/raid1/www/Hosts/bankrupt/TCR_Public/030723.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Wednesday, July 23, 2003, Vol. 7, No. 144
Headlines
360NETWORKS: Committee Sues Cisco Systems to Recover $1.7 Mill.
ADVANCED MEDICAL: $177MM of 9-1/4% Senior Sub. Notes Tendered
AIR CANADA: Reaches ILFC Aircraft Lease Restructuring Agreement
AIR CANADA: Pionairs & ASPBA Want to Represent Inactive Retirees
AIRGAS INC: Inks Strategic Account Supply Pact with Goodrich
ALGIERS RESOURCES: Signs-Up Bagell Josephs as New Accountants
ALL STAR: More Debtor Affiliates & List of Unsecured Creditors
AMERCO: Court Appoints Trumbull as Claims & Noticing Agent
AMES DEPARTMENT: Brings-In Storch Amini as Special Counsel
ANC RENTAL: Secures Nod for Master Lease Pacts with Lessor SPEs
ARMSTRONG: AWI Wants to Assume Amended Dow Chemical Contract
ARVINMERITOR: Fiscal Q3 2003 Results Show Decline in Earnings
ATLANTIC COAST: Will Publish Second Quarter Results on July 30
BAYOU STEEL: Signs-Up Hilco Appraisal as Valuation Experts
B/E AEROSPACE: Second Quarter 2003 Net Loss Balloons $14 Million
BETHLEHEM STEEL: First Creditors' Meeting Scheduled for Nov. 19
BETTER MINERALS: Completes Sale of Better Materials for $158MM
BURLINGTON IND.: Mohawk Industries Wants to Acquire Lees Carpet
BURLINGTON INDUSTRIES: Receives Several Asset Acquisition Offers
BURLINGTON INDUSTRIES: Selling Aircraft to Wings for $7.8 Mill.
CANDLEWOOD HOTEL: Completes $65-Mill. Sale-Leaseback Transaction
CHARLES J. MILLER: Wants Nod to Use Lenders' Cash Collateral
CHART INDUSTRIES: Asks Court to Fix Aug. 22 Confirmation Hearing
CINTECH SOLUTIONS: Toronto Stock Exchange to Suspend Trading
CLAYTON HOMES: Hires Bear Stearns to Evaluate Potential Offers
CORNING INC: Posts Q2 $22 Million Net Loss on $752 Million Sales
COVANTA ENERGY: Sues Allied Aviation for Breach of Contract
DIVINE INC: Pulls Plug on KMPG LLP Engagement as Auditor
DOMAN INDUSTRIES: Canadian Extends CCAA Stay Until September 22
EL PASO CORP: Will Publish Second Quarter 2003 Results on Aug 13
EL PASO CORP: Options Start Trading on Pacific Exchange
EMMIS COMMS: May 2003 Quarter Results Enter Positive Territory
ENRON: Reaches Settlement with Marlin Water Trust Noteholders
ENRON CORP: Provides Summary and Overview of Chapter 11 Plan
EXIDE: Court Okays Payment of Exit Financing Due Diligence Fees
EXODUS COMMS: Millennium Tech. Acquires More Equity in Aventail
FLEETWOOD: Intends Vigorously Assert Claims in Coleman Lawsuit
HARBISON-WALKER: Seeks Stay Extension Until September 30, 2003
HASBRO INC: Second Quarter 2003 Results Reflect Strong Growth
HEXCEL CORP: June 30 Net Capital Deficit Narrows to $91 Million
I2 TECHNOLOGIES: March 31 Net Capital Deficit Narrows to $260MM
I2 TECHNOLOGIES: Completes Re-Audits and Files SEC Form 10-K
IMCLONE SYSTEMS: Harlan W. Waksal Resigns as CSO and Director
IMPERIAL PLASTECH: Secures Court Protection Under Section 304
INTEGRATED HEALTH: Resolves Sysco Corp.'s $5.8MM Unsecured Claim
LEAP WIRELESS: Committee Signs-Up Kramer Levin as Co-Counsel
LEARNING LIBRARY: Secures Working Capital Loan from Lowenstein
LIQUIDIX INC: Sellers & Andersen Expresses Going Concern Doubt
LNR PROPERTY: JV Venture with Lennar to Acquire Newhall Land
MEGO FINANCIAL: Will Liquidate All Assets in 6 or 8 Months
MIRANT: Fitch Says Company May Less Likely Reject PEPCO Contract
MOLECULAR DIAGNOSTICS: Files 2002 Annual Report on Form 10-K
NATIONAL STEEL: Resolves St. Paul & Marine $49.8MM Admin. Claim
NEXIA HOLDINGS: Liquidity Concerns Raise Going Concern Doubt
NORSKE SKOG: Extends Exchange Offer for 8-5/8% Notes to July 31
OWENS CORNING: Court Okays Disallowance of $40MM Disputed Claims
OWENS & MINOR: Board Approves Third Quarter 2003 Cash Dividend
PACIFIC GAS: Earns Approval to Deposit $3.7 Mill. with Bank One
PANGEO PHARMA: Accepts Jamieson Labs.' Offer to Acquire Assets
PORT WEST: Taps Keen Realty & CB Richard to Sell Certain Assets
QUAIL PIPING: Selling Assets to J-M Acquisition for $6 million
QWEST COMMS: Inks Pact with DIRECTV to Offer Satellite Services
RIBAPHARM: ICN Amends and Extends Tender Offer for Co.'s Shares
SAFETY-KLEEN CORP: Assuming Amended CIT Transportation Lease
SAGENT: Special Stockholders Meeting Adjourned Until July 28
SEITEL INC: Case Summary & 25 Largest Unsecured Creditors
SELECT MEDICAL: Prepares to Offer $175 Million Senior Sub. Notes
SPIEGEL GROUP: Brings-In Sachnoff & Weaves as Insurance Counsel
STEEL DYNAMICS: Reports Weaker Second Quarter Ops. Performance
SUMMIT NATIONAL: Asks Court to Dismiss of Chapter 11 Proceeding
SYSTECH RETAIL: Wants August 21 Administrative Bar Date Fixed
TECO ENERGY: Completes Final 2 Units at Gila River Power Station
TERAYON COMMS: Will Publish Second Quarter Results on July 30
TROPICAL SPORTSWEAR: Defaults on BofA $7 Mill. Real Estate Loan
UNITED AIRLINES: Committee Wants to Hire Cognizant as Consultant
WABASH NAT'L: Wins $120-Million Order Contract with U.S.Xpress
WEIRTON STEEL: Lease Decision Time Extension Hearing on August 4
WESTERN WIRELESS: Redeeming All 10.50% Senior Subordinated Notes
WESTPOINT STEVENS: Wants Lease Decision Time Extended to Dec. 1
WINSTAR: Chapter 7 Trustee Sues Winstar Holding to Recoup $3.3MM
WORLD WIRELESS: Hires Barnett & Maxwell as Independent Auditors
WORLDCOM INC: Wants Blessing to Assume Amended New York Lease
WORKFLOW MANAGEMENT: Lenders Agree to Forbear Until July 31
W.R. GRACE: Has Until Jan. 31, 2004 to Move Actions to Delaware
* Fitch Expresses Concern about Risks for Airport Bondholders
* Meetings, Conferences and Seminars
*********
360NETWORKS: Committee Sues Cisco Systems to Recover $1.7 Mill.
---------------------------------------------------------------
Peter D. Morgenstern, Esq., at Bragar Wexler Eagel & Morgenstern
LLP, in New York, relates that on or within 90 days prior to the
Petition Date, 360networks (USA) inc. made preferential transfers
to or for the benefit of Cisco Systems, Inc. totaling at least
$1,733,122 in equipment returns.
On March 26, 2002, the Debtors demanded Cisco return the
Transfers. Cisco didn't.
Mr. Morgenstern informs Judge Gropper that:
(a) each of the Transfers was made to Cisco for or on
account of an antecedent debt the Debtors owed
before each Transfer was made;
(b) Cisco was a creditor at the time of the Transfers;
(c) the Transfers were made while 360 was insolvent; and
(d) by reason of the Transfers, Cisco was able to receive
more than it would otherwise receive if:
-- these Cases were cases under Chapter 7 of the
Bankruptcy Code;
-- the Transfers had not been made; and
-- Cisco received payment of the debts in a Chapter 7
proceeding in the manner the Bankruptcy Code
specified.
By this complaint, the Official Committee of Unsecured Creditors,
on the Debtors' behalf, seeks a Court judgment:
(a) pursuant to Section 547 of the Bankruptcy Code, declaring
that the Transfers be and are avoided;
(b) pursuant to Section 547, declaring that Cisco pay at
least $1,733,122 plus interest from the date of the
Debtors' Demand Letter as permitted by law;
(c) pursuant to Section 550, declaring that Cisco pay at
least $1,733,122 plus interest from the date of the
Demand Letter as permitted by law;
(d) pursuant to Section 502(d), providing that any and all of
Cisco's claims against the Debtors will be disallowed
until it repays in full the Transfers, plus all
applicable interest; and
(e) awarding the Committee all costs, reasonable attorneys'
fees and interest. (360 Bankruptcy News, Issue No. 52;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
ADVANCED MEDICAL: $177MM of 9-1/4% Senior Sub. Notes Tendered
-------------------------------------------------------------
Advanced Medical Optics, Inc. (NYSE:AVO) announced preliminary
results of its "Modified Dutch Auction" tender offer for up to
$115.0 million aggregate principal amount at maturity of its
outstanding 9-1/4% Senior Subordinated Notes due 2010. The Offer
commenced on June 18, 2003 and expired at 12:00 midnight on
July 18, 2003.
As of the Expiration Date, the Depositary for the Offer reported
that approximately $177.6 million aggregate principal amount at
maturity of Notes had been properly tendered by holders of Notes
(including $500,000 aggregate principal amount at maturity
tendered through notice of guaranteed delivery) at or below the
maximum offer price of $1,150 per $1,000 aggregate principal
amount at maturity of Notes. Due to the over-subscription, in
accordance with the terms of the Offer, AMO expects to purchase
(i) all Notes tendered below the purchase price and (ii) Notes
tendered at the purchase price on a pro rata basis in an amount
that will enable the Company to purchase the full $115.0 million
aggregate principal amount at maturity of Notes subject to the
Offer. AMO will pay the same purchase price for all Notes accepted
for payment in the Offer. Based on the preliminary results, AMO
expects the purchase price to be the maximum offer price of $1,150
per $1,000 aggregate principal amount at maturity of Notes and
expects the pro-ration factor to be approximately 11%. The actual
purchase price and pro-ration factor will be announced promptly
following completion of the verification process. Final
determination of the actual aggregate principal amount at maturity
of Notes to be purchased is subject to final delivery and final
confirmation. Any Notes not accepted for payment will be promptly
returned to holders.
Morgan Stanley & Co. Incorporated acted as exclusive dealer
manager, Mellon Investor Services LLC acted as information agent
and The Bank of New York acted as depositary in connection with
the Offer.
Advanced Medical Optics, Inc., is a global leader in the
development, manufacturing and marketing of ophthalmic surgical
and eye care products. The Company focuses on developing a broad
suite of innovative technologies and devices to address a wide
range of eye disorders. Products in the ophthalmic surgical line
include foldable intraocular lenses, phacoemulsification systems,
viscoelastics and related products used in cataract surgery, and
microkeratomes used in LASIK procedures for refractive error
correction. AMO owns or has the rights to such well-known
ophthalmic surgical product brands as PhacoFlex(R), Clariflex(R),
Array(R) and Sensar(R) foldable intraocular lenses, the
Sovereign(R) phacoemulsification system and the Amadeus(TM)
microkeratome. Products in the eye care line include disinfecting
solutions, daily cleaners, enzymatic cleaners and lens rewetting
drops. Among the well-known eye care product brands the Company
possesses are COMPLETE(R), COMPLETE(R) Blink-N-Clean(R),
Consept(R) F, Consept(R) 1 Step, Oxysept(R) 1 Step, Ultracare(R),
Ultrazyme(R), Total Care(R) and blink(TM). Amadeus(TM) is a
licensed product of, and a trademark of, SIS, Ltd.
Advanced Medical Optics, Inc. is based in Santa Ana, California,
and employs approximately 2,000 worldwide. The Company has
operations in about 20 countries and markets products in
approximately 60 countries. For more information, visit the
Company's Web site at http://www.amo-inc.com
As reported in Troubled Company Reporter's June 24, 2003 edition,
Fitch Ratings assigned a credit rating of 'B' to Advanced
Medical Optics Inc.'s new $125 million convertible senior
subordinated notes offering and affirmed a rating of 'BB-' to the
company's amended senior secured credit facility. The ratings
apply to approximately $250 million of bank debt and securities.
The Rating Outlook is Stable.
AIR CANADA: Reaches ILFC Aircraft Lease Restructuring Agreement
---------------------------------------------------------------
Air Canada has reached an agreement with International Lease
Finance Corporation, the airline's second largest operating
lessor, on restructured lease terms for 12 aircraft in its fleet.
The renegotiated terms apply for the lifetime of leases for nine
Airbus narrow body aircraft consisting of six A319s and three
A320s as well as one A340 and two Boeing 767-300 aircraft.
Together with the completion of other renegotiated leases, the
agreement with ILFC brings to 121 the total number of aircraft
with restructured leases.
"[Mon]day's agreement with ILFC, a world leader in aircraft
leasing and Air Canada's second largest operating lessor, confirms
their confidence in Air Canada's strategic direction and is a
major endorsement of our overall restructuring plan," said Robert
Milton, Air Canada's President and Chief Executive Officer. "With
our two largest aircraft lessors now on board, we are focused on
completing the majority of our remaining lease agreements by our
July 31st target date and moving quickly to the next phase of
restructuring."
"Air Canada has made significant progress in short order towards
restructuring and confirming its position as one of the world's
leading airline franchises," said John Plueger, President and
Chief Operating Officer of ILFC. "We are fully supportive of Air
Canada's senior management team and recognize them as industry
leaders for their progress in transforming Air Canada to compete
profitably in the new industry environment."
The detailed terms of the agreement with ILFC are confidential. As
part of the agreement, the airline will recommence payment of
aircraft rent to ILFC.
Air Canada and its financial advisors are involved in intensive
negotiations with aircraft lessors and lenders on revised aircraft
lease arrangements consistent with current rates and the Company's
restructuring plan. The Company will resume aircraft lease
payments at restructured rates as new agreements are reached.
ILFC is a leader in the leasing and remarketing of advanced
technology commercial jet aircraft to airlines around the world.
ILFC owns a portfolio valued at more than USD$30 billion,
consisting of more than 600 jet aircraft. It is a wholly owned
subsidiary of AIG, the world's leading international insurance and
financial services organization, with operations in approximately
130 countries and jurisdictions.
AIR CANADA: Pionairs & ASPBA Want to Represent Inactive Retirees
----------------------------------------------------------------
The Air Canada Pionairs was incorporated by certain Air Canada
retirees in 1979 as a non-profit corporation under the Canada
Corporations Act, for the purpose of organizing the retirees and
surviving spouses of Air Canada airlines. Pionairs also include
retirees who had formerly been members of unions and those who had
not. It presently has 9,980 members and constitute over 50% of
the retirees or surviving spouses of Air Canada and its
constituent airlines. Pionairs endeavors to promote the general
interests of all retirees and represent its members to Air Canada,
in all matters having an impact on their welfare.
