010 Boise Building Solutions Trade Debt $68,284 Lumbermens Underwriting Trade Debt $47,109 Alliance American International Trade Debt $40,332 Forest Products Sunset Forest Trade Debt $34,792 Cost Management Services Trade Debt $26,000 Liberty Security Trade Debt $17,597 Columbia River Log Scaling Log Scaling $15,000 Pacific Rim Log Scaling Log Scaling $15,000 Bureau Snavely Forest Products Trade Debt $12,904 Forest Marketinh Inc. Trade Debt $10,876 Yellowstone Transportation Trade Debt $7,710 Hamer Environmental LP Trade Debt $4,754 Angeles Machine Works Inc. Trade Debt $4,806 Fuchs Lubricants Trade Debt $4,408 Samuel Strapping Systems Trade Debt $3,354 Western Wood Products Assn. Trade Debt $3,000 Whatcom Security Agency Trade Debt $2,831 Louisiana Pacific Corp. Trade Debt Unliquidated CWMBS INC: Fitch Rates Class B-3 and B-4 P-T Certs. at BB/B ----------------------------------------------------------- CWMBS, Inc.'s mortgage pass-through certificates, CHL Mortgage Pass-Through Trust 2003-28 classes A-1 through A-13, PO and A-R (senior certificates, $297,958,100) are rated 'AAA' by Fitch Ratings. In addition, Fitch rates class M ($4,481,000) 'AA', class B-1 ($1,699,000) 'A', class B-2 ($927,000) 'BBB', class B-3 ($618,000) 'BB' and class B-4 ($464,000) 'B'. The 'AAA' rating on the senior certificates reflects the 2.85% subordination provided by the 1.45% class M, 0.55% class B-1, 0.30% class B-2, 0.20% privately offered class B-3, 0.15% privately offered class B-4 and 0.20% privately offered class B-5 (not rated by Fitch). Classes M, B-1, B-2, B-3 and B-4 are rated 'AA', 'A', 'BBB', 'BB' and 'B', respectively, based on their respective subordination. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings also reflect the quality of the underlying mortgage collateral, strength of the legal and financial structures and the master servicing capabilities of Countrywide Home Loans Servicing LP (Countrywide Servicing) - rated 'RPS1' by Fitch, a direct wholly owned subsidiary of Countrywide Home Loans, Inc. (CHL). The certificates represent an ownership interest in a pool of conventional, fully amortizing, 20- to 30-year fixed-rate mortgage loans, secured by first liens on one- to four-family residential properties. As of the closing date (June 27, 2003), the mortgage pool demonstrates an approximate weighted-average original loan- to-value ratio of 67.57%. Approximately 55.06% of the loans were originated under a reduced documentation program. Cash-out refinance loans represent 13.98% of the mortgage pool and second homes 1.33%. The average loan balance is $491,257. The weighted average FICO credit score is approximately 744. All of the mortgage loans are originated in the state of California (100%). The five regions that represent the largest portion of mortgage loans are Los Angeles County (31.79%), Orange County (12.46%), San Diego County (10.33%), Santa Clara County (7.98%), and Alameda County (5.45%). The collateral characteristics provided are based off the mortgage loans as of the closing date. Fitch ensures that the deposits of subsequent loans conform to representations made by CHL. The deal is 99.52% funded as of the closing date (June 27, 2003). None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. Approximately 95.08% and 4.92% of the mortgage loans were originated under CHL's standard underwriting guidelines and expanded underwriting guidelines, respectively. Mortgage loans underwritten pursuant to the expanded underwriting guidelines may have higher loan-to-value ratios, higher loan amounts, higher debt-to-income ratios and different documentation requirements than those associated with the standard underwriting guidelines. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. CWMBS purchased the mortgage loans from CHL and deposited the loans in the trust, which issued the certificates, representing undivided beneficial ownership in the trust. The Bank of New York will serve as trustee. For federal income tax purposes, an election will be made to treat the trust fund as multiple real estate mortgage investment conduits. DENALI CAPITAL: S&P Assigns Prelim. BB Rating to Cl. B-2L Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Denali Capital CLO III Ltd./Denali Capital CLO III (Delaware) Corp.'s $378.5 million fixed- and floating-rate notes due 2015. The preliminary ratings are based on information as of June 27, 2003. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect the following: -- The credit enhancement provided to each class of notes through the subordination of cash flows to more junior classes and preferred shares; -- The transaction's cash flow structure, which has been subjected to various stresses requested by Standard & Poor's; -- The experience of the collateral manager; and -- The legal structure of the transaction, including the bankruptcy remoteness of the issuer. PRELIMINARY RATINGS ASSIGNED Denali Capital CLO III Ltd./ Denali Capital CLO III (Delaware) Corp. Class Rating Amount (mil. $) A-1L AAA 295.0 A-2L AA 18.5 A-3F A- 5.0 A-3L A- 31.0 B-1L BBB 18.0 B-2L BB 11.0 DOMAN INDUSTRIES: Chester Johnson Steps Down from Board of Dir. --------------------------------------------------------------- Doman Industries Limited announced that, at its annual meeting of shareholders, Mr. Chester Johnson retired from the board. The Chairman, Mr. Herb S. Doman said: "Mr. Johnson made a great contribution in his nearly 20 years as a director and he deserves our thanks for his counsel and dedication during his time with the Company." The seven remaining directors who were re-elected are: Mr. Herb S. Doman Chairman Mr. Rick Doman President and CEO Mr. Jake Brouwer Mr. Ian Danvers Mr. Joseph Frumento Mr. Bud Smith Mr. Roger Stanyer * * * At March 31, 2003, Doman Industries reported a total shareholders' equity deficit of about CDN$363 million. As part of the plan, on November 7, 2002, the Company obtained a B.C. Supreme Court order for protection under the Companies' Creditors Arrangement Act. The effect of the order, and subsequent extensions, has been to stay the Company's current obligations to creditors, in order that a plan of compromise or arrangement can be approved and implemented. The proposed plan was designed to keep Doman intact and establish a capital structure to position the Company as a strong long-term competitor in the British Columbia coastal forest products industry. The proposed plan would reduce the Company's long-term debt from US$673 million to US$273 million and provide a minimum US$32.5 million in funds for working capital purposes. On March 7, 2003 the Company's application to file its proposed plan and call a creditors' meeting was dismissed by the Court as a result of objections raised by an ad hoc committee of Secured Noteholders. Permission, however, was granted to the Company to reapply with a revised plan of compromise or arrangement. On April 25, 2003 the Company obtained an extension of the stay of proceedings to July 23, 2003 in order to provide it more time to revise its plan. Discussions with representatives of secured and unsecured noteholders are continuing but the Company does not expect to file a revised plan before June 2003. DVI CORP: S&P Junks Counterparty Rating to CCC after SEC Ruling --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Jamison, Pennsylvania-based DVI Inc., including its long-term counterparty credit rating to 'CCC+' from 'B', following the announcement that the SEC has taken the position that the company's most recent 10-Q filings are deficient. The ratings were removed from CreditWatch with negative implications, where they were placed on June 5, 2003. The outlook is negative. Standard & Poor's is concerned that the company noted that this may cause DVI to be in default of covenants within certain indentures and other agreements that govern various debt obligations. "Additionally, since many of the DVI's debt obligations contain cross-default or cross-acceleration provisions, a successful claim of default would have serious adverse consequences," said credit analyst Steven Picarillo. Standard & Poor's is concerned about the impact this may have on both short-term and long-term liquidity, most notably the company's $155 million senior notes maturing in February 2004. EISBERG FINANCE: Fitch Drops Class D Floating-Rate Notes to DD -------------------------------------------------------------- Fitch Ratings has downgraded one class of notes and affirmed three classes of notes from the Eisberg Finance Ltd. transaction. Eisberg is a synthetic balance sheet collateralized debt obligation established by UBS AG, London Branch to provide credit protection on a $2.5 billion portfolio of investment grade, corporate debt obligations. The following class has been downgraded and removed from Rating Watch Negative: -- $15,000,000 class D floating-rate notes to 'DD' from 'C'. The following classes have been affirmed: -- $85,500,000 class A floating-rate notes 'AAA'; -- $65,000,000 class B floating-rate notes 'A'; -- $41,250,000 class C-1 floating-rate notes 'CCC-'; -- $22,500,000 class C-2 fixed-rate notes 'CCC-'. In addition, classes B, C-1 and C-2 are removed from Rating Watch Negative. Fitch's rating action reflects the deterioration in credit quality of several of the underlying assets as well as higher than expected credit protection payments under the credit default swap. Subsequently, there is a diminished level of credit enhancement for the notes. EL PASO: Settlement Participants Complete Final Procedural Step --------------------------------------------------------------- Participants in the El Paso settlement have taken the final procedural step required to ensure the completion of the settlement first negotiated in March and finalized June 26, 2003. As a part of the overall settlement, the participants have entered into a Stipulated Judgment filed with the United States District Court for the Central District of California. In order to implement this portion of the settlement, The Attorney General of the State of California, Southern California Edison Company, and Pacific Gas & Electric Company filed lawsuits against El Paso Natural Gas Company, El Paso Merchant Energy-Gas, L.P. and El Paso Merchant Energy Company in the United States District Court for the Central District of California. These lawsuits are strictly procedural vehicles needed to allow the Court to adopt the Stipulated Judgment negotiated by the parties. El Paso announced it had reached an agreement in principle relating to such litigation on March 21, 2003. A definitive settlement agreement was announced on June 26, 2003. El Paso Corporation (NYSE: EP) is the leading provider of natural gas services and the largest pipeline company in North America. The company has core businesses in pipelines, production, and midstream services. Rich in assets, El Paso is committed to developing and delivering new energy supplies and to meeting the growing demand for new energy infrastructure. For more information, visit http://www.elpaso.com An Edison International company, Southern California Edison is one of the nation's largest electric utilities, serving a population of more than 12 million via 4.3 million customer accounts in a 50,000-square-mile service area within central, coastal and Southern California. For more information on the California electricity market, see http://www.sce.com * * * As reported in Troubled Company Reporter's February 11, 2003 edition, Standard & Poor's lowered its long-term corporate credit rating on energy company El Paso Corp., and its subsidiaries to 'B+' from 'BB'. Standard & Poor's also lowered its senior unsecured debt rating at the pipeline operating companies to 'B+' from 'BB' and the senior unsecured rating on El Paso to 'B' from 'BB-', reflecting structural subordination relative to the operating companies. All ratings on El Paso and its subsidiaries were removed from CreditWatch, where they were placed Sept. 23, 2002. The outlook is negative. ENCOMPASS SERVICES: Asks Court to Clear Liberty Settlement Pact --------------------------------------------------------------- Encompass Services Corporation and its debtor-affiliates ask the Court to approve their settlement agreement with Liberty Mutual Insurance Company and the bank lenders to a revolving prepetition credit agreement. Alfredo R. Perez, Esq., Weil, Gotshal, & Manges LLP Houston, Texas, tells the Court that Bank of America, N.A., the issuing bank for the Revolving Lenders to the Prepetition Credit Agreement, issued a $22,000,000 letter of credit to Liberty in accordance with the Lenders' Prepetition Credit Agreement with the Debtors. The Prepetition Lenders made loans to the Debtors to fund their business operations under a February 22, 2000 credit agreement. Under the Prepetition Credit Agreement, Bank of America acts as the administrative agent and JP Morgan Chase Bank serves as syndication agent. The Letter of Credit was issued as a condition to Liberty's agreement to continue providing bonding for the Debtors' construction-related projects. Under the terms of the Letter of Credit and related agreements, Liberty is permitted to draw up to $22,000,000 at any time in the event of a surety loss as defined in an Indemnity and April 12, 2002 Security Agreement between the Debtors and Liberty. If Liberty makes the draw, the Debtors are obligated to repay the Revolving Lenders all amounts paid to Liberty pursuant to the Letter of Credit. Unless the Revolving Lenders provide written notice of their election not to renew at least 60 days in advance of the date on which the Letter of Credit expires, the Letter of Credit automatically renews for a one-year period beginning on the 18th day of April each year. However, if the Revolving Lenders elect not to renew the Letter of Credit, Liberty may claim the full $22,000,000 even absent the occurrence of a Surety Loss. Mr. Perez relates that, recently, Liberty alleged that the Surety Losses would result from certain construction projects being performed by the Debtors, including those projects which are being performed by Debtor Farfield Company. Accordingly, Liberty intends to draw upon the Letter of Credit and the Debtors will, in turn, be liable to the Revolving Lenders for the amounts. Absent Liberty's draw on the Letter of Credit, the Debtors have reason to believe that the Revolving Lenders will not renew the Letter of Credit. In light of the events, and to eliminate the attendant risk of costly, time-consuming, and distracting litigation, the Debtors, the Revolving Lenders and Liberty have agreed to settle certain obligations under the Prepetition Credit Agreement and the Letter of Credit. Pursuant to the Settlement, the parties agree that: (a) Liberty will return the Letter of Credit to Bank of America, thus releasing the Revolving Lenders from their obligations under the Letter of Credit. The return of the Letter of Credit will reduce any liability, which the Debtors may owe to the Revolving Lenders as a result of a potential draw upon the Letter of Credit from $22,000,000 to $17,000,000; (b) In exchange for the return of the Letter of Credit to Bank of America, the Revolving Lenders will pay Liberty $17,000,000; and (c) Bank of America, as agent for the Prepetition Lenders, will receive the proceeds from the sale of Farfield free and clear of all claims, rights or interests that Liberty may assert with regard to the proceeds. Absent Court approval, Mr. Perez notes that the Debtors will be required to repay the Revolving Lenders the entire $22,000,000. Although this liability may potentially be reduced at some future date, Mr. Perez says, this outcome is unlikely considering the fact that Liberty alleges potential Surety Losses, which exceed the $17,000,000 discounted price the Revolving Lenders have agreed to pay for the Letter of Credit. Furthermore, if the Parties do not enter into the Settlement, the Debtors will be liable for any amounts, which Liberty draws on under the Letter of Credit until Farfield's projects are complete. The Debtors estimate that it will take five years to complete those projects. Additionally, although the Debtors sold Farfield and certain of their contract liabilities and obligations were assumed by Farfield's buyer, the Debtors continue to remain liable for all liabilities and obligations which were not specifically assumed by the buyer. The Debtors submit that these obligations could potentially exist for an extended period of time. (Encompass Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON CORP: Secures Court Approval of Qwest Settlement Pact ----------------------------------------------------------- Melanie Gray, Esq., at Weil, Gotshal & Manges, in New York, relates that Qwest Communications Corporation and Enron Broadband Services, Inc. entered into certain capacity agreements to provide each other with telecommunications capacity, conduit, fiber, collocation space and other consideration, namely the: (1) Dark Fiber IRU Agreement (EBS to Qwest) in respect of EBS' Salt Lake City to New Orleans fiber optic system route; (2) Wave IRU Agreement (Qwest to EBS) in respect of defined capacity on Qwest's domestic fiber optic network; (3) Collocation Agreement (Running Line) granting Qwest rights to locate telecommunications equipment within facilities controlled by EBS along its Salt Lake City to New Orleans system route; and (4) Master Collocation Agreement concerning the rights to place one party's telecommunications equipment within certain facilities owned or controlled by the other party, and to interconnect the equipment with other equipment within the facilities. In connection with the Capacity Agreements, Qwest and EBS entered into certain related transaction agreements including, but not limited to, a Security Agreement, an Assignment and Assumption Agreement and a Settlement and Release Agreement, each dated September 30, 2001. Furthermore, Enron Corp. guaranteed certain EBS's obligations relating to the Capacity Agreements and certain of the Related Transaction Agreements pursuant to that certain Guaranty Agreement. Likewise, Qwest Communications International, Inc. guaranteed certain obligations of Qwest relating to the Capacity Agreements and certain of the Related Transaction Agreements pursuant to that certain Guaranty Agreement. Pursuant to the Dark Fiber Agreement, Ms. Gray informs Judge Gonzalez, Qwest purchased an indefeasible right to use certain dark fibers on the EBS Network for $308,000,000. Qwest paid $112,000,000 at closing and signed two promissory notes in EBS's favor for the purchase price balance. One promissory note for $47,401,100 was payable on April 1, 2002. The second promissory note for $148,598,900 was payable in two installments: -- $50,598,900 on April 1, 2002, and -- $98,000,000 on September 30, 2002. Each Note installment was supported by separate letters of credit Bank of America issued. Under the Wave Agreement, Qwest sold EBS certain indefeasible rights to use certain lit wavelength capacity in two tranches. EBS paid Qwest $112,000,000 for the first tranche on September 30, 2001. Qwest alleges that EBS owes them an additional $83,500,000 for additional wavelength capacity that Qwest contends that EBS was required to take on or before September 30, 2002. Under the Wave Agreement and the Dark Fiber Agreement, Qwest and EBS are obligated to pay for and provide operation and maintenance obligations, collocation, and related services over a 25-year term ending in September 2026. Due to EBS's Chapter 11 filing, Qwest alleged that it has a right to adequate protection of EBS's performance in the Dark Fiber Agreement. EBS disputes that Qwest is entitled to adequate protection and adequate assurance of future performance. In addition, EBS and Qwest have various disputes regarding the nature, scope, and terms of the agreements that they have previously entered into. These disputes include: (a) Qwest's contention that EBS was obligated to purchase an additional $83,500,000 of wavelength capacity on or prior to September 30, 2002; (b) Qwest's contention that EBS is obligated to pay $93,298 and $69,619 per month for a term of 25 years for O&M; (c) Qwest's contention that EBS is in default under the Dark Fiber Agreement, EBS cannot cure the defaults, and therefore, EBS is not entitled to any payment under the Notes; (d) Qwest's contention that EBS cannot provide adequate assurance of future performance as required by Section 365(b)(1)(c) of the Bankruptcy Code, and therefore, EBS is not entitled to any payment under the Notes; (e) EBS' contention that Qwest is obligated to pay $4,200,000 per year for a term of 25 years for O&M; (f) EBS' contention that it has fraudulent conveyance claims against Qwest arising out of the Wave Agreement; and (g) Whether, and to what extent, Qwest has any set-off or recoupment rights against the payments due EBS under the Dark Fiber Agreement. Ms. Gray tells the Court that the parties entered into a Joint Stipulation for Adequate Protection on March 14, 2002 to avoid the cost and risk of litigation over Qwest's demand for adequate protection. Pursuant to the Stipulation, Qwest and EBS agreed that Qwest would pay the first installment due under the $148,000,000 Note into a segregated, interest-bearing account, subject to the set-off or recoupment rights, if any, held by Qwest. The parties also agreed to negotiate in good faith to resolve their disputes and attempt to reach a global settlement. On September 13, 2002, Qwest and EBS entered into a modification of the Joint Stipulation. Pursuant to the Modification, EBS drew down $98,000,000, the amount equal to the second installment under the $148,000,000 Note, in accordance with one of the Letters of Credit, which supported the second installment under the $148,000,000 Note, and placed the proceeds into the Segregated Account. Since then, the Debtors and Qwest have negotiated a settlement of the various disputes among the parties by entering into the Settlement Agreement, which provides that: (a) For settlement purposes only, the Debtors and Qwest have agreed to treat the Capacity Agreements, the two IRU agreements dated December 21, 1999, and June 30, 2000, and the Assumed Contracts as executory contracts or unexpired leases within the meaning of Section 365 of the Bankruptcy Code; (b) All of the approximately $150,000,000 deposited in the Segregated Account will be released to EBS on the Closing Date, except for: (1) subject to adjustment as set forth in the Agreement, Qwest will pay $11,000,000, (2) the net payment to Qwest, if any, resulting from the proration of certain obligations for taxes, utility expenses, etc., and (3) an amount equal to $8,000,000 for (w) Post-Closing Adjustments , if any, (x) any payments to Qwest resulting from the breach of any representation and warranties that survive Closing, (y) with respect to any Transition Agreement Indemnity Claim under the Transition Agreement, and (z) the post-Closing prorations, if any; (c) Effective upon Closing, each Debtor will be deemed to have rejected the Wave Agreement and the Master Collocation Agreement; (d) EBS will assume the Dark Fiber Agreement, the SLC-NO Collocation Agreement, and the two IRU Agreements between Qwest and EBS dated December 21, 1999 and June 30, 2000, and will assign all of its rights in those agreements to Qwest, except for EBS' right to receive certain payments under the Dark Fiber Agreement as the Agreement specified; (e) Each party agrees to release certain payment and other obligations; (f) EBS will transfer to Qwest all its interest in the System Assets, along the Salt Lake City to New Orleans route; (g) EBS will transfer to Qwest the Other Assets; and (h) EBS and Qwest will enter into a Transition Agreement, pursuant to which the operation and maintenance of the Salt Lake City to New Orleans fiber optic route will be turned over to Qwest. By this motion, the Debtors seek the Court's authority to enter into the Agreement with Qwest, and approval of the Settlement Agreement in its entirety, including all transfers, agreements, actions, and payments contemplated. Ms. Gray contends that the Settlement Agreement is warranted because: (a) it avoids litigation and provides a solution that resolves the matters amicably and without the need for costly, time-consuming and risky litigation; (b) the Agreement was entered into only after extensive negotiations and a thorough analysis of the facts and law with respect to the claims between the Debtors and Qwest; (c) the Agreement will allow a substantial payment on the $148,000,000 Note from the Segregated Account; (d) it will relieve EBS of potentially onerous acquisition payments and O&M obligations; and (e) it provides that the Agreement for Construction and Transfer between EBS and All West Communications, Inc., dated as of March 11, 1999, as amended, will be further modified and will be assigned to Qwest and that the Collocation Agreement by and between EBS and McLeodUSA Telecommunications Services, Inc. entered into postpetition will be assigned to Qwest. Thus, the Debtors ask the Court to authorize the execution, assumption and assignment of the Assumed Contracts. EBS believes that it is not in monetary default on any of the Assumed Contracts. Hence, no cure amounts are required. Ms. Gray further asserts that the assignment of the Assumed Contracts to Qwest will, in and of itself, provide adequate assurance of future performance of the Assumed Contracts. Ms. Gray notes that the Debtors' rejection of the Wave Agreement and the Master Collocation Agreement will relieve each Party of any obligation to the other to make any payments. In effect, the Debtors' rejection of these agreements in connection with the proposed settlement will enable the Debtors to eliminate potential claims against their estates. To assure to Qwest the continued benefit of its rights after Closing in the assumed Capacity Agreements and the other Assumed Contracts, and to relieve each of the Debtors and their Affiliates from post-Closing liabilities under the Capacity Agreements and Assumed Contracts, the Debtors will transfer, convey and assign to Qwest all of the Debtors' right, title and interest in and to: (1) the optical fiber cable containing the EBS Fibers, and associated splicing connections, splice boxes and vaults installed by or on the Debtors' behalf along the System Route; (2) the EBS Fibers, which include the dark optical fibers in the Cable in which Qwest was granted an IRU pursuant to the Dark Fiber Agreement and all other optical fibers installed along the System Route, including lit fibers, which any Debtor or any of its Affiliates owns or controls, including but not limited to, residual ownership interests, if any, remaining after IRUs, leases or other rights in the fibers have been granted to third parties; (3) the Conduit; (4) the System Equipment, which includes all of the Debtors' and their Affiliates' Telecommunications Equipment, Spare Equipment and other equipment used or held for use in connection with the System's operation or maintenance; (5) the Equipment Records; (6) the Real Property Interests, which include certain parcels of land, easements, buildings, improvements, fixtures, leases, etc., utilized in connection with the System's operation; (7) the Underlying Rights; (8) the Assumed Contracts; (9) the System Records; (10) all of the Debtors' and their Affiliates' right, title and interest in any other asset used in connection with the ownership, operation and maintenance of the System and located along the System Route; and (11) the Other Assets as described in the Agreement. EBS has determined that it is no longer in its best interest to operate along the Salt Lake City to New Orleans fiber optic route. "The continued costs to operate and maintain the route far exceed the anticipated revenues which may be derived from continuing to operate the route," Ms. Gray explains. The Debtors further contend that it is appropriate that the Assets be sold and the Assumed Contracts be assigned free and clear of liens, claims, encumbrances, and interests, as well as set-off rights, netting, deduction or recoupment. The Debtors believe that: (1) their secured lenders will consent to the proposed sale of the Assets, (2) the value to be received by the Debtors in consideration of the sale of the Assets is equal to or exceeds the value of the liens upon the collateral, or (3) creditors with interests in the Assets can be compelled to accept a monetary satisfaction of their claims. Moreover, the Agreement provides that the Debtors will have paid prior to Closing or will pay at Closing all ad valorem taxes, real property taxes, assessments and similar governmental charges which have been levied with respect to the Assets, which are delinquent, past due, or otherwise due and payable. Thus, Ms. Gray insists, the sale of the Assets free and clear of the Interests satisfies the statutory prerequisites of Section 363(f) of the Bankruptcy Code. * * * After due consideration, Judge Gonzalez approved the Qwest Settlement Agreement. (Enron Bankruptcy News, Issue No. 71; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON: Asia Pacific's Case Summary & 18 Unsecured Creditors ----------------------------------------------------------- Debtor: Enron Asia Pacific/Africa/China LLC 1400 Smith Street Houston, Texas 77002 Bankruptcy Case No.: 03-14225 Type of Business: The Debtor is an affiliate of Enron Corp. Chapter 11 Petition Date: June 