The Airline Supplementary Pension and Benefit Association was more
recently formed under the leadership of Ray Lindsay to separately
represent the particular retirement benefit interests of 132
persons who retired from Management "A", Management "B" or
Executive categories. ASPBA has kept in direct contact with
Pionairs.
Both organizations are aware that notwithstanding the commonality
of interest of various unions -- whose executives take direction
from the votes of the active, employed, union members and not
those of the retirees -- there can be certain fundamental
conflicts of interest between active and non-active beneficiaries
of benefits plans in a corporate insolvency. Pionairs and ASPBA
doubt as to whether the different unions acting in concert could
represent surviving spouses who were never Air Canada employees,
non-union employees who are not Pionairs or ASPBA members, or the
estates, heirs and successors of pension plan beneficiaries.
According to Pionairs President Fraser O'Shaughnessy, the most
fundamental fact with respect to a under-funded federally-
regulated pension plan is that the funded ratio and its ability to
meet all payments is likely to be higher on a going-concern
valuation than on a wind-up valuation. Mr. O'Shaughnessy
elaborates that those who have left their employment, and rely on
their pension income, would be demonstrably better off if the
plans are continued and the funding of those plans continues, as
compared to the result which would follow if the plans were wound
up. In stark contrast is the situation of the actives. While the
same funded ratio feature applies to them, Mr. O'Shaughnessy says,
they will not have left employment and are not dependant on
pension income. They may have many years to continue to work and
thus earn further pension credits. They may also have many years
of working life over which to defer the impact of, and thus
overcome, a plan wind-up payment loss. For the non-actives, this
would constitute an immediate non-recoverable loss.
The inherent conflict, Mr. O'Shaughnessy tells the Court, is
enhanced to the extent that a debtor may propose that all, or more
than an equal share, of the burden of any pension and benefit cost
savings required should be placed on the active employees rather
than on the retirees, by amortizing the pension cost through
lengthening retirement qualification factors, reducing future
benefit rates or similar methods.
"The conflict is further enhanced insofar as the Company and the
Court seek to avoid having to transgress the Pension Benefits
Standards Act any more than is necessary in the circumstances, by
way of honoring that legislations' voiding -- under its subsection
10.1(2) -- of any plan amendment which would reduce accrued
pension benefits," Mr. O'Shaughnessy points out. In those
situations an organization representing both active and non-active
beneficiaries would find great difficulty in representing the
interests of both, Mr. O'Shaughnessy states.
By this motion, Pionairs and ASPBA propose to represent all non-
active beneficiaries of the Applicants' various pension and
benefits plans and programs who are not already represented.
Pionairs and ASPBA also propose to retain John R. Varley, a
Senior Counsel at Pallett Valo, LLP, in Mississauga, Ontario, as
counsel. Mr. Varley is experienced in the field of pension
insolvency and does not represent any financial institution,
lessor or other conflicting client in the CCAA proceeding.
Pionairs and ASPBA also ask the Court to require the Applicants
to provide information, documentation and communication
facilities and provide for their costs. (Air Canada Bankruptcy
News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
AIRGAS INC: Inks Strategic Account Supply Pact with Goodrich
------------------------------------------------------------
Airgas, Inc., (NYSE:ARG) has signed an agreement with Goodrich
Corporation (NYSE:GR), the Charlotte, NC-based global supplier of
systems and services to the aerospace and defense industry. Airgas
will be Goodrich's preferred supplier of industrial gases, welding
supplies and safety products, with greater savings to those
Goodrich facilities that use more than one product line. The
agreement is part of the Airgas Strategic Accounts program, which
provides supply chain management solutions to corporate customers
with multiple manufacturing sites nationwide.
"Companies are looking for creative ways to improve efficiency,
manage their supply chains and reduce vendors," said Pat
Visintainer, senior vice president, sales for Airgas, Inc. "We
have the footprint, the distribution capabilities, the range of
products and a proven supply chain management process to deliver
results across a customer's entire enterprise, as we plan to do
for Goodrich Corporation."
"We are always looking for ways to manage our supply chain more
effectively across all our divisions," said John Foulk, director,
supply chain management, for Goodrich Corporation. "After having
Airgas as our safety supplier for the past few years, we worked
together to structure this new agreement to add gases and welding
supplies and provide greater savings to Goodrich locations that
use more than one product line. This kind of agreement would not
be possible without people who provide consistent service and
local attention at every facility."
Strategic Account Managers and teams within Airgas' 12 regional
companies provide the day-to-day service through more than 700
branch locations nationwide. Airgas Strategic Accounts approach
combines the company's purchasing power and integrated supply
network to deliver a diverse product portfolio, where and when it
is needed.
"Airgas grew Strategic Accounts to more than $225 million last
year as more and more major corporations sought to improve their
supply chain management," said Visintainer. "Airgas is committed
to offering a solid resource to give customers the best total
range of business solutions."
Goodrich Corporation, a Fortune 500 company, is a leading global
supplier of systems and services to the aerospace and defense
industry. If there's an aircraft in the sky - we're on it.
Goodrich technology is involved in making aircraft fly ... helping
them land ... and keeping them safe. Serving a global customer
base with significant worldwide manufacturing and service
facilities, Goodrich is one of the largest "pure play" aerospace
companies in the world. For more information visit
http://www.goodrich.com
Airgas, Inc. (NYSE:ARG) (S&P, BB Corporate Credit Rating,
Positive) is the largest U.S. distributor of industrial, medical
and specialty gases, welding, safety and related products. Its
integrated network of nearly 800 locations includes branches,
retail stores, gas fill plants, specialty gas labs, production
facilities and distribution centers. Airgas also distributes its
products and services through eBusiness, catalog and telesales
channels. Its national scale and strong local presence offer a
competitive edge to its diversified customer base. For more
information, visit http://www.airgas.com
ALGIERS RESOURCES: Signs-Up Bagell Josephs as New Accountants
-------------------------------------------------------------
Command International Corporation, formerly known as Algiers
Resources, Inc., has appointed Bagell, Josephs & Company, LLC as
its new independent public accountant and terminated its
engagement of Lazar Levine & Felix LLP as its independent public
accountant, effective with respect to the Company's fiscal year
ending December 31, 2003. This change in independent public
accountant was approved by the Board of Directors of Command on
July 8, 2003, upon the recommendation of the audit committee
consisting of the full Board.
The audit report of Lazar on the financial statements of the
Company for the fiscal year ended December 31, 2002, contained an
explanatory paragraph as to the Company's ability to continue as a
going concern.
The audit report of the Company's prior accountant, Singer Lewaks
Greenbaum & Goldstein LLP for the fiscal year ended December 31,
2001 expressed a belief that the Company may not continue as a
going concern.
On July 7, 2003, the Company, then known as Algiers Resources,
Inc., a Delaware corporation, merged with and into the wholly-
owned Delaware subsidiary, then known as Algiers Merger Co. As
part of the merger, the Company changed its name to Command
International Corporation.
ALL STAR: More Debtor Affiliates & List of Unsecured Creditors
--------------------------------------------------------------
Lead Debtor: All Star Gas Corporation, a Missouri corporation
PO Box 303
119 West Commercial Street
Lebanon, MO 65536
Bankruptcy Case No.: 2-03-12705-CGC
Additional Debtor affiliates filing separate Ch. 11 petitions:
Entity Case No.
All Star Gas Inc. of Wyoming, 2-03-12717-RJH
a Wyoming corporation
All Star Gas Transports Inc.- MO, 2-03-12718-RTB
a Delaware corporation
Ellington Propane Inc., 2-03-12719-SSC
a Missouri corporation
Empire Underground Storage, Inc., 2-03-12720-SSC
a Kansas corporation
Red Top Gas Inc., 2-03-12721-RTB
a Missouri corporation
Utility Collection Corporation, 2-03-12722-CGC
a Delaware corporation
Type of Business: The Debtor, together with its direct and
indirect subsidiaries, has been in business
for 40 years and engaged primarily in the
retail marketing of propane and propane-
related appliances, supplies, and equipment to
residential, agricultural, and commercial
customers
Chapter 11 Petition Date: July 21, 2003
Court: District of Arizona (Phoenix)
Debtors' Counsel: Rob Charles, Esq.
Lewis and Roca LLP
1 South Church Ave Ste 700
Tucson, AZ 85701-1611
520-629-4427
Fax : 520-879-4705
Email: rcharles@lrlaw.com
Susan M. Freeman, Esq.
Lewis and Roca
40 N. Central Ave
Phoenix, AZ 85004-4429
602-262-5756
Fax : 602-262-5747
Email: SMF@LRLAW.COM
Total Assets: $43,704,000 (as of December 31, 2002)
Total Debts: $105,580,000 (as of December 31, 2002)
List of Debtors' Largest Unsecured Creditors:
A. RED TOP GAS INC.
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Great Western Energy Promissory Note $200,000
Green Oil Company Inc. Trade Payable $13,873
Riverton Tire and Oil Co, Inc Trade Payable $6,074
Department #258201 Trade Payable $3,864
KA Bergquist
Leran Gas Products Trade Payable $3,157
P&E Painting Trade Payable $2,750
Grimm's Pump & Industrial Trade Payable $2,522
TCI Tire Centers Trade Payable $2,460
Fairbank Equipment Inc. Trade Payable $2,047
State of Wyoming- DFS Customer Refund $2,014
C & R Auto Glass Trade Payable $1,530
JR's Repair Trade Payable $1,498
Bowman Fuel & Oil Company Trade Payable $1,341
LIEAP Trade Payable $1,245
Dale Bowman Trade Payable $1,008
AAARMS, Inc. Trade Payable $982
McTier Supply Company Trade Payable $926
S B Fuels of Wyoming, Inc. Trade Payable $901
Big Horn Petroleum Trade Payable $844
Newton Hydro & Meter Proving Trade Payable $815
B. ALL STAR GAS INC. OF WYOMING
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Ron's L.P. Gas Service Note $30,000
Big Horn Petroleum Trade Payable $22,211
Big Horn Travel Plaza Trade Payable $5,119
Leran Gas Products Trade Payable $3,656
Trick-N-Trucks Trade Payable $1,448
Kwik Mart Trade Payable $1,330
Newton Hydro & Meter Proving Trade Payable $1,160
LIEAP Trade Payable $734
Gas Equipment Company, Inc. Trade Payable $676
FEI Inc. Trade Payable $608
Bolinger Welding & Trade Payable $548
Fabrication
Paxton Resources LLC Customer Refund $526
Black Diamond Energy Customer Refund $523
Steve's Truck Service Trade Payable $494
Mountain Auto Supply Trade Payable $374
Mrs. Earl Palmer Customer Refund $311
Cook/ Harriet Construction Customer Refund $265
Eastside Texaco Trade Payable $263
TEECO Products Inc. Trade Payable $243
Spiering Construction Trade Payable $218
C. ALL STAR GAS TRANSPORTS INC.-MISSOURI
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Comdata Transportation Trade Payable $5,082
Service
B&D Auto/Truck Plaza Trade Payable $3,895
Truck Parts & Supply Co. Inc. Trade Payable $2,381
Voss Truck Port Trade Payable $2,030
FYR FYTER of Missouri, Inc. Trade Payable $814
Les Schwab Tire Center Trade Payable $420
William N. Rowles Trade Payable $330
Howard's B&D Truck Repair Trade Payable $252
CS Towing Inc. Trade Payable $211
Purcell Tire & Rubber Co. Trade Payable $181
Newton Hydro & Meter Proving Trade Payable $125
Jacksonville Fire Trade Payable $118
Extinguisher
Parker's Portable Pressure Trade Payable $80
& Steam Washing Service
Philip Caster, M.D. Trade Payable $55
Cabool Tires Inc. Trade Payable $24
Sanders Equipment Trade Payable $21
D. ELLINGTON PROPANE INC.
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Judith Strong Customer Refund $336
Gas Equipment Company Inc. Trade Payable $276
Roy Williams Customer Refund $202
Shawna Joplin Customer Refund $187
James Vert Customer Refund $184
Lynch's Fire Protection, Inc Trade Payable $150
Warner Conder Customer Refund $134
Baker Machine & Sales Inc. Trade Payable $112
Ethel Lay Customer Refund $86
Bertha Ashlock Customer Refund $66
Jim's Auto Repair Trade Payable $59
Leran Gas Products Trade Payable $47
Ellington Auto Supply Trade Payable $40
Gastineau Hardware & Trade Payable $21
Lumber Co.
Terrance Hanley Customer Refund $21
AMERCO: Court Appoints Trumbull as Claims & Noticing Agent
----------------------------------------------------------
Pursuant to Section 156(c) of the Judicial Procedures Code, Amerco
seeks the Court's authority to employ Trumbull Associates, LLC,
formerly known as Trumbull Services, LLC, as their claims and
noticing agent.
Bruce T. Beesley, Esq., at Beesley, Peck & Matteoni, Ltd., in
Reno, Nevada, relates that Amerco identified over 1,000 creditors,
potential creditors and other parties-in-interest to whom certain
notices, including notice of the Chapter 11 case commencement and
voting documents, must be sent. However, upon information and
belief, the office of the Clerk of the Bankruptcy Court for the
District of Nevada is not equipped to efficiently and effectively
docket and maintain the extremely large number of proofs of claim
that are likely to be filed in this case. "The sheer magnitude of
Amerco's creditor body makes it impracticable for the Clerk's
Office to undertake that task and send notices to the creditors
and other parties-in-interest," Mr. Beesley remarks.
To efficiently and effectively accomplish the process of
receiving, docketing, maintaining, photocopying and transmitting
proofs of claim in this case, an independent third party must be
engaged to act as the Court's agent. According to Mr. Beesley,
Trumbull is a data processing firm that specializes in noticing,
claims processing and other administrative tasks in Chapter 11
cases. Trumbull has assisted and advised numerous Chapter 11
debtors in connection with noticing, claims administration and
reconciliation and administration of plan votes. In fact,
Trumbull has provided identical or substantially similar services
in the Chapter 11 cases of Kmart Corp., Glenoit Corporation,
Safety-Kleen and Talk America, among others.
Under the terms of the parties' Service Agreement, Trumbull will:
(a) prepare and serve notices in this Chapter 11 case,
including:
-- a notice of the Chapter 11 case commencement and the
initial meeting of creditors under Section 341(a) of
the Bankruptcy Code;
-- a notice of the claims bar date;
-- notices of claims objections;
-- notices of any hearings on a disclosure statement and
confirmation of a plan of reorganization; and
-- other miscellaneous notices as Amerco or the Court may
deem necessary or appropriate for an orderly
administration of this Chapter 11 case;
(b) 2ithin five business days after the service of a
particular notice, file with the Clerk's Office a
certificate or affidavit of service that includes:
-- a copy of the notice served,
-- an alphabetical list of persons on whom the notice
was served, along with their addresses, and
-- the date and manner of service;
(c) maintain copies of all proofs of claim and proofs of
interest filed in this case;
(d) maintain official claims registers in this case by
docketing all proofs of claim and proofs of interest in
a claims database that includes these information for
each claims or interest asserted:
-- the name and address of the claimant or interest
holder and any agent thereof, if the proof of claim or
proof of interest was filed by an agent;
-- the date of the proof of claim or proof of interest
was received by the Claims and Noticing Agent or the
Court;
-- the claim number assigned to the proof of claim or
proof of interest; and
-- the asserted amount and classification of the claim;
(e) implement necessary security measures to ensure the
completeness and integrity of the claims registers;
(f) transmit to the Clerk's Office a copy of the claims
registers on a weekly basis, unless the Clerk's Office
requests a more or less frequent basis;
(g) maintain an up-to-date mailing list for all entities that
have filed proofs of claim or proof of interest and make
the list available upon request to the Clerk's Office or
any party-in-interest;
(h) provide access to the public for examination of copies of
the proofs of claim or proofs of interest filed in this
case without charge during regular business hours;
(i) record all transfers of claims pursuant to Rule 3001(e)
of the Federal Rules of Bankruptcy Procedure and provide
notice of the transfers as required by Rule 3001(e), if
directed to do so by the Court;
(j) comply with applicable federal, state, municipal and
local statutes, ordinances, rules, regulations, orders
and other requirements;
(k) provide temporary employees to process claims, as
necessary;
(l) promptly comply with further conditions and requirements
as the Clerk's Office or the Court may at any time
prescribe; and
(m) provide other claims processing, noticing, balloting and
related administrative services as may be requested from
time to time by Amerco.