27, 2003 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Tel: 212-310-8602 Fax : 212-310-8007 Estimated Assets: More than $100 Million Estimated Debts: More than $100 Million Debtor's 18 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Mitsui Fudosan Jutaku Trade Debt $36,158 Lease Co. Ltd. Milbank, Tweed, Hadley Legal Fees $29,344 & Mccloy Hunter & Hunter Legal Fees $10,837 Proact Technologies Corp Trade Debt $8,000 Ken Corporation KK Trade Debt $6,327 Japan Translation Trade Debt $3,246 Officeteam Trade Debt $2,432 AT&T Trade Debt $1,161 Eastman Kodak Company 2074 Trade Debt $779 Asap Software Express, Inc. Trade Debt $731 Zhang Wei 6666 Trade Debt $642 Skytel Trade Debt $348 Carey Sloan 4812 Trade Debt $313 Houston Chronicle 801 Trade Debt $253 Vinson & Elkins L.L.P. Legal Fees $225 Intl Medicine Center Trade Debt $220 Fs Language Services Inc Trade Debt $204 Federal Express Trade Debt $23 Corporation Post ENRON: Atlantic Commercial's Case Summary & 3 Unsec. Creditors -------------------------------------------------------------- Debtor: Atlantic Commercial Finance, Inc. 1400 Smith Street Houston, Texas 77002 Bankruptcy Case No.: 03-14223 Type of Business: The Debtor is an affiliate of Enron Corp. Chapter 11 Petition Date: June 27, 2003 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Tel: 212-310-8602 Fax : 212-310-8007 Estimated Assets: More than $100 Million Estimated Debts: More than $100 Million Debtor's 3 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Belastingdienst Grote Statutory Dues $93,823 Commonwealth of Mass. Statutory Dues $456 Enron (St. Lucia) Accounts Payable $80 International Business Corporation IBC ENRON: Development Corp.'s Case Summary & Unsecured Creditor ------------------------------------------------------------ Debtor: Enron Development Corp. 1400 Smith Street Houston, Texas 77002 Bankruptcy Case No.: 03-14226 Type of Business: The Debtor is an affiliate of Enron Corp. Chapter 11 Petition Date: June 27, 2003 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Tel: 212-310-8602 Fax : 212-310-8007 Estimated Assets: $50 Million to $100 Million Estimated Debts: More than $100 Million Debtor's Largest Unsecured Creditor: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Verizon Wireless Trade Debt $414 ENRON: ET Power 3 LLC's Voluntary Chapter 11 Case Summary --------------------------------------------------------- Debtor: ET Power 3 LLC 1400 Smith Street Houston, Texas 77002 Bankruptcy Case No.: 03-14227 Type of Business: The Debtor is an affiliate of Enron Corp. Chapter 11 Petition Date: June 27, 2003 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Tel: 212-310-8602 Fax : 212-310-8007 Estimated Assets: More than $100 Million Estimated Debts: $0 to $50,000 ENRON: Global Power's Voluntary Chapter 11 Case Summary ------------------------------------------------------- Debtor: Enron Global Power & Pipelines LLC 1400 Smith Street Houston, Texas 77002 Bankruptcy Case No.: 03-14230 Type of Business: The Debtor is an affiliate of Enron Corp. Chapter 11 Petition Date: June 27, 2003 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Tel: 212-310-8602 Fax : 212-310-8007 Estimated Assets: More than $100 Million Estimated Debts: More than $100 Million ENRON: Nowa Sarzyna Holding's Case Summary & Unsecured Creditor --------------------------------------------------------------- Debtor: Nowa Sarzyna Holding B.V. Equity Trust Co. N.V. Schouburgpleim 30-34 3012 CL Rotterdam Netherlands Bankruptcy Case No.: 03-14228 Type of Business: The Debtor is an affiliate of Enron Corp. Chapter 11 Petition Date: June 27, 2003 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Tel: 212-310-8602 Fax : 212-310-8007 Estimated Assets: $10 Million to $50 Million Estimated Debts: $1 Million to $10 Million Debtor's Largest Unsecured Creditor: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Belastingdienst Grote Income Tax Payable $70,000 Ondernemingen ENRON: Portland General's Voluntary Chapter 11 Case Summary ----------------------------------------------------------- Debtor: Portland General Holdings, Inc. 121 SW Salmon Street Portland, Oregon 97204 Bankruptcy Case No.: 03-14231 Type of Business: The Debtor is an affiliate of Enron Corp. Chapter 11 Petition Date: June 27, 2003 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Tel: 212-310-8602 Fax : 212-310-8007 Estimated Assets: $0 to $50,000 Estimated Debts: $50,000 to $100,000 ENRON: Portland Transition's Voluntary Chapter 11 Case Summary -------------------------------------------------------------- Debtor: Portland Transition Company, Inc. 121 SW Salmon Street Portland, Oregon 97204 Bankruptcy Case No.: 03-14232 Type of Business: The Debtor is an affiliate of Enron Corp. Chapter 11 Petition Date: June 27, 2003 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Tel: 212-310-8602 Fax : 212-310-8007 Estimated Assets: $10 Million to $50 Million Estimated Debts: $10 Million to $50 Million ENRON: Protane Corp.'s Case Summary & 20 Unsecured Creditors ------------------------------------------------------------ Debtor: The Protane Corporation 1400 Smith Street Houston, Texas 77002 Bankruptcy Case No.: 03-14224 Type of Business: The Debtor is an affiliate of Enron Corp. Chapter 11 Petition Date: June 27, 2003 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Tel: 212-310-8602 Fax : 212-310-8007 Estimated Assets: More than $100 Million Estimated Debts: $50 to $100 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ EcoElectrica LP Trade Debt $285,983 273 Ponce de Leon Avenue Suite 902 Hato Rey, Puerto Rico 00917 Tropigas Trade Debt $291,066 P.O. Box 70205 San Juan, Puerto Rico 00936-8205 Caribe Olefins LLP, SP Contract $200,000 AEE Trade Debt $30,550 COSVIMED Trade Debt $5,470 Adsuar Muniz Goyco & Besosa Trade Debt $3,594 International Controls Trade Debt $2,827 Lic. Jose F. Sarraga Trade Debt $2,345 Borinquen Del Sur COOP Trade Debt $623 Air Products & Chemicals, Trade Debt $517 Inc. Citicorp Finance Bank Loan $516 A Rivera - Petty Cash Urb Trade Debt $494 RIMCO Trade Debt $491 Mc-Master Carr Trade Debt $424 Administradora ASUME Trade Debt $417 Popular Leasing Trade Debt $317 Verizon Wireless Trade Debt $179 Sanang Maintenance Service Trade Debt $94 Escuela de La Comunidad Trade Debt $50 Firm Delivery Goldman Antonetti Cordova Trade Debt $44 ENRON: South America LLC's Case Summary & 16 Unsec. Creditors ------------------------------------------------------------- Debtor: Enron South America LLC 1400 Smith Street Houston, Texas 77002 Bankruptcy Case No.: 03-14229 Type of Business: The Debtor is an affiliate of Enron Corp. Chapter 11 Petition Date: June 27, 2003 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 Tel: 212-310-8602 Fax : 212-310-8007 Estimated Assets: More than $100 Million Estimated Debts: $10 Million to $50 Million Debtor's 16 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Wilson Management Trade debt $67,031 Associates Inc. American Express Bank Credit debt $43,857 Limited Arthur Andersen LLP Trade debt $35,500 Edward Graham Trade debt $29,277 Diana Perez Trade debt $14,508 Roberto Pensotti Trade debt $5,702 Vedior North America Trade Debt $3,098 Kathleen Wagner Trade debt $2,797 Travieso Evans Hughes Legal Fees $2,390 Arria Huntlaw Corporate Svcs Ltd Trade debt $500 Sigma Internet, Inc. Trade debt $449 Momentum Document Services Trade debt $132 Inc. Stevenson Enterprises Trade debt $75 Ala Carte Express/Citi Trade debt $61 Express Southwestern Bell Telephone Trade debt $0.85 John Hardy Jr. Trade debt $0.62 FLEMING COMPANIES: Selling Grocery Wholesale Business to C&S ------------------------------------------------------------ Fleming Companies, Inc. and C&S Wholesale Grocers, Inc., have entered into a letter of intent regarding the sale of Fleming's wholesale grocery business to C&S. The letter of intent contemplates the sale of all of Fleming's grocery wholesale operations and assets to C&S. The letter of intent is subject to the execution of a definitive asset purchase agreement. In a separate arrangement, C&S has agreed to promptly begin supplying Fleming with selected vendor products for distribution to Fleming retail customers. "These actions represent major steps in Fleming's Chapter 11 process," said Fleming's Interim President and Chief Executive Officer Pete Willmott. "We believe the best way to maximize the value of the business for our constituents is to sell Fleming's grocery wholesale business to a strong buyer who can provide our customers with the service and reliability they need. This arrangement with C&S, one of the nation's largest grocery wholesalers, is designed to allow performance to be restored and enhanced in our grocery wholesale divisions, to the benefit of our customers and associates. The supply arrangement with C&S, which is effective immediately, will provide additional product to enhance service to Fleming customers." C&S Executive Vice President Mark Gross said, "The purchase of Fleming's wholesale grocery operations would allow us to expand our business into parts of the country where we do not presently operate. We are excited about working with Fleming and its chain and independent supermarket customers in a mutually beneficial transition for all parties." Fleming expects to file a motion with the U.S. Bankruptcy Court in Delaware to establish the procedures for the sale of Fleming's grocery wholesale operations. The company also expects to file a definitive binding asset purchase agreement with C&S. Fleming expects to request that the Bankruptcy Court set an auction for the sale of the grocery wholesale business by the end of July, with the highest or best offer presented to the Bankruptcy Court for approval in early August. Fleming's Core-Mark convenience business, which operates as a separate entity, is not affected by this action. The company maintains its focus on supporting the Core-Mark operation and has made substantial progress in restoring service levels of its convenience distribution business. C&S Wholesale Grocers, Inc. is a privately owned grocery wholesale company with annual sales in excess of $11 billion. As ranked by Forbes magazine, C&S is the 11th largest privately held company in the nation. Founded in 1918, C&S provides wholesale food distribution to grocery chains, as well as independent stores throughout the Northeastern and Midwestern United States, delivering to over 2,200 locations from its distribution centers in Vermont, Massachusetts, Connecticut, New York, New Jersey, Maryland, Ohio and Pennsylvania. To learn more about C&S Wholesale, visit the company's Web site at http://www.cswg.com Fleming (OTC Pink Sheets: FLMIQ) is a 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 www.fleming.com . Fleming and its operating subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on April 1, 2003. The filings were made in the U.S. Bankruptcy Court in Wilmington, Delaware. Fleming's court filings are available via the court's Web site at http://www.deb.uscourts.gov FLEMING COMPANIES: Court Directs DIP Agents to Allow GOB Sales -------------------------------------------------------------- Upon the occurrence of a termination event pursuant to the DIP Financing Agreement, U.S. Bankruptcy Court Judge Walrath rules that the Fleming Companies, Inc.'s DIP Agents are entitled to direct the Debtors to conduct a liquidation or going out of business sale on any of their owned or leased premises without further Court approval, provided that all postpetition lease obligations have been paid. The Debtors will fully comply with any instructions from the Agents or their designee in the execution of any liquidation sale. Deutsche Bank Trust Company Americas is the administrative agent for the postpetition lenders. JPMorgan Chase Bank is the collateral agent. During the liquidation sale on any real property leased by the Debtors, the Agents and the Lenders will be responsible for the timely payment of the Debtors' obligations under Section 365(d)(3) of the Bankruptcy Code arising on or before the Debtors surrender the property to the landlord. Judge Walrath also established GOB guidelines for any liquidation sale: 1. Business will be conducted so that the leasehold properties remain open during the normal hours of operation; 2. The Liquidation Sales will be conducted in accordance with applicable state and local "Blue Laws", and thus, where applicable, no Liquidation Sales will be conducted on a Sunday; 3. The Debtors will not distribute handbills, leaflets or other written materials to customers outside any Leasehold Property's premises, but may solicit customers within the Leasehold Properties themselves. The Debtors will not use flashing lights or any type of amplified sound to advertise the Liquidation Sales or solicit customers; 4. At the conclusion of each Liquidation Sale, the Debtors will vacate the Leasehold Property in broom clean condition, except for the removal of furniture, fixtures, equipment and remaining supplies. The Debtors will leave the Property in the same condition as on the commencement of the Liquidation Sale, ordinary wear and tear is expected. Any merchandise or furniture, fixtures and equipment left in the store premises after the Surrender Date will be deemed abandoned. The Debtors will provide three business days' notice of the abandonment to any known affected lienholders; 5. After the commencement of a Liquidation Sale, the Debtors will not augment or otherwise bring any new merchandise into the Leasehold Properties, other than the inventory they ordered before the Liquidation Sale for purposes of consolidating merchandise currently located at the Leasehold Properties; 6. All display and hanging signs used in connection with a Liquidation Sale will be professionally lettered, and all hanging signs will be hung in a professional manner; 7. With respect to the advertising of the Liquidation Sales, the Debtors may use the terms "Going-Out-Of-Business Sale", "Store Closing Sale" or "Total Liquidation Sale"; 8. If sales are to be considered "final", conspicuous signs will be posted in each of the affected stores to the effect that all sales are "final". The Debtors will provide a named representative with a telephone number that customers can contact with any questions or complaints; 9. The Debtors will not make any alterations to the Leasehold Properties, excluding the removal of store signs, unless the removal is prohibited by the leases; 10. The Debtors will not make any alterations to interior or exterior Leasehold Property lighting; 11. The Debtors will keep the Leasehold Property premises and surrounding area clean and orderly consistent with present practices and consistent with the lease terms; 12. The lease landlords will have reasonable access to the Property premises on the conclusion of a Liquidation Sale solely for the purpose of dressing the Property windows to minimize the appearance of a dark store; 13. The Debtors will not auction any furniture, fixture or equipment; and 14. The Debtors will provide at least three business days' written advance notice to the landlords of the conclusion of each Liquidation Sale. (Fleming Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) GENTEK INC: Files Plan of Reorganization & Disclosure Statement --------------------------------------------------------------- GenTek Inc. (OTC Bulletin Board: GNKIQ), a diversified manufacturer of telecommunications and other industrial products, has filed its Plan of Reorganization and Disclosure Statement with the United States Bankruptcy Court for the District of Delaware. GenTek's Plan reflects an agreement as to the principal terms of a consensual reorganization reached among the company, its senior- secured lenders and the official committee of GenTek's unsecured creditors. "The filing of our reorganization plan represents a key milestone on GenTek's path to emergence from Chapter 11 and marks the commencement of the final phase of the company's financial restructuring," said Richard R. Russell, President and Chief Executive Officer. "We believe that the Plan provides the framework for a successful reorganization that will allow GenTek to emerge later this year as a stronger, more competitive company. We especially want to thank our customers, vendors, employees and lenders for their continued support." Under the company's proposed Plan, which is subject to creditor approval, confirmation by the Bankruptcy Court and certain other conditions, GenTek's balance sheet would be substantially delevered. Subject to the terms of the Plan, key elements of the company's proposed Plan include: -- The exchange of approximately $756 million of pre-petition senior secured debt for a combination of approximately $60 million in cash, $250 million in new senior secured notes, $100 million in new senior subordinated notes and approximately 92.4 percent of the company's new common stock; -- The exchange of approximately $200 million of pre-petition senior subordinated notes for approximately 5.5 percent of the company's new common stock, plus warrants to purchase additional shares of the company's new common stock, subject to the support of the noteholders; -- Trade creditors and certain other unsecured creditors would receive their pro rata share of up to approximately 2.1 percent of the company's new common stock, plus warrants to purchase additional shares of the company's new common stock, or if these classes approve the Plan, they would have an option to receive in lieu thereof cash in the amount equal to the lesser of (i) 6 percent of their allowed claim or (ii) their pro rata share of $5 million. Other treatment is proposed for certain groups of tort claimants; -- Cancellation of all existing common shares without any distribution; and -- The company is seeking to secure an exit financing facility of up to $125 million, which will be used to fund working capital requirements, pay Plan obligations and for other general corporate purposes. GenTek expects to have aggregate, funded debt of approximately $380 million upon emergence. The next step in the confirmation process is for the company to seek Bankruptcy Court approval of the adequacy of its Disclosure Statement at a hearing expected to be scheduled later this summer. Upon approval of the Disclosure Statement's adequacy, GenTek will be able to commence solicitation of votes for approval of the Plan from those of its pre-petition creditors who are entitled to vote on the Plan. GenTek Inc. is a diversified manufacturer of telecommunications and other industrial products. Additional information about the company is available on GenTek's Web site at http://www.gentek-global.com GLOBAL LEARNING: Asks Court to Extend Schedules Filing Deadline --------------------------------------------------------------- Global Learning System Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Maryland to extend the time period within which they must file their schedules of assets and liabilities, statements of financial affairs and lists of executory contracts and unexpired leases required under 11 U.S.C. Sec. 521(1). Due to the limited staff available to perform the required internal review of the Debtors' businesses and affairs, and the press of numerous other matters incident to the commencement of these cases, the Debtors are requesting a brief extension of time to file the Schedules and Statements under Bankruptcy Rule 1007(c) will not be sufficient. The Debtors believe that the Schedules and Statements can be filed on or before July 7, 2003. This would constitute an appropriate two-week extension of the deadline beyond the 15 days provided under Bankruptcy Rule. Global Learning Systems, Inc., an improvement solutions company headquartered in Frederick, Maryland, filed for chapter 11 protection June 6, 2003 (Bankr. Md. Case No. 03-30218). Brent C. Strickland, Esq., at Whiteford, Taylor & Preston LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed assets of over a million and debts of more than $10 million. GOODYEAR TIRE: USWA Nixes Company's Proposal and Talks Break Off ---------------------------------------------------------------- The United Steelworkers of America rejected a company proposal late last night that would have allowed Goodyear to close many North American facilities, while slashing health care benefits for active and retired members. The company's final offer also made no commitment to restructure its crushing debt, a burden that locks Goodyear into a stranglehold that prevents it from making necessary capital investments in its facilities. No further talks are scheduled. "The company claims it needs cost-savings, but it made no commitment to reduce the substantial waste in its operations," stated USWA International vice president Andrew V. Palm. "Also, they have no plan to cut out any of the excessive layers of fat that exists throughout its management system, from the highest levels in its corporate offices right down onto the shop floor." USWA financial and legal experts, assisted by Wall Street experts, conducted an extensive examination of Goodyear's finances and operation prior to the beginning of bargaining. The study noted an appalling bloated bureaucratic structure with many excessive layers of managerial personnel and the immediate need for the company to restructure its staggering debt. The Union's business plan included a strategy to increase production efficiencies at each of the 14 facilities covered by the master contract negotiations, and a program to rein in rapidly escalating health care and prescription drug costs. "If we allow Goodyear to conduct massive job cuts and plant closures, it would devastate American heartland communities like ours," stated Kevin Terrett, president of Local 878 in Union City, Tennessee. New contract talks between the USWA and Goodyear began on March 12 in Cincinnati. Contracts at 11 of the plants were set to expire on April 19, but both sides agreed to a day-to-day extension agreement a few days prior to the deadline. The agreement remains in effect with both sides holding the right to terminate it upon delivering a 72-hour notice. Contracts at the other three plants are set to expire on July 6, 2003. The negotiations cover contracts for more than 19,000 active workers and 22,000 retirees employed at Goodyear, Kelly- Springfield and Dunlop plants across the U.S. The local unions involved in the contract negotiations include: Goodyear Local 2 -- Akron/Green, Ohio Goodyear Local 12 -- Gadsden, Alabama Dunlop Local 135 -- Buffalo, New York Goodyear Local 200 -- St. Marys, Ohio Goodyear Local 286 -- Lincoln, Nebraska Goodyear Local 307 -- Topeka, Kansas Kelly-Springfield Local 745 -- Freeport, Illinois Kelly-Springfield Local 746 -- Tyler, Texas Goodyear Local 831 -- Danville, Virginia Goodyear Local 843 -- Marysville, Ohio Goodyear Local 878 -- Union City, Tennessee Goodyear Local 904 -- Sun Prairie, Wisconsin Dunlop Local 915 -- Huntsville, Alabama Kelly-Springfield Local 959 -- Fayetteville, North Carolina The USWA represents 1.2 million active and retired members in North America, including nearly 90,000 active workers in the rubber and plastics industry. Headquartered in Pittsburgh, the USWA has 12 districts spanning the continent and more than 2,000 locals. www.uswa.org Goodyear (NYSE: GT) is the world's largest tire company. Headquartered in Akron, Ohio, the company manufactures tires, engineered rubber products and chemicals in more than 90 facilities in 28 countries. It has marketing operations in almost every country around the world. Goodyear employs about 95,000 people worldwide. Goodyear Tire & Rubber's 8.500% bonds due 2007 (GT07USR1) are trading at about 84 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=GT07USR1for real-time bond pricing. As previously reported, Fitch Ratings downgraded the senior unsecured debt ratings of The Goodyear Tire & Rubber Company to 'B' from 'B+' and assigned a rating of 'B+' to the senior secured bank facilities. Approximately $5 billion of debt is affected. The rating action was based on continued erosion of operating fundamentals in Goodyear's core North American Tire operations which continue to face major challenges, onerous pension obligations funding, and execution risk to the operating turn- around plan in the midst of weak industry demand and intense competition. The downgrade of the senior unsecured debt also reflects the weaker position of unsecured creditors under the recent bank agreement which granted security interest to the bank creditors. While cash holdings and the restructured financing arrangements afford near-term liquidity, lack of significant operating improvements in the next 9 to 15 months could jeopardize availability of these funding sources due to covenant violations. With the rating action, the Rating Watch Negative has been replaced with Rating Outlook Negative. GRUPO IUSACELL: Seeks Further Extension of Loan Default Waiver -------------------------------------------------------------- Grupo Iusacell, S.A. de C.V. (BMV:CEL) (NYSE:CEL) announced that its subsidiary, Grupo Iusacell Celular, S.A. de C.V., formally requested an additional extension of its temporary Amendment and Waiver of certain provisions and defaults under its US$266 million Amended and Restated Credit Agreement, dated as of March 29, 2001. The lenders under the Credit Agreement acknowledge receiving the Iusacell Celular request and are currently considering and evaluating the Company's request. During the first half of 2003, Iusacell Celular exceeded the permitted leverage ratio under the Credit Agreement of 2.50. On April 28, 2003 Iusacell Celular and the lenders entered into a temporary amendment and waiver to the Credit Agreement to increase the permitted leverage ratio from 2.50 to 2.70. On May 22, 2003, the Amendment was extended until June 13, 2003 and on June 12, 2003, the Amendment was further extended until June 26, 2003. The Amendment has expired, which resulted in an event of Default (as defined in the Credit Agreement) as if the Amendment had never been executed. Accordingly, the lenders under the Credit Agreement have the right to declare the indebtedness under their loan immediately due and payable. Grupo Iusacell, S.A. de C.V. (Iusacell, NYSE: CEL; BMV: CEL) is a wireless cellular and PCS service provider in seven of Mexico's nine regions, including Mexico City, Guadalajara, Monterrey, Tijuana, Acapulco, Puebla, Leon and Merida. The Company's service regions encompass a total of approximately 92 million POPs, representing approximately 90% of the country's total population. HAWK CORP: Offering Employees Stock Option Cancellation Option -------------------------------------------------------------- Hawk Corporation (NYSE: HWK) is offering employees of Hawk and its subsidiaries who are not members of its board of directors the opportunity to cancel their existing stock options having an exercise price of at least $6.00 per share in exchange for new options to be granted under Hawk's existing option plans. This offer is not available to the Company's board of directors, including its senior executive officers who are members the board. The Company is making the offer because many of its valued employees hold stock options with an exercise price that is significantly higher than the current market price of the Company's common stock. As a result, those options are no longer providing those employees with a realistic performance incentive. Ronald E. Weinberg, Hawk's Chairman and Chief Executive Officer, said, "The economy during the last three years has been difficult. We are aware that some of our employees have forgone salary increases and performance bonuses and that we eliminated discretionary 401(k) profit sharing contributions in 2001 and 2002. Despite these difficulties and distractions, our employees have remained focused and committed to achieving Hawk's long- term goals. We believe the offer to exchange is an important and appropriate incentive for our valued employees who have been granted options." The Company expects to grant the new options at least six months and one day after the date of cancellation of the options accepted for exchange. The new options will have the same vesting schedules as the options for which they are exchanged, but will have an exercise price equal to the closing price of the Company's common stock as reported by the New York Stock Exchange on the date of the new option grant. The exact number of new options issuable in exchange for old options will depend on the exercise price of the old options. Tendered options with an exercise price per share between $6.00 and $16.99 will be replaced with new options equal to the number of those options, while tendered options with an exercise price per share of at least $17.00 will be replaced with new options equal to 90% of the total number of those tendered options. The total number of options available for exchange is approximately 264,000 shares, or 23%, of the total number of options outstanding. The offer is currently scheduled to expire on July 28, 2003, and the Company expects to cancel tendered options on July 29, 2003, or as soon as possible thereafter. The offer is not conditioned on a minimum number of options being tendered, and participation in the offer is completely voluntary. Hawk filed Friday a tender offer statement with the Securities and Exchange Commission that will provide additional information, including detailed terms and conditions, about the option exchange offer. The terms and conditions of the offer are subject to change during the offering period, and the offering period may be extended by Hawk in its discretion. Hawk Corporation -- whose Corporate Credit Rating has been upgrade by Standard & Poor's to 'single-B' -- is a leading worldwide supplier of highly engineered products. Its friction products group is a leading supplier of friction materials for brakes, clutches and transmissions used in airplanes, trucks, construction equipment, farm equipment and recreational vehicles. Through its precision components group, the Company is a leading supplier of powder metal and metal injected molded components for industrial applications, including pump, motor and transmission elements, gears, pistons and anti-lock sensor rings. The Company's performance automotive group manufactures clutches and gearboxes for motorsport applications and performance automotive markets. The Company's motor group designs and manufactures die-cast aluminum rotors for fractional and subfractional electric motors used in appliances, business equipment and HVAC systems. Headquartered in Cleveland, Ohio, Hawk has approximately 1,700 employees and 16 manufacturing sites in five countries. Hawk Corporation is online at: http://www.hawkcorp.com HAYES LEMMERZ: Battle Over Mexican Joint Venture Continues ---------------------------------------------------------- Hayes Lemmerz International-Mexico, Inc., Hayes' wholly owned subsidiary, was a party three agreements pertaining to the Hayes Wheels de Mexico, S.A. de C.V. -- the Mexican JV: (i) a Shareholders Agreement with DESC Automotriz, S.A. de C.V.; (ii) a Marketing and Support Services Agreement with the Mexican JV and DESC; and (iii) a Technology License and Technical Assistance Agreement with the Mexican JV and DESC. On March 28, 2003, the Hayes Wheels Mexico Entities filed the DESC Claim seeking payment of a cure demand, or in the alternative, allowance and payment of an administrative claim for more than $20,000,000. In April 2003, Hayes Mexico terminated each of the Agreements in accordance with their terms, but the Hayes Wheels Mexico Entities appeared to dispute the validity and effectiveness of those terminations. Therefore, on May 6, 2003, the Reorganized Debtors sought to reject certain contracts as a precaution to reject the Agreements if their termination was not effective and they remained executory as of the Effective Date, which was June 3, 2003. On May 7, 2003, counsel for the Reorganized Debtors and the Hayes Wheels Mexico Entities informed the Court that the parties had agreed to continue the hearing on the DESC Claim until June 13, 2003, at which time the hearing would go forward on the limited issue of the arbitrability of the parties' disputes. On May 27, 2003, certain of the Reorganized Debtors filed a complaint seeking (i) declaratory judgments that the Agreements were terminated and were not executory contracts on the Effective Date and that the DESC Claim is not entitled to administrative priority status under 11 U.S.C. Sections 503(b) and 507(a), (ii) turnover under 11 U.S.C. Section 542 of materials and equipment relating to technology, know-how, processes, patents, trademarks and Confidential Information, and (iii) to enjoin use of the technology, know-how, processes, patents, trademarks and Confidential Information. On May 29, 2003, the Reorganized Debtors served and filed their brief on the arbitrability of the Hayes Wheels Mexico Disputes. Among other things, the Reorganized Debtors stated their belief that the material facts set forth should be undisputed by the DESC Entities. However, recognizing that the Reorganized Debtors' belief might be mistaken, and in an effort to avoid any delay in the hearing on the arbitrability of the Hayes Wheels Mexico Disputes, counsel for the Reorganized Debtors sent a letter to counsel for the Hayes Wheels Mexico Entities on June 4, 2003 requesting that the Hayes Wheels Mexico Entities inform the Reorganized Debtors whether they intended to dispute the factual matters or Mexican law issues set forth in the Reorganized Debtors' Brief and, if so, asking that they produce the documents pertaining to those matters and make available for deposition the witnesses relied upon by the Hayes Wheels Mexico Entities before the June 13th hearing. On June 6, 2003, counsel for the Hayes Wheels Mexico Entities responded by letter refusing to identify any such issues or witnesses before June 11, 2003, when the Hayes Wheels Mexico Entities' brief on the arbitration issue was due. On June 10, 2003, counsel for the Reorganized Debtors sent a letter to counsel for the Hayes Wheels Mexico Entities notifying them that if the Hayes Wheels Mexico Entities' brief asserted material disputes of fact or Mexican law, the Reorganized Debtors would ask the Court to continue the June 13th hearing to permit reasonable discovery with respect thereto. In a responding letter later that day -- at the same time they were preparing to submit to the Court the declaration of their undisclosed purported Mexican law expert, a witness whom they deliberately prevented the Debtors from deposing -- counsel for the Hayes Wheels Mexico Entities argued that the June 13th hearing is "not [to be] an evidentiary hearing" and that the Hayes Wheels Mexico Entities "will strongly object to any effort by the Debtors to submit additional materials" at the hearing. On June 11, 2003, the Hayes Wheels Mexico Entities filed their brief on the arbitrability of the Hayes Wheels Mexico Disputes, which raises disputes as to material issues of fact, as well as the Reorganized Debtors' contentions concerning Mexican law. In that brief, the Hayes Wheels Mexico Entities ask the Court, in determining whether to require arbitration, to consider and rely upon the declaration of their purported Mexican legal expert who they identified for the first time in that brief and who they have prevented the Reorganized Debtors from deposing. By this motion, the Reorganized Debtors ask the Court to continue the hearing on the arbitrability of the Hayes Wheels Mexico Disputes from June 13, 2003 to a date to be determined by the Court to afford a fair opportunity to conduct reasonable discovery regarding disputed evidentiary matters that pertain to a determination of the arbitrability of the Hayes Wheels Mexico Disputes. Anthony W. Clark, Esq., at Skadden Arps Slate Meagher & Flom LLP, in New York, tells the Court that the Hayes Wheels Mexico Entities' argument that the Court may compel Hayes, a non-party to the pertinent Agreements, to arbitrate the Disputes in Mexico is predicated on factual contentions that are not a part of the record, mischaracterizations of factual statements by the Reorganized Debtors, and the declaration of a purported Mexican legal expert whom the Hayes Wheels Mexico Entities identified for the first time late in the day on June 11, 2003 and whom they have prevented the Reorganized Debtors from deposing, even though the Reorganized Debtors dispute the "expert's" opinions. Before the Court determines whether the Disputes, which include more than $20,000,000 in alleged administrative claims, should be referred to arbitration in Mexico, the Reorganized Debtors should be allowed to conduct reasonable discovery on the evidentiary bases for Hayes Wheels Mexico Entities' arguments, including deposing their purported expert on Mexican law. Mr. Clark tells the Court that the Hayes Wheels Mexico Entities have consistently taken the position that there are no evidentiary issues relevant to the arbitrability of the Disputes. However, the Hayes Wheels Mexico Entities belie this contention. Moreover, Mr. Clark notes that the Hayes Wheels Mexico Entities are relying on, and ask the Court to rely on, a purported Mexican legal expert whose existence and proposed testimony was never disclosed as required by Rule 7026 of the Federal Rules of Bankruptcy Procedure and Rule 26(a)(2) of the Federal Rules of Civil Procedure and who the Hayes Wheels Mexico Entities have prevented the Reorganized Debtors from deposing, despite repeated requests to do so. Additionally, the Hayes Wheels Mexico Entities' "summary" of "the record" is replete with contentions that are not a part of the record, and it mischaracterizes the factual statements by the Reorganized Debtors. Recognizing the difficulty in trying to compel someone not a party to an arbitration agreement to nevertheless arbitrate disputes that arise thereunder, the Hayes Wheels Mexico Entities have mischaracterized the record in an effort to convince the Court that there is a basis to compel Hayes to arbitrate the Disputes in Mexico. Specifically, the Hayes Wheels Mexico Entities assert that this Court may compel the Reorganized Debtors to arbitrate the Disputes in Mexico notwithstanding that it is not a party to the Agreements on account of the Reorganized Debtors' "substantial activity in these matters." The Reorganized Debtors dispute the DESC Entities' representations regarding Hayes' alleged "substantial activity" that purportedly permits this Court to compel Hayes to arbitrate the Disputes, and the Reorganized Debtors specifically requested, and should be given, the opportunity to conduct reasonable discovery on the basis for the Hayes Wheels Mexico Entities' contentions on this. These contentions, which are mere allegations with no basis in the record, apparently constitute the "substantial activity" by Hayes that the Hayes Wheels Mexico Entities cite as a legal basis for this Court to compel Hayes, a non-party to the Agreements, to arbitrate disputes thereunder in Mexico. The Reorganized Debtors dispute many of these allegations and should be afforded an opportunity to conduct reasonable discovery with respect to thereto. Similarly, the Hayes Wheels Mexico Entities mischaracterize and take out of context the statement of facts made by the Reorganized Debtors. To the extent that the statement imply improper conduct by the Reorganized Debtors, Mr. Clark contends that they are grossly misleading as the Hayes Wheels Mexico Entities conveniently ignore a number of considerations. GM had originally designated Hayes to manufacture aluminum wheels for the GMT 355 platform. Moreover, contrary to the Hayes Wheels Mexico Entities' assertions, the Reorganized Debtors have made no statements at all, let alone admissions, concerning the notice that the Mexican JV may have had about the transfer of the GM Orders to the La Mirada, California facility. Hayes Wheels Mexico Entities' contentions with respect to the Ford Order completely disregard the Reorganized Debtors' contention that Hayes appropriately reserved the right to transfer manufacture of these wheels to a Ford-approved site other than the Mexican JV because Hayes was concerned that the Mexican JV would not be able to produce the volume and quality of wheels required by Ford. Mr. Clark adds that Hayes Wheels Mexico Entities also rely on, and ask the Court to rely on, the declaration of Jose Maria Abascal, a purported Mexican legal expert, for the proposition that "whether the scope of the arbitration provisions extends to [Hayes] as a designee under the Marketing Agreement is an issue for the arbitrators to decide on the basis of the evidence before them." The Reorganized Debtors have their own Mexican legal expert, Dr. Claus von Wobeser, a leading authority in Mexico on arbitration and alternative dispute resolution, who refutes Mr. Abascal's opinion and contends that there is no basis under Mexican law to compel a non-party to an agreement to arbitrate disputes arising thereunder. While Hayes Wheels Mexico Entities ask the Court to accept their "expert's" untested opinion, they refused to produce him for deposition, and they argue that the Reorganized Debtors should not be permitted to rebut that opinion with testimony from the Reorganized Debtors' expert. Mr. Clark asserts that Hayes Wheels Mexico Entities' contention that this Court should compel Hayes, a non-signatory to the Agreements, to arbitrate disputes in Mexico is predicated entirely on mischaracterizations of the factual record and a contested and untested expert opinion from an individual who has never been made available for deposition. The Court should not base its judgment on the arbitrability issue on the DESC Entities' arguments, allegations and unsworn "facts" that are contained only in their brief and not in a proper evidentiary record. See Trap Rock Industries, Inc. v. Local 825, International Union of Operating Engineers, AFL-CIO, 982 F.2d 884, 892 (3d Cir. 1992). Therefore, the Reorganized Debtors should be given a reasonable opportunity to conduct discovery with respect to the disputed evidentiary matters before the Court holds a contested hearing on the arbitration issue. (Hayes Lemmerz Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 609/392-0900) IMMTECH INT'L: Chan Kon Fung Discloses 15.232% Equity Stake ----------------------------------------------------------- Chan Kon Fung beneficially owns 1,246,600 shares of the common stock of Immtech International, Inc., representing 15.232% of the outstanding common stock of the Company. Mr. Fung has sole powers of voting and disposition of the entire amount of stock held. Immtech International, Inc. is a biopharmaceutical company focused on the discovery, development and commercialization of drugs for the treatment of fungal diseases, tuberculosis, hepatitis, pneumonia, diarrhea, and cancer. * * * As previously reported, since inception, the Company has incurred accumulated losses of approximately $41,466,000. Management expects the Company to continue to incur significant losses during the next several years as the Company continues its research and development activities and clinical trial efforts. There can be no assurance that the Company's continued research will lead to the development of commercially viable products. Immtech's operations to date have consumed substantial amounts of cash. The negative cash flow from operations is expected to continue in the foreseeable future. The Company will require substantial funds to conduct research and development, laboratory and clinical testing and to manufacture (or have manufactured) and market (or have marketed) its product candidates. Immtech's working capital is not sufficient to fund the Company's operations through the commercialization of one or more products yielding sufficient revenues to support the Company's operations; therefore, the Company will need to raise additional funds. The Company believes its existing unrestricted cash and cash equivalents and the grants the Company has received or has been awarded and is awaiting disbursement of, will be sufficient to meet the Company's planned expenditures through July 2003, although there can be no assurance the Company will not require additional funds. These factors, among others, indicate that the Company may be unable to continue as a going concern. The Company's ability to continue as a going concern is dependent upon its ability to generate sufficient funds to meet its obligations as they become due and, ultimately, to obtain profitable operations. Management's plans for the forthcoming year, in addition to normal operations, include continuing their efforts to obtain additional equity and/or debt financing, obtain additional grants and enter into various research, development and commercialization agreements with other entities. LARRY'S STANDARD: Court Okays Forshey & Prostol as Attorneys ------------------------------------------------------------ Larry's Standard Brand Shoes, Inc., sought and obtained approval from the U.S. Bankruptcy Court for the Northern District of Texas to employ Forshey & Prostol, LLP as its attorneys. Forshey & Prostokis has substantial real estate, litigation and bankruptcy expertise and is particularly well suited to represent the Company in its chapter 11 restructuring, the Debtors tell the Court. Specifically, Forshey & Prostok will: a) advise the Debtor of its rights, powers and duties as a debtor and debtor in possession continuing to operate and manage their businesses and properties; b) advise the Debtor concerning, and assisting in the negotiation and documentation of, agreements, debt restructurings, and related transactions; c) review the nature and validity of liens asserted against the property of the Debtor and advising the Debtor concerning the enforceability of such liens; d) advise the Debtor concerning the actions that it might take to collect and to recover property for the benefit of the Debtor's estate; e) prepare on behalf of the Debtor all necessary and appropriate applications, motions, pleadings, draft orders, notices, schedules and other documents, and reviewing all financial and other reports to be filed in these chapter 11 cases; f) advise the Debtor concerning, and preparing responses to, applications, motions, pleadings, notices and other papers that may be filed and served in these chapter 11 cases; g) counsel the Debtor in connection with the formulation, negotiation and promulgation of plans of reorganization and related documents; and h) perform all other legal services for and on behalf of the Debtor that may be necessary or appropriate in the administration of this chapter 11 case and its business, including advising and assisting the Debtor with respect to debt restructurings, stock or asset dispositions, general corporate, securities, tax, finance, real estate and litigation matters. The current hourly rates charged by Forshey & Prostok are: Partners $295 to $305 Associates $125 to $225 Of Counsel $200 to $250 Paralegals: $ 60 to $ 85 Larry's Standard Brand Shoes, Inc., is in the business of retail sales of men's shoes and accessories. The Company filed for chapter 11 protection on June 3, 2003 (Bankr. N.D. Tex. Case No. 03-45283). J. Robert Forshey, Esq., at Forshey and Prostok, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $8,836,861 in total assets and $10,782,378 in total debts. LEAP WIRELESS: Court Extends Lease Decision Time Until Sept. 10 --------------------------------------------------------------- Robert A. Klyman, Esq., at Latham & Watkins LLP, in Los Angeles, California, informs the Court that a main component of their telecommunications network is cell towers, large towers, which broadcast and receive signals to and from customers' handheld cell phones. Depending on the particular location, the Leap Wireless International Inc., and its debtor-affiliates sometimes lease the land underneath the cell towers, lease use of a third- party tower or lease rooftop space to place an antenna. Certain of these arrangements may not be non-residential real property leases. The Debtors have approximately 2,600 leases for cell sites and 27 leases for switches, approximately 40 leases for office space, and 90 leases for Cricket's local retail stores. The Debtors are working diligently to evaluate the Leases and determine which of them should be assumed and which of them should be rejected. While the Debtors have made progress evaluating the Leases, the balance of this process will take a significant amount of time due to the large number of Leases, which the Debtors must review. Thus, the Debtors should be given an extension to prevent decisions from being made that are not fully informed and that might cause a decrease in the value of the Debtors' estates. As part of the Debtors' reorganization strategy, Mr. Klyman relates that the Debtors seek to streamline their operations by shedding areas that are under-performing or are unnecessary. This requires an in-depth review of the performance of the Debtors' business in each market. The Debtors' operations include thousands of Leases important to their business. For example, each Cell Site Lease requires a net traffic analysis to determine if consumer demand in that area justifies the expense of the cell site or if sufficient network coverage will still be available should the lease be rejected. In addition, the Retail Leases require the Debtors to compare a specific store's profitability and overall customer traffic against the expense of finding a new location and relocating. The Debtors need more time to make informed and intelligent decisions as to each of the Leases to maximize the value of the estates for their creditors. Mr. Klyman adds that the Debtors may seek to assign certain Leases. In most cases, the Cell Site Leases cannot be assigned to a third-party for any profit, but in certain instances, the Office Leases and Retail Leases have value if assigned. Consequently, the Debtors require additional time to prevent premature rejection of a lease that may be valuable to the Debtors' estates. If the period to assume or reject the Leases is not extended, the Debtors will be at risk of: A. prematurely and improvidently assuming a lease that the Debtors later discover is burdensome and not desired by potential buyers, thus creating potential burdens on the estates and significant administrative claims by the landlords after the Debtors' later termination of these leases; and B. prematurely and improvidently rejecting a lease that the Debtors later discover should have been assumed for continuing operations or assumed and assigned to a potential buyer or other third party for significant consideration. By this motion, the Debtors ask the Court to extend the date by which the Debtors must assume or reject the Leases to September 10, 2003 or any other date as the Court may order. This request is without prejudice to either the Debtors' right to seek a further extension after notice and a hearing, or the right of any lessor to request that the extension be shortened for a particular Lease. Section 365(a) of the Bankruptcy Code provides debtors-in- possession with the power, subject to Court approval, to assume or reject executory contracts or unexpired leases. Section 365(d)(4) mandates a time frame of 60 days after the order for relief within which a debtor-in-possession must assume or reject a non-residential real property lease, but expressly authorizes a court to extend the debtor's time to assume or reject for cause shown. Mr. Klyman points out that the Debtors have made significant progress towards reorganization. Already the Debtors have negotiated a Plan of Reorganization and Disclosure Statement with the Informal Vendor Debt Committee and the Creditors' Committee. Mr. Klyman believes that the rejection of the Leases at this time would be premature and prejudicial to the creditors of the estates. Conversely, assumption of the Leases at this time also would be premature because the Debtors may later be forced to reject these Leases and face significant administrative claims. See In re Frontier Properties, Inc., 979 F.2d 1358, 1367 (9th Cir. 1992) (when an executory contract is assumed and later rejected, all of the liabilities under the contract flowing from the rejection, including interest, are entitled to priority as administrative expenses of the bankruptcy estate); see also In re Klein Sleep Products, Inc., 78 F.3d 18 (2d Cir. 1996) (claims for future rent arising from assumed and subsequently rejected lease are administrative expenses of the bankruptcy estate); In re Airlift International, Inc., 761 F.2d 1503, 1509 n.5 (11th Cir. 1985) (the breach of an "unexpired lease assumed under section 365 clearly results in an administrative expense claim."). The diversity and complexity of these cases and the significant progress the Debtors have made towards reorganization also justifies an extension. Courts often grant extensions to assume or reject leases in large, complicated cases involving numerous leases. See, e.g., In re Victoria Station, hie., 875 F.2d at 1381-82; Channel Home Centers, Inc. v. Channel Home Centers, Inc. (In re Channel Home Centers, Inc., 989 F.2d 682, 683-84 (3d Cir. 1993); In re Garrett Rd. Supermarket, Inc., 89 B.R. 514, 520 (Bankr. E.D. Pa. 1988), aff d, 95 B.R. 902 (F.D. Pa. 1989) ("Given the numerous court appearances required by the Debtor and the difficult legal issues presented by this case, some extension of the Section 365(d)(4) 60-day period for the Debtor certainly appears warranted by good cause."). The Debtors fall squarely within this authority because: A. The Leases are a critical component of their business, without them the Debtors could not operate. B. The Debtors require more time to determine the proper disposition of the Leases due to the sheer size of the network and the volume of leases to review. The Debtors are parties to 2,600 Cell Sites Leases, 40 Office Leases and 90 Retail Lease, located in 20 different states across the country. Assumption or rejection of the Leases prior to a complete review could jeopardize the Debtors' efforts to maximize the value of these estates by either: (i) significantly increasing the amount of claims entitled to administrative priority; or (ii) abandoning assets of these estates that are subsequently determined to have had value. C. The Debtors are current on the payment of postpetition rent under the Leases. Therefore, the landlords will not be prejudiced by the relief sought. The Debtors intend to continue to meet their postpetition obligations unless and until they determine to reject a particular lease. D. The Debtors require additional time to determine the profitability of each location. Each cell site requires a net traffic analysis to determine customer usage and each retail store requires an assessment of the particular store's sales versus the costs to relocate. The Debtors are simply not in a position to assume or reject the Leases without completing this research. E. The factors weighing against an extension of time are not present here. The Debtors are current on postpetition rent and taxes; the landlords are not incurring damages beyond normal compensation; the Debtors are expeditiously moving to confirm a plan of reorganization; and the properties are not vacant. In light of these circumstances, Judge Adler finds that ample "cause" exists to grant a 90-day extension of the Debtors' lease decision period pursuant to Section 365(d) of the Bankruptcy Code through September 10, 2003. (Leap Wireless Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) LENNAR CORPORATION: Declares Quarterly Cash Dividends ----------------------------------------------------- Lennar Corporation (NYSE: LEN and LEN.B) has declared quarterly cash dividends of $0.0125 per share for both Class A Common Stock and Class B Common Stock. The dividends are payable on August 15, 2003 to holders of record on August 5, 2003. Lennar Corporation, founded in 1954, is headquartered in Miami, Florida and is one of the nation's leading builders of quality homes for all generations, building affordable, move-up and retirement homes. Under the Lennar Family of Builders banner, the Company includes the following brand names: Lennar Homes, U.S. Home, Greystone Homes, Village Builders, Renaissance Homes, Orrin Thompson Homes, Lundgren Bros., Winncrest Homes, Sunstar Communities, Don Galloway Homes, Patriot Homes, NuHome, Barry Andrews Homes, Concord Homes, Summit Homes, Cambridge Homes, Seppala Homes, Coleman Homes, Genesee and Rutenberg Homes. The Company's active adult communities are primarily marketed under the Heritage and Greenbriar brand names. Lennar's Financial Services Division provides mortgage financing, title insurance, closing services and insurance agency services for both buyers of the Company's homes and others. Its Strategic Technologies Division provides high-speed Internet access, cable television and alarm installation and monitoring services to residents of the Company's communities and others. For more information on the Company visit http://www.lennar.com * * * As reported in Troubled Company Reporter's February 7, 2003 edition, Standard & Poor's Ratings Services raised its corporate credit rating on Lennar Corp., to 'BBB-' from 'BB+'. At the same time, ratings are raised on approximately $2.185 billion senior debt, including bank lines, and on $254 million subordinated debt. The company's outlook is revised to stable from positive. The ratings and outlook acknowledge Lennar's solid market position, highly profitable operations, successful track record of integrating acquisitions, and sound financial risk profile. These credit strengths, coupled with management's discipline with regard to debt leverage, should enable Lennar to perform solidly even if housing demand does soften. RAISED RATINGS Lennar Corp. Ratings To From -- ---- Corporate credit BBB-/Stable BB+/Positive $2.185 bil. sr debt BBB- BB+ $254.19 mil. sub debt BB+ BB- U.S. Homes Corp. Ratings To From -- ---- Corporate credit BBB- BB+ $2.181 mil. sr debt BBB- BB+ $6.187 mil. sub debt BB+ BB- LIBERTY TAX CREDIT: Trien Rosenberg Airs Going Concern Doubt ------------------------------------------------------------ The following is a letter to the Partners of Liberty Tax Credit Plus L.P. and Subsidiaries, a Delaware Limited Partnership, written on May 30, 2003 by Trien, Rosenberg, Rosenberg, Weinberg, Ciullo & Fazzari, LLP of New York, New York, the Company's independent auditors. "In connection with our audits of the consolidated financial statements of Liberty Tax Credit Plus L.P. and Subsidiaries included in the Form 10-K as presented in our opinion dated May 30, 2003 on page 16 and based on the reports of other auditors, we have also audited supporting Schedule I for the 2002, 2001 and 2000 Fiscal Years and Schedule III at March 