Lorenzo Mendizabal, President of Trumbull Associates, LLC,
informs the Court that as in exchange for the services Trumbull
will provide, Trumbull will seek -- on a monthly basis --
compensation of its professionals and reimbursement of out-of-
pocket expenses. Trumbull's professionals have these hourly
rates:
Administrative Support $50
Assistant Case Manager/Data Specialist 65 - 80
Case Manager 110 - 125
Automation Consultant 140 - 160
Sr. Automation Consultant 165 - 185
Consultant 175 - 225
Sr. Consultant 230 - 300
Claims Management, including processing, examination, data entry
and review, will be charged at $65 per hour. Pursuant to the
Service Agreement, Trumbull will hold throughout the duration of
its employment, a $10,000 retention.
Mr. Mendizabal assures Judge Zive that, among other things:
(i) Trumbull will not consider itself employed by the U.S.
government and will not seek any compensation from the
U.S. government in its capacity as Claims and Noticing
Agent in this Chapter 11 case;
(ii) By accepting employment in this Chapter 11 case, Trumbull
waives any rights to receive compensation from the U.S.
government;
(iii) In its capacity as Claims and Noticing Agent in this
Chapter 11 case, Trumbull will not be an agent of the
United States and will not act on its behalf;
(iv) Trumbull will not misrepresent any fact to the public; and
(v) Trumbull will not employ any past or present employees of
Amerco in connection with its work as Claims and Noticing
Agent in this Chapter 11 case.
To the best of his knowledge, Mr. Mendizabal says that neither
Trumbull nor any of its employees has any connection with Amerco,
its creditors, or any other party-in-interest or hold any adverse
interest to Amerco's estate. Thus, Trumbull is a "disinterested
person" as that term is defined in Section 101(14) of the
Bankruptcy Code.
Mr. Beesley believes that Trumbull's employment will expedite
service of Rule 2002 notices, streamline the claims
administration process and permit Amerco to focus on its
reorganization efforts.
* * *
After due consideration, Judge Zive permits Amerco to employ
Trumbull as its Claims and Noticing Agent pursuant to the terms
of the Service Agreement. (AMERCO Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
AMES DEPARTMENT: Brings-In Storch Amini as Special Counsel
----------------------------------------------------------
Ames Department Stores, Inc., and its debtor-affiliates seek the
Court's authority to employ the law firm of Storch Amini & Munves,
P.C. as special counsel, effective as of July 1, 2003. The
Debtors want Storch to:
(a) undertake any investigation, litigation, mediation or any
other action on the Debtors' behalf to avoid and recover
any preferential payments or payments that are otherwise
avoidable;
(b) appear before the Court and any appellate court to protect
the Debtors' interests; and
(c) perform all other necessary legal services as requested by
the Debtors in the Preference Actions and these Chapter 11
cases.
The Debtors have transferred over $500,000,000 to creditors
within 90 days of the Petition Date. The Debtors believe that a
significant number of these transactions may constitute
preferences pursuant to Sections 547, 550 and 551 of the
Bankruptcy Code.
With respect to the collection and litigation of the preference
claims, the Debtors propose to pay Storch 21% of collections
realized on the settlement or compromise of any preference claim
as contingency fee. This Special Counsel Fee is the maximum fee
that Storch will charge the Debtors. The Special Counsel Fee
will be calculated based on the settlement value realized from a
recovery. For instance, if a settlement were comprised of a
$25,000 cash payment and waiver of an existing claim that has an
established dividend value of $5,000, the Special Counsel Fee
would be based on a $30,000 total settlement value.
In addition to the Special Counsel Fee, the Debtors will
reimburse Storch for all reasonable out-of-pocket expenses
incurred in connection with the pursuit of potentially avoidable
transfers on their behalf. The Debtors will advance to Special
Counsel, or pay directly, sums sufficient to cover Bankruptcy
Court filing fees for commencing adversary proceedings to recover
preferences.
The Debtors have selected Storch as special counsel because of
the firms' extensive experience in, and knowledge of, litigating
preference actions under Chapter 11 of the Bankruptcy Code.
Storch has previously served as counsel litigating various
bankruptcy matters, most recently prosecuting over 300 preference
actions on behalf of the Chapter 11 Trustee of County Seat
Stores, Inc. and CSS Trade Names, Inc., as well as other claims
on behalf of the Trustees in the bankruptcy cases of County Seat
and Flutie New York Corporation.
The Debtors have determined that retaining Storch as special
counsel will result in the most expeditious and efficient
resolution of certain remaining Preference Actions and related
claims. Given the magnitude of payments made within 90 days of
the Petition Date, the Debtors believe that engaging an
additional firm to review, analyze, file and prosecute avoidance
actions will enable these actions to be commenced and resolved
quickly.
Bijan Amini, Esq., assures the Court that no attorney at Storch
represents professionally or is associated with the Debtors,
their creditors or any other party-in-interest. Mr. Amini
discloses that the firm may have represented creditors and other
interested parties in matters totally unrelated to the Debtors'
proceeding. Nevertheless, Mr. Amini tells Judge Gerber that
Storch is a "disinterested person" as defined in Section 101(14)
of the Bankruptcy Code. (AMES Bankruptcy News, Issue No. 40;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
ANC RENTAL: Secures Nod for Master Lease Pacts with Lessor SPEs
---------------------------------------------------------------
ANC Rental Corporation and its debtor-affiliates, in connection
with the issuance of the 2003 Variable Funding Notes, obtained
permission from the Court to to:
1. enter into the Additional Master Lease Agreements with the
Lessor SPEs;
2. guarantee the obligations of each lessee under the
Additional Master Lease Agreements;
3. enter into the New VFN Documents;
4. pay the 2003 VFN Fees associated with the issuance of the
2003 VFN and pursuant to the New VFN Documents; and
5. enter into other agreements and documents necessary to
consummate the transactions contemplated by the 2003 VFN
and the New VFN Documents.
Backgrounder
Prior to the Petition Date, ANC Rental Corporation and its debtor-
affiliates financed their vehicle fleet primarily by leasing
vehicles from certain wholly owned indirect non-debtor
subsidiaries of ANC, which financed the acquisition of the fleet
through the issuance of asset-backed commercial paper, asset-
backed medium-term notes and asset-backed auction rate notes,
arranged by certain special purpose subsidiaries of ANC. Bonnie
Glantz Fatell, Esq., at Blank Rome LLP, in Wilmington, Delaware,
relates that these programs were financed through ARG Funding
Corp., a non-debtor special purpose entity and a wholly owned
direct subsidiary of ANC, which issued medium term "Rental Car
Asset-Backed Notes," auction rate notes to the public through
private placements, variable funding notes funded by ANC Rental
Funding Corp., an indirect wholly owned subsidiary of ANC, and
various bank multi-seller conduits through the issuance of
commercial paper to the public.
ARG Funding loaned the proceeds of these issuances to three
special purpose entities for the purpose of purchasing vehicles:
1. Alamo Financing L.P.,
2. National Car Rental Financing Limited Partnership, and
3. CarTemps Financing L.P.
In exchange for the funds advanced by ARG Funding to each of the
Lessor SPE, Ms. Fatell states that each Lessor SPE issued Variable
Funding Notes or VFN to ARG Funding. Each Lessor SPE used these
proceeds and a portion of its partnership capital to, among other
things, purchase and finance vehicles. The Lessor SPEs, in turn,
leased the vehicles to ANC's three operating companies each of
which are debtors in these Chapter 11 cases:
1. Alamo Rent-A-Car, LLC;
2. National Car Rental System, Inc.; and
3. Spirit Rent-A-Car, Inc., d/b/a Alamo Local.
These leasing arrangements between each Operating Company and each
Lessor SPE are governed by the Amended and Restated Master Lease
Agreements dated as of June 30, 2000. ANC is a guarantor under
the Existing Master Lease Agreements.
The Operating Companies rent the vehicles to the public as part of
their car rental businesses. Each Operating Company uses the cash
generated from its rental operations to make the lease payments
due to its Lessor SPE under the Existing Master Lease Agreements.
Each Lessor SPE, in turn, uses the lease payments to make payments
due on the Existing Leasing Company Notes issued to ARG Funding.
ARG Funding then uses the payments to make payments due to the
holders of the medium term notes, the variable funding notes, and
the auction rate notes.
On April 4, 2002, the Court authorized the Debtors to:
1. enter into New Master Lease Agreements and Related
Operating Leases;
2. guarantee the obligations of Each Lessee Under the New
Master Lease Agreements;
3. pay certain fees associated with the transaction; and
4. enter into other agreements and documents necessary to
consummate the transaction.
On August 23, 2002, the Court approved an amendment of the term
sheet with Deutsche Bank Securities Inc. relating to issuance of
Medium Term Notes. On May 7, 2003, the Court approved the DB
Order. In the motion leading up to the May 2003 DB Order, the
Debtors noted that, among other things, if market conditions
dictated, the Debtors might elect to file a motion seeking
authority to provide for the additional financing needed through
the issuance of a VFN, rather than through the issuance of
additional MTNs.
Pursuant to the DB Orders, among other things:
1. the Debtors were authorized to enter into the New Master
Lease Agreements;
2. it was contemplated that ARG Funding Corp. II would
a. issue the 2002-1 Variable Funding Note or VFN to an
affiliate of Deutsche Bank Securities Inc. in an amount
up to $575,000,000; and
b. issue the medium-term notes, placed with certain
investors by DB Securities, in an amount up to
$1,050,000,000;
3. DB Securities obtained the right to act as the Debtors'
structuring and placement agent with respect to one or more
financings up to $1,050,000,000; and
4. the Debtors were authorized to pay to DB Securities on the
closing of any Additional Financing a placement fee equal
to 1.0% on the remaining notional amount of the Additional
Financing.
In May 2002, ARG II issued the VFN amounting to $275,000,000. In
June 2002, ARG II increased the maximum invested amount of the VFN
from $275,000,000 to $575,000,000. In August 2002, ARG II
refinanced the VFN with the issuance of the MTNs by ARG II in the
aggregate amount equal to $600,000,000. As of May 31, 2003, all
of the MTNs remain outstanding.
Due to conditions in the financial marketplace, the Debtors have
determined that it is financially more attractive to issue the
2003 VFN rather than the Additional MTNs. Thus, the Debtors seek
Judge Walrath's permission, in connection with the 2003 VFN Term
Sheet, to enter into Additional Master Lease Agreements with the
Lessor SPEs and enter into other agreements and documents
necessary to consummate the issuance of the 2003 VFN, pursuant to
which ARG II will issue the 2003 VFN to the DB Structured
Products, Inc. or Deutsche Bank AG, New York Branch.
Pursuant to the 2003 VFN Term Sheets, ARG II will issue the 2003
VFN, in an amount up to $350,000,000 to the DB Structured
Products, Inc. or Deutsche Bank AG, New York Branch. It is
currently anticipated that the initial amount of the 2003 VFN will
be $225,000,000, with the option to increase that amount to
$350,000,000. The Debtors will have access to a fully revolving
credit facility, funded by the 2003 VFN, which will expire upon
the occurrence of the Termination Date. The 2003 VFN Term Sheet
also provides for, among other things, the DB Structured Products,
Inc. or Deutsche Bank AG, New York Branch to receive the 2003 VFN
Fees and dynamic credit enhancement in the form of
over-collateralization and cash based on the net book value of
eligible vehicles and receivables. (ANC Rental Bankruptcy News,
Issue No. 35; Bankruptcy Creditors' Service, Inc., 609/392-0900)
ARMSTRONG: AWI Wants to Assume Amended Dow Chemical Contract
------------------------------------------------------------
Armstrong World Industries, Inc., asks Judge Newsome's judicial
blessing on its assumption of an executory contract with The Dow
Chemical Company, as amended by a letter agreement dated April 1,
2003.
The Supply Agreement
On January 22, 1999, AWI and Union Carbide Corporation signed a
contract under which Union Carbide agreed to sell to AWI a
material used in the manufacture of the Duracote coatings that are
used on all of the coated residential tile products of AWI and its
subsidiaries. While the Supply Agreement itself is confidential
and not filed with he Court, the terms are described generally in
this Motion.
AWI purchases approximately $1 million of TM 100 annually under
this Supply Agreement. While the Agreement itself is said to be
confidential and is not included in the Motion, AWI says that the
principal terms of the Supply Agreement are:
(1) Quantity: AWI agrees to purchase 100% of its
requirements (estimated to be 600,000 pounds per year)
of TM 100 meeting certain specifications;
(2) Price: A firm price for all shipments of TM 100 made
under the Supply Agreement through the calendar year
2001 is included. In support of AWI's need for price
stability, price increases during the remaining term
of the Supply Agreement are limited to one price
increase per twelve-month period upon thirty days'
written notice by the supplier;
(3) Term: The Supply Agreement continues in effect from
year to year after December 31, 2002, unless canceled
on any anniversary of that date by either party upon
at least sixty days' written notice to the other
party;
(4) Product Warranty: The supplier warrants that TM 100
will meet the Specifications upon delivery. AWI is
under no obligation to purchase any TM 100 that does
not meet the Specifications, and, to the extent the
supplier is unable to deliver TM 100 meeting the
Specifications, AWI is free to purchase its
requirements from any other supplier, in addition to
exercising any other remedies to which it may be
entitled;
(5) Price Matching: If, during the present remaining term
of the Supply Agreement, AWI provides the supplier
with reasonable written evidence that it can purchase
100% of its requirements for TM 100 meeting the
Specifications from another manufacturer at a price
lower than that provided for by the Supply Agreement
and upon similar terms and conditions, then the
supplier shall have fifteen days to respond with an
offer meeting that lower price. If the supplier fails
to meet the lower price, AWI may (but is not
obligated to) purchase its requirements for TM 100
from the other manufacturer by giving the supplier at
least thirty days' prior written notice; whereupon,
at the end of that period, the Supply Agreement
shall be deemed terminated; and
(6) Payment Terms: AWI is billed at net 30 days. If AWI
pays its bill within the first ten days, it receives
a 10% discount off of the purchase price.
The Proof of Claim
On January 26, 2001, Union Carbide filed a proof of claim against
AWI asserting an unsecured claim in the amount of $81,800 for
goods sold pre-petition to AWI under the Supply Agreement. On
March 1, 2001, Union Carbide amended its proof of claim,
increasing the claim amount to $161,680. AWI believes that the
amount claimed pursuant to the Proof of Claim constitutes a valid
claim amount.