15, 2003. In our opinion, and based on the reports of the other auditors (certain of which were modified due to the uncertainty of these subsidiary partnerships' abilities to continue in existence), these consolidated schedules present fairly, when read in conjunction with the related consolidated financial statements, the financial data required to be set forth therein. "[T]he consolidated financial statements include the financial statements of two subsidiary partnerships with significant contingencies and uncertainties regarding their continuing operations. During the 2002 Fiscal Year, these subsidiary partnerships incurred significant operating losses and have significant equity deficiencies. These conditions raise substantial doubt about the subsidiary partnerships' abilities to continue as going concerns. The financial statements of these two subsidiary partnerships were prepared assuming that each will continue as a going concern. The two subsidiary partnerships' losses aggregated $663,949 (2002 Fiscal Year), $240,856 (2001 Fiscal Year) and $66,246 (2000 Fiscal Year) and their assets aggregated $10,746,963 and $11,018,863 at March 15, 2003 and 2002, respectively. Management's plans regarding these matters are also discussed in Note 11(a). The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties." LNR PROPERTY: Completes $350MM Senior Subordinated Note Offering ---------------------------------------------------------------- LNR Property Corporation (NYSE: LNR) has completed an offering of $350 million of 7-5/8% Senior Subordinated Notes due 2013 to qualified institutional investors in a transaction complying with Securities and Exchange Commission Rule 144A. LNR had previously announced that it was proposing to offer $250 million of Senior Subordinated Notes. The final amount offered was increased to $350 million. As previously announced, LNR expects to use approximately $216 million of the proceeds from the Note sale to redeem its 9 3/8% Senior Subordinated Notes due 2008 at a redemption price equal to 104.688% of their principal amount plus accrued interest of approximately $7 million. The remainder of the proceeds will be used to reduce senior debt and for general corporate purposes. The 7-5/8% Notes have not been registered under the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirement. As reported in Troubled Company Reporter's March 6, 2003 edition, Fitch Ratings assigned a 'BB-' rating to LNR Property Corp's 5.5% $200 million contingent convertible senior subordinated notes. The notes have a final maturity of 2023 and are pari passu with LNR's existing senior subordinated debt. Although notes do not become redeemable at noteholder option until 2010, LNR will have the option to redeem them beginning in 2008. LUBY'S INC: Elects Gasper Mir as Company's New Board Chairman ------------------------------------------------------------- Luby's (NYSE: LUB) announced the election of Gasper Mir of Houston to become its new board chairman effective at the beginning of its coming fiscal year on August 28, 2003. Mir presently serves as chairman of the finance and audit committee of the Luby's board and for fifteen years led the Houston-based accounting firm that he founded in 1988. Mr. Mir is currently serving as executive advisor to the superintendent of the Houston Independent School District. "I'm excited about this opportunity to help Luby's as the company works to implement the two-year business plan," said Gasper Mir, incoming board chairman. "I salute Bob Herres for all of his hard work on behalf of Luby's -- he has indeed set a high standard for us all." Luby's outgoing chairman, Robert T. Herres, will retire from the board of directors at the close of the fiscal year when he is replaced by Mir. Herres joined the board in January 2000 and was elected chairman in March 2001 in conjunction with the management change in the company that took place at the time. "Over the past two years, Bob has been an invaluable partner to Luby's in our efforts to help make the company stronger and healthier," said Chris Pappas, President and CEO. "His guidance and experience have provided us with tremendous support, and we will truly miss his wise counsel." At the January 2003 annual shareholders' meeting, Herres announced that, while his first three-year term of board service ended at that meeting, his election for another term would be in conflict with the age policy of the company. Board policy precludes election or reelection for another term on the Luby's board after a member reaches the age of seventy. However, under appropriate circumstances, the board may waive this restriction when it believes the situation justifies such action. Herres explained to shareholders then that he had passed this age limit, but that he had agreed to serve an additional year in order to lead the board through the ongoing transition to the new management team. On presentation of his resignation, Herres pointed out that he had accepted the responsibility of chairman of the Luby's board of directors for the purpose of facilitating the critical period of transition to a new management team, and will have served for two and one-half years in that capacity through the effective date of his resignation and will have served as a board member for seven months beyond the age of the mandatory retirement policy for board service. As a consequence, he felt that the time had come to bring his relationship with Luby's, Inc. to a close. Herres concluded by saying, "I wish to extend my very best wishes to the management and board of Luby's for the future success of this great company and South Texas institution." Mir will be replaced as chairman of the finance and audit committee by Joe McKinney, currently the vice chairman of Broadway Bank in San Antonio. McKinney pursued a twenty-nine year career in banking, which included a term as chairman and chief executive officer of JPMorgan Chase Bank for the San Antonio region. Luby's provides its customers with delicious, home-style food, value pricing, and outstanding customer service at its restaurants in Dallas, Houston, San Antonio, the Rio Grande Valley, and other locations throughout Texas and other states. The company currently operates 159 locations, and its stock is traded on the New York Stock Exchange (symbol LUB). Luby's, Inc.'s May 7, 2003 balance sheet shows that its total current liabilities exceeded its total current assets by about $116 million. As reported in Troubled Company Reporter's May 27, 2003 edition, Luby's (NYSE: LUB) was notified by its subordinated note holders, Chris and Harris Pappas, that as a result of the ongoing default under the Company's senior indebtedness (bank debt), the Company's subordinated debt held by the Pappases was also in default. The bank debt default also triggered an automatic suspension of interest payments on the subordinated debt. MANDALAY RESORT: Files SEC Form S-3 re Conv. Debenture Resales -------------------------------------------------------------- Mandalay Resort Group (NYSE: MBG) has filed a registration statement on Form S-3 relating to resales by securityholders of the company's issued and outstanding Floating Rate Convertible Senior Debentures due 2033 and the shares of its common stock issuable up conversion of the debentures. A copy of the prospectus may be obtained from Les Martin, Mandalay Resort Group, 3950 Las Vegas Boulevard South, Las Vegas, NV 89119. A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. Mandalay Resort Group owns and operates 11 properties in Nevada: Mandalay Bay, Luxor, Excalibur, Circus Circus, and Slots-A-Fun in Las Vegas; Circus Circus-Reno; Colorado Belle and Edgewater in Laughlin; Gold Strike and Nevada Landing in Jean and Railroad Pass in Henderson. The company also owns and operates Gold Strike, a hotel/casino in Tunica County, Mississippi. The company owns a 50% interest in Silver Legacy in Reno, and owns a 50% interest in and operates Monte Carlo in Las Vegas. In addition, the company owns a 50% interest in and operates Grand Victoria, a riverboat in Elgin, Illinois, and owns a 53.5% interest in and operates MotorCity in Detroit, Michigan. As previously reported, Fitch Ratings affirmed the 'BB+' rating on Mandalay Resort Group's (NYSE: MBG) senior debt and the 'BB-' rating on the company's senior subordinated debt. The rating action affected approximately $2.1 billion in debt securities. Fitch assigned a 'BB+' rating to the company's $1.1 billion senior unsecured bank credit facility. The Rating Outlook has been revised to Stable from Negative. MERRILL CORP: S&P Revises Outlook on Low-B and Junk Ratings ----------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook for Merrill Corp., to stable from negative. At the same time, Standard & Poor's affirmed its 'B' corporate credit and senior secured, and 'CCC+' subordinated debt ratings for Merrill. "The ratings for Merrill reflect the company's significant debt levels, moderate-size cash flow base, and competitive market conditions," said credit analyst Michael Scerbo. In addition, the company's transaction-based financial printing business is subject to the volatility of the capital markets. These factors are somewhat offset by Merrill's good market position in financial printing, and a diversified customer base. Also, the company's increasing focus on diversifying its business, most notably through its document management and real estate segments, is expected to help provide more stable revenues and cash flows, which likely will help offset the variability of capital markets- related printing. St. Paul, Minnesota-based Merrill is a diversified communications and document services company that provides a broad range of services to financial, legal, and corporate clients. The company is organized into four business units: Financial Document Services, Strategic Communication Services, Document Management Services, and Merrill Print Group. FDS and SCS are the company's largest segments, and focus on transaction-based printing for IPOs and mergers & acquisitions, and marketing and compliance printing for financial and corporate clients. Merrill's focus on cost control and leveraging its resources helped mitigate the bottom- line impact of the lower revenues, and it maintained solid growth trends in its other businesses, most notably document management services to the legal industry and marketing and communication services to the real estate industry. This diversification of revenues has to some extent helped to offset the depressed financial markets. Given the ongoing relatively weak economy, Standard & Poor's expects the overall printing sector to remain pressured throughout 2003. However, Merrill's good market position in financial printing and diversification into document management services is expected to mitigate material downside exposure. As a result, Standard & Poor's expects Merrill's credit measures to gradually improve from current levels. METRIS COMPANIES: Funds 1-Year $125 Million Term Loan Agreement --------------------------------------------------------------- Metris Companies Inc. (NYSE:MXT) has successfully funded the one- year, $125 million term loan agreement announced earlier this month. The Company used a portion of the proceeds to repay today the $100 million term loan due June 30, 2003. The completion of this funding represents a further step in the Company's plan that is focused on liquidity and a return to profitability. Metris Companies Inc. (NYSE: MXT) is one of the nation's leading providers of financial products and services. The company issues credit cards through its wholly owned subsidiary, Direct Merchants Credit Card Bank, N.A. Through its enhancement services division, Metris also offers consumers a comprehensive array of value-added products, including credit protection and insurance, extended service plans and membership clubs. For more information, visit http://www.metriscompanies.comor http://www.directmerchantsbank.com As reported in Troubled Company Reporter's March 3, 2003 edition, Fitch Ratings lowered the senior and bank credit facility ratings of Metris Companies Inc. to 'CCC' from 'B-'. In addition, the long-term deposit rating of Direct Merchants Credit Card Bank, N.A. has been lowered to 'B' from 'B+'. The short-term deposit rating remains at 'B'. The ratings have been removed from Rating Watch Negative where they were placed on Dec. 20, 2002. The Rating Outlook is Negative for Metris and DMCCB. Approximately $350 million of holding company debt is affected by this rating action. The action reflects heightened execution risk as Metris attempts to address liquidity concerns with its various credit providers. Fitch remains concerned with Metris' ability to renew or replace conduit facilities that mature in the June and July 2003 timeframe, coupled with a $100 million term loan drawn under the company's bank credit facility due in June 2003. While Metris is in active negotiations with its credit providers, Fitch believes the pace and complexity of this process has increased overall risk to the company. The downgrade of DMCCB reflects its operational ties to the holding company, which it relies on to fund assets longer term. Furthermore, Fitch remains concerned with low excess spread levels in the Metris Master Trust, Metris' primary securitization vehicle. Excess spread levels have declined significantly over the past few months, and for many series are below 2%, eroding the cushion that once existed. Under the company's current bank credit agreement, Metris must maintain minimum excess spread in the MMT. Moreover, if trust level excess spread becomes negative, on a three month rolling average, an early amortization of the MMT would occur. If an early amortization of the trust were to take place, Fitch does not believe that Metris would have sufficient liquidity to withstand such an occurrence. In Fitch's opinion, even if near-term liquidity issues are satisfactorily resolved, Metris will remain challenged to address earnings and asset quality concerns in a difficult economic and capital markets environment. In addition, federal bank regulators have imposed more stringent requirements on credit card lending, namely higher capital and reserves for subprime loans along with greater scrutiny of fee and finance charges. While Metris has complied with these regulatory changes, Fitch believes that these actions have negatively impacted the economics of Metris' credit card business. MIDWEST AIRLINES: Gov. Jim Doyle Proposes Financing Agreement ------------------------------------------------------------- At a news conference Friday at General Mitchell International Airport, Governor Jim Doyle and the county executives of Milwaukee and Racine counties announced a financing proposal to support Midwest Airlines' efforts to financially restructure its operations. The proposal would permit Milwaukee County to become the guarantor of payments by Midwest Airlines on two industrial development revenue bonds. The bonds were issued by the City of Milwaukee to fund construction of two aircraft hangars on county-owned property: one for Midwest Airlines ($7.9 million in 1998), the other for Midwest Connect ($6.3 million in 2001). The bond payments are currently guaranteed by two letters of credit totaling $14.4 million issued by the company's credit facility banks. The agreement with the credit facility banks is scheduled to expire on August 30, 2003; Midwest is seeking replacement financing. The arrangement with Milwaukee County will not become effective until the new financing is in place. At the request of Governor Doyle, the Wisconsin Department of Commerce will provide a $4 million Economic Community Development Block Grant to Racine County. The grant is targeted to support job creation and retention for Racine County by ensuring the long-term viability of the air transportation system based at nearby General Mitchell International Airport and its locally based airline, which employs more than 300 Racine County residents. Racine County will retain $12,000, with the balance going to Milwaukee County to be added to $1 million provided by Midwest Airlines. The money will be placed in escrow for use in the event Midwest would fail to make required interest or principal payments. "This agreement is an excellent example of intergovernmental cooperation," said Governor Doyle. "The state, working with both counties, will help ensure a strong transportation infrastructure for southeastern Wisconsin." The agreement is designed to impose no risk for taxpayers because there will be more than sufficient collateral to guarantee interest and principal payments on the $14.2 million debt: $5 million in cash in escrow plus hangars valued at $12.75 million, for a total of $17.75 million. "The challenges the airline industry is facing are unprecedented, and we are truly gratified by the backing of the state, and Milwaukee and Racine counties -- another example of the loyalty that the citizens of this state have extended to us over the past 19 years," said Timothy E. Hoeksema, chairman and chief executive officer of Midwest Airlines. He pointed out that the financing proposal is a critical component of the airline's restructuring efforts, whether those efforts are completed with or without the help of the court in Chapter 11. The Milwaukee and Racine county boards must still approve the proposal. In Milwaukee, a committee vote is scheduled for July 17, with the full board vote on July 24. Midwest Airlines (NYSE: MEH) features nonstop jet service to major destinations throughout the United States. Skyway Airlines, Inc. - - its wholly owned subsidiary -- operates Midwest Connect, which offers connections to Midwest Airlines as well as point-to-point service between select markets on regional jet and turboprop aircraft. Together, the airlines offer service to 51 cities. More information is available at http://www.midwestairlines.com MISSISSIPPI CHEMICAL: Court Approves KPMG LLP as Accountants ------------------------------------------------------------ The U.S. Bankruptcy Court for the Southern District of Mississippi gave its stamp of approval to Mississippi Chemical Corporation and its debtor-affiliates' request to employ KPMG LLP as Accountants, Auditors, Tax Consultants and Bankruptcy Compliance Advisors. The Debtors report that KPMG has served as accountants and auditors for them since 2002. The professional services KPMG will render include: A. Accounting and Auditing Services 1) Audit and review examinations of the financial statements of the Debtors as may be required from time to time; 2) Analysis of accounting issues and advice to the Debtors' management regarding the proper accounting treatment of events; 3) Assistance in the preparation and filing of the Debtors' financial statements and disclosure documents required by the Securities and Exchange Commission; 4) Assistance in the preparation and filing of the Debtors registration statements required by the Securities and Exchange Commission in relation to debt and equity offerings; and 5) Performance of other accounting services for the Debtors as may be necessary or desirable. B. Tax Advisory Services 1) Review of and assistance in the preparation and filing of any tax returns; 2) Advice and assistance to the Debtors regarding tax planning issues, including but not limited to, assistance in estimating net operating loss carryforwards, international taxes, and state and local taxes; 3) Assistance regarding transaction taxes, state and local sales and use taxes; 4) Assistance regarding tax matters related to the Debtors' pension plans; 5) Assistance regarding any existing or future IRS, state and/or local tax examinations; 6) Other consulting, advice, research, planning or analysis regarding tax issues as may be requested from time to time; and 7) Advice and assistance on the tax consequences of proposed plans of reorganization, including, but not limited to, assistance in the preparation of Internal Revenue Service ruling requests regarding the future tax consequences of alternative reorganization structures. C. Bankruptcy Compliance Services 1) Assistance in the preparation and review of reports or filings as required by the Bankruptcy Court or the Office of the United States Trustee, including but not limited to schedules of assets and liabilities, statement of financial affairs, mailing matrix and monthly operating reports; 2) Assistance with implementation of bankruptcy accounting procedures as required by the Bankruptcy Code and generally accepted accounting principles, including, but not limited to, Statement of Position 90-7; 3) Attendance, if necessary at meetings with bank lenders, creditors and any official or informal committees; and 4) Other such functions as requested by the Debtors or their counsel to assist the Debtors in their business and reorganization. Timothy J. Cantrell reports KPMG's current hourly rates are: Accounting and Tax Advisory --------------------------- SEC. National and other Advisory Partners $550 - $700 Partners $325 - $350 Directors/Senior Managers/Managers $225 - $245 Senior/Staff Accountants $125 - $170 Bankruptcy Compliance Advisory ------------------------------ Partners $540 - $600 Directors/Senior Managers/Managers $360 - $510 Senior/Staff Consultants $180 - $330 Paraprofessionals $120 Mississippi Chemical Corporation, through its direct or indirect subsidiaries and affiliates, produces and markets all three primary crop nutrients (nitrogen-phosphorus and potassium-based products), as well as similar chemicals for industrial uses. The Company filed for chapter 11 protection on May 15, 2003 (Bankr. S.D. Miss. Case No. 03-02984). James W. O'Mara, Esq., at Phelps Dunbar LLP, represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $552,9342,000 in total assets and $462,496,000 in total debts. MOHEGAN TRIBAL: Modifies Tender Offer for 8.75% Senior Sub Notes ---------------------------------------------------------------- As previously announced on June 19, 2003, the Mohegan Tribal Gaming Authority commenced a cash tender offer and consent solicitation for any and all of its $300,000,000 aggregate principal amount of 8.75% Senior Subordinated Notes due 2009. The consent solicitation described in the Offer to Purchase and Consent Solicitation Statement and the accompanying Letter of Transmittal and Consent, dated June 19, 2003, expired at 5 p.m., New York City time, yesterday, and the expiration date for the Offer is midnight, New York City time, July 17, 2003. The Authority is extending the period of time in which holders of Notes may tender their notes and receive the Consent Payment, as defined in the Tender Offer Documents, until noon, New York City time, today, provided that the Consent Date, the Expiration Date and the other terms of the Offer, as described in the Tender Offer Documents, remain unchanged. On June 27, 2003, the Authority filed Amendment No. 1 to its Annual Report for the fiscal year ended September 30, 2002 on Form 10-K/A. The Amendment amends and restates in their entirety Item 6. "Selected Financial Data" and Exhibit 12.1 "Computation of Ratio of Earnings to Fixed Charges." The Authority is an instrumentality of the Mohegan Tribe of Indians of Connecticut, a federally recognized Indian tribe with an approximately 405-acre reservation situated in southeastern Connecticut, which has been granted the exclusive power to conduct and regulate gaming activities on the existing reservation of the Tribe located near Uncasville, Connecticut, including the operation of the Mohegan Sun, a gaming and entertainment complex that is situated on a 240-acre site on the Tribe's reservation. The Tribe's gaming operation is one of only two legally authorized gaming operations in New England offering traditional slot machines and table games. Mohegan Sun currently operates in an approximately 3.0 million square foot facility, which includes the Casino of the Earth, Casino of the Sky, the Shops at Mohegan Sun, a 10,000-seat Arena, a 300-seat Cabaret, meeting and convention space and an approximately 1,200-room luxury hotel. More information about Mohegan Sun and the Authority can be obtained by visiting http://www.mohegansun.com As reported in Troubled Company Reporter's April 8, 2003 edition, Standard & Poor's Ratings Services assigned its 'BB+' rating to the Mohegan Tribal Gaming Authority's $391 million bank loan agreement, which is comprised of a $291 million revolving credit facility and a $100 million term loan facility, both due on March 31, 2008. A portion of the proceeds from the new bank agreement were used to refinance the outstanding bank debt. At the same time, Standard & Poor's withdrew its rating on the former facility. In addition, the 'BB+' corporate credit rating on Connecticut-based MTGA was affirmed. The outlook is negative. Total debt outstanding at Dec. 31, 2002, was $1.128 billion. NATIONAL STEEL: Joint Plan's Claim Classification and Treatment --------------------------------------------------------------- In accordance with Section 1122 of the Bankruptcy Code, the National Steel Corporation and its debtor-affiliates proposed Plan provides for the classification of Classes of claims and equity interests. Section 1122(a) permits a plan to place a claim or an interest in a particular class only if the claim or interest is substantially similar to the other claims or interests in that class. Pursuant to Bankruptcy Code Section 1123(a)(1), Administrative Expense Claims and Priority Tax Claims have not been classified and the holders of these Claims are not entitled to vote to accept or reject the Plan. Allowed Administrative and Allowed Priority Claims are to be paid in full on the Effective Date of the Plan, or, for ordinary course Administrative Claims, when the claims become due and, for tax claims, as contemplated under Section 507(a)(8) of the Bankruptcy Code. Claims against and Interests in each Debtor are classified for all purposes including voting, confirmation and distribution pursuant to the Plan and pursuant to Bankruptcy Code Section 1122 and 1123(a)(1). A Claim or Interest will be deemed classified in a particular Class only to the extent that the Claim or Interest qualifies for the description and will be deemed classified in a different Class to the extent that any remainder of that Claim or Interest qualifies for the description of that different Class. A Claim or Interest is in a particular Class only to the extent that the Claim or Interest is allowed in that Class and has not been paid or settled before the Effective Date. The Debtors believe that the classification of Claims and Equity Interests under the Plan is appropriate and consistent with applicable law. Summary of Claims Against & Interests In National Steel Corporation Class Description Treatment ----- ----------- --------- N/A Administrative and Paid in cash, in full Priority Tax Claims NSC-1 Miscellaneous Secured Unimpaired, not entitled Claims against NSC to vote A Claim secured by a Each holder will receive: lien on a property in which NSC has an 1. Cash equal to the interest unpaid portion of the Allowed Claim; or 2. Other treatment as the parties agree in writing. 100% estimated recovery NSC-2 Other Priority Claims Unimpaired, not entitled to vote A Claim entitled to Each holder will receive: priority pursuant to Section 507(a) of 1. Cash equal to the the Bankruptcy Code, unpaid portion of the other than Priority Allowed Claim; or Tax Claim or Administrative Claim 2. Other treatment as the parties agree in writing. 100% estimated recovery NSC-3 PBGC Claims Impaired, entitled to vote $2,100,000,000 Distribution in accordance with settlement agreement NSC-4 Bond Claims Impaired, entitled to vote Any Claim arising from HSBC Bank USA and Robert the First Mortgage Conrad as Indenture Bonds or the Indenture Trustees received $234,000,000 for the bondholders' benefit at the Closing of the U.S. $376,236,887 Steel Sale. The Trustees will receive Cash from the Bond Recovery Pool, which consists of 64% of the Reorganized Debtor Net Available Cash. Houlihan, Lokey, Howard & Zukin Capital, the Bondholders' Committee's investment banker, will receive $1,263,322 on the Effective Date as Substantial Contribution Claim. 66.8% recovery received during Chapter 11 case to date 4% estimated recovery from additional distribution 70.8% total estimated recovery NSC-5 Mitsubishi and Marubeni Impaired, entitled to vote Claims Mitsubishi and Marubeni Received $77,420,000 payment at the closing of $131,160,000 the U.S. Steel Sale and will receive 16% of the Reorganized Debtor Net Available Cash. 62% recovery received during Chapter 11 case to date 2.8% estimated recovery from additional distributions 64.8% total estimated recovery NSC-6 General Unsecured Impaired, entitled to Claims vote. A Claim against NSC Each holder will receive that is not a its Pro Rata share of ___% Miscellaneous Secured of the Overall Unsecured Claim, Administrative Creditor Recovery Pool. Claim, Priority Tax Claim, Other Priority Claim, or PBGC Claim. NSC-7 Interests in NSC Impaired, not entitled to vote. The rights and interests of the The holders will not holder of any equity receive any distributions security in NSC. nor retain any property under the Plan. On the Effective Date, all Interests will be deemed cancelled or extinguished. 