The 2003 Letter Amendment
On February 6,2001, Union Carbide became a wholly owned subsidiary
of Dow Chemical. At that time, Dow Chemical became the leading
market entity for TM 100 and continued to fulfill AWI's purchase
orders under the Supply Agreement. After substantial
negotiations, AWI and Dow Chemical entered into a letter amendment
to the Supply Agreement dated April 1, 2003. Under the 2003
Letter Amendment, AWI and Dow Chemical have agreed to several new
provisions relating to, inter alia, resolution of Union Carbide's
pre-petition claim as set forth in the Proof of Claim, the
assignment of the Supply Agreement from Union Carbide to Dow
Chemical, and the agreement of Dow Chemical not to increase its
prices under the Supply Agreement unless hardship is proven as a
result of "extraordinarily high energy prices."
Specifically, the 2003 Letter Amendment provides:
(a) Assignment: Pursuant to the 2003 Letter Amendment,
Dow Chemical acknowledges that Union Carbide has
assigned the Supply Agreement to Dow Chemical. AWI
consents to that assignment. Neither AWI nor Dow
Chemical may assign the Amended Supply Agreement
without obtaining prior written consent from the
other party;
(b) Pre-petition Settlement: Upon the Court's approval
of AWI's assumption of the Amended Supply Agreement,
AWI will make a cash payment to Dow Chemical in the
amount of $89,000, in full settlement of all
pre-petition claims asserted against AWI in the Proof
of Claim and in full satisfaction of AWI's obligation
to cure defaults under the Bankruptcy Code;
(c) Withdrawal of Proof of Claim: Dow Chemical will
withdraw, or cause Union Carbide to withdraw, the
Proof of Claim with prejudice after AWI's assumption
of the Amended Supply Agreement is approved by the
Court;
(d) Quantity: Dow Chemical and AWI acknowledge that the
Supply Agreement is a 100% requirements contract,
exclusive of test quantities of materials AWI deems
necessary for contingency purposes. In this regard,
AWI will inform Dow Chemical of test quantities used
within thirty days, and will provide Dow Chemical with
estimates of its requirements for TM 100 for planning
purposes only;
(e) Term: The term of the Supply Agreement will continue
in effect through December 31, 2004. The term will
extend year to year thereafter, subject to the right
of either party to terminate the agreement upon at
least sixty days' prior written notice. Beginning
January 1, 2004, and continuing annually for as long
as the Amended Supply Agreement is in effect, if Dow
Chemical announces a price increase under the Amended
Supply Agreement between November 1 of the current
year and January 31 of the following year, AWI will
have an additional sixty days from the date of any
announcement to provide Dow Chemical with written
notice of cancellation;
(f) Price: Except as provided in a hardship clause set
forth in the 2003 Letter Agreement, the Amended Supply
Agreement continues to provide, through December 31,
2004, the same firm price for TM 100 stated in the
January 22, 1999 Contract. Additionally, with respect
to AWI's need for price stability, price increases
during the remaining term of the Amended Supply
Agreement will continue to be limited to one per
twelve-month period, and will require 45 days'
written notice from Dow Chemical; and
(g) Payment Terms: 1% discount if paid within ten days;
upon conversion to electronic funds transfer, the
payment will be discounted by 1% if paid within
fifteen days of EFT, with payment received on the
due date. EFT may be provided by an outside service
if both parties agree.
The Reasons for Assumption
AWI believes its assumption of the Amended Supply Agreement is in
the best interest of AWI's estate, creditors, and other parties in
interest, and should be approved by the Court. Dow Chemical has
agreed that the only default under the Supply Agreement is that
AWI owes pre-petition amounts totaling $161,680. Upon obtaining
approval of the Court to assume the Amended Supply Agreement, AWI
will cure this default by making payment to Dow Chemical of
$89,000, as agreed under the 2003 Letter Amendment.
Since the commencement of AWI's chapter 11 case, AWI has spent a
significant amount of its time and resources in an effort to
develop and implement a restructuring program designed ultimately
to reduce costs, improve cash flow and achieve profitability. In
that connection, AWI has undertaken an extensive review of its
executory contracts and unexpired leases, including its supply
agreements. Although this review continues, AWI submits that
assumption of the Amended Supply Agreement at this time will
benefit its estate and creditors.
The Amended Supply Agreement contains terms that are very
favorable to AWI; accordingly, its assumption is a sound component
of AWI's ongoing business plan. The Amended Supply Agreement
provides AWI with a 2-year price freeze, the option to qualify an
alternative source for TM 100, a "meet or release" pricing clause,
and improved payment terms.
Moreover, AWI is required to cure any defaults as a condition to
its assumption of the Amended Supply Agreement. Although AWI owes
pre-petition amounts totaling $161,680, Dow Chemical has agreed to
reduce AWI's pre-petition debt by approximately $72,000. This
will enable AWI to cure any default under the Supply Agreement
with a single payment of $89,000.
Without TM 100, the Company cannot produce coated residential tile
products. To AWI's knowledge, Dow Chemical is the only confirmed
manufacturer of TM l00. If AWI did not enter into the Amended
Supply Agreement, AWI would be required to devote a significant
amount of time and incur a great capital expense to develop and
produce a product equivalent to TM 100. Entry into the Amended
Supply Agreement, therefore, will enable AWI to avoid that result.
Finally, AWI's assumption of the Amended Supply Agreement will
benefit its estate and creditors because it will enable AWI to
continue its association with Dow Chemical, the only supplier of
TM 100 in North America. AWI purchases approximately $1 million
worth of TM 100 from Dow Chemical annually and incorporates those
materials into all of its coated residential tile products. AWI
has worked and will continue to work diligently to foster a
mutually beneficial business relationship with Dow Chemical
because, as a market leader, Dow Chemical is well-positioned to
service AWI's supply needs. (Armstrong Bankruptcy News, Issue No.
44; Bankruptcy Creditors' Service, Inc., 609/392-0900)
ARVINMERITOR: Fiscal Q3 2003 Results Show Decline in Earnings
-------------------------------------------------------------
ArvinMeritor, Inc. (NYSE: ARM) reported sales of $2.1 billion and
net income of $47 million, for its third fiscal quarter ended
June 30, 2003. Sales increased $226 million, or 12 percent, as
compared to last year's third quarter. Foreign currency
translation, driven by the stronger euro, favorably impacted sales
by approximately $125 million, and the company's acquisition of
Zeuna Starker added sales of $176 million in the third fiscal
quarter. Sales would have been down without these items, as
compared to the third quarter of fiscal year 2002. Net income
declined $15 million, as compared to last year's third-quarter net
income of $62 million. Results for the third quarter of fiscal
year 2002 included a one-time gain on sale of business of $4
million after-tax.
ArvinMeritor Chairman and Chief Executive Officer Larry Yost said,
"Our results for the third fiscal quarter were negatively impacted
by lower light vehicle production volumes in both North America
and Western Europe, continued soft demand in our Light Vehicle
Aftermarket business and reduced build rates in certain of our
Commercial Vehicle Systems markets. We continue to identify
aggressive actions in response to the current market conditions,
including further rationalization of our engineering and
manufacturing facilities, as well as other workforce consolidation
and reduction activities."
Operating income for the third quarter of fiscal year 2003 was $97
million, compared to $122 million for the same period last year.
Included in operating income in the third quarter of fiscal year
2002 was a $6-million gain on sale of business. Operating margin
declined to 4.6 percent, from 6.5 percent in the third quarter of
fiscal year 2002.
Equity in earnings of affiliates increased $4 million, primarily
due to improved earnings from commercial vehicle affiliates. Net
interest expense of $26 million was flat, compared to the same
period last year. The effective tax rate was 32 percent in the
third quarter of fiscal years 2003 and 2002. The company expects
the full-year effective tax rate to approximate the third- quarter
rate of 32 percent.
Specific business segment financial results include:
-- Light Vehicle Systems sales were $1,195 million, up $211
million, or 21 percent, from the third quarter of fiscal year
2002. Foreign currency translation favorably impacted sales by
approximately $85 million, as compared to the prior year's
quarter, and the acquisition of Zeuna Starker added sales of
$176 million. Operating margin was 3.8 percent, down from 6.0
percent in last year's third quarter. Lower volumes contributed
to the operating margin decline, as did higher steel prices of
$5 million in the third quarter of fiscal year 2003. LVS
recorded restructuring costs in this year's third fiscal
quarter of $3 million associated with previously announced
programs. Savings of $4 million were realized from these
restructuring actions.
-- Commercial Vehicle Systems sales were $645 million, up $23
million, or four percent, from the third quarter of fiscal year
2002. Foreign currency translation increased sales by
approximately $30 million, as compared to last year's third
quarter. During the second quarter of fiscal year 2003, CVS
sold net assets related to its off-highway planetary axle
products. Sales of off-highway planetary axle products were
approximately $30 million in the third quarter of fiscal year
2002. Excluding these items, sales were up in the third quarter
of fiscal year 2003, despite a decline in North American Class
8 truck production. Higher trailer volumes in North America
offset declines in North American and Western European truck
volumes. Operating margin improved to 5.9 percent, up from 5.6
percent in last year's third quarter.
-- Light Vehicle Aftermarket sales were $225 million, down $9
million, or four percent, from last year's third quarter.
Foreign currency translation favorably impacted sales by
roughly $10 million in the third quarter of fiscal year 2003.
Operating income in the third quarter of fiscal year 2002
included a $6-million gain on the sale of the exhaust
accessories manufacturing business. Operating margin was 4.4
percent, as compared to 11.1 percent (8.5 percent, excluding
the one-time gain of $6 million) in the prior year's third
quarter. During the third quarter of fiscal year 2003, LVA
recorded restructuring costs of $2 million associated with
previously announced restructuring actions. Lower volumes also
contributed to the operating margin decline.
Nine-Month Summary
For the first nine months of fiscal year 2003, sales were $5.8
billion, up $675 million, or 13 percent, compared to the same
period last year. The sales increase includes incremental Zeuna
Starker revenues of $374 million and favorable currency
translation of approximately $275 million. Operating income for
the first nine months of fiscal year 2003 was $233 million, a
decline of $19 million, compared to the same period last year,
reflecting an operating margin of 4.0 percent, down from 4.9
percent last year.
Net income for the first nine months of fiscal year 2003 was $103
million down from $108 million before the cumulative effect of
accounting change, in the same period last year. Net income in the
first nine months of fiscal year 2002 included the cumulative
effect of the goodwill accounting change of $42 million.
Outlook
"Our fiscal year 2003 outlook for light vehicle production is 15.9
million vehicles in North America and 16.4 million vehicles in
Western Europe. Our outlook for Class 8 truck production in North
America remains unchanged at 166,000 units for fiscal year 2003,"
Yost said. "Our outlook for diluted earnings per share for the
fourth quarter of fiscal year 2003 is in the range of $0.43 to
$0.48, before an expected gain on the sale of our exhaust tubing
operations and further planned restructuring actions in our Light
Vehicle Systems business.
"We recently announced that we had signed a definitive agreement
to sell our Light Vehicle Systems Columbus, Ind., exhaust tube
manufacturing operation to AK Tube LLC, a subsidiary of AK Steel
Corporation. Although the sale is subject to regulatory approval,
we expect to close the transaction in the fourth fiscal quarter
and record a pre-tax gain."
Yost continued, "We continue to integrate Zeuna Starker into the
ArvinMeritor organization and further consolidate our Light
Vehicle Systems businesses to proactively address competitive
challenges in the automotive supplier industry.
Planned restructuring actions include additional facility
closures, business consolidations and workforce downsizing. We
estimate total pre-tax costs of $20 million to $25 million and
annualized pre-tax savings of approximately $20 million related to
these actions. The fourth fiscal quarter impact of these actions
has not been finalized."
ArvinMeritor, Inc. is a premier $7-billion global supplier of a
broad range of integrated systems, modules and components to the
motor vehicle industry. The company serves light vehicle,
commercial truck, trailer and specialty original equipment
manufacturers and related aftermarkets. In addition, ArvinMeritor
is a leader in coil coating applications. The company is
headquartered in Troy, Mich., and employs 32,000 people at more
than 150 manufacturing facilities in 27 countries. ArvinMeritor
common stock is traded on the New York Stock Exchange under the
ticker symbol ARM. For more information, visit the company's Web
site at: http://www.arvinmeritor.com
* * *
As previously reported in Troubled Company Reporter, Standard &
Poor's Ratings Service placed its 'BB+' corporate credit and
senior unsecured debt ratings on ArvinMeritor Inc. on CreditWatch
with negative implications. In addition, Standard & Poor's placed
its 'BB' corporate credit and senior unsecured debt ratings on
Dana Corp., on CreditWatch with negative implications.
Fitch Ratings also downgraded the ratings of ArvinMeritor Inc.'s
senior unsecured debt to 'BB+' from 'BBB-' and capital securities
to 'BB-' from 'BB+' and placed the Ratings on Watch Negative. The
downgrade reflects ARM's intent to acquire growth through debt
financed acquisitions and a willingness to substantially raise the
leverage in its capital structure. If the transaction is completed
on the proposed terms, further rating action is expected. New
financing for the transaction is likely to be on a secured basis,
further impairing unsecured debt holders. The ratings have been
placed on Rating Watch Negative.
ATLANTIC COAST: Will Publish Second Quarter Results on July 30
--------------------------------------------------------------
Atlantic Coast Airlines, the Dulles, VA-based regional carrier
(Nasdaq: ACAI) rescheduled its second quarter 2003 earnings
release to Wednesday, July 30th from the previously announced
release date of Wednesday, July 23rd. On July 30th at 2:00pm
Eastern, the senior executives of the company will conduct a live
webcast.
The Company has reached a tentative settlement with United
Airlines regarding rates for 2003 service under its existing
United Express Agreement. As a result, the Company requires
additional time to finalize and obtain approvals for the tentative
settlement and has elected to delay its earnings release by one
week in order to properly incorporate the results of the tentative
settlement into its second quarter 2003 financial results. The
Company also announced today that it will not complete the
retirement of all of its J-41 turboprop aircraft originally
planned by December 31, 2003, and as a result, intends to reverse,
in its second quarter results, the portion of the prior charges
for the retirement of those aircraft that will not be retired
prior to year end 2003.
As previously announced, ACA and United have also been engaged in
discussions related to the terms of a new agreement to replace the
existing United Express Agreements between the parties. Although
the Company and United continue to talk regarding proposed terms,
the parties have not reached an agreement on terms satisfactory to
the Company, and there can be no assurances that the Company and
United will reach such an agreement in the future. The Company
continues to develop contingency plans to allow it to establish an
alternative to the United business in the event that satisfactory
arrangements for future United Express service cannot be agreed
with United. The Company would pursue such an alternative if it
concludes that the alternative offers more favorable prospects
than offered by United. The Company cannot predict the timing or
outcome of any decision by United with respect to the Company's
code share arrangements.
The webcast will be hosted by:
* Kerry Skeen, Chairman and Chief Executive Officer
* Richard Surratt, Executive Vice President and Chief
Financial Officer Instructions to hear the webcast:
The live webcast can be accessed directly through the ACA Web site
at http://www.atlanticcoast.com(go to the "For Investors"
section).