0% estimated recovery Summary of Claims against and Interests in National Steel Pellet Company Class Description Treatment ----- ----------- --------- N/A Administrative and Paid in cash, in full Priority Tax Claims NSP-1 Miscellaneous Secured Unimpaired, not entitled Claims against NSP to vote A Claim secured by a Each holder will receive: lien on a property in which NSP has an 1. Cash equal to the interest unpaid portion of the Allowed Claim; or 2. Other treatment as the parties agree in writing. 100% estimated recovery NSP-2 Other Priority Claims Unimpaired, not entitled to vote A Claim entitled to Each holder will receive: priority pursuant to Section 507(a) of 1. Cash equal to the the Bankruptcy Code, unpaid portion of the other than Priority Allowed Claim; or Tax Claim or Administrative Claim 2. Other treatment as the parties agree in writing. 100% estimated recovery NSP-3 PBGC Claims Impaired, entitled to vote $2,100,000,000 Distribution in accordance with settlement agreement NSP-4 General Unsecured Impaired, entitled to vote Claims A Claim against NSP Each holder will receive that is not a its Pro Rata Share of Miscellaneous Secured ___% of the Overall Claim, Administrative Unsecured Creditor Claim, Priority Tax Recovery Pool Claim, Other Priority Claim, or PBGC Claim NSP-5 Interests in NS Pellet Impaired, not entitled to vote. The rights and interests of the On the Effective Date, all holder of any equity Interests will be deemed security in NSP. cancelled and extinguished. 0% estimated recovery Summary of Claims against and Interests in ProCoil Corporation Class Description Treatment ----- ----------- --------- N/A Administrative and Paid in cash, in full Priority Tax Claims PRO-1 Miscellaneous Secured Unimpaired, not entitled Claims against ProCoil to vote A Claim secured by a Each holder will receive: Lien on property in which an Estate has an 1. Cash equal to the interest unpaid portion of the Allowed Claim; or 2. Other treatment as the parties agree in writing. 100% estimated recovery PRO-2 Other Priority Claims Unimpaired, not entitled to vote A Claim entitled to Each holder will receive: priority pursuant to Section 507(a) of 1. Cash equal to the the Bankruptcy Code, unpaid portion of the other than Priority Allowed Claim; or Tax Claim or Administrative Claim 2. Other treatment as the parties agree in writing. 100% estimated recovery PRO-3 PBGC Claims Impaired, entitled to vote $2,100,000,000 Distribution in accordance with settlement agreement PRO-4 General Unsecured Impaired, entitled to vote Claims A Claim against ProCoil Each holder will receive that is not a its Pro Rata Share of Miscellaneous Secured ___% of the Overall Claim, Administrative Unsecured Creditor Claim, Priority Tax Recovery Pool Claim, Other Priority Claim, or PBGC Claim PRO-5 Interests in ProCoil Impaired, not entitled to vote. The rights and interests of the On the Effective Date, all holder of any equity Interests will be deemed security in ProCoil. cancelled and extinguished. 0% estimated recovery Summary of Claims against and Interests in Inactive Debtors Class Description Treatment ----- ----------- --------- N/A Administrative and Paid in cash, in full Priority Tax Claims Inactive-1 All Claims against each Impaired, entitled to vote of the Inactive Debtors except Administrative In the event that any of Claims, Priority Tax the Claims become Allowed Claims, and PBGC Claims Claims, the Claims will be treated as Claims against NSC in the applicable Class set forth in the Plan Inactive-2 PBGC Claims Impaired, entitled to vote $2,100,000,000 Distribution in accordance with settlement agreement Inactive-3 Interests in Inactive Impaired, not entitled to Debtors vote The rights and The holders will neither interests of the holder receive any distributions of any equity security nor retain any property. in any Inactive Debtors On the later of the Effective Date and completion of the dissolution of the Inactive Debtors, all Interests will be deemed cancelled or extinguished. 0% estimated recovery Summary of Claims against and Interests in No Asset Debtors Class Description Treatment ----- ----------- --------- N/A Administrative and Paid in cash, in full Priority Claims No Asset-1 All Claims against each Impaired, not entitled to of the No Asset Debtors vote except Administrative Claims, Priority Tax Claims will not receive Claims, and PBGC Claims any distribution of Property 0% estimated recovery No Asset-2 PBGC Claims Impaired, entitled to vote $2,100,000,000 Distribution in accordance with settlement agreement No Asset-3 Interests in a No Asset Impaired, not entitled to Debtor vote The rights and The holders will neither interests of the holder receive any distributions of any equity security nor retain any property. in any No Asset Debtor On the later of the Effective Date and completion of the dissolution of the No Asset Debtors, all Interests will be deemed cancelled or extinguished. 0% estimated recovery (National Steel Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) NEW WORLD RESTAURANT: Inks Equity Restructuring Agreement --------------------------------------------------------- New World Restaurant Group, Inc. (OTC: NWCI.PK) has entered into an agreement with the holders of all of its Series F preferred stock, who also own more than a majority of its common stock, that will result in a recapitalization of the company's equity. Under terms of the agreement, one of the holders of New World's Series F preferred stock will exchange all of its equity interests, including common stock and warrants, in New World for $57.0 million face amount of a new Series Z preferred stock, while the other holder will exchange all of its Series F preferred shares for common stock. The Series Z preferred stock will be non- convertible, will be mandatorily redeemable on June 30, 2009 or upon an earlier change of control, and will not pay or accrue dividends. New World's Board of Directors has approved this equity recapitalization, which is subject to the consummation of the refinancing of the company's senior secured increasing rate notes due 2003, stockholder approval and other customary conditions. The Board received an opinion from the company's financial advisor, CIBC World Markets Corp., to the effect that, as of the date of the equity restructuring agreement, the shares of Series Z preferred stock and common stock to be issued in exchange for the interests of the holders of Series F preferred stock is fair to the company from a financial point of view. The company intends to provide its shareholders with details regarding the terms of the restructuring in a proxy statement to be filed with the Securities and Exchange Commission in advance of a special stockholders meeting that will be called to approve the restructuring. There can be no assurance that New World will be successful in refinancing its indebtedness or restructuring its equity. If the conditions are fulfilled, Greenlight Capital, Inc. and certain of its affiliates will beneficially own approximately 92.0% of New World's outstanding common stock following the closing of the refinancing and equity recapitalization. The balance of the outstanding common stock will be held by the company's current common stockholders and warrant holders. Greenlight Capital is a New York-based investment firm. "Assuming the successful refinancing and shareholder vote, this equity restructuring will stabilize our capital structure and give us the foundation for future growth," said Anthony Wedo, chairman and chief executive officer of New World. "Greenlight Capital, which will become our largest common shareholder, has been a longstanding investor in New World, and supports our efforts in strengthening the organization to better serve our customers, enhance career opportunities for our employees, and deliver value to our shareholders. This restructuring will open a fresh chapter in our corporate history." New World Restaurant Group is a leading company in the quick casual sandwich industry, the fastest-growing restaurant segment. The company operates locations primarily under the Einstein Bros. and Noah's New York Bagels brands and primarily franchises locations under the Manhattan Bagel and Chesapeake Bagel Bakery brands. The company's retail system currently consists of 455 company-owned locations and 288 franchised and licensed locations in 32 states. The company also operates a dough production facility and a coffee roasting plant. As reported in Troubled Company Reporter's June 18, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit and senior secured ratings on quick-casual restaurant operator New World Restaurant Group Inc. to 'D' from 'CCC-'. All ratings were removed from CreditWatch, where they had been placed May 20, 2003. NEXMED INC: Regains Compliance with Nasdaq Listing Requirements --------------------------------------------------------------- NexMed, Inc. (Nasdaq: NEXM), a developer of innovative transdermal products based on its proprietary NexACT(R) drug delivery technology, has regained full compliance with Nasdaq's continued listing requirement. The Company received a letter dated June 27, 2003 from the NASDAQ Hearings Department stating that it has demonstrated full compliance with the shareholders' equity/market value of listed securities/assets and total revenue requirement and all other requirements necessary for continued listing on the Nasdaq National Market. Accordingly, the Company's oral hearing scheduled for Thursday, July 10, 2003 will be considered moot and the hearing file will be closed. NexMed, Inc. is an emerging pharmaceutical and medical technology company, with a product development pipeline of innovative transdermal drug treatments based on the NexACT(R) transdermal delivery technology. Its lead NexACT(R) product under development is the Alprox-TD(R) cream treatment for erectile dysfunction. The Company is also working with various pharmaceutical companies to explore the incorporation of NexACT(R) into their existing drugs as a means of developing new patient-friendly transdermal products and extending patent lifespans and brand equity. * * * Going Concern Uncertainty In the Company's Form 10-K filed on March 31, 2003, the Company reported: "OUR INDEPENDENT ACCOUNTANTS HAVE DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN FOR A REASONABLE PERIOD OF TIME. "As a result of our losses to date, working capital deficiency and accumulated deficit, our independent accountants have concluded that there is substantial doubt as to our ability to continue as a going concern for a reasonable period of time, and have modified their report in the form of an explanatory paragraph describing the events that have given rise to this uncertainty. Our continuation is based on our ability to generate or obtain sufficient cash to meet our obligations on a timely basis and ultimately to attain profitable operations. Our independent auditors' going concern qualification may make it more difficult for us to obtain additional funding to meet our obligations. We anticipate that we will continue to incur significant losses until successful commercialization of one or more of our products, and we may never operate profitably in the future. "WE WILL NEED SIGNIFICANT FUNDING TO COMPLETE OUR RESEARCH AND DEVELOPMENT EFFORTS. "Our research and development expenses for the years ended December 31, 2002, 2001, and 2000 were $21,615,787, $12,456,384, and $6,892,283, respectively. Since January 1, 1994, when we repositioned ourselves as a medical and pharmaceutical technology company, we have spent $50,695,348 on research and development. We anticipate that our expenses for research and development will not increase in 2003. Given our current lack of cash reserves, we will not be able to advance the development of our products unless we raise additional cash reserves through financing from the sale of our securities and/or through partnering agreements. If we are successful in entering partnering agreements for our products under development, we will receive milestone payments, which will offset some of our research and development expenses. "As indicated above, our anticipated cash requirements for Alprox-TD(R) through the NDA filing in the first half of 2004, will be approximately $15 million. Completion of the open label study is not a prerequisite for our NDA filing. We may not be able to arrange for the financing of that amount, and if we are not successful in entering enter into a licensing agreement for Alprox-TD(R), we may be required to discontinue the development of Alprox-TD(R). "We will also need significant funding to pursue our product development plans. In general, our products under development will require significant time-consuming and costly research and development, clinical testing, regulatory approval and significant additional investment prior to their commercialization. The research and development activities we conduct may not be successful; our products under development may not prove to be safe and effective; our clinical development work may not be completed; and the anticipated products may not be commercially viable or successfully marketed. Commercial sales of our products cannot begin until we receive final FDA approval. The earliest time for such final approval of the first product which may be approved, Alprox-TD(R), is sometime in early 2005. We intend to focus our current development efforts on the Alprox-TD(R) cream treatment, which is in the late clinical development stage." ONE PRICE CLOTHING: Completes Equity Investment by Sun Cap. Unit ---------------------------------------------------------------- One Price Clothing Stores, Inc., an operator of a national chain of 568 retail specialty stores offering first quality, in-season apparel and accessories for women and children, completed its previously disclosed equity investment by an affiliate of Sun Capital Partners, Inc., a Boca Raton-based private investment firm. In the transaction, the Sun Capital affiliate paid a total purchase price of $7.0 million for 5,119,101 shares of the Company's common stock and 100 shares of the Company's Series A Preferred Stock that will be convertible into an aggregate of 11,964,500 shares of the Company's common stock at such time as the number of shares of the Company's common stock authorized for issuance is increased to allow such conversion. The shares that were issued Friday pursuant to this investment were authorized but unissued shares of the Company. As a result of the investment, the Sun Capital affiliate now owns an aggregate of approximately 85% of the Company's voting securities. The Company also said that it completed an amendment to its existing credit facility with Congress Financial Corporation (Southern) to increase the size of the facility from $44.65 million to $54.65 million. In order to satisfy a condition to the closing of both the equity investment and the credit facility increase, the Company also announced that it successfully obtained certain concessions from its vendors. "We are very pleased to announce the completion of the Sun Capital equity investment and the credit facility increase with our existing bank group," commented Leonard M. Snyder, Chief Executive Officer. "We especially appreciate the support from our vendors which was instrumental to the completion of the transaction. The new capital that Sun Capital's equity investment provides, coupled with additional flexibility created by our enhanced credit facility and the support of our vendors, is expected to strengthen One Price and facilitate the roll-out of our tri-box store concept. We welcome Sun Capital as our new equity partner and look forward to benefiting from their involvement with One Price." "We are excited about our investment in One Price and believe the Company is now positioned for success," stated M. Steven Liff, Principal at Sun Capital Partners, Inc. "The support from the vendor community has been tremendous, indicating that the Company has a special niche in the market that the manufacturers believe in. The management team has also demonstrated their leadership capabilities and credibility in the marketplace, and we are looking forward to helping Lenny Snyder and his team continue to build the One Price concept." In connection with the investment, the Company named four new directors to fill two existing vacancies and two vacancies created by the resignations of Laurie M. Shahon and Renee M. Love. The new directors are Marc J. Leder and Rodger R. Krouse, both co- founders and Managing Directors of Sun Capital Partners, Inc., Clarence E. Terry, a Managing Director of Sun Capital Partners, Inc., and Lynn Skillen, a Vice President of Sun Capital Partners, Inc. The Company also announced that, after determining that its listing on the NASDAQ SmallCap Market no longer met NASDAQ's listing criteria, such listing was terminated after completing trading on June 24, 2003. The Company is in the process of working with market makers to have its common stock quoted on the Over-the-Counter Bulletin Board. One Price Clothing Stores, Inc. -- whose May 3, 2003 balance sheet shows a total shareholders' equity deficit of about $1.2 million -- currently operates 568 stores in 30 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands under the One Price & More!, BestPrice! Fashions and BestPrice! Kids brands. For more information about One Price, visit http://www.oneprice.com Sun Capital Partners, Inc. is a leading private investment firm focused on leveraged buyouts of market-leading companies that can benefit from its in-house operating professionals and experience. Sun Capital has invested in approximately 50 companies during the past several years with combined sales in excess of $7 billion. Sun Capital has more than $700 million under management and is making new investments through Sun Capital Partners III, LP and Sun Capital Partners III QP, LP, together, a $500 million fund raised in January 2003. Participating in Sun Capital's fund are leading fund-of-funds investors, university endowments, pension funds, financial institutions and high net worth individuals, families and trusts. For more information about Sun Capital, visit http://www.SunCapPart.com OWENS CORNING: Selling Hebron, Ohio Property for about $1 Mill. --------------------------------------------------------------- J. Kate Stickles, Esq., at Saul Ewing LLP, in Wilmington, Delaware, informs the Court that Owens Corning owns real property located at 341 O'Neill Drive in Hebron (Licking County) Ohio. The Property is comprised of 7.38 acres of land and a facility at which Owens Corning previously manufactured insulation for appliances, refrigerators, ovens and similar appliances. The 81,106-square feet facility was acquired by Owens Corning as part of its purchase of Fibre-Lite Corporation in 1996. The Debtors have ceased all activity at the Property and no longer need it for their operations. Accordingly, the Debtors have decided to sell the Property and have entered into a Purchase and Sale Agreement with Golden Property Management LLC. The Settlement Agreement's principal terms are: 1. The gross purchase price for the Property is $1,015,000. The Agreement requires a $25,000 security deposit, which is refundable if the contingencies are not satisfied or waived by Golden Property, or if Golden Property terminates the Agreement on or prior to the expiration of the Investigation Period. 2. The Agreement provides for an "Investigation Period," commencing with the execution of the Agreement and continuing for 60 days after the date the order approving the Agreement is final and no longer subject to timely appeal. During the Investigation Period, Golden Property is entitled to investigate certain matters regarding the Property, including: a. the Property's zoning, any applicable use permits or any other governmental rules and regulations limiting the use of the Property; b. documents regarding, inter alia, environmental assessment data, real property leases, construction contracts, management contracts, reciprocal easement agreements, real property tax bills and soil and building reports and engineering data; and c. the Property's environmental condition. 3. During the Investigation Period, Golden Property is entitled to review the Title Commitment to be obtained with respect to the Property and is required to either approve the Commitment or notify Owens Corning of any items which are reasonably objectionable. In the event there are any objections, the Agreement contains provisions for their resolution. 4. The Agreement requires Owens Corning to satisfy, except to the extent prohibited by the Court, any liens or encumbrances affecting the Property that are dischargeable after payment of a fixed or ascertainable sum of money that do not constitute "Title Objections" under the Agreement. In the event the Court does not authorize the payment at Closing of the liens or encumbrances, Owens Corning is obligated to use commercially reasonable best efforts to either deliver a release of the Property from the lien or encumbrance, or cause the company issuing the Title Commitment to insure over any lien or encumbrance. The Agreement may be terminated by Owens Corning in the event the cost of removing liens or encumbrances with respect to the Property exceeds $100,000, so long as the termination occurs on or before July 17, 2003. 5. The Agreement provides that it may be terminated by Golden Property at any time prior to the expiration of the Investigation Period, for any or no reason. After any termination, Golden Property is entitled to a return of its security deposit. 6. The Agreement contains representations by Owens Corning that the Property does not contain any hazardous or toxic materials in violation of applicable environmental laws or regulations. The Agreement contains an environmental indemnity provision by which Owens Corning is obligated to indemnify and defend Golden Property with respect to the presence of hazardous substances on the Property, after Golden Property has paid for the first $30,000 of expenses relating to any substances. 7. Golden Property Management has agreed to accept the Property in an "as is, where is" condition, although Owens Corning is required to remove all personal property at the Property and to make certain repairs to the Property. 8. Closing under the Agreement will be no later than 30 days following completion of the Investigation Period, subject to a potential 30-day extension upon the posting by Golden Property of an additional $25,000 security deposit. There are real property taxes with respect to the Property totaling $16,900 in principal, plus potential interest, penalties and other charges for which valid liens have been asserted against the Property. The Agreement requires the Debtor to pay, inter alia, all these amounts, as well as any other delinquent taxes affecting the Property, including penalties and interest. An updated title report with respect to the Property references mortgages held by the Director of Development of the State of Ohio of $1,100,000 and the County Commissioners of Licking County of $345,000. The Debtors do not believe that either of these mortgages secures existing debt. In the event this is incorrect, or there are other liens or encumbrances against the Property that exceed $100,000, the Debtors will have the right to terminate the Agreement. Ms. Stickles relates that before Owens Corning entered into the Agreement, it commissioned an appraisal of the Property, which was obtained in January 2003. After receipt of the appraisal, Owens Corning, with the assistance of The Staubach Company, one of the Debtors' Court-approved real estate brokers, marketed the Property and received an initial offer from Golden Property for $923,000, which was below the Property's appraised value. After negotiation, Golden Property increased its offer to $1,015,000, which exceeds the appraised value of the Property. Although the Debtors have received several inquiries regarding the Property, they have not received any other serious expression of interest with respect to the Property. The Debtors accordingly believe that the proposed sales price of $1,015,000 is fair and reasonable. The Debtors believe that Golden Property Management is financially capable of consummating the transaction. The Agreement is the result of arm's-length, good-faith negotiations between the Debtors and Golden Property Management. Ms. Stickles assures the Court that Golden Property is not an "insider" of the Debtors within the meaning of Section 101(31) of the Bankruptcy Code and is not controlled by, or acting on behalf of, any insider of the Debtors. The Debtors seek, pursuant to Sections 363(b) and 363(f) of the Bankruptcy Code, the Court's authority to sell the Property free and clear of all liens, claims, and encumbrances, with any liens, claims, and encumbrances to attach to the proceeds of sale. The Debtors also seek, pursuant to Sections 105 and 363 of the Bankruptcy Code, to pay the Property Taxes from the proceeds of sale. Pursuant to applicable Ohio law, a lien for unpaid real estate taxes attaches on the assessment date of the year for which the taxes are assessed. Therefore, the Property Taxes are appropriately payable from the sale proceeds. In addition, the Debtors seek, pursuant to Section 1146(c) of the Bankruptcy Code, exemption of the sale from stamp or similar taxes. The Debtors seek the Court's approval of the sale to facilitate their business reorganization strategy, which includes the sale of surplus facilities, and thereby further the formulation and ultimate confirmation of a plan that will yield the highest possible returns to their creditors. Ms. Stickles explains that the sale is a necessary step toward a reorganization plan. (Owens Corning Bankruptcy News, Issue No. 54; Bankruptcy Creditors' Service, Inc., 609/392-0900) PROCOM TECHNOLOGY: Fails to Meet Nasdaq Listing Requirement ----------------------------------------------------------- Procom Technology, Inc. (Nasdaq: PRCM) has received a letter from the Nasdaq Listing Qualifications Staff dated June 24, 2003 indicating that, as a result of the Company's failure to timely file with the Securities and Exchange Commission its Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2003, the Company fails to comply with Nasdaq Marketplace Rule 4310(C)(14) requiring the timely filing of periodic reports and that, accordingly, the Company's securities will be delisted from the Nasdaq Stock Market at the opening of business on July 3, 2003 unless the Company requests a hearing in accordance with applicable Nasdaq Marketplace Rules. The Company intends to request a hearing before the Nasdaq Listing Qualifications Panel to appeal the Staff's determination. Pending the appeal process, the Company's shares would continue to be listed on The Nasdaq SmallCap Market. The Company previously disclosed in its Annual Report on Form 10-K for the fiscal year ended July 31, 2002 that it had been notified by Nasdaq that the bid price of its common stock had closed below $1.00 per share for 30 consecutive trading days, and accordingly, that it did not comply with Marketplace Rule 4450(a)(5). In March 2003, the Company transferred to The Nasdaq SmallCap Market and was afforded the remainder of a 180-day grace period for that market, or until January 21, 2003, to regain such compliance. On March 3, 2003, the Staff notified the Company that it had not regained compliance with the minimum $1.00 closing bid price per share requirement and granted the Company an additional 180-day grace period, which commenced on January 21, 2003. The Company has not regained compliance with the minimum bid price requirement. The Staff's June 24 letter indicates that the Company would also need to address compliance with this requirement at the hearing. The Company cannot provide any assurance that it will be successful in its efforts to maintain continued listing on The Nasdaq SmallCap Market. * * * Liquidity and Capital Resources In its SEC Form 10-Q, the Company reported: "For the six months ended January 31, 2003 and the fiscal year ended July 31, 2002, the Company incurred net losses of $5.5 million and $24.4 million, respectively. At January 31, 2003, the Company had working capital of $10.8 million and cash and cash equivalents of $10.0 million (including $0.5 million of restricted cash). To reduce its cash used in operations, the Company put in place various cost containment initiatives, both domestically and internationally, during fiscal 2002 and 2003, including an additional reduction in headcount of approximately 41 employees in the first six months of fiscal 2003. The Company's plan to address its liquidity issues is to generate cash flow from operations by increasing sales and cutting costs. There can be no assurance that the Company will be able to generate cash flows from operations, increase its sales or further reduce costs sufficiently to provide positive cash flows from operations. The Company is currently seeking alternative financing including the leasing, selling or refinancing of the Company's headquarters. There can be no assurance that the sale of the building will generate net proceeds in excess of the carrying value of the Company's headquarters. Net proceeds that are less than the carrying value of the Company's headquarters would cause the Company to record a loss on the sale. Under the terms of the Company's long-term debt, the lender may immediately accelerate all amounts disbursed and terminate