ACA operates as United Express and Delta Connection in the Eastern
and Midwestern United States as well as Canada. The Company has a
total fleet of 148 aircraft -- including 85 CRJs and 33 328JET
regional jets -- and offers over 840 daily departures, serving 84
destinations.
Atlantic Coast Airlines (S&P/B-/Negative/-) employs over 4,800
aviation professionals. The common stock of parent company
Atlantic Coast Airlines Holdings, Inc. is traded on the Nasdaq
National Market under the symbol ACAI. For more information about
ACA, visit http://www.atlanticcoast.com
BAYOU STEEL: Signs-Up Hilco Appraisal as Valuation Experts
----------------------------------------------------------
Bayou Steel Corporation and its debtor-affiliates ask for
authority from the U.S. Bankruptcy Court for the Northern District
of Texas to retain and employ Hilco Appraisal Services, LLC as
valuation experts for all personal and real property located in
Oklahoma, Tennessee and Illinois.
The Debtors need Hilco Appraisal to provide:
a) appraisal inspection, investigation and analysis of the
Assets and records related to the Assets;
b) appraisal related data, information gathering, market
research and other related activities;
c) appraisal report preparation; and
d) confer, advise and discuss our specific appraisal of the
Assets, appraisal methodology and witness preparation,
depositions and defense of any litigation related to
these matters.
Hilco Appraisal will be paid a fixed fee of $48,000 plus expenses,
in this engagement. In cases wherein Hilco Appraisal will be
required to defend or support their appraisal, prepare
depositions, prepare other analysis, Hilco Appraisal will be
compensated on the hourly rate ranging from $250 per hour to $400
per hour.
Bayou Steel Corp., a producer of light structural shapes and
merchant bar steel products, filed for chapter 11 protection on
January 22, 2003 (Bankr. N.D. Tex. 03-30816). Patrick J. Neligan,
Jr., Esq., at Neligan, Tarpley, Andrews & Foley, LLP represents
the Debtors in their restructuring efforts. When the Company
filed for protection from its creditors, it listed $176,113,143 in
total assets and $163,402,260 in total debts.
B/E AEROSPACE: Second Quarter 2003 Net Loss Balloons $14 Million
----------------------------------------------------------------
B/E Aerospace, Inc. (Nasdaq:BEAV) announced financial results for
the second quarter ended June 30, 2003 and commented on the
outlook for the remainder of calendar 2003.
Effective July 21, 2003, B/E's financial news releases will
generally discuss results on a generally accepted accounting
principles (GAAP) basis only. The company will disclose unusual or
one-time items when necessary to help provide a more meaningful
picture of underlying trends, and will continue to disclose EBITDA
(earnings before interest, taxes, depreciation and amortization)
and EBITDA as adjusted for unusual or one-time items as determined
under B/E's bank credit agreement (Adjusted EBITDA). EBITDA and
Adjusted EBITDA are "non-GAAP financial measures" as defined by
the Securities and Exchange Commission. This news release presents
EBITDA and Adjusted EBITDA as additional measures of operating
performance and our ability to service our debt. We also present
these measures because investors have expressed an interest in
such information. EBITDA and Adjusted EBITDA should not be viewed
as substitutes for or superior to net earnings, cash flow from
operations or other data prepared in accordance with GAAP, as
measures of our profitability or liquidity. Since EBITDA and
Adjusted EBITDA are not prepared in accordance with GAAP, they are
not necessarily comparable to similarly titled measures furnished
by other companies. As required by the SEC, we provide a table at
the end of this release reconciling EBITDA and Adjusted EBITDA to
cash flow from operations.
HIGHLIGHTS
-- Reported net loss of $14.1 million, or $0.39 per share for
three months ended June 30, 2003
-- Total backlog increased sequentially by $65 million to $500
million, B/E's first significant backlog improvement since
September 2001
-- Maintained adequate liquidity, with cash and available bank
credit of about $120 million at quarter-end, down $6 million
compared to March 2003 balances
-- Expect to achieve goal of profitable operations on a quarterly
basis by the end of this calendar year
"The quarter was challenging from an operational perspective.
However, we executed on our plan to close the Dafen (Wales)
facility," said Mr. Robert J. Khoury, President and Chief
Executive Officer of B/E Aerospace. "This was the fifth plant
shutdown in a major cost reduction effort which we initiated soon
after the September 2001 terrorist attacks. However, the results
we report today were adversely affected by plant closing costs,
inefficient operations at the now-closed Dafen plant and start-up
costs in our plastics manufacturing operation. Foreign exchange
losses and weak sales of certain high-margin products also
adversely affected profitability.
"New order activity and a substantial upturn in customer requests
for quotations, particularly in the past six weeks, were welcome
favorable developments," said Mr. Khoury.
FINANCIAL RESULTS: SECOND QUARTER
For the three months ended June 30, 2003, B/E reported a net loss
of $14.1 million compared to a net loss of $3.2 million for the
three-month period ended June 30, 2002.
The company recorded $7.0 million of charges during the quarter,
primarily related to provisions for bad debts and inventories and
to adjust properties held for sale to reflect fair value less
estimated costs to sell. Such charges were offset by cash proceeds
of $9.0 million received in the second quarter in connection with
the resolution of the final matters associated with the 1999 sale
of B/E's In-Flight Entertainment business.
Restructuring, consolidation and transition costs are included in
cost of goods sold in both the current and year-ago periods. Such
costs were slightly higher in the current period.
Net sales were $151.8 million for the period ended June 2003,
virtually unchanged as compared to the same period a year ago.
Sales for both periods reflect very depressed demand for B/E's
products as a result of the continuing crisis in the airline
industry. Current period sales also reflect the steep downturn in
business jet deliveries.
Gross profit for the quarter ended June 2003 was down $11.6
million compared to the same period a year ago. Reflecting the
decline in gross profit, operating earnings decreased $10.0
million for the quarter just ended compared with the prior year.
Second quarter gross and operating profit margins declined on a
year-over-year basis. In the commercial aircraft products segment,
the lower margins and operating earnings reflect Dafen plant
closing and integration costs ($5.2 million), adverse impacts from
foreign exchange ($1.5 million), charges for bad debts,
inventories and properties held for sale and manufacturing start-
up costs in B/E's plastics operations ($3.8 million).
In the business jet segment, margins were lower due to a 33
percent decrease in sales of higher-margin executive aircraft
seats, partially offset by an increase in lower-margin VIP
aircraft project work. The drop in executive seat sales reflects a
43 percent industry-wide reduction in production of new business
jets, partially offset by an increase in B/E's executive seating
market share. The VIP aircraft projects, including development of
super-premium international first class products for airlines,
generated minimal profit due to start-up and developmental costs
which were included in cost of goods sold.
SIX-MONTH RESULTS
For the six months ended June 30, 2003, B/E reported a net loss of
$24.9 million. For the same period last year, B/E reported a net
loss of $9.1 million.
The increased loss reflects lower margins due to plant closing and
integration costs, the manufacturing start-up costs of plastics
operations in the seating business, the aforementioned shift in
business jet product mix and adverse foreign exchange impacts.
Restructuring, consolidation and transition costs are included in
cost of goods sold in both the current and year-ago periods. Sales
were $306.5 million for the six months just ended, up $9.3 million
compared to a year ago.
UPDATE ON CONSOLIDATION PROGRAM
"In recent months our airline customers have endured the SARS
epidemic, a war in Iraq and continued weakness in the economy,"
Mr. Khoury stated. "These adverse events came in the midst of an
airline industry downturn which is now in its third year."
The world's airlines lost $25 billion in 2001 and 2002. Steep
losses continue this year. Seventeen airlines worldwide have
sought bankruptcy protection or ceased operations in the past two
years. In response, airlines have severely cut spending and idled
about 2,220 aircraft. As a result, B/E has experienced
significantly reduced demand for its commercial aircraft cabin
interior products.
"B/E is also experiencing soft demand in the business jet
segment," Mr. Khoury stated. "For the first half of 2003,
deliveries of new business jets were down 43 percent compared to a
year ago."
To re-position B/E for profitability at the lower demand levels,
management launched a cost reduction program soon after the 2001
terrorist attacks. This consolidation effort, now largely
complete, involved closing five factories and eliminating over
1,400 positions. Consolidation costs already incurred since
inception of the program total about $160 million, including
approximately $70 million of cash costs. Management expects
consolidation costs for the remainder of this year to total $1 -
$2 million, which will be recorded in the third quarter.
BACKLOG INCREASED SEQUENTIALLY
Despite a tumultuous quarter for the airlines, B/E's backlog
increased 15 percent sequentially to approximately $500 million as
of June 30, 2003, compared to $435 million at the end of March
2003. The significant growth in backlog was driven primarily by
increases in the commercial aircraft and fastener distribution
segments.
RECENT TRENDS
"Our commercial aircraft products segment experienced weak order
activity during most of the second quarter," Mr. Khoury said.
"However, over the past six weeks we have seen a significant
increase in both actual order placement and new business
opportunities."
The increased opportunities are primarily related to Asian,
European and Middle Eastern airlines' orders for new wide-body
aircraft, including the A330, A340-500/600 and the A380, and their
desire to retrofit their existing wide-body fleets with the same
new interior equipment to achieve fleet commonality.
"Time will tell whether this trend will be sustained, and whether
this new activity will produce significant orders for B/E," Mr.
Khoury said. "However, based on the number of requests we have
received, it appears that our new business opportunities are
increasing significantly."
LIQUIDITY REMAINS ADEQUATE
B/E's cash and available bank credit was about $120 million as of
June 30, 2003, a decrease of approximately $6 million compared to
March 31, 2003 balances. Cash interest paid during the quarter
totaled $21.6 million.
"Cash and available bank credit of about $120 million should be
adequate to meet operating needs and service our debt
obligations," Mr. Khoury stated. "Our cash position at December
2002 was unusually high, enabling us to reduce bank borrowings by
$50 million in the first quarter of 2003. The voluntary payment
reduced interest expense and will assist in returning B/E to
profitability." Cash and available bank credit has decreased by
about $37 million since December 31, 2002, reflecting a $15.0
million reduction in the size of the bank credit facility, the
cash component of the year-to-date net loss, capital expenditures
and normal working capital fluctuations.
Net debt (total debt less cash and cash equivalents) was $717.5
million, as compared to $712.1 million at March 31, 2003 and
$696.0 million at December 31, 2002. EBITDA was $11.6 million for
the twelve months ended June 2003, including consolidation costs,
the charges reported today and items related to the In-Flight
Entertainment sale. Adjusted EBITDA was $95.8 million for the
twelve-month period. Net cash flows used in operations were $8.2
million for the same period.
Due to recurring losses, B/E Aerospace, Inc.'s June 30, 2003
balance sheet shows that its total shareholders' equity further
dwindled to $51 million from $70 million recorded 6 months ago.
OUTLOOK
"With such volatile industry conditions, forecasting is difficult
for our customers and for B/E as well," Mr. Khoury stated.
"Therefore, for the time being we have elected not to give
quantitative guidance on sales and earnings." Financial guidance
for calendar 2003 is as follows: -- For the third quarter and
beyond, B/E expects substantial improvements in margins and
bottom-line results, and expects to achieve profitable operations
on a quarterly basis by the end of this calendar year. -- Backlog,
which increased sequentially by $65 million or 15 percent during
the second quarter, should remain flat or increase slightly over
the next six months, driven primarily by opportunities in B/E's
commercial aircraft products and fastener distribution segments.
Activity in the business jet market remains very soft.
"Looking ahead, we expect substantial financial improvement in the
third and fourth quarters of this year and for all of next year,"
Mr. Khoury said. "B/E Aerospace has a number of attributes that
should enable us to maintain adequate liquidity during this
industry downturn. Our debt structure is well-suited to these
volatile industry conditions. Our bank credit facility is
adequately supported by current assets and matures in August 2006.
All other long-term debt requires no additional principal payments
until 2008 through 2011.
"Our customer base is global, with over 45 percent of last year's
sales coming from outside the U.S. Our competitive position is
very strong, with leading worldwide market shares in many product
lines.
"Our aftermarket focus should make B/E a leading indicator of the
industry recovery," he said. "The airlines will begin to spend on
their existing fleets long before they can afford to purchase new
aircraft because refurbishing existing aircraft is much less
expensive. Accordingly, aftermarket demand should lead the
aerospace industry recovery.
"When demand improves, the cost reductions we have achieved should
give us substantial operating leverage and enhanced earnings
power. We believe that our factories have the capacity to generate
revenues of up to $1 billion without significant additional
capital investment. In the meantime, we have a seasoned executive
team which has navigated prior downturns," Mr. Khoury concluded.
B/E Aerospace, Inc. (S&P, B+ Corporate Credit Rating, Negative) is
the world's leading manufacturer of aircraft cabin interior
products and a leading aftermarket distributor of aerospace
fasteners. With a global organization selling directly to the
world's airlines, B/E designs, develops and manufactures a broad
product line for both commercial aircraft and business jets and
provides cabin interior design, reconfiguration and conversion
services. Products for the existing aircraft fleet -- the
aftermarket -- provide about 60 percent of sales. For more
information, visit B/E's Web site at http://www.beaerospace.com
BETHLEHEM STEEL: First Creditors' Meeting Scheduled for Nov. 19
---------------------------------------------------------------
The United States Trustee for Region 2 has called for a meeting
of the Bethlehem Steel Debtors' creditors pursuant to 11 U.S.C.
Sec. 341(a) to be held on November 19, 2003 at 1:30 p.m. at 80
Broad Street, Second Floor in New York. All creditors are
invited, but not required, to attend. This Official Meeting of
Creditors offers the one opportunity in a bankruptcy proceeding
for creditors to question a responsible office of the Debtor under
oath. (Bethlehem Bankruptcy News, Issue No. 39; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
BETTER MINERALS: Completes Sale of Better Materials for $158MM
--------------------------------------------------------------
Better Minerals & Aggregates Company, a leading U.S. producer of
industrial minerals, completed the sale of Better Materials
Corporation, its crushed stone and hot mixed asphalt business, to
a subsidiary of Hanson Building Materials America, Inc., on
July 18, 2003.
Total cash received at the closing, before fees and expenses, was
approximately $158 million, including an adjustment for changes in
Better Material's working capital since the terms of the stock
purchase were first announced April 16, 2003. BMAC intends to use
the proceeds to reduce its outstanding debt.
A portfolio company of J.P. Morgan Partners and D. George Harris &
Associates, BMAC is a leading supplier of high quality silica sand
and aplite for the glass, foundry, chemical, recreational and
construction industries, and fine ground silica and kaolin clay
products for the paint, plastic and ceramic industries. The
company employs 760 people at its 16 facilities in the United
States.
As previously reported, Standard & Poor's Ratings Services lowered
its corporate credit rating on Better Minerals & Aggregates Co.,
to 'CCC+' from 'B+' as a result of an unexpected decline in
liquidity, expected covenant violations, weak performance in its
aggregates business, and increasing silica product liability
claims.
The Berkeley Springs, West Virginia company has about $308
million in debt outstanding. The current outlook is negative.
BURLINGTON IND.: Mohawk Industries Wants to Acquire Lees Carpet
---------------------------------------------------------------
Mohawk Industries, Inc. (NYSE: MHK) has entered an agreement with
W. L. Ross & Company to acquire the assets and assume certain
liabilities of the carpet division of Burlington Industries, Inc.