any further obligation of the lender to disburse additional amounts under the financing arrangement if there exists any event or condition that the lender in good faith believes impairs (or is substantially likely to impair) the Company's ability to repay the obligations under the financing arrangement. There can be no assurance that the lender will not accelerate the payment of all amounts disbursed under the arrangement. Additionally, there can be no assurance that the Company would be able to lease, sell or refinance the headquarters building, if necessary, or otherwise obtain any additional financing, on favorable or any terms." RAVEN MOON ENTERTAINMENT: Initiates Capital Restructuring Plan -------------------------------------------------------------- Raven Moon Entertainment, Inc. (OTC Bulletin Board: RMOO) will be undertaking a capital restructuring to better position the company for growth and expansion. For all shareholders of record as of June 27, the Company will effect a 50 to 1 reverse stock split with an effective date of July 7, 2003. The Raven Moon Entertainment Board approved this capital restructure to position the company to be more attractive for possible acquisition candidates, to reduce the market volatility that Raven Moon shares have experienced, and have profits reflected with a higher earnings per share. Raven Moon Entertainment will be conducting its annual shareholders' meeting at the Sea World Renaissance Hotel at 3:00 pm on August 15, 2003. Shareholders will be voting on future dividends and, voting for election of the board of directors, and they will have the opportunity to preview the "Gina D's Cuddle Bug Christmas Special". Raven Moon Entertainment's new corporate Web site is ready with 10 "Gina D's Kids Club" products. Orders will be taken for the new "Gina D's Kids Club" 3 Episode DVD and free "Cuddle Bug" plush toy. Visit http://www.ravenmoon.net Most "Gina D's Kids Club" products are now available on Amazon.com key word: "Gina D's Kids Club" Raven Moon Entertainment's March 31, 2003 balance sheet shows a total shareholders' equity deficit of about $42. In its Form 10-QSB for the quarter ended March 31, 2003, the Company reported" "The Company is currently working to establish the following lines of business: Home Video and Television Productions Internet Retail Sales Music CDs Plush Toys "The [Company's] financial statements are prepared on a going concern basis which assumes that the Company will be able to realize assets and discharge liabilities in the normal course of business. Accordingly, it does not give effect to adjustments, if any, that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize assets and liquidate its liabilities, contingent obligations and commitments in other than the normal course of business and the amounts which may be different from those shown in these financial statements. The ability to continue as a going concern is dependent on its ability to: Obtain additional debt and equity financing. Generate profitable operations in the future. "The Company has initiated several actions to generate working capital; and improve operating performances, including equity and debt financing and cost reduction measures. There can be no assurance that the company will be able to successfully implement its plan, or if successfully implemented the Company will achieve its goals. Furthermore, if the Company is unable to raise additional funds it may be required to reduce its workforce, reduce compensation levels, reduce dependency on outside consultants, modify its growth and operating plans, and even be forced to terminate operations completely." RELIANT RESOURCES: Fitch Rates $1.1B Senior Secured Notes at B+ --------------------------------------------------------------- Reliant Resources, Inc.'s $550 million 9.25% senior secured notes due 2010 and $550 million 9.50% senior secured notes due 2013 are rated 'B+' by Fitch Ratings. The Rating Outlook is Stable. Net proceeds from the new issuance will be utilized to repay a portion of RRI's $3.8 billion senior secured term loan. Importantly, the expected pay down of bank debt eliminates a $500 million May 2006 mandatory principal payment required under RRI's credit facility. As a result, RRI will not have any significant corporate level debt maturities until the final maturity of the bank credit facility on March 15, 2007. In addition, the bank debt pay down removes soft amortization targets in 2004 and 2005. The notes will rank pari passu with RRI's $5.9 billion secured credit facility and will be secured by all previously unencumbered assets including a lien on approximately 9,200 megawatts of electric generating capacity and the pledge of certain subsidiary stock including RRI's Texas retail business, Orion Power Holdings, and REMA. In Fitch's view, the secured creditors have reasonable asset protection, but the margin of protection is slimmer than in other comparable transactions due to the extremely high proportion of secured debt relative to total corporate debt and obligations. The rating recognizes the weak performance of RRI's wholesale merchant power segment and the high debt leverage stemming from the 2002 acquisition of Orion Power Holdings. Wholesale segment performance is expected to remain depressed through 2003-2004 due to weak supply/demand fundamentals and losses in 2003 associated with the wind down of speculative trading activities. Because the vast majority of RRI's generating portfolio is unhedged beyond 2004 a recovery in wholesale performance is dependent on a recovery in spark spreads and/or RRI's ability to secure a higher percentage of long-term power sales agreements at favorable prices. Fitch notes that the potential exercise of the Texas Genco purchase option in 2004, while providing a physical hedge for RRI's retail business, would further expose RRI to cyclical wholesale power markets particularly in the over-supplied ERCOT region. A positive consideration is the ongoing profitability and strong cash flow contributed by RRI's Texas based retail electric operations. Since the implementation of Texas electric deregulation in January 2002, retail operations have performed as designed, providing a partial hedge against wholesale earnings volatility. In particular, retail margins have benefited from RRI's ability to lock in favorable natural gas and capacity prices. In addition, customer loss has been lower than originally anticipated. Although retail should be a significant source of free cash flow for RRI in the near-term, the earnings sustainability of this business could be impaired over time by increased competition and less favorable wholesale power pricing dynamics. RRI's current financial profile is overly leveraged, especially given cyclical commodity market conditions which have significantly reduced realized returns on the company's generating portfolio. Consolidated gross debt to EBITDA, adjusted to include off-balance sheet debt and certain non-recourse project financings, currently approximates 6.0 times. In addition, RRI's consolidated capital structure includes more than $2 billion of secured subsidiary debt and lease obligations with terms that could limit RRI's ability to upstream cash dividends for debt service at the corporate level. The March 2003 show cause order issued by the Federal Energy Regulatory Commission related to RRI's energy trading activities in the West currently remains unresolved. Under the order, RRI has to effectively 'show cause' why FERC should not revoke their market-based rate authority due to RRI's alleged participation in energy price manipulation at the Palo Verde power trading hub. Although the mechanics of revocation of market-based rate authority are unclear, it would not necessarily preclude RRI from participating in the wholesale power markets nor from entering into bilateral power contracts. However, the company's returns could ultimately be capped at cost-of-service tariffs. The current stable outlook reflects Fitch's expectation that this and other regulatory investigations will ultimately be settled in a manner which will not have a substantially adverse near-term impact on RRI's liquidity position. Any unexpected severe penalties would be a negative credit event and would likely result in a change in RRI's rating and/or Outlook. RESIDENTIAL ACCREDIT: Fitch Rates Class B-1 & B-2 Notes at BB/B --------------------------------------------------------------- Fitch rates Residential Accredit Loans, Inc.'s $251.7 million mortgage pass-through certificates, series 2003-QS12 classes A-1 through A-5, A-P, A-V, R-I and R-II certificates (senior certificates) 'AAA'. In addition, Fitch rates class M-1 ($4.3 million) 'AA', class M-2 ($500,000) 'A', class M-3 ($800,000) 'BBB', privately offered class B-1 ($400,000) 'BB' and privately offered class B-2 ($300,000) 'B'. The 'AAA' ratings on senior certificates reflect the 2.55% subordination provided by the 1.65% class M-1, 0.20% class M-2, 0.30% class M-3, 0.15% privately offered class B-1, 0.10% privately offered class B-2 and 0.15% privately offered class B-3 (not rated by Fitch). Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings reflect the quality of the mortgage collateral, strength of the legal and financial structures, and Residential Funding Corp.'s servicing capabilities (rated 'RMS1' by Fitch) as master servicer. As of the cut-off date, June 1, 2003 the mortgage pool consists of 1,555 conventional, fully amortizing, 15-year fixed-rate, mortgage loans secured by first liens on one- to four-family residential properties with an aggregate principal balance of $258,252,490. The mortgage pool has a weighted average original loan-to-value ratio of 64.76%. Approximately 56.31% and 1.93% of the mortgage loans possess FICO scores greater than or equal to 720 and less than 660, respectively. Loans originated under a reduced loan documentation program account for approximately 68.25% of the pool, equity refinance loans account for 47.65%, and second homes account for 1.83%. The average loan balance of the loans in the pool is $166,079. The three states that represent the largest portion of the loans in the pool are California (29.99%), Texas (11.07%) and Florida (4.78%). None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. For additional information on Fitch's rating criteria regarding predatory lending legislation, please see the press release issued May 1, 2003 entitled, 'Fitch Revises Rating Criteria in Wake of Predatory Lending Legislation', available on the Fitch Ratings web site at 'www.fitchratings.com'. All of the mortgage loans were purchased by the depositor through its affiliate, Residential Funding, from unaffiliated sellers except in the case of 30.5% of the mortgage loans, which were purchased by the depositor through its affiliate, Residential Funding, from HomeComings Financial Network, Inc., a wholly-owned subsidiary of the master servicer. No other unaffiliated seller sold more than approximately 20.7% of the mortgage loans to Residential Funding. Approximately 77.9% of the mortgage loans are being subserviced by HomeComings Financial Network, Inc. (rated 'RPS1' by Fitch). The mortgage loans were originated under GMAC-RFC's Expanded Criteria Mortgage Program (Alt-A program). Alt-A program loans are often marked by one or more of the following attributes: a non- owner-occupied property; the absence of income verification; or a loan-to-value ratio or debt service/income ratio that is higher than other guidelines permit. In analyzing the collateral pool, Fitch adjusted its frequency of foreclosure and loss assumptions to account for the presence of these attributes. Deutsche Bank Trust Company Americas will serve as trustee. RALI, a special purpose corporation, deposited the loans in the trust, which issued the certificates. For federal income tax purposes, an election will be made to treat the trust fund as two real estate mortgage investment conduits. SECURITY ASSET: Liquidity Issues Raise Going Concern Uncertainty ---------------------------------------------------------------- Hurley & Company has resigned as auditors for Security Asset Capital Corporation because the Company's form 10-KSB for the year ending December 31, 2002 was filed before the audit was completed. The Company's management is continuing to have discussions with Hurley & Company and is working to complete the audit and reissue the 10-KSB. As a result of its auditor's resignation, Security Asset Capital is withdrawing its Annual Report, form 10-KSB. The Company will amend certain disclosures regarding litigation and the SEC investigation. The Company's auditor, Hurley & Company, has stated that certain disclosures regarding the noteholders' and other creditors' litigation and the SEC investigation need to be amended in the Company's form 10-KSB for the year ended December 31, 2003. Management has discussed these matters with Hurley & Company and agree with the accountant's recommendations and will accordingly make such amendments. The Company has only a limited operating history and revenues and has had net losses from operations. The Company's continued existence is dependent upon its ability to resolve its liquidity problems, principally by the continued sale of its Loan Portfolio Assets and by obtaining additional debt financing and equity capital until such time as the Company becomes profitable. The lack of financial resources and liquidity raises substantial doubt about its ability to continue as a going concern. The Company plans to continue funding its operations from the further sale of its debt receivables portfolio and additional debt and equity capital offerings. There is no assurance that management will be successful in these endeavors. SHAW COMMS: Net Loss Narrows to $13 Million in Third Quarter ------------------------------------------------------------ Shaw Communications Inc. announced that, on a consolidated basis, the Company achieved net positive free cash flow of approximately $44.1 million in the third quarter, bringing the year to date amount to $40.3 million. The Cable business unit generated $60.2 million of free cash flow for the quarter compared to a negative amount of $13.1 million last year. Jim Shaw, chief executive officer of Shaw Communications Inc. said: "Last year we set a tough target for everyone at Shaw Communications Inc. cable division to achieve $105 million of free cash flow. With the focus, dedication and commitment of everyone on the Shaw team, we have already achieved year to date FCF of $132.2 million for cable, significantly exceeding our target". Basic cable subscription increased by 7,009 customers over Q2; internet customers grew by 25,925 over Q2; and the digital customer base increased by 6,705 over Q2. "This third quarter customer subscription growth is significant because, historically, seasonal disconnections result in a drop in subscribers. In addition to building our customer base, we are noticing reduced churn as a result of the use of targeted sales, bundling strategies and improved customer offerings including the sale of cable modems and digital boxes." noted Mr. Shaw. "This is the direct result of a commitment to customer service by all the Shaw Communications staff". One of the bright lights of the quarter was continued customer growth at the company's Star Choice division where the addition of 8,259 subscribers pushed Star Choice past the 800,000 customer level. Total revenue increased on a quarterly and year to date basis by 5.9% and 9.9% respectively, while operating income before amortization improved by 20.2% and 33.1%. "We have increased revenue by adding new customers, increasing rates, introducing new services such as HDTV and VOD to various markets, and expanding our bundling options for customers. Operating income has improved not only from revenue growth but also benefited from the positive impact of cost reductions and rationalization of operations undertaken in the past twelve months. Shaw continues to be one of North America's most successful cable operators, our senior management team is focused on delivering shareholder value, and we are committed to continuing to strive to further improve our results and strengthen our financial position as we have in this quarter", said Mr. Shaw. Cash flow from operations in the third quarter ended May 31, 2003 was $138.3 million compared to $98.6 million in the same period last year, representing an increase of 40.4%. For the nine months ended May 31, 2003, cash flow from operations was $378.6 million, a 68.4% improvement over the same period last year ($224.9 million). Net loss for the third quarter ended May 31, 2003 was $13.2 million compared to a loss of $79.3 million for the same period last year. "We are extremely pleased with our results in the third quarter, particularly the strengthening in cable television," added Mr. Shaw. "In addition, our achievement of net free cash flow for the second consecutive quarter underlines our resolve to strengthen the Company's operations through offering our customers an attractive array of services while at the same time managing our financial resources in a prudent fashion." Shaw Communications Inc. (S&P/BB+ Corporate Credit Rating/Stable} is a diversified Canadian communications company whose core business is providing broadband cable television, Internet and satellite direct-to-home services to approximately 2.9 million customers. Shaw is traded on the Toronto and New York stock exchanges and is included in the S&P/TSX 60 index. (Symbol: TSX - SJR.B, NYSE - SJR). SHAW COMMS: Provides Guidance for Fiscal 2003 and Fiscal 2004 ------------------------------------------------------------- Shaw Communications announced its guidance for fiscal 2003 and fiscal 2004. The guidance for fiscal 2003 is as follows: In $Millions August 31, 2003 ------------------------------------------------- Three months ended Year ended ------------------ ---------- Cable(1) Satel- Consol- Cable(1) Satel- Consol- lite idated lite idated(2) ------------------------------------------------- Operating income 182 28 210 723 92 815 Capital expenditures 75 23 98 285 124 409 Free cash flow (deficit) 44 (10) 34 177 (102) 75 The guidance for fiscal 2004 is as follows: Ranges stated in $Millions Year ended August 31, 2004 ------------------------------------- Cable(1) Satellite Consolidated ------------------------------------- Operating income 775 - 800 120 - 130 895 - 930 Capital expenditures 290 - 300 100 - 110 390 - 410 Free cash flow (deficit) 235 - 270 (20) - (40) 195 - 250 The outlook for 2004 anticipates free cash flow will more than double over 2003. The increase reflects increased operating income of $80 - 115 million and anticipated interest savings of approximately $40 million due to continued repayment of debt. The increase in operating income adjusting for the exclusion of the US cable systems for all of 2003 amounts to a 10% - 13% increase for the cable division and a 38% - 44% increase for the satellite division. The growth in operating income is due to actual and planned rate increases in 2003 and 2004, growth in customer base, anticipated savings from the restructuring of operations announced in Shaw's third quarter earnings release and ongoing cost reduction programs. Capital expenditures, including equipment subsidies should remain consistent with 2003 levels of approximately $410 million. "The results achieved in 2003 and the outlook for 2004 demonstrate management's ability to achieve the Company's objective of obtaining free cashflow and growing it in a significant manner," said Jim Shaw, C.E.O. of Shaw Communications. Shaw Communications Inc. (S&P/BB+ Corporate Credit Rating/Stable} is a diversified Canadian communications company whose core business is providing broadband cable television, Internet and satellite direct-to-home services to approximately 2.9 million customers. Shaw is traded on the Toronto and New York stock exchanges and is included in the S&P/TSX 60 index. (Symbol: TSX - SJR.B, NYSE - SJR). SLMSOFT INC: Canadian Court Extends CCAA Protection Until Aug. 8 ---------------------------------------------------------------- SLMsoft Inc. (TSX: ESP.a, ESP.b), a leading global provider of e- financial solutions, announced that the Court has granted an extension of the stay of proceedings contained in the Initial Order of May 27, 2003 under the Companies' Creditors Arrangement Act (CCAA), to facilitate its corporate restructuring. The stay protection is extended until August 8, 2003. SPARTAN STORES: Sells 17 Food Town Stores for $30 Million Cash -------------------------------------------------------------- Spartan Stores, Inc. (NASDAQ:SPTN) has completed the sale of 17 Food Town retail grocery stores in the Toledo, Ohio and Southeast Michigan market area. The Kroger Co. represents the largest purchase transaction, buying 13 of the total stores. Under terms of the agreements, net proceeds from the sales will approximate $30 million in cash. The Company intends to use the net proceeds from the transactions to reduce outstanding bank borrowings. "We are very pleased to have completed the transactions with these buyers," stated Spartan Stores' President and Chief Executive Officer, Craig C. Sturken. "The sales are an outcome of our strategic evaluation process announced in February and will help our efforts to restore retail profitability. We are continuing to evaluate the future of the remaining Food Town stores and expect to announce those plans shortly. These transactions will immediately help improve our operating cash flow and allow us to concentrate resources on our best performing grocery stores in geographic areas where we have the strongest growth potential," said Mr. Sturken. The stores are located at the Toledo Southland shopping center, 5201 Suder Avenue, Toledo, Ohio, 1316 Oak Harbor Road, Fremont, Ohio, 101 6th Street, Findlay, Ohio, 1800 N. Blanchard, Findlay, Ohio, 850 S. McCord Road, Holland, Ohio, 210 East Mary Street, Bucyrus, Ohio, 1300 Michigan Avenue, Waterville, Ohio, 113 East Airport Highway, Swanton, Ohio, 531 West Main Street, Milan, Michigan, 850 South Monroe, Monroe, Michigan, and 3833 North Dixie, Monroe, Michigan, 571 East Monroe Street, Dundee, Michigan, 211 North Telegraph Road, Monroe, Michigan, 32825 Fort Street, Rockwood, Michigan, 121 Blossom Center, Willard, Ohio, 1703 Airport Highway, Toledo, Ohio. Spartan Stores, Inc., (Nasdaq:SPTN) (S&P/BB-/Negative) Grand Rapids, Michigan, owns and operates 63 supermarkets and 21 deep- discount drug stores in Michigan and Ohio, including Ashcraft's Markets, Family Fare Supermarkets, Food Town, Glen's Markets, Great Day Food Centers, Prevo's Family Markets and The Pharm. The Company also distributes more than 40,000 private-label and national brand products to more than 330 independent grocery stores. SPECIAL METALS: Reaches Tentative Labor Agreements with USWA ------------------------------------------------------------ Special Metals Corporation (SMCXQ.PK) and the United Steelworkers of America have reached a tentative agreement on the terms of three new collective bargaining agreements covering Special Metals' manufacturing facilities in Huntington, West Virginia, Burnaugh, Kentucky and Dunkirk, New York. The tentative agreements are subject to ratification by the Union membership at each of these facilities. The parties believe the new agreements meet the financial restructuring needs of the business and are a positive step towards the Company's emergence from Chapter 11 bankruptcy proceedings. Special Metals is the world's largest and most-diversified producer of high-performance nickel-based alloys. Its specialty metals are used in some of the world's most technically demanding industries and applications, including: aerospace, power generation, chemical processing, and oil exploration. Through its 10 U.S. and European production facilities and a global distribution network, Special Metals supplies over 5,000 customers and every major world market for high-performance nickel-based alloys. SPIEGEL GROUP: Committee Turns to FTI for Financial Advice ---------------------------------------------------------- The Official Committee of Unsecured Creditors of The Spiegel Debtors sought and obtained the Court's authority to retain FTI Consulting, Inc. as its financial advisor effective as of March 24, 2003. FTI will provide the Committee with financial advisory services important in the evaluation of the Debtors' businesses during their Chapter 11 cases. Specifically, FTI will: (a) advise and assist the Committee in its analysis and monitoring of the Debtors' historical, current and projected financial affairs, including without limitation, its business plan, schedules of assets and liabilities, statement of financial affairs, periodic operating reports, analyses of cash receipts and disbursements, analyses of cash flow forecasts, analyses of trust accounting, analyses of various asset and liability accounts, analyses of cost-reduction programs, analyses of any unusual or significant transactions between the Debtors and any other entities, and analyses of proposed restructuring transactions; (b) review the Debtors' expense structure and identify opportunities for further reductions, including store closings and arrangements for liquidation sales; (c) develop a monitoring report to enable the Committee to effectively evaluate the Debtors' performance on an ongoing basis; (d) analyze and critique actual and proposed debtor-in- possession financing arrangements; (e) analyze arrangements with trade creditors regarding postpetition credit extension, including inventory return programs and other related issues; (f) advise and assist the Committee in: -- reviewing executory contracts, including leasing arrangements and provide recommendations to assume or reject; -- identifying or reviewing preference payments, fraudulent conveyances and other causes of action; and -- review of the books and records of Debtors for related party or potential avoidance actions; (g) perform liquidation analyses of the Debtors and accordingly advise the Committee and its bankruptcy counsel; (h) assist and advise the Committee in evaluating and analyzing restructuring plans proposed by the Debtors, review and provide analysis of any plan of reorganization and disclosure statement relating to the Debtors, assist and advise the Committee in implementing a reorganization plan for the Debtors and ascertain the reasonableness of Debtors' long-term viability and reorganization plan; (i) analyze alternative reorganization scenarios in an effort to maximize the recovery to the Committee and develop negotiation strategies to support the Committee's position, assist the Committee and its counsel in the negotiation of any and all aspects of a restructuring and advise and assist the Committee in reviewing any proposed sales or acquisitions of strategic or non-strategic assets or business units; (j) advise and assist the Committee in its: -- assessments of the Debtors' management team, including a review of any existing or proposed bonus, incentive and retention plans, including key employee retention plans; and -- review of the Debtors' existing management processes, including but not limited to organizational structure, cash management and management information and reporting systems; (k) render expert testimony and litigation support services, as requested from time to time by the Committee and counsel, regarding the feasibility of a reorganization plan and other matters; (l) attend Committee meetings and court hearings as may be required in the role as financial advisor to the Committee; (m) assist and advise the Committee and counsel in reviewing and evaluating court motions filed or to be filed by the Debtors or any other parties-in-interest; and (n) participate in meetings and discussions with the Committee, the Debtors, the other parties-in-interest and their professionals, provide other bankruptcy and related financial advisory services as are consistent with the Committee's role and duties. The Committee selected FTI because of the firm's restructuring professionals who have extensive expertise in restructuring consulting. FTI professionals have participated in more than 500 cases, including some of the largest bankruptcy proceedings and out-of-court restructurings in the country, as well as numerous middle-market cases. FTI will be compensated on an hourly basis, plus reimbursement of its actual, necessary expenses. FTI professionals' customary hourly rates are: Position Title Rate -------------- ---- Senior Managing Director $550 - 625 Managing Director 425 - 525 Director 350 - 405 Consultant 165 - 325 Jay Borow, FTI's Senior Managing Director, attests that the firm does not have or represent any interest materially adverse to the Debtors' interests, or those of their estates, and is a "disinterested person" as defined by Section 101(14) of the Bankruptcy Code. (Spiegel Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) STILLWATER MINING: Robert M. Taylor Resigns as VP Operations ------------------------------------------------------------ Stillwater Mining Company (NYSE: SWC) announced that Robert M. Taylor has resigned from his position as Vice President of Operations effective immediately. Commenting on the resignation, Stillwater Chairman and Chief Executive Officer, Francis R. McAllister said, "I want to acknowledge Bob's contributions during his tenure