(Lees Carpet). Ross has entered a binding bid to Burlington to
purchase certain assets and assume certain liabilities of
Burlington in connection with its emergence from bankruptcy. The
bid includes a provision for Lees Carpet to be sold to Mohawk by
Ross if it is successful in the auction process. The auction is
scheduled to be held on July 28, 2003, and a Bankruptcy Court
Hearing to approve the auction is scheduled on July 31, 2003.
Should Ross be successful, the closing of Mohawk's purchase of
Lees Carpet would be subject to customary regulatory approval and
confirmation of Burlington's plan of reorganization by the
bankruptcy court.
Mohawk is a leading supplier of flooring for both residential and
commercial applications and a producer of woven and tufted
broadloom carpet, rugs and ceramic tile. The Company designs,
manufactures and markets premier carpet brand names, which include
"Mohawk," "Aladdin," "Bigelow," "Custom Weave," "Durkan,"
"Galaxy," "Helios," "Horizon," "Karastan," "Mohawk Commercial,"
"World," and "Wunda Weve." Mohawk offers a broad line of home
products including rugs, throws, pillows and bedspreads under the
brand names Aladdin, Goodwin Weavers, Karastan, Mohawk Home and
Newmark. Mohawk manufacturers and distributes ceramic tile and
natural stone products under the brand names Dal-Tile, Mohawk and
American Olean. Mohawk also offers other products that include
laminate, wood and vinyl flooring and carpet padding under the
Mohawk brand name.
BURLINGTON INDUSTRIES: Receives Several Asset Acquisition Offers
----------------------------------------------------------------
Burlington Industries, Inc. (OTC Bulletin Board: BRLG) has
received several proposals in connection with the sale process
approved last May by the Court in its reorganization proceedings.
Burlington said it is assessing the proposals and did not expect
to have any additional comment unless it enters into a sale
agreement or determines to terminate the process. There can be no
assurance that Burlington will agree to any particular transaction
or, if so, as to the timing or terms thereof.
With operations in the United States, Mexico and India and a
global manufacturing and product development network based in Hong
Kong, Burlington Industries is one of the world's most diversified
marketers and manufacturers of softgoods for apparel and interior
furnishings.
BURLINGTON INDUSTRIES: Selling Aircraft to Wings for $7.8 Mill.
---------------------------------------------------------------
In accordance with the Order Establishing Procedures for
Miscellaneous Asset Sales entered in January 2002, Burlington
Industries, Inc., and debtor-affiliates propose to terminate a
lease and sell a 2001 Cessna Citation Excel aircraft to Wings
Associates, Inc. pursuant to the terms of a lease termination
letter agreement and an Aircraft Purchase and Sale Agreement.
The Debtors are currently leasing the 2001 Cessna from C.I.T.
Leasing Corporation pursuant to the Aircraft Lease dated February
15, 2001. Pursuant to the Lease Termination Letter and the Sale
Agreement, Wings will provide the funds on the Debtors' behalf to
buy out the Aircraft Lease and provide certain additional funds to
the Debtors.
According to Daniel J. DeFranceschi, Esq., at Richards, Layton &
Finger, in Wilmington, Delaware, the proposed sale of the 2001
Cessna contemplates that:
(a) Wings will provide $7,800,000 total consideration for
the 2001 Cessna;
(b) Wings will pay a Pay-Off Amount currently expected to be
$7,070,735 to CIT on Burlington's behalf. In exchange
for the Payoff Amount, CIT and Burlington will terminate
the Aircraft Lease, and CIT will transfer all of its
right, title and interest in and to the Aircraft to
Burlington, free of any liens;
(c) Immediately after the termination of the Aircraft Lease,
Burlington will sell to Wings, and Wings will pay
Burlington $729,264, the difference between the Purchase
Price and the Payoff Amount. Accordingly, the net
consideration for the Proposed Sale to Burlington is
$729,264;
(d) There are no executory contracts and unexpired leases
related to the Aircraft that Burlington proposes to
assume and assign or reject;
(e) These parties may hold liens or have other interests
in the 2001 Cessna Aircraft:
-- CIT;
-- The Chase Manhattan Bank, as Administrative Agent to
that certain Credit Agreement, dated as of Sept. 30,
1988, as amended and restated as of December 5, 2000;
and
-- JPMorgan Chase Bank, as Administrative Agent,
Documentation Agent and Collateral Agent to that
certain Revolving Credit and Guaranty Agreement dated
as of November 15, 2001.
Each Lienholder has either consented to the Proposed Sale
or the Lienholder's lien or interest can be extinguished,
has been waived, or is capable of monetary satisfaction;
and
(f) In Burlington's view, the conveyance of the 2001 Cessna in
connection with the Proposed Sale does not require the
consent of Burlington's secured lenders or any government
regulatory agency, although certain FAA filings will be
made in connection with the transfers. (Burlington
Bankruptcy News, Issue No. 36; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
CANDLEWOOD HOTEL: Completes $65-Mill. Sale-Leaseback Transaction
----------------------------------------------------------------
Candlewood Hotel Company, Inc. (OTC Bulletin Board: CNDL), a
leading owner, manager, and franchisor of high-quality, value-
oriented, business-travel hotels, has completed a sale-leaseback
transaction with Hospitality Properties Trust (NYSE: HPT), on
behalf of a joint venture the Company has with Boston Capital and
Mass Mutual.
The $65 million transaction represents seven Candlewood Suites
with a total of 888 suites. The seven hotels have been added to
an existing lease pool of 57 hotels, creating one lease for 64
hotels, for a total of 7,775 suites. The seven hotels are
geographically diversified in six states, two of which are in
California, with an average age of 2.8 years.
The proceeds of the transaction will be used to repay all of the
mortgage debt and mezzanine debt of the joint venture the Company
formed with Boston Capital and Mass Mutual in 1999, and to provide
working capital for the Company.
Candlewood Hotel Company, headquartered in Wichita, Kansas, owns,
operates and franchises Candlewood Suites and Cambridge Suites --
hotel properties that offer high-quality accommodations for all
guests, while catering to mid-market and upscale business and
personal travelers seeking multiple night stays. Jack DeBoer,
Chairman and CEO and founder of Residence Inn, started Candlewood
Hotel Company in late 1995.
At March 31, 2003, Candlewood Hotel's balance sheet shows a total
shareholders' equity deficit of about $53 million.
CHARLES J. MILLER: Wants Nod to Use Lenders' Cash Collateral
------------------------------------------------------------
Charles J. Miller, Inc., and its debtor-affiliates ask for
authority from the U.S. Bankruptcy Court for the District of
Maryland to use their prepetition lenders' cash collateral
The Debtors report that their prepetition loans from Mercantile-
Safe Deposit and Trust Company are secured by liens on
substantially all then-existing and afteracquired assets. The
Prepetition Collateral includes the Debtors' cash, negotiable
instruments, documents of title, securities, deposit accounts and
other cash equivalents, whenever acquired, as well as all proceeds
of such collateral, which items constitute cash collateral within
the meaning of Section 363 of the Bankruptcy Code.
As of the Petition Date, the Debtors were in default under the
Prepetition Loan Agreements and owed $6,625,403 to the Prepetition
Lender, plus additional interest, costs, fees and expenses, along
with amounts that may become owing on account of events or
occurrences after the Petition Date.
Due to the nature of the Debtors' businesses, they will not be
able to operate without the use of the Cash Collateral to pay
their payroll and other operating expenses pending filing and
confirmation of a plan of reorganization.
The Debtors' need to use the Cash Collateral is immediate. In the
absence of the proposed use of Cash Collateral, the Debtors will
not be able to continue to operate. In order to successfully
proceed with this case, it is critical that this Motion be granted
and that the Debtors be permitted to use Cash Collateral.
The Debtors tell the Court that they are unable to obtain the
required funds to replace the Cash Collateral in the form of
unsecured credit or unsecured debt allowable under Section
503(b)(1) of the Bankruptcy Code as an administrative expense
pursuant to Section 364(a) or (b) of the Bankruptcy Code,
unsecured credit or unsecured debt having the priority afforded by
Section 364(c)(1) of the Bankruptcy Code, or debt or credit
secured as described in Section 364(c)(2) or (3) of the Bankruptcy
Code.
The Debtors submit that the proposed use of Cash Collateral has
been negotiated in good faith and at arms' length between the
Debtors and the Prepetition Lender, with both parties represented
by counsel.
If the Debtors are not immediately authorized to use the Cash
Collateral to make payroll and other operating expenses, these
bankruptcy estates will suffer immediate and irreparable harm.
Accordingly, the Debtors request that this Court authorize them to
use the Cash Collateral pursuant to the Budget through July 13,
2003:
Total Funds Available $3,920,670
Total Payables 3,909,734
Net Available 10,935
Charles J. Miller, Inc., headquartered in Hampstead, Maryland, is
a construction company principally involved in excavation, paving
and site preparation for commercial construction and housing
development projects. The Company filed for chapter 11 protection
on July 14, 2003 (Bankr. Md. Case No. 03-80504). James A. Vidmar,
Jr., Esq., at Linowes and Blocher, LLP represent the Debtors in
their restructuring efforts. When the Company filed for
protection from its creditors, it listed debts and assets of over
$10 million each.
CHART INDUSTRIES: Asks Court to Fix Aug. 22 Confirmation Hearing
----------------------------------------------------------------
As previously reported in the Troubled Company Reporter's July 16,
2003 issue, Chart Industries Inc., delivered a Prepackaged Chapter
11 Plan and Disclosure Statement to the U.S. Bankruptcy Court for
the District of Delaware.
The Debtors ask the Court to schedule the Confirmation Hearing on
August 22, 2003.
Prior to the Petition Date, the Debtors solicited votes on the
Plan from holders of the twelve sub-classes of Senior Lender
Claims, classified by the Plan. The holders of Class 2 Senior
Lender Claims who voted on the Plan unanimously voted to accept
the Plan pursuant to section 1126(c) of the Bankruptcy Code and
the Debtors submit that such acceptances are sufficient to confirm
the Plan pursuant to sections 1129 (a)(10) and 1129(b) of the
Bankruptcy Code. Specifically, 100% in amount and 1,000 in number
of those holders of Class 2 Senior Lender Claims voting on the
Plan (i.e., entities holding over 94% of all Class 2 Senior Lender
Claims) voted to accept the Plan.
The Debtors submit that it is in the best interests of their
estates, creditors and parties in interest to hold the
Confirmation Hearing as soon as practicable. The holders of Class
2 Senior Lender Claims overwhelmingly accepted the Plan. In order
to avoid frustrating the purposes of the Plan and to preserve the
Senior Lenders' bargained-for recovery in these cases, it is
imperative that the Debtors' time in chapter 11 be minimized. The
proposed schedule affords creditors, interest holders and all
other parties in interest ample notice of the confirmation
proceedings.
Chart Industries, Inc., headquartered in Cleveland, Ohio, are
suppliers of standard and custom-engineered products and systems
serving a wide variety of low-temperature and cryogenic
operations. The Company filed for chapter 11 protection on July 8,
2003 (Bankr. Del. Case No. 03-12114). Mark S. Chehi, Esq., at
Skadden, Arps, Slate, Meagher & Flom represents the Debtors in
their restructuring efforts. When the Company filed for
protection from its creditors, it listed $268,082,000 in total
assets and $361,228,000 in total debts.
CINTECH SOLUTIONS: Toronto Stock Exchange to Suspend Trading
------------------------------------------------------------
Cintech Solutions, Inc. (TSX:CTM), developer of interaction
management software, announced that the Toronto Stock Exchange
will suspend trading of Cintech's common stock effective at the
close of market on August 18, 2003. The decision to suspend
trading was imposed for failure by the company to meet the
continued listing requirements of the TSX.
The suspension is effective for a period of one year, during which
the company may seek TSX approval for reinstatement. If the
company is unable to remedy all deficiencies, the company's common
shares will be de-listed as of close of business on August 18,
2004.
Separately, the Ontario Securities Commission and the British
Columbia Securities Commission have issued temporary orders that
the trading of Cintech common stock cease due to the company's
failure to file the required financial report for the period ended
March 31, 2003. The company reports that it had encountered
certain administrative obstacles, stemming from the Chapter 11
Bankruptcy filing, in completing the required financial report and
that it expects to file this report on or before Friday, July 25,
2003.
Cintech Solutions is a provider of interaction management
technology to medium and small contact centers in North America.
Cintech Solutions' products and services improve customer service
and provide rapid return on investment through the intelligent
delivery and management of incoming customer contacts. With over
13,000 installations and over 15 years commitment to its market,
Cintech Solutions delivers its solutions through an extensive
distribution channel across North America. For more information on
Cintech Solutions, visit http://www.cintechsolutions.com
CLAYTON HOMES: Hires Bear Stearns to Evaluate Potential Offers
--------------------------------------------------------------
Clayton Homes' (NYSE:CMH) Board of Directors selected Bear Stearns
to evaluate any potential offers from bona fide bidders that may
be received prior to its special shareholders' meeting scheduled
for July 30, 2003, including any from Cerberus Capital Management
which began due diligence at the company's home office Monday.
In addition, Bear Stearns will assist the company in continuing to
review strategic alternatives to maximize shareholders' value.
To arrive at the decision, the independent board members met over
the weekend and recommended that Bear Stearns' be retained. The
full board affirmed the decision of the independent directors, and
Bear Stearns began work Monday.
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.
CORNING INC: Posts Q2 $22 Million Net Loss on $752 Million Sales
----------------------------------------------------------------
Corning Incorporated (NYSE:GLW) announced that its second-quarter
sales were $752 million and that it incurred a net loss of $22
million or $0.02 per share. This net loss includes $47 million or
$0.04 per share of after-tax charges primarily related to the
shutdown of Corning Asahi Video Products Company; the planned exit
from its photonics business; and a mark-to-market adjustment to
the portion of its asbestos liability settlement to be paid in
Corning common stock.
"We are pleased that our results exceeded our second-quarter
guidance. This performance gives us confidence that we will
achieve our goals for the year. We continue to maintain our focus
on managing costs, paying down debt and investing in future
technologies," said James R. Houghton, chairman and chief
executive officer.
Second-Quarter Charges
Corning said its second-quarter results include net pretax charges
of $75 million (net after-tax charges totaling $47 million or
$0.04 per share). These include:
-- Restructuring charges of $54 million related to the shutdown of
CAV, $33 million related to the exit of its photonics business
and $38 million related to other cost reduction programs
primarily in the telecommunications segment, offset by a
reversal of $76 million of liabilities relating to prior years'
restructuring charges. These charges and credits total $49
million, which after tax of $18 million and minority interest
of $28 million had a $3 million impact on Corning's second-
quarter net loss.
-- Charges to increase the deferred tax asset valuation allowance
of $21 million and impair equity investments of $7 million,
both of which are directly related to the decision to exit the
photonics business.
-- A $39 million charge ($24 million after-tax) to reflect the
increase in the market value of Corning common stock to be
contributed to settle the asbestos litigation related to
Pittsburgh Corning Corporation.
-- A net gain of $13 million ($8 million after-tax) related to
debt repurchase as a result of the company's recently completed
tender offer.
In addition to these items, Corning recorded a $9 million
inventory write-off in gross margin related to the closure of CAV.
Second-Quarter Operating Results
Second-quarter sales of $752 million exceeded the company's
guidance range of $715 million to $745 million and increased from
first-quarter sales of $746 million. Corning's technologies
segment recorded sales of $400 million, an increase over first-
quarter sales of $388 million. The increase was primarily driven
by the continued strong performance of the liquid crystal display
glass business that experienced sequential volume gains of more
than 15 percent and stable pricing. The growing popularity of
notebook computers and increasing market penetration of LCD
desktop monitors fueled the quarter's growth. In the second
quarter, LCD desktop monitors outpaced cathode ray tube monitors
for the first time achieving a level of 52 percent of the U.S.
market.
These gains were partially offset by lower sales in the company's
semiconductor business. Sales in Corning's environmental business
were flat versus the first quarter, as an anticipated general
slowdown in the automotive industry did not materialize.
Corning's telecommunications segment sales were $347 million, a
slight decline from $352 million in sales for the first quarter.
As expected, the quarterly sales decline was due to lower fiber
and cable volumes in Asia, resulting from seasonal slowdowns in
Japan. Fiber volume declined in the second quarter by 20 percent,
slightly less than the company expected. Fiber pricing in the
second quarter was down about 5 percent. The fiber and cable sales
decline was partially offset by sequential increases in the
hardware and equipment business.
Corning's second-quarter results benefited from the receipt of $17
million in royalties at CAV, foreign exchange gains and a higher
effective tax benefit rate. Corning's second-quarter results also
included $25 million of equity earnings from Dow Corning, which
the company began to recognize effective January 1, 2003.
Liquidity Update
Corning ended the second quarter with $1.5 billion in cash and
short-term investments, a decline from $1.85 billion at the end of
the first quarter. The decline was primarily due to financing
transactions. In the quarter, Corning raised net proceeds of $267
million from the issuance of 50 million shares of common stock and
used $623 million of cash to retire $834 million aggregate
principal amount of its outstanding zero-coupon convertible
debentures. In July, Corning repaid an additional $123 million of
debt. Corning said that it might continue from time-to-time to
retire its debt securities in open market, privately negotiated or
other transactions.
Corning ended the quarter with a debt-to-capital ratio of 40
percent compared with 45.6 percent at the end of the previous
quarter. Corning's revolving credit facility includes one
financial covenant limiting the ratio of total debt to total
capital, as defined, to not greater than 60 percent. The company
also said that it is considering increasing its voluntary
contributions to its pension plans in 2003 from approximately $60
million to approximately $160 million. In the first half of this
year, Corning made $30 million in contributions to its U.S.
pension plan.
Third-Quarter Outlook
Corning said it expects third-quarter sales to be in the range of
$740 million to $765 million. The company anticipates earnings per
share in the range of $0.01 to $0.03, excluding any remaining
gains or losses related to the exit of CAV or its photonics
business and any further adjustments to the asbestos settlement
reserve required by movement in Corning's stock price.
Corning anticipates sequential volume gains for its LCD glass
business of about 5 percent to 10 percent in its consolidated
business and 10 percent to 15 percent at Samsung Corning
Precision. The company plans to ramp up Generation 5 and 6 glass
production in the third quarter and move forward with its capacity
expansion plans to meet accelerating global industry demand.
Corning will incur start-up costs with these expansions.
Corning said it anticipates that sales in its environmental
business will be consistent with the second quarter. The company
also expects that a shift to more premium-priced thin-wall
products will continue in the third quarter. Sales of diesel
products are projected to continue growing with increased
retrofits on emissions systems for heavy-duty equipment and off-
road vehicles. The company's new diesel product manufacturing
facility in Erwin, N.Y., will phase in limited production through
the second half of this year.
Third-quarter fiber volumes are expected to increase sequentially
in the range of 5 percent to10 percent due to renewed demand in
Japan and a slight increase in North American orders. Pricing
pressure is anticipated to remain moderate, at a level consistent
with the second quarter.
Corning expects sales in its photonics and conventional TV glass
businesses to decline modestly in the third quarter and then
effectively cease in the fourth quarter with the final exit from
these businesses.
James B. Flaws, vice chairman and chief financial officer, said,
"We continue to be pleased by the strength of our LCD business.
This business has certainly hit its stride and it is providing
Corning with significant opportunity for growth and
profitability." Flaws said that signs of stability across the
telecommunications sector are giving the company some cause for
optimism. "The preliminary FCC ruling on fiber deployments is also
very promising for the industry and we have been further
encouraged by the announcement of three Regional Bell Operating
Companies to work together in developing standards for future
fiber to the premises investments. However, we do not expect any
significant revenue impact this year from these developments,"
Flaws said.
Established in 1851, Corning Incorporated (www.corning.com)
creates leading-edge technologies that offer growth opportunities
in markets that fuel the world's economy. Corning manufactures
optical fiber, cable, hardware and equipment in its
Telecommunications segment. Corning's Technologies segment
manufactures high-performance display glass, and products for the
environmental, life sciences, and semiconductor markets.
COVANTA ENERGY: Sues Allied Aviation for Breach of Contract
-----------------------------------------------------------
David M. Greenwald, Esq., at Jenner and Block, in Chicago,
Illinois, recounts that prior to December 2001, Covanta Energy
Corporation, PA Aviation Fuel Holdings, Inc., Ogden New York
Services, Inc., and Ogden Allied Maintenance Corporation operated
an aviation fueling business at 22 airports in the United States,
Canada and Panama. Allied Aviation Holdings Corporation acquired
the shares of the business operating at 19 of those airports --
Non-PA businesses, and agreed -- pursuant to its overhead
services agreement -- to manage certain other operations of the
remaining business. In December 2002, Allied Aviation acquired
the shares and certain assets of the remaining businesses, which
operated at the three major New York City area airports -- PA
businesses.
By this complaint, the Debtors ask the Court to compel Allied
Aviation Holdings Corporation, Allied Aviation Services Company
of Newfoundland, Ogden Services of Canada, CAFAS Fueling,
Airconsol Aviation Services and Consolidated Aviation Fueling to
turn over property of the Debtors' estates. The Debtors also
accuse Allied Aviation and certain guarantors of various breaches
of contract. The Guarantors include:
-- Tampa Pipeline Corporation,
-- St. Louis Pipeline Corporation,
-- Illinois Pipeline Corporation,
-- San Antonio Pipeline Corporation,
-- SA Pipeline LP,
-- Illinois Petroleum Supply Corporation,
-- Idaho Pipeline Corporation,
-- Eastern Hydroelectric Corporation,
-- Pipeline Holdings Corporation,
-- Pipeline Management Corporation, and
-- TM & PL Holdings Corporation.
Pursuant to an Amended and Restated Ogden Aviation Fueling
Services Acquisition Agreement, Allied Aviation purchased the
shares of Allied Aviation Services, Inc. formerly known as Ogden
Aviation Services, Inc., Ogden Allied Maintenance Securities
Inc., Ogden Aviation Services Company of Puerto Rico, Allied
Newfoundland and OSCI, as well as Covanta's indirect beneficial
ownership interest in two Panamanian trusts.
Pursuant to Section 12.14 of the Non-PA Agreement, the Guarantors
agreed to jointly and severally, unconditionally and irrevocably
guarantee to Covanta and Ogden Allied "the prompt payment and
performance when due of all present and future obligations . . .
of [Allied Aviation] arising under [the Non-PA Agreement] or the
Ancillary Agreements or in connection with the transactions
contemplated hereby and thereby."
Pursuant to the PA Business Acquisition Agreement dated
November 14, 2002 and closed on December 31, 2002, Allied
Aviation purchased the shares of Ogden Aviation Service Company
of New Jersey, Inc., Ogden Aviation Service Company of New York,
Inc., LaGuardia Fueling Facilities Corp. and Newark Automotive
Fueling Facilities Corporation, and substantially all of the
assets and business operations of Ogden NY -- the JFK Assets --
and assumed certain obligations and liabilities related thereto.
The Guarantors also guaranteed Allied Aviation's obligations to
Covanta, PA Aviation and Ogden NY under the PA Agreement.
Pursuant to the Overhead Services Agreement and prior to the PA
Agreement closing, Allied Aviation agreed to manage certain
operations of the PA businesses for the Debtors' benefit.
The Debtors complain to the Court that Allied Aviation and the
Guarantors harmed them on these instances:
A. Refusal to Turn-over Tax Refunds
Pursuant to the Non-PA Agreement, Allied Aviation agreed
that any tax refunds that it, or the acquired Non-PA
businesses, received relating to taxable periods prior to
December 31, 2001 would be Ogden Allied's property. Allied
Aviation and the Non-PA Business Defendants received tax
tax refunds in excess of CND$2,200,000. However, they
continue to hold these amounts and refuse to pay it to
Covanta and Ogden Allied.
(a) OSCI received a CND$15,716 tax refund:
Amount
Period (in Canadian $)
------ ---------------
March 31, 2002 $5,193
September 23, 2002 258,381
November 26, 2002 4,353
December 16, 2002 149,861
January 17, 2003 147,652
(b) CAFAS, Inc. received a CND$886,198 tax refund:
Amount
Period (in Canadian $)
------ ---------------
July 4, 2002 $130,238
July 31, 2002 276,502
August 8, 2002 142,607
September 16, 2002 336,851
(c) Airconsol received a CND$605,423 tax refund:
Amount
Period (in Canadian $)
------ ---------------
September 20, 2002 $223,727
October 25, 2002 381,696
(d) Allied Newfoundland received a CND$60,568 tax refund:
Amount
Period (in Canadian $)
------ ---------------
July 12, 2002 $13,094
September 10, 2002 47,474
Additional tax refunds for taxable periods prior to
December 31, 2001 and relating to Non-PA businesses or for
taxable periods prior to December 31, 2002 and relating to the
PA businesses may have been received, or may in the future be
received by Allied Aviation or the acquired companies.
Allied Aviation and its acquired Non-PA businesses have
received approximately CND$2,203,345 in tax refunds for the
taxable periods prior to December 31, 2001.
By letter dated January 28, 2003, the Debtors requested a
report and supporting documentation detailing any refunds
or credits that had been received by Allied Aviation or the
Non-PA businesses relating to the taxable periods ending on or
before December 31, 2001. The Debtors demanded that the funds
or credits be returned to them immediately. However, Allied
Aviation has not provided supporting documentation and has not
returned the Tax Refunds to Covanta.
B. Refusal To Turn Over Ogden NY Cash
Pursuant to the PA Agreement, certain Ogden NY assets were
excluded from Allied Aviation's purchase of the JFK Assets.
During the final week of 2002 and prior to the Closing Date of
December 31, 2002, Allied Aviation deposited into bank
accounts, which it controlled and managed pursuant to its
overhead services agreement with Covanta, approximately
$856,000 on Ogden NY's behalf. The Excluded Cash was an
excluded asset that was not sold or assigned to Allied
Aviation or its designee. The Debtors demanded that Allied
Aviation return the Excluded Cash immediately but Allied
Aviation did not do so.
C. Failure to Pay For Transition Services
Pursuant to the Transition Services Agreement, the Debtors
agreed to provide to Allied Aviation certain transition
services for specified periods after the closing of the PA
Agreement. Allied Aviation agreed to reimburse the Debtors
for the costs and expenses attributable to transition
services. The Guarantors guaranteed Allied Aviation's
obligations.
From September 2002 to April 2003, the Debtors provided
Allied Aviation with a Communications and Management
Information Systems. Allied Aviation failed to reimburse
Covanta for the costs of providing these services.
The Debtors demanded that Allied Aviation reimburse Covanta
CND$95,000 for costs and expenses associated with transition
services that has been provided from September 1, 2002 through
the end of January 2003. Covanta has incurred additional
costs and expenses related to transition services provided
since January 2003.
Allied Aviation acknowledges that it owes the Debtors amounts
due under the Transition Services Agreement, but it has not
reimbursed the Debtors for any of these amounts.
D. Refusal to Reimburse Workers' Compensation Expenses
The Non-PA Agreement provides that:
(1) Neither the Debtors nor Ogden Allied will have any
liability for self-insured workers' compensation claims
with respect to the Non-PA businesses acquired by Allied
Aviation; and
(2) Allied Aviation will fully indemnify Ogden Allied, the
Debtors and their subsidiaries, with respect to any
liability, claim, damage or expense of any kind whatsoever
arising out of or relating to workers' compensation claims
assumed by Allied Aviation pursuant to the agreement.
For the period from the closing of the Non-PA businesses sale
through December 31, 2002, the Debtors incurred CND$68,100 in
workers' compensation related expenses relating to claims
that were assumed by Allied Aviation. The Debtors demanded
that Allied Aviation reimburse it for these workers'
compensation related expenses. Allied Aviation has not
indemnified nor reimbursed the Debtors for these expenses.
E. The Dulles Retirees
As part of the Non-PA Agreement, Allied Aviation purchased
the AASI shares. Effective August 7, 1995, AASI entered into
an agreement with the Internal Association of Machinists and
Aerospace Workers District 141, with respect to Washington
National Airport and Washington Dulles Airport. The
Collective Bargaining Agreement provides for certain
health insurance coverage for workers at both National and
Dulles. AASI is currently obligated with the terms of the
Collective Bargaining Agreement.
In May 2002, Allied Aviation notified the Debtors that AASI
would no longer pay the health insurance costs for the Dulles
Retirees who were covered by the Collective Bargaining
Agreement. The Debtors has paid the Dulles Retiree Costs
since May 2002. However, pursuant to the Collective
Bargaining Agreement, the Dulles Retiree Costs are properly
AASI's responsibility.
Turnover Action
Mr. Greenwald argues that pursuant to Section 542(a) of the
Bankruptcy Code:
"Except as provided in subsection (c) and (d) of this
section, an entity, other than a custodian, in possession,
custody, or control, during the case, of property that the
trustee may use, sell, or lease under section 363 of this
title, or that the debtor may exempt under section 522 of
this title, shall deliver to the trustee, and account for,
such property or value of such property, unless such
property is of inconsequential value or benefit to the
estate."
Thus, pursuant to Section 542(a), the Debtors are entitled to
turnover all Tax Refunds and Excluded Cash. The Debtors ask the
Court to:
A. order Allied Aviation and the Non-PA Business Defendants to
turnover to Covanta approximately CND$2,203,345 and
US$856,000;
B. order Allied Aviation and the Non-PA Business Defendants to
provide an accounting of all monies held that are the
property of the Debtors, including all tax refunds of the
Non-PA businesses and the PA businesses relating to taxable
periods prior to December 31, 2001;
C. In the alternative, enter judgment in Covanta's favor
amounting to approximately CND$2,203,345 plus US$856,000,
plus interest; and
D. award the Debtors their reasonable attorneys' fees and
costs.
Breach of the Non-PA Agreement
Because Allied Aviation breached the Non-PA Agreement, the
Debtors ask Judge Blackshear to enter a judgment in their favor
amounting to approximately CND$2,203,345, plus interest; and
award them their reasonable attorneys' fees and costs.
Because of AASI's failure to fulfill the Non-PA Agreement, the
Debtors ask the Court to enter a judgment in their favor
amounting in excess of $42,000, plus interest; order AASI to pay
any Dulles Retiree Costs that may arise in the future; and award
the Debtors their attorneys' fees and costs.
Breach of the PA Agreement
Because Allied Aviation continues to hold the Excluded Cash that
is property of the Debtors, the Debtors ask Judge Blackshear to
enter a judgment in their favor amounting in excess of $856,000,
plus interest; and award them their reasonable attorneys' fees
and costs.