with the Company which included the completion of development at the East Boulder mine and transition of operations following suspension in the Company's expansion plans." Further, McAllister said, "The Company is in the process of identifying a Chief Operating Officer and hopes to make an announcement shortly." Stillwater Mining Company (S&P/BB+ Corporate Credit/Developing) is the only U.S. producer of palladium and platinum and is the largest primary producer of platinum group metals outside of South Africa. The Company's shares are traded on the New York Stock Exchange under the symbol SWC. Information on Stillwater Mining can be found at its Web site: http://www.stillwatermining.com SURGICARE INC: Forbearance Agreement Extended for 60 Days --------------------------------------------------------- SurgiCare Inc. (AMEX:SRG), a Houston-based Ambulatory Surgery Center provider, has signed a letter of intent to open an MRI center in Dover, Ohio. Upon completion, the MRI center will be the first open MRI operating in Tuscarawas County. This letter of intent sets the structure of the deal as a joint venture between the Company and local physician partners. Equipment has been ordered for an anticipated start-up in fall 2003. SurgiCare already operates the Tuscarawas Surgery Center. "This new facility provides an answer to the medical needs of the community," said Keith LeBlanc, SurgiCare's Chief Executive Officer. "This begins our strategic plan to enter the imaging business, collaborating with physician partners to create outpatient medical malls. We plan to replicate the MRI facility in other communities in which we operate surgery centers." The company has sold its 10% equity interest in Physicians Endoscopy Center, a single-specialty facility in Houston, Texas. SurgiCare had made an offer to buy up to 35% in that facility, but the physician partners denied the request. "The company's primary focus is on multi-specialty outpatient surgery centers with SurgiCare owning a 35% interest and the physician partners owning the remaining 65%," LeBlanc said, "This center did not meet the long-term strategic vision of the company and was thus sold." SurgiCare states that it is continuing the restructuring of the company. DVI has given SurgiCare a 60-day extension on its Forbearance Agreement. All transactions for complete restructuring are anticipated to be completed within the forbearance period. SurgiCare has established a second Web site at www.srgdoc.com to provide collaborative business partners with updates on company restructuring and expansion opportunities. SurgiCare Inc. operates freestanding, technologically-advanced ambulatory surgery centers which are staffed by board certified surgeons. They are licensed, certified and Medicare-approved outpatient facilities. The company plans to add additional centers as joint ventures with other healthcare partners. A publicly- traded company, SurgiCare plans to also soon add imaging and other operating units. To find out more about SurgiCare Inc. (AMEX:SRG), visit its Web site at http://www.surgicare.com TELESYSTEM INT'L: Unit Closes $225 Million Senior Debt Offering --------------------------------------------------------------- Telesystem International Wireless Inc. announces that its indirect subsidiary, MobiFon Holdings B.V., has closed its US$ 225,000,000 issue of 12.5% Senior Notes due 2010. The Notes were sold at 97.686% of par for a yield to maturity of 13%. Net proceeds from the offering were US$ 211.6 million of which US$ 28.1 million were used to establish a debt service reserve account. Substantially all of the remaining net proceeds will be used to repay intercompany loans made to MobiFon Holdings by ClearWave N.V., MobiFon Holding's parent company and a majority- owned subsidiary of TIW. ClearWave will use the funds it receives from MobiFon Holdings to repay outstanding indebtedness to TIW and to make distributions to its shareholders. TIW will use the funds it receives from ClearWave and its available cash resources to redeem in full its outstanding 14% Senior Guaranteed Notes due December 2003. TIW expects to complete the redemption of its 14% Senior Guaranteed Notes by the end of July 2003. "The closing of this offering completes TIW's recapitalization begun in 2001 and removes the going concern uncertainty related to the company," said Andre Gauthier, Vice-President and Chief Financial Officer of TIW. "TIW is now fully funded with two strong performing operations and will be essentially debt free at the corporate level," added Andre Gauthier. The Notes have not been registered under the U.S. Securities Act of 1933 and may not be offered or sold in the U.S. absent an applicable exemption from the registration requirements of the Act. The Notes will be offered in other jurisdictions in accordance with rules permitting offerings to professional investors or on a restricted basis. MobiFon Holdings, incorporated in the Netherlands, holds TIW's 57.1% indirect equity interest in MobiFon S.A., a major provider of GSM wireless telecommunications services in Romania. TIW (S&P/CCC+ Corporate Credit Rating/Positive) is a leading cellular operator in Central and Eastern Europe with almost 4.1 million managed subscribers. TIW is the market leader in Romania through MobiFon S.A. and is active in the Czech Republic through Cesky Mobil a.s. The Company's shares are listed on the Toronto Stock Exchange ("TIW") and NASDAQ ("TIWI"). TERADYNE INC: Will Publish Second Quarter Results on July 15 ------------------------------------------------------------ Teradyne, Inc. (NYSE:TER) will release results for the Second Quarter of 2003 on Tuesday, July 15, 2003, following the close of markets, at 6:30 p.m. Eastern Daylight Time or later. A conference call to discuss Second Quarter 2003 results and management's outlook will follow at 10:00 a.m. Eastern Daylight Time, Wednesday, July 16, 2003. The call will be broadcast simultaneously over the Internet. Interested investors should access the webcast at http://www.teradyne.comand click on "Investors" at least five minutes before the call begins. A replay will be available two hours after the completion of the call. The replay number in the U.S. & Canada is 1-800-642-1687. The pass code is 1543350. A replay will also be available on the Teradyne Web site http://www.teradyne.com Click on "Investors" for a link to the replay. The replay will be available via phone and web site through July 30, 2003. Teradyne (S&P/B+ Corporate Credit/Stable) is the world's largest supplier of Automatic Test Equipment, and a leading supplier of interconnection systems. The company's products deliver competitive advantage to the world's leading semiconductor, electronics, automotive, telecommunications, and network systems companies. Teradyne had sales of $1.22 billion in 2002, and currently employs about 6,800 people worldwide. TOP-FLITE GOLF: Files for Chapter 11 Protection in Delaware ----------------------------------------------------------- The Top-Flite Golf Company and affiliated companies (SHC, Inc., Top-Flite, Inc. and Lisco Sports, Inc.) have reached an agreement for the sale of substantially all the company's golf-related assets to Callaway Golf Company (NYSE: ELY). The proposed sale is pursuant to section 363 of Chapter 11 of the U.S. Bankruptcy Code. The total price to be paid by Callaway Golf for the acquired assets will be approximately $125 million, subject to certain adjustments. To facilitate the sale, Top-Flite Golf filed yesterday a voluntary petition for relief under Chapter 11 with the U.S. Bankruptcy Court for the District of Delaware. Top-Flite Golf's international operations are part of the sale, but are not part of the bankruptcy filing. Under a section 363 asset sale, all of the assets of a company are sold to a purchaser free and clear of virtually all liens, claims and interests. The sale of Top-Flite Golf's assets to Callaway Golf is subject to Bankruptcy Court approval. Top-Flite Golf expects to complete the sale to Callaway Golf within 70 to 90 days. Completion of the transaction also is contingent upon government review under the Hart-Scott-Rodino Pre-Merger Notification Act. Top-Flite Golf said that it has adequate cash balances to fully fund operations during the reorganization process and will file various motions to enable it to meet obligations related to certain customer practices and programs, import obligations and other similar charges. As in all Chapter 11 cases, subject to court approval post-petition obligations to vendors, employees and others will be satisfied in the normal course of business without the need to obtain further court approval. Jim Craigie, president and chief executive officer of Top-Flite Golf, said, "The proposed sale of our assets to Callaway Golf will allow Top-Flite Golf to remain a strong competitor and maximize our value for customers, employees and other stakeholders. Callaway has expressed interest in keeping and investing in our brands, continuing an association with Greater Springfield and offering employment to a substantial portion of our employee base." Craigie continued, "In the meantime, Top-Flite Golf will maintain business as usual during the reorganization process. We do not expect any interruption in our supply chain, production or distribution, and all vendors will be paid in the normal course of business for post-petition obligations. All of our products will continue to be available, we will continue to honor all warranties, and we will move forward with the launch of our new Top-Flite Infinity line with substantial marketing support." In making its filing to the Bankruptcy Court, Top-Flite Golf noted that the large debt load inherited from its 1996 leveraged buyout, as well as worldwide overcapacity in the golf ball market, have resulted in deteriorating sales, margins and market share. Management has concluded that in order to maximize the value to all stakeholders, that Chapter 11 protection is necessary to stabilize Top-Flite's business and preserve its value during the process of selling its assets to Callaway Golf. "In the consolidating golf industry, even if Top-Flite Golf were to eliminate our debt load from the 1996 leveraged buyout through Chapter 11, we could not survive in the current marketplace against existing strong competitors. We have carefully considered all possible alternatives, and the combination of a bankruptcy filing and an immediate Section 363 sale is the only viable course of action for the Company's future," Mr. Craigie said. Ron Drapeau, Chairman, President and CEO of Callaway Golf, said, "Our acquisition of the Top-Flite assets free from the significant debt load that burdened the company should permit us to reverse the recent decline of the Top-Flite brand in the golf ball marketplace. We also believe that our consolidated golf ball operations will provide Callaway Golf and its shareholders with the solution to the profitability drain that has dogged our golf ball business since start-up. Moreover, the acquisition of the Top-Flite and Ben Hogan brands in golf clubs permits us to participate in categories and channels where the Callaway Golf brand has been absent or had little presence. Overall, we see this as an opportunity to compete effectively in a broad range of golf equipment business segments. We have every reason to believe that we will receive all needed approvals to complete the transfer of these Top-Flite assets to Callaway Golf later this year." Top-Flite Golf also has retained Kroll Zolfo Cooper LLC, the financial consulting firm specializing in corporate restructuring, to work with senior management and assist the company through the bankruptcy and asset sale process. Kroll Zolfo Cooper executives have been appointed to the following positions: Kevin Golmont will serve as Chief Restructuring Officer, and Andrew Howley will serve as Interim Chief Financial Officer. The Top-Flite Golf Company, formerly part of Spalding Sports Worldwide, is the world's largest golf ball manufacturer. It is the first U.S. manufacturer of golf balls, dimpled golf balls, two-piece golf balls, multi-layer golf balls, and American-made golf clubs. Under The Top-Flite Golf Company umbrella are the TOP- FLITE, STRATA and BEN HOGAN brands. To find more information on The Top-Flite Golf Company, visit its Web site at http://www.topflite.com TOP-FLITE: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------- Lead Debtor: SHC, Inc. 425 Meadow Street Chicopee, Massachusetts 01013 aka Spalding Holdings Corporation Bankruptcy Case No.: 03-12002 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Top-Flite, Inc. 03-12003 The Top-Flite Golf Company 03-12004 Lisco Sports, Inc. 03-12005 Type of Business: Manufacturer of golf balls and clubs and other sporting goods Chapter 11 Petition Date: June 30, 2003 Court: District of Delaware Judge: Mary F. Walrath Debtors' Counsel: Pauline K. Morgan, Esq. Young, Conaway, Stargatt & Taylor The Brandywine Bldg. 1000 West Street, 17th Floor PO Box 391 Wilmington, DE 19899-0391 Tel: 302 571-6600 Fax : 302-571-1253 Estimated Assets: $0 to $50,000 Estimated Debts: More than $100 Million Debtors' 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Bank of America Bank Loan $430,000,000 c/o Agency Management (principal & Bank of America interest only, 1455 Market Street excludes fees & San Francisc, CA 94103 expenses) Attn: Kathy Carry Estimated value Fax: 415-503-5001 of security is $130,000,000 based on the total cash consideration under that certain Asset Purchase Pact among The Top- Flite Golf Company and Callaway Golf Company Oaktree Capital Management Bonds $72,241,598 c/o US Bank Corporate Trust Services US Bank Trust Center 180 East Fifth Street 2nd Floor St. Paul, MN 55101 Attn: Rich Prokosh Fax: 651-244-0711 KKR Debt $37,147,698 c/o Agency Management Bank of America 1455 Market Street San Francisc, CA 94103 Attn: Kathy Carry Fax: 415-503-5001 Franklin Advisors, Inc. Bonds $20,778,012 c/o US Bank Corporate Trust Services US Bank Trust Center 180 East Fifth Street 2nd Floor St. Paul, MN 55101 Attn: Rich Prokosh Fax: 651-244-0711 Teachers Insurance & Bonds $10,600,165 Annuity Assoc. of America c/o US Bank Corporate Trust Services US Bank Trust Center 180 East Fifth Street 2nd Floor St. Paul, MN 55101 Attn: Rich Prokosh Fax: 651-244-0711 IRS Trade $4,175,000 The Insolvency Section 31 Hokins Plaza Room 1150 Baltimore, MD 06383 Fax: 410-962-9955 Caraustar Custom Trade $3,188,162 Packaging 126 Inland Road PO Box 258 Versailles, CT 06383 Fax: 860-822-9704 KSL Media, Inc. Trade $2,480,854 149 Fifth Avenue 15th Floor New York, NY 10010 Attn: Hannibal Travit Fax: 212-614-2328 Plaza Pacific, Ltd. Trade $1,988,863 No. 11, Lane 11 Sec 3 nansan Road Luchu Hsiang Taoyuan Hsein, Taiwan Tel: 66-2-3240350 Gold Chuck Industrial Trade $1,850,600 Ltd. Beverly Commercial Centre Rm. 901 87-105 Chantham Road Tsim Sha Tsui Kowloon, Hong Kong Orga Industrial Trade $1,842,363 11 F-3, No. 91 Ta-Shun 1st Road Tso-Ying District Kaoshiung, Taiwan Jeffrey Benjamin Bonds $1,310,238 c/o US Bank Corporate Trust Services US Bank Trust Center 180 East Fifth Street 2nd Floor St. Paul, MN 55101 Attn: Rich Prokosh Fax: 651-244-0711 Endo Manufacturing Trade $1,152,635 5-3 Chuo-Dori Tsubame City Nigala 959 1244, Japan Vega, Balls Mfg. Trade $1,064,240 653 SOI E6 Patana 1 Road Bangpoo Industrial Estate Samutprakarn, Thailand Sartomer Company Trade $1,001,947 Oaklands Corp. Center 502 Thomas Jones Way Exton, PA 19341 Attn: Anne McClung Fax: 610-363-4140 Wistanley Association Trade $814,473 114 Main Street Lenox, MA 01240 Attn: Pat Consolatti Fax: 413-637-2045 Allen & Geritsen Trade $739,164 85 School Street Watertown, MA 02472 Attn: Kim Christie Tel: 617-926-4005 Cary N. May Bonds $652,132 c/o Bond Administration HSBC Bank USA 10 East 40th Street 14th Fllor New York, NY 10016 Attn: Russ Palladino Fax: 212-525-1366 Inland Paperboard Trade $579,742 and Packaging 17507 S. Dupont Highway Harrington, DE 19952 Fax: 302-398-1460 Max Power Co. Trade $571,220 9th Floor No. 838 Ching-Kuo Road Taoyuan City, Taiwan TOUCH AMERICA: WLR Recovery Extends $5 Million of DIP Financing --------------------------------------------------------------- Touch America Holdings, Inc., and its debtor-affiliates ask for authority from the U.S. Bankruptcy Court for the District of Delaware to obtain postpetition financing from WLR Recovery Fund II, LP as agent. The Debtors tell the Court that they need up to $1.5 million pending final hearing and up to $5 million as final authority, in order to finance the Debtors' operations and preserve the value of the Debtors' estates pending sale of substantially all of their assets. The Debtors relate that their business has been strongly affected by the prolonged United States economic downturn. The demand for fiber optic network capacity has been lower than expected which calls for intense price competition, in turn, reduced revenue and profits. The Debtors, together with their various advisors, sought proposals for a debtor in possession financing facility for a long time, but were unable to locate any lender who was willing to provide them any financing on better terms than those offered by the Lender. The Lender will be afforded with first priority lien on all Unencumbered Collateral and junior lien on all junior Lien Collateral as security and superpriority administrative expense claim with priority over any and all administrative expenses of the kind specified in Sections 503(b) and 507(b), as priority. The Debtors will pay the Lender: i) an arrangement fee of $150,000; ii) Unused Line Fee 1% per annum; and iii) Expense Reimbursement up to a maximum of $250,000. Given the Debtors' current financial condition, the Debtors are unable to sustain their operations with the use of cash otherwise available and that a working capital facility needed in these cases could not have been obtained on an unsecured basis. Because of the Debtors' immediate need for cash, the need to maintain confidentiality and the impracticability of pursuing numerous prospective lenders, the Debtors have selected the Lender's proposal, as having the best terms of financing received by the Debtors. The Debtors contend that they seriously need immediate access to a working capital facility. The Debtors' current operations cannot provide them with the cash flow necessary to meet the substantial day-to-day operating costs associates with maintaining a large fiber optic network. Access to sufficient cash is therefore critical to the Debtors' survival. In the absence of immediate access to cash and credit, the Debtors will be unable to meet the needs of their current customers. It is highly likely that cancellations of pending orders could follow and the Debtors' ability to maintain existing accounts could be jeopardized. The Debtors argue that that success of these cases depends on the confidence of the Debtors' suppliers and customers. If that confidence was destroyed, then so too would be the Debtors' ability to maximize the value of their estates. Touch America Holdings, Inc., headquartered in Butte, Montana, filed for chapter 11 protection on June 19, 2003 (Bankr. Del. Case No. 03-11915). Touch America, through its principal operating subsidiary, Touch America, Inc., develops, owns, and operates data transport and Internet services to commercial customers. Maureen D. Luke, 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 $631,408,000 in total assets and $554,200,000 in total debts. UNITED AIRLINES: Operating Loss Totals $155 Million in May ---------------------------------------------------------- UAL Corporation (OTC Bulletin Board: UALAQ), the holding company whose primary subsidiary is United Airlines, filed its May Monthly Operating Report with the United States Bankruptcy Court, and said that it met the requirements of its debtor-in-possession financing for the fourth straight month. As part of its DIP financing agreements, United's lenders required the company to achieve a cumulative EBITDAR (earnings before interest, taxes, depreciation, amortization and aircraft rent) loss of no more than $738 million between December 1, 2002 and May 31, 2003. The company reported a loss from operations of $155 million in May. The company also reported non-operating income of $219 million, which included $300 million that the company received from the U.S. government under the terms of the Emergency Wartime Supplemental Appropriations Act in recompense for costs due to the war in Iraq. These items resulted in net earnings of $64 million. UAL again improved its cash position for the month and reported an increase in cash of approximately $456 million for May, ending the month with a cash balance of approximately $2.2 billion, which included $659 million in restricted cash (filing entities only). UAL began May with a cash balance of approximately $1.7 billion, which included $651 million in restricted cash (filing entities only). Excluding the government assistance and approximately $45 million received from large one-time asset sales, the company's cash balance increased approximately $111 million for the month or $3.5 million per day. United's Executive Vice President and Chief Financial Officer Jake Brace said, "United is continuing to produce very good results in our efforts to reduce operating costs across the board. In May, our new collective bargaining agreements went into effect, substantially reducing salaries and labor-related costs. Combining the benefits of these new CBAs and the company's expected 15% reduction year-over-year in capacity in the quarter, the company is on track to reduce labor costs for the second quarter year- over-year by $500 million or more. There is still much work to be done and we are now focusing on finalizing a business plan and beginning the exit financing process." Brace continued, "United met its cumulative EBITDAR goal for the fourth time. In addition, we are pleased to report that our EBITDAR for the month of May itself was positive for the first time since filing for Chapter 11, even excluding the $300 million in government assistance that we received in May. The company is confident that it will also meet the cumulative EBITDAR requirements for June. On the revenue side, we continue to face a difficult economic environment, but we are seeing positive signs for our business." United's Executive Vice President - Customer, John P. Tague said, "Improving revenue is our foremost priority as we move to leverage the cost effectiveness that United is building into its business model. This includes customer-focused service improvements and carefully targeted marketing programs. For example, this month United became the first major U.S. carrier to announce the introduction of in-flight passenger e-mail access in our domestic market. We also introduced the 'Fly Three, Fly Free' advertising and marketing campaign that has resulted in a number of registered participants that has far exceeded our expectations. We are encouraged by the steady demand against rising yields that we are currently experiencing." United continued its strong operational performance. The company recorded its best May performance ever, including a departure completion rate of 99.7%, on-time departures of 77% and arrivals within 14 minutes of schedule of 86%. United operates more than 1,700 flights a day on a route network that spans the globe. News releases and other information about United may be found at the company's website at www.united.com . UNITED AIRLINES: L.A. Airport Demands $1.3MM Stub Rent Payment -------------------------------------------------------------- The City of Los Angeles, Department of Airports, asks Judge Wedoff to compel United Airlines to pay "stub" rent for the period December 9, 2002 through December 31, 2002. For many years, Los Angeles has provided United with landing privileges, cargo facilities, maintenance facilities and passenger terminal facilities at the Los Angeles International Airport and Ontario International Airport. On the Petition Date, United and Los Angeles were parties to nine unexpired non-residential real property leases. The Debtors rejected the Leases at LAX and ONT. Rockard J. DelGadillo, Esq., City Attorney for Los Angeles, reports that the Debtors owe $1,373,255 for postpetition use and occupancy of the Leases for the stub rent period. (United Airlines Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 609/392-0900) UNOVA INC: Reaches Settlement of Patent Dispute with Fujitsu ------------------------------------------------------------ UNOVA, Inc. (NYSE:UNA) announced a settlement of a patent dispute with Fujitsu Limited and Fujitsu PC Corporation regarding UNOVA's smart battery management technology. Terms of the agreement and financial terms of the settlement are confidential. "In the last four years, seven of the world's leading computer companies have recognized the legitimacy of our patent position in the field of smart battery management and taken a license for our intellectual property," said Daniel S. Bishop, Senior Vice President and General Counsel of UNOVA. "We continue to be encouraged by the ongoing strength of our intellectual property licensing program." Smart battery management describes UNOVA's patented technology in which a portable computer incorporates a rechargeable battery that uses a processor to communicate data to the portable computer so that the computer can monitor and regulate battery use. The technology is estimated to extend useful battery life by 30 to 40 percent and is widely used in portable computing devices. UNOVA's Intermec Technologies division is a leader in global supply chain solutions and in the development, manufacture and integration of wired and wireless automated data collection, Intellitag(R) RFID (radio frequency identification) and mobile computing systems. The company's products and services are used by customers in many industries to improve productivity, quality and responsiveness of business operations, from supply chain management and enterprise resource planning to field sales and service. According to the May 2002 Patent Scorecard, published by Technology Review magazine, an MIT Enterprise, UNOVA is among the Top 30 global computer companies in terms of the relative strength and technological impact of its patents. * * * As previously reported in Troubled Company Reporter, Fitch Ratings affirmed the rating on UNOVA Inc.'s senior notes at 'CCC', and changed the Rating Outlook to Stable from Negative. The change in the rating outlook reflects UNA's success in bringing down debt levels through one-time events and intellectual property settlements, and in reducing costs. UNA's covenants have been amended to provide more room and its free cash flows have improved. It also considers the company's uncertainty in generating cash flows through its core businesses. U.S. ENERGY: Receives $1.9 Million from Carrizo Oil Subsidiary -------------------------------------------------------------- U.S. Energy Corp. (Nasdaq: USEG) and Crested Corp. (OTC Bulletin Board: CBAG), announced today that their Rocky Mountain Gas, Inc. subsidiary received a lump sum payment of approximately $1.9 million from CCBM, Inc., a subsidiary of Carrizo Oil & Gas, Inc. (Nasdaq: CRZO). The payment is part of the settlement of a note owed by CCBM to RMG pursuant to the definitive agreement between the parties entered into in July 2001, and allowed CCBM to contribute its proportionate share of certain properties to the recently announced Pinnacle Gas Resources, Inc. transaction. CCBM still owes RMG additional monies and is subject to a drilling commitment to complete the original agreement with RMG. The remaining properties in the original agreement include the Oyster Ridge (approximately 65,000 gross acres) and Castle Rock (approximately 125,000 gross acres) properties. "We are pleased that our partners at Carrizo have purchased and contributed their assets to the Pinnacle transaction," commented Keith Larsen, President of U.S. Energy Corp. "Since our partnership began two years ago, the professional team at Carrizo has and continues to be a great asset in our joint efforts to develop our projects. With the recently completed Pinnacle transaction, the Letter of Intent signed on the sale of the Ticaboo properties, and this cash infusion, management continues to focus the Companies' efforts on natural gas exploration and production in the coalbed methane basins of the Rocky Mountains. As can be seen by the recent comments of Alan Greenspan and Energy Secretary Spencer Abraham, the general public is being made aware of the country's appetite for natural gas and the current supply- demand imbalance. To that end, our Companies are diligently working to provide natural gas to the marketplace and provide solutions to this energy problem," concluded Mr. Larsen. U.S. Energy and its majority owned subsidiary, Crested Corp., are engaged in joint business operations as USECC, and through their subsidiary Rocky Mountain Gas, Inc., own interests in over 320,000 gross acres prospective for coalbed methane in the Powder River Basin of Wyoming and Montana and acreage adjacent to the Greater Green River Basin in southwest Wyoming. Certain properties are subject to a definitive agreement with a division of Carrizo Oil & Gas, Inc. of Houston, TX to develop and expand RMG's CBM properties dated July 10, 2001. USECC owns control of Sutter Gold Mining Company, which owns gold properties in California. USECC also owns various interests in uranium properties in Wyoming and Utah. As previously reported, Grant Thornton LLP of Denver, Colorado has included a "going concern" qualification in its July 18, 2002, Auditors Report on the financial condition of U. S. Energy. "[T]he Company has experienced recurring losses from operations and has a substantial accumulated deficit. These factors raise substantial doubt about the ability of the Company to continue as a going concern," Grant Thornton says. WEIRTON STEEL: Alliance Wants Relief from Utility Injunction ------------------------------------------------------------ Landers P. Bonenberger, Esq., at McDermott & Bonenberger, in Wheeling, West Virginia, relates that Weirton Steel Corporation and Alliance Energy Services, Inc. are parties to a contract known as a Gas Sale and Transportation Contract dated October 4, 2001. Alliance is a commodity broker/dealer that purchases natural gas from a number of unaffiliated parties, which it then resells to the Debtor. Significantly, Alliance must first purchase, out of pocket, any gas that it sells to an end-user. The Gas Sale and Transportation Contract was amended by the parties effective March 14, 2002, to require the Debtor to make prepayments for each natural gas delivery to be made. Under this amendment, Alliance is not obligated to make a delivery in the event that the Debtor does not make the required prepayment. The Debtor has prepaid for all deliveries through May 31, 2003. In this connection, Mr. Bonenberger notes that the Court issued a May 21, 2003 Order, which prohibits utility companies from discontinuing, altering or refusing service to the Debtor for the Debtor's failure to pay any prepetition charges. The Order also appears, at least temporarily, to prohibit the Utility Companies from discontinuing service where the Debtor and the Utility Companies disagree regarding the provision of adequate assurance of payment, in the form of a deposit or other security, for services provided after the Petition Date. Although Alliance is not a utility, but rather a commodities broker/dealer, it is concerned that it might be deemed a utility under the Order and therefore be required to comply with the Order. If, in fact, Alliance is found to be one of the Utility Companies covered by the Order, then the Debtor would be entitled to receive natural gas from Alliance without prepaying for each delivery as provided in the Contract. Mr. Bonenberger asserts that the financial consequences of this finding would be severe for Alliance. At present, Alliance provides the Debtor with more than $300,000 of natural gas per day. While the Debtor has largely paid Alliance for the natural gas, this prepayment for most of the natural gas deliveries only lasts through May 31, 2003. If Alliance is found to be a utility within the coverage of the Order, then starting June 1, 2003, notwithstanding the Debtor's failure to prepay as per the terms of the Contract, Alliance could be required to expend more than $300,000 per day of its own funds to supply the Debtor with natural gas. This exposes Alliance to an unwarranted forced credit risk, and it also requires Alliance to fund from its own capital the purchase of the natural gas, while awaiting later payment from the Debtor. Thus, Alliance asks Judge Friend to find that it is not a "utility" within the meaning and scope of Section 366 of the Bankruptcy Code and is therefore not bound by the May 21, 2003 Court Order restraining utilities from discontinuing, altering or refusing service. Alliance also asks the Court to order that it need not continue to supply the Debtor with natural gas should the Debtor fail to comply with the terms of the Amended Gas Sale and Transportation Contract. (Weirton Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) WELLMAN INC: Completes $126M Equity Investment & $275M Revolver --------------------------------------------------------------- Wellman, Inc. (NYSE: WLM) has completed the sale of $126 million of perpetual convertible preferred stock and warrants to Warburg Pincus, the global private equity firm, and entered into a new three-year, $275 million revolving credit facility. This transaction included the conversion of the previously issued $20 million convertible subordinated note plus accrued interest into preferred stock. The warrants, half of which were previously issued with the convertible subordinated note, enable Warburg Pincus to purchase 2.5 million shares of Wellman common stock at an exercise price of $11.25 per share. In addition, David Barr, a Warburg Pincus partner, was named a director of Wellman, Inc., increasing the size of Wellman's Board of Directors to ten members. Wellman's shareholders approved the sale of the preferred stock in a Special Meeting of Shareholders held last week, with approximately 80% of the outstanding shares represented at the meeting and 81% of the shares represented voted in favor of the proposals. As a result of this investment, Warburg Pincus will have approximately 26% of the ownership of Wellman on an as converted basis. Proceeds from the transaction will be used primarily to pay down existing debt. J.P. Morgan Securities, Inc. was lead advisor and Fleet Securities, Inc. and Bear, Stearns & Co. were co-advisors on the equity transaction. Tom Duff, Wellman's Chairman and Chief Executive Officer, said, "The strong show of support for this transaction by Wellman's shareholders reaffirms our view that this investment substantially improves our financial flexibility and allows us to build upon our strong competitive positions in the PET resin and polyester fiber businesses. We couldn't be more delighted to move forward with our strategy with a premier private equity firm like Warburg Pincus as our financial partner." Mr. Barr, a Warburg Pincus Managing Director, said, "We are pleased to consummate this substantial investment in Wellman. We look forward to working with management and the Board to enhance shareholder value." The bank facility is a three-year, $275 million revolving credit facility. J.P. Morgan was syndication agent, Fleet National Bank will serve as Administrative Agent and Deutsche Bank, National City Bank and Bank of Nova Scotia will serve as co-documentation agents for the facility. "Our facility was positively received in the bank market, so we increased the size of the facility to $275 million, which is $100 million more than what was required to complete the private equity transaction," said Keith Phillips, Wellman's Chief Financial Officer. "After the issuance of the preferred stock and the closing of our Revolving Credit facility, we have a strong financial position and significant liquidity. " Wellman, Inc. manufactures and markets high-quality polyester products, including PermaClear(R) and EcoClear(R) brand PET (polyethylene terephthalate) packaging resins and Fortrel(R) brand polyester fibers. The world's largest PET plastic recycler, Wellman utilizes a significant amount of recycled raw materials in its manufacturing operations. Warburg Pincus LLC has been a leading private equity investor since 1971. The firm currently has approximately $8 billion under management and $6 billion available for investment globally in a range of sectors including chemicals and industrials, energy and natural resources, financial services and technologies, healthcare and life sciences, information and communications technology, media and business services and real estate. As reported in Troubled Company Reporter's February 19, 2003 edition, Standard & Poor's Ratings Services revised its outlook on Wellman Inc., to stable from negative following the company's announcement of a $125 million private equity investment from Warburg Pincus. At the same time, Standard & Poor's affirmed its 'BB+' corporate credit and preliminary senior unsecured debt ratings on the company. Wellman, based in Shrewsbury, New Jersey, is a producer of polyester staple fibers and polyethylene terephthalate resins and has about $235 million of reported debt outstanding. WINFIELD CAPITAL: Reports $6MM Net Loss for Year Ended March 31 --------------------------------------------------------------- Winfield Capital Corp. (WCAP:OTCBB) announced a net loss of $5,994,571 for the fiscal year ended March 31, 2003 versus a net loss of $14,367,075 for the fiscal year ended March 31, 2002. The net loss in fiscal year 2003 included a net investment loss of $3,356,288 for the fiscal year ended March 31, 2003 compared with a net investment loss of $2,584,282 for the fiscal year ended March 31, 2002. It also included an unrealized depreciation on loans and investments of $2,654,690 (or $2,692,012 excluding an unrealized appreciation on short-term marketable securities) for the year ended March 31, 2003 (principally reflecting the decreased market price of investments in nine publicly traded portfolio companies partially offset by the increased market price of one publicly traded portfolio company and the decreased fair value of investments in five privately held portfolio companies partially offset by the increased fair value of investments in five privately held portfolio companies compared with an unrealized depreciation on loans and investments of $8,492,858 (or $8,395,076 excluding an unrealized depreciation on short-term marketable securities) for the year ended March 31, 2002. Partially offsetting the net loss was a realized capital gain for the year ended March 31, 2003 of $16,407 which reflected a long- term capital gain on an equity security of $208,287, a short-term capital gain on an equity security of $50,680 partially offset by a write-off of $182,001 on a debt security, long-term net capital losses on assets acquired in liquidation of $45,168 and short-term losses on the repositioning of temporarily invested funds of $15,391 compared with a realized net loss of $3,289,935 for the year ended March 31, 2002. The Company's investment income decreased by $327,507 or a decrease of 30.9%, from $1,057,404 for the year ended March 31, 2002 to $729,897 for the year ended March 31, 2003. This reflected principally a $620,128 decrease in interest from temporarily invested funds as a result of a decrease in the idle funds that were being invested along with a decrease in interest rates, which was partially offset by a $294,737 increase in interest from small business concerns as a result of the Company's increased level of investment activity. Operating expenses increased from $1,731,292 for the year ended March 31, 2002 to $2,207,702 for the year ended March 31, 2003 due primarily to the acceleration of the maturity of the U.S. Small Business Administration debentures which resulted in fully expensing the related debenture fees of $496,214 and an insurance expense increase of $35,421 due primarily to the increased Directors and Officers insurance renewal premium. Partially offsetting these increases were decreases in payroll and payroll-related expenses of $52,678 due primarily to the resignation of an executive officer effective December 31, 2002 and other operating costs that netted to $2,547. According to the SBA Regulations, the Company is required to be in compliance with the capital impairment rules, as defined by regulation 107.1830 of the SBA Regulations. The Company has been notified by the SBA that the Company is no longer in compliance with the SBA's capital impairment requirements and that the SBA has accelerated the maturity date of Winfield Capital's debentures. The aggregate principal, interest and fees due under the debentures totaled approximately $25.6 million as of April 30, 2003, including interest and fees due through the next semi-annual payment date. The SBA has transferred Winfield Capital's account to liquidation status where any new investments and material expenses are subject to prior SBA approval. Although it has not done so as of the date of this press release filing, and may not do so, the SBA has the right to institute proceedings for the appointment of the SBA or its designee as receiver. If the SBA were to require the Company to immediately pay back the entire indebtedness including accrued interest, certain private security investments may need to be disposed of in a forced sale which may result in proceeds less than their carrying value at March 31, 2003. As such, this impairment could have a material adverse effect on the Company's financial position, results of operations and cash flows which raises substantial doubt about the Company's ability to continue as a going concern. Management has submitted a plan to the SBA providing for the liquidation of the Company over a three-year period; however, to date, the SBA has not indicated whether it will approve of the proposed plan. The Company continues to explore various strategic alternatives, including a third party equity infusion, although there can be no assurance that it will be successful in its ability to consummate or implement these or any other strategic alternatives. Winfield Capital is a small business investment company that makes loans and equity investments pursuant to funding programs sponsored by the SBA and is a non-diversified, closed-end investment company that is a business development company under the Investment Company Act of 1940. The Company's common stock is traded on the Over the Counter Bulletin Board ("OTCBB") under the symbol "WCAP". For more information, visit Winfield Capital's Web site at: http://www.winfieldcapital.com/ WINSTAR: Ch. 7 Trustee Asks Court to Clear Stratex Settlement ------------------------------------------------------------- Sheldon K. Rennie, Esq., at Fox Rothschild O'Brien & Frankel LLP, in Wilmington, Delaware, recounts that on April 15, 2003, Winstar Communications' Chapter 7 Trustee commenced an adversary proceeding against Stratex Networks, formerly known as Digital Microwave Corporation, to avoid and recover transfers pursuant to Sections 547 and 550 of the Bankruptcy Code. After settlement discussions with Digital, the Trustee signed a Settlement Agreement with Digital on June 5, 2003. The Trustee's complaint against Digital asserted a $9,821,910.30 gross preference amount. Digital provided strong evidence of statutory new value, as well as payments made in the ordinary course of business. To avoid litigation costs and delay, the Trustee has agreed to accept $2,083,874.00 in full and final settlement of all claims and the parties will exchange mutual releases. Accordingly, the Trustee asks the Court to approve the Settlement Agreement with Stratex. (Winstar Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM INC: Court Fixes May 28 as Record Date for Plan Voting --------------------------------------------------------------- U.S. Bankruptcy Court Judge Gonzalez establishes May 28, 2003 as the record date for determining which Worldcom Inc. creditors are entitled to vote on the Plan. All Ballots and Master Ballots must be properly executed, completed, and the original thereof shall be delivered to the Debtors' solicitation and tabulation agent so as to be actually received by Debtors' solicitation and tabulation agent no later than 4:00 p.m. (Eastern Time) on August 12, 2003. If any claimant seeks to challenge the allowance of its claim for voting purposes, Judge Gonzalez directs the claimant to serve on the Debtors and file with the Court on or before July 22, 2003 a motion for an order pursuant to Bankruptcy Rule 3018(a) temporarily allowing the claim in a different amount for purposes of voting to accept or reject the Plan. The Court will consider all 3018 Motions at a hearing on August 7, 2003 at 10:00 a.m. (Eastern Time) or as soon thereafter as counsel may be heard. (Worldcom Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) W.R. GRACE: Summit Wants Prompt Decision on Land Option Pact ------------------------------------------------------------ Debtors W. R. Grace & Co., Gloucester New Communities Co., Inc., and Summit Ventures LLC, ask Judge Fitzgerald to order GNCC to immediately assume an Option Agreement and related Tri-Party Agreements. Before 1996, William M. Kelleher, Esq., at Ballard Spahr Andrews & Ingersoll LLP, in Wilmington, Delaware, relates, GNCC acquired ownership of 1,680 acres of undeveloped land located in Woolwich Township in Gloucester County, New Jersey. Summit Ventures, a limited liability company based in New Jersey, was organized for the purpose of acquiring the land from GNCC, obtaining development approvals for the land, performing improvements on the land, and selling the land to home builders, commercial developers, and other end users. The project was intended to span a period of nearly 20 years and result in the creation of new residential communities containing thousands of homes, commercial properties, schools, a municipal complex, a park, and related infrastructure. The Option Agreement GNCC, as seller, and Summit, as purchaser, signed an Option and Sale Agreement for Land dated August 7, 1996. Under this agreement, Summit has the exclusive option of purchasing the land during the term of the option period, which began on August 7, 1996, and ends on December 31, 2015, unless terminated sooner under the terms of the Option Agreement. Summit obtained a General Development Plan approval from the Planning Board of the Township of Woolwich contemplating, in concept, the development of 4,500 residential units on the land, together with 200,000 square feet of commercial space, in addition to required open space for schools to serve the developed communities. Under the Option Agreement, Summit may acquire the land only for purposes of the purchase and re-sale of the land to builders and third-party purchasers. Under the Option Agreement, Summit is obligated to pay to GNCC a $5,000,000 base price for the land, which is to be divided among the residential units and commercial acreage as set out in the Option Agreement. In addition, Summit is obligated to pay to GNCC a percentage of its net profits from the resale of the land, pay 50% of its net profits until GNCC has received $5,000,000 on account of sales, and 33-1/3% of net profits after that. Summit has already paid GNCC $5,843,500 and reimbursed $201,630 in expenses under the Option Agreement. The Tri-Party Agreements To facilitate the development of the Land and the purchase and resale of lots, Summit has negotiated agreements with utility providers and made applications to governmental authorities for development and utility services. In that connection, certain Tri-Party Agreements have been entered into by GNCC, Summit and various third parties in furtherance of the development scheme for the land. Those Tri-Party Agreements include a Service Agreement dated as of May 8, 1998, among Summit, GNCC and Consumers New Jersey Water Company, by which sewer and water service is to be provided to the land and units developed on the Land. Summit has closed on Land for 1,935 residential units from GNCC pursuant to the Option Agreement, together with some commercial space. In connection with these acquisitions, Summit has obtained all the necessary approvals and has arranged for the installation and construction of all infrastructure necessary for development of these properties. A substantial portion of the properties has been acquired since the Petition Date. Summit has determined that it must file this motion to compel the Debtor to assume the Option Agreement because it is now critical that Summit receive prompt assurance that the Option Agreement will be assumed by GNCC within the context of its Chapter 11 case. Critical New Development Assumption of the Option Agreement is critical at this time because Summit will be now required to expend substantial additional funds for engineering and infrastructure in connection with the further development of the Land, and such expenditures must be made before purchasing and taking title to all the acreage required to benefit from the expenditures. Summit cannot expend those funds without certainty that GNCC is contractually bound by the terms and conditions of the Option Agreement as development moves forward into a critical stage, which will require significant additional funding. In particular, the additional expenditures by Summit which are now required in regard to the further development of the Land under the Option Agreement include: (a) the design, approval and construction of a sewer trunk main of approximately two miles in length from the land to the wastewater treatment center operated by Logan Township Municipal Utilities Authority and a sewer pump station. These expenditures alone will amount to approximately $4,000,000. No further resale or development of the land is possible until this expenditure is made; (b) the pre-purchase of sewer connections to the LTMUA plant at a cost of approximately $2,137,000. The LTMUA will utilize these funds to expand the sewer plant to increase its capacity to 2,000,000 gallons per day so that it can treat the effluent expected from the new development. No further resales or development of the land will be possible until this expenditure is made; (c) the design, approval and installation of new drainage facilities and water lines; (d) the installation of widened roads and intersection improvements at an additional estimated cost of $660,000; and (e) the engineering and design for further municipal and other land use approvals at an approximate cost in excess of $1,000,000. Even the additional sewer capacity will not be sufficient to serve all of the Land. Summit is party to a contract to construct a further expansion of the LTMUA sewerage treatment plant to fully service the remainder of the Project. The cost of that construction would be approximately $6,000,000. Substantial engineering costs would be incurred in planning for such an expansion. Further land purchases will require Summit to address additional problems associated with development, like the resolution of the need for vibration and sound barriers to protect and isolate the land from the negative impact of an adjacent industrial facility. Accordingly, Summit is not able to responsibly undertake these substantial expenditures, which will benefit both GNCC and Summit as parties to the Option Agreement and the related Tri-Party Agreements unless and until GNCC assumes the Option Agreement pursuant to the Bankruptcy Code. GNCC and Summit have continued to function under the Option Agreement in the ordinary course of business during the pendency of this Chapter 11 case such that the Option Agreement may be assumed by the Debtor at this time without any additional cost to or burden on GNCC. Summit acknowledges that GNCC has provided adequate assurance of future performance under the Option Agreement and is not in default under its terms. (W.R. Grace Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 609/392-0900) * Ernst & Young Merges with Synergy Partners in Canada ------------------------------------------------------ Two of Alberta's leading corporate finance firms have combined to create the largest mid-market organization of its kind in Western Canada. The corporate finance arm of professional services firm Ernst & Young, and Synergy Partners, an independent business sale advisory firm, officially announced the deal Friday. The combined firms will operate within Ernst & Young's Transaction Advisory Services group. In a market challenged by business failures, greater regulatory requirements and corporate governance scrutiny, 2002 was the weakest year for mergers and acquisitions activity in the last decade. But, Barry Munro, the practice leader for Ernst & Young Corporate Finance in Alberta, says the merger makes sense despite those challenges. "We think the market challenges present us with the opportunity to dominate the Alberta marketplace," says Mr. Munro. "Through this merger we've confirmed our strategic view - here in Alberta and elsewhere - that corporate finance transactions will continue to be critical to the survival and growth of companies. The corporate finance market in this province is fundamentally strong," he says. "We're committed to assisting our clients with their transaction services requirements as they build their businesses in an environment that requires strategic thinking, thorough analysis, realistic and objective assessments, and the courage to act." The combination of the two firms makes Ernst & Young Corporate Finance the largest mid-market M&A firm in Alberta. Tailored to serve the Alberta market, the firm has extensive and specialized capabilities in oil and gas, power, oilfield services, and business succession. "These are the market segments that are particularly critical to Alberta business and we are now positioned to lead," says Mr. Munro. Complementing the M&A expertise are the additional capabilities of financing, business valuation, litigation support, restructuring, M&A tax, and transaction support. "The market has been demanding a focus on transactional services," says Mr. Munro. "This merger is another step in meeting that demand. Our focus will be on adding strategic and financial value for our clients, and offering the international reach of Ernst & Young as we deliver the full range of services," he says. In Alberta, Ernst & Young's Transaction Advisory Services group of 33 professionals has a strong presence in Calgary and Edmonton, and joins the other 230 Ernst & Young transaction professionals across Canada. Ernst & Young Corporate Finance Inc. is Canada's largest financial advisory business focused on the mid-market. We have more than 25 years of experience providing transaction advisory services and more than 270 professionals in nine cities, specializing in specific industry sub-sectors. Our clients benefit from our multidisciplinary team approach, which seamlessly integrates Ernst & Young's M&A, Financing, Business Valuation, Litigation Support, Restructuring, M&A Tax and Transaction Support practices to ensure that every aspect of a transaction is effectively managed. Synergy Partners is Western Canada's leading business sale advisory firm. The firm specializes in planning, evaluating and executing on the sale of mid- market companies. The firm's proven track record, experience and methodology allows customers to take the guesswork out of selling their business, and combines effective and professional merger and acquisition skills with a wealth of real-world experience. Ernst & Young, a global leader in professional services, is committed to restoring the public's trust in professional services firms and in the quality of financial reporting. Its 106,000 people in more than 140 countries around the globe pursue the highest levels of integrity, quality, and professionalism to provide clients with solutions based on financial, transactional, and risk- management knowledge in Ernst & Young's core services of audit, tax, and corporate finance. Ernst & Young practices also provide legal services in those parts of the world where permitted. Further information about Ernst & Young and its approach to a variety of business issues can be found at http://www.ey.com/perspectives Ernst & Young refers to all the members of the global Ernst & Young organization. * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Advisory Board ABCO (16) 48 (20) Alliance Imaging AIQ (39) 683 43 Akamai Technologies AKAM (168) 230 60 Alaris Medical AMI (32) 586 173 Amazon.com AMZN (1,353) 1,990 550 Aphton Corp APHT (11) 16 (5) Arbitron Inc. ARB (100) 156 (2) Alliance Resource ARLP (46) 288 (16) Atari Inc. ATAR (115) 242 52 Actuant Corp ATU (44) 295 18 Avon Products AVP (91) 3,327 73 Saul Centers Inc. BFS (13) 389 N.A. Blount International BLT (369) 428 91 Cincinnati Bell CBB (2,104) 1,467 (327) Cubist Pharmaceuticals CBST (7) 221 131 Choice Hotels CHH (114) 314 (37) Columbia Laboratories COB (8) 13 5 Campbell Soup Co. CPB (114) 5,721 (1,479) Centennial Comm CYCL (470) 1,607 (95) Echostar Comm DISH (1,206) 6,260 1,674 D&B Corp DNB (19) 1,528 (104) W.R. Grace & Co. GRA (222) 2,688 587 Graftech International GTI (351) 859 108 Hollywood Casino HWD (92) 553 89 Imax Corporation IMAX (104) 243 31 Imclone Systems IMCL (186) 484 139 Gartner Inc. IT (29) 827 1 Jostens JOSEA (512) 327 (71) Journal Register JRC (4) 702 (20) KCS Energy KCS (30) 268 (16) Kos Pharmaceuticals KOSP (75) 69 (55) Level 3 Comm Inc. LVLT (240) 8,963 581 Memberworks Inc. MBRS (21) 281 (100) Moody's Corp. MCO (327) 630 (190) McDermott International MDR (417) 1,278 154 McMoRan Exploration MMR (31) 72 5 MicroStrategy MSTR (34) 80 7 Northwest Airlines NWAC (1,483) 13,289 (762) Petco Animal PETC (11) 555 113 Primedia Inc. PRM (559) 1,835 (248) Primus Telecomm PRTL (168) 724 65 Per-Se Tech Inc. PSTI (39) 209 32 Qwest Communications Q (1,094) 31,228 (1,167) Rite Aid Corp RAD (93) 6,133 1,676 Revlon Inc REV (1,640) 939 (44) Ribapharm Inc RNA (363) 199 92 Sepracor Inc SEPR (392) 727 413 St. John Knits Int'l SJKI (76) 236 86 I-Stat Corporation STAT 0 64 33 Town and Country Trust TCT (2) 504 N.A. Tenneco Automotive TEN (75) 2,504 (50) TiVo Inc. TIVO (25) 82 1 Triton PCS Holdings TPC (36) 1,617 172 UnitedGlobalCom UCOMA (3,040) 5,931 (6,287) United Defense I UDI (30) 1,454 (27) UST Inc. UST (47) 2,765 829 Valassis Comm. VCI (33) 386 80 Valence Technology VLNC (16) 30 3 Ventas Inc. VTR (54) 895 N.A. Warnaco Group WRNC (1,856) 948 471 Western Wireless WWCA (464) 2,399 (120) Xoma Ltd. XOMA (11) 72 30 ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***