Breach of Transition Services Agreement
As a result of Allied Aviation's breach of the Transition
Services Agreement, the Debtors have been injured in excess of
$133,000, plus interest. The Debtors ask the Court to enter a
judgment in their favor amounting to $133,000; and award them
their reasonable attorneys' fees and costs.
Breach of Contract
Workers' Compensation Expenses
For failure to indemnify them, the Debtors ask the Court to enter
a judgment in their favor and against Allied Aviation amounting
to $68,000; and award the Debtors their attorneys' fees and
costs.
Breach of the Guarantees
Because the Guarantors failed to fulfill their obligations
pursuant to the Agreements, the Debtors ask Judge Blackshear to
enter a judgment in their favor amounting approximately
CND$2,203,345 plus interest and $1,057,000. (Covanta Bankruptcy
News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
DIVINE INC: Pulls Plug on KMPG LLP Engagement as Auditor
--------------------------------------------------------
On June 9, 2003, KPMG LLP, terminated the client-auditor
relationship between it and divine, inc., a Delaware corporation.
KPMG previously served as principal accountants for divine. KPMG's
resignation was not recommended or approved by divine's Board of
Directors nor by any audit or similar committee of divine's Board
of Directors.
According to the Company, during divine's two most recent fiscal
years ended December 31, 2001 and 2000, and the subsequent interim
period through June 9, 2003:
(1) KPMG did not advise divine that the internal controls
necessary for the development of reliable financial statements
did not exist.
(2) KPMG did not advise divine that information had come to its
attention that led it to be unable to rely on management's
representation or that made it unwilling to be associated with
the financial statements prepared by management.
(3) KPMG did not advise divine of the need to expand significantly
the scope of its audit, or that information had come to its
attention that further investigation might materially impact
the fairness or reliability of either previously issued audit
reports or the underlying financial statements, and KPMG did
not so expand the scope of their audit or conduct such further
investigations.
(4) KPMG did not advise divine that information had come to its
attention that it had concluded materially impacts the
fairness or reliability of previously issued audit reports or
the underlying financial statements or the financial
statements issued covering fiscal periods subsequent to the
date of the most recent financial statements covered by an
audit report.
divine inc, an affiliate of RoweCom Inc., is an extended
enterprise company, which serves to make the most of customer,
employee, partner, and market interactions, and through a holistic
blend of Technology, services, and hosting solutions, assist its
clients in extending their enterprise. The Company filed for
Chapter 11 protection on February 25, 2003, in the U.S. Bankruptcy
Court for District of Massachusetts (Boston).
DOMAN INDUSTRIES: Canadian Extends CCAA Stay Until September 22
---------------------------------------------------------------
Doman Industries Limited announced that the Supreme Court of
British Columbia issued an order today, in connection with
proceedings under the Companies Creditors Arrangement Act,
extending the stay of proceedings to September 22, 2003. A copy of
the order may be obtained by accessing the Company's Web site at
http://www.domans.com
The Company sought the extension on the basis that it will require
additional time to adequately consider a new proposal the Company
received on a confidential basis from the Tricap Restructuring
Fund. The proposal is materially different from the proposal
previously received from a group of unsecured noteholders,
including Tricap, and tabled with the Court on November 7, 2002.
In addition, if the new proposal is ultimately accepted by the
Company, further negotiations with representatives of the holders
of unsecured notes, are necessary before a revised plan of
arrangement can be presented to the Court. In the circumstances,
the Company does not expect to be in a position to file a revised
plan of arrangement before September.
Implementation of a revised plan is also dependent on the
implementation of the new forest reform package, recently
introduced by the Government of British Columbia. The timing of
this is uncertain but the Government has indicated that some
regulations will not be available until September.
Doman is an integrated Canadian forest products company and the
second largest coastal woodland operator in British Columbia.
Principal activities include timber harvesting, reforestation,
sawmilling logs into lumber and wood chips, value-added
remanufacturing and producing dissolving sulphite pulp and NBSK
pulp. All the Company's operations, employees and corporate
facilities are located in the coastal region of British Columbia
and its products are sold in 30 countries worldwide.
EL PASO CORP: Will Publish Second Quarter 2003 Results on Aug 13
----------------------------------------------------------------
El Paso Corporation (NYSE: EP) plans to release its second quarter
2003 earnings results before the market opens on August 13, 2003.
The company has scheduled a live webcast to discuss the earnings
results at 10:00 a.m. Eastern Time on August 13. The webcast may
be accessed online through its Web site at http://www.elpaso.com
in the Investors section. A limited number of telephone lines
will also be available to participants by dialing (973) 935-8506
ten minutes prior to the start of the webcast.
A replay of the webcast will be available online through its Web
site in the Investors section. A telephone audio replay will be
also available through August 20, 2003 by dialing (973) 341-3080
(access code 4069279). If you have any questions regarding this
procedure, please contact Margie Fox at (713) 420-2903.
El Paso Corporation (S&P, B+ L-T Corporate Credit Rating,
Negative) 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
EL PASO CORP: Options Start Trading on Pacific Exchange
-------------------------------------------------------
The Pacific Exchange yesterday began trading options on El Paso
Corp. (NYSE: EP; PCX: XPA; XZR; YKP).
El Paso Corp. options will trade on the January expiration cycle
with exercise limits set at 75,000 contracts. The issue is traded
by lead market makers Timothy Brennan and Patrick Hickey of Morgan
Stanley & Co.
El Paso Corporation (S&P, B+ L-T Corporate Credit Rating,
Negative) 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
EMMIS COMMS: May 2003 Quarter Results Enter Positive Territory
--------------------------------------------------------------
Effective July 1, 2003, Emmis Communications Corporation acquired,
for a purchase price of $105.2 million, a controlling interest of
50.1% in a partnership that owns six radio stations in the Austin,
Texas metropolitan area. These six stations are KLBJ-AM, KLBJ-FM,
KXMG-FM, KROX-FM, KGSR-FM and KEYI-FM. Emmis financed the
acquisition through borrowings under its credit facility and the
acquisition will be accounted for as a purchase. In addition,
Emmis has the option, but not the obligation, to purchase its
49.9% partner's entire interest in the partnership after a period
of approximately five years based on an 18-multiple of trailing
12-month cash flow.
On June 6, 2003 EOC amended its credit facility to allow for the
acquisition of the controlling interest in the Austin partnership,
as described above. Specifically, the amendment increased the
amount of Investments (as defined in the credit facility) that EOC
could make to allow for the investment in the partnership. In
addition to permitting the Austin acquisition, the amendment
provided additional room under certain financial covenants
applicable to the Revolver, Term A loan and Term B loan. More
specifically, required decreases in senior leverage and total
leverage ratios were delayed from November 30, 2003 to June 1,
2004.
Effective June 5, 2003, Emmis sold its mobile television
production company, Mira Mobile Television, to Shooters Production
Services, Inc. for $3.9 million in cash, plus payments for working
capital. Emmis received $3.3 million of the purchase price at
closing and received a promissory note due October 31, 2005 for
the remaining $0.6 million. Emmis had acquired this business in
connection with the Lee acquisition in October 2000. The book
value of the long-lived assets as of May 31, 2003 was $3.1 million
and the operating performance of Mira Mobile was not material to
the Company.
On a consolidated basis, the Company's net revenues for the three
months ended May 31, 2003 increased $5.6 million, or 4.1%, due to
the effect of the items described above.
Station operating expenses, excluding noncash compensation:
Radio station operating expenses, excluding noncash compensation,
increased $0.8 million, or 2.2%, for the three months ended May
31, 2003. Reported results for the prior year included $0.7
million in operating expenses for Emmis' Denver radio stations
that was sold in May 2002. The increase relates to higher sales-
related costs and higher insurance and
health-related costs.
Television station operating expenses, excluding noncash
compensation, increased $1.4 million, or 3.9%, for the three
months ended May 31, 2003. This increase is principally due to
higher programming costs and higher insurance and health-related
costs.
Publishing operating expenses, excluding noncash compensation,
increased $1.1 million, or 7.3%, for the three months ended May
31, 2003. The Company's publishing division has replaced lost
national advertising revenues with revenues from custom
publications and special advertiser sections, which are more
expensive to produce due principally to editorial and production
costs. Emmis' publishing division also experienced higher
insurance and health-related costs.
On a consolidated basis, station operating expenses, excluding
noncash compensation, for the three months ended May 31, 2003
increased $3.3 million, or 3.9%, due to the effect of the items
described above.
Noncash compensation expenses:
Noncash compensation expenses for the three months ended May 31,
2003 were $7.1 million compared to $5.4 million for the same
period of the prior year, an increase of $1.7 million, or 31.9%.
In the three months ended May 31, 2003, $2.4 million, $2.4
million, $0.9 million and $1.4 million was attributable to radio,
television, publishing and corporate divisions, respectively. In
the three months ended May 31, 2002, $2.4 million, $1.7 million,
$0.7 million and $0.6 million was attributable to radio,
television, publishing and corporate divisions, respectively.
Noncash compensation includes compensation expense associated with
restricted common stock issued under employment agreements, common
stock issued to employees at Company discretion, Company matches
in the 401(k) plan, and common stock issued to employees pursuant
to the Company's stock compensation program. The stock
compensation program resulted in noncash compensation expense of
approximately $4.4 million and $4.5 million for the three months
ended May 31, 2002 and 2003, respectively. Effective March 1,
2003, Emmis discontinued its profit sharing plan, but doubled its
401(k) match to $2 thousand per employee, with one-half of the
contribution made in Emmis stock. This resulted in approximately
$1 million of additional noncash compensation expense in the three
months ended May 31, 2003 over the same period in the prior year.
The remaining increase of $0.7 million is primarily attributable
to expense associated with restricted stock issued under
employment agreements signed during the quarter.
Corporate expenses, excluding noncash compensation:
Corporate expenses, excluding noncash compensation, for the three
months ended May 31, 2003 were $5.8 million compared to $5.1
million for the same period of the prior year, an increase of $0.7
million, or 12.3%. These costs increased due to higher insurance
and health care costs, professional fees associated with
evaluating new business opportunities, merit increases and funding
for training and diversity initiatives.
Depreciation and amortization:
Radio depreciation and amortization expense for the three months
ended May 31, 2003 was $2.0 million compared to $2.1 million for
the same period of the prior year, a decrease of $0.1 million, or
5.7%. Although radio depreciation and amortization expense
decreased slightly in the first fiscal quarter, the Company
expects it to be higher for the remainder of the fiscal year as a
result of the Austin radio acquisition, which closed in July 2003.
Actual amounts will depend on the allocation of the purchase price
based on the appraisal of the assets, which has not yet been
finalized.
Television depreciation and amortization expense for the three
months ended May 31, 2003 was $7.7 million compared to $6.9
million for the same period of the prior year, an increase of $0.8
million, or 10.4%. The increase was mainly attributable to
depreciation of equipment purchased for the conversion of Emmis'
analog equipment to digital equipment.
Publishing depreciation and amortization expense for the three
months ended May 31, 2003 was $0.2 million compared to $0.6
million for the same period of the prior year, a decrease of $0.4
million, or 63.2%. The decrease was mainly attributable to certain
intangible assets becoming fully amortized during fiscal 2003.
Corporate depreciation and amortization expense for the three
months ended May 31, 2003 was $1.5 million compared to $1.1
million for the same period of the prior year, an increase of $0.4
million, or 31.8%. The increase was mainly attributable to higher
depreciation expense related to computer equipment and software
purchases over the past twelve months.
On a consolidated basis, depreciation and amortization expense for
the three months ended May 31, 2003 was $11.4 million compared to
$10.8 million for the same period of the prior year, an increase
of $0.6 million, or 5.5%, due to the effect of the items described
above.
Operating income:
Radio operating income for the three months ended May 31, 2003 was
$25.0 million compared to $23.8 million for the same period of the
prior year, an increase of $1.2 million, or 5.2%. This increase is
attributable to higher net revenues, partially offset by higher
station operating expenses, as discussed above.
Television operating income for the three months ended May 31,
2003 was $12.0 million compared to $11.7 million for the same
period of the prior year, an increase of $0.3 million, or 2.2%.
This increase was driven by higher net revenues, partially offset
by higher station operating expenses, higher noncash compensation
and higher depreciation and amortization expense, as discussed
above.
Publishing operating income for the three months ended May 31,
2003 was $0.2 million compared to $0.6 million for the same period
of the prior year, a decrease of $0.4 million, or 72.2%. The
decrease was primarily attributable to the shift in revenue mix.
On a consolidated basis, operating income for the three months
ended May 31, 2003 was $28.5 million compared to $29.2 million for
the same period of the prior year, a decrease of $0.7 million, or
2.4%. This decrease principally related to the changes in radio,
television and publishing operating income and higher corporate
expenses and higher noncash compensation expense, as discussed
above.
Interest expense:
With respect to Emmis, interest expense for the three months ended
May 31, 2003 was $22.8 million compared to $29.9 million for the
same period of the prior year, a decrease of $7.1 million, or
23.9%. This decrease is attributable to a decrease in the interest
rates Emmis pay on amounts outstanding under its credit facility,
which is variable rate debt, and repayments of amounts outstanding
under its credit facility and its senior discount notes. The
decreased interest rates reflected both a decrease in the base
interest rate for its credit facility due to a lower overall
interest rate environment, and a decrease in the margin applied to
the base rate resulting from the June 2002 credit facility
amendment. A portion of the decrease in interest expense is
attributable to the expiration of interest rate swap agreements
originally entered into in fiscal 2001. These swaps, which began
expiring in February 2003, had an original aggregate notional
amount of $350.0 million and fixed LIBOR at a weighted-average
4.76%. As of May 31, 2003, outstanding swaps totaled $190.0
million and fixed LIBOR at a weighted-average 4.72%. These
remaining contracts expire during the remainder of fiscal 2004. In
the quarter ended May 31, 2002, the Company repaid amounts
outstanding under its credit facility with the proceeds of the
Denver radio asset sales in May 2002 and a portion of the proceeds
from its equity offering in April 2002, with the remaining portion
being used to reduce amounts outstanding under its senior discount
notes in the quarter ended August 31, 2002. Emmis reduced its
total debt outstanding by $270.6 million during the year ended
February 28, 2003. With respect to EOC, interest expense for the
three months ended May 31, 2003 was $16.3 million compared to
$22.4 million for the same period of the prior year, a decrease of
$6.2 million or 27.6%. This decrease is also primarily
attributable to a decrease in the interest rates Emmis pays on
amounts outstanding under its credit facility, and repayments of
amounts outstanding under the credit facility. The difference
between interest expense for Emmis and EOC is due to interest
expense associated with the senior discount notes, for which ECC
is the obligor, and thus it is excluded from the results of
operations of EOC.
Income before income taxes and accounting change:
With respect to Emmis, income before income taxes and accounting
change for the three months ended May 31, 2003 was $5.6 million
compared to $4.2 million for the same period in the prior year, an
increase of $1.4 million, or 32.5%. The increase is mainly
attributable to better operating results at its stations and a
reduction in interest expense as a result of the factors described
above, partially offset by the gain on sale of the Denver radio
assets of $8.9 million included in the prior year. With respect to
EOC, income before income taxes and accounting change for the
three months ended May 31, 2003 was $12.1 million compared to
$11.7 million for the same period in the prior year, an increase
of $0.4 million, or 3.4%. The increase is mainly attributable to
better operating results at its stations and a reduction in
interest expense as a result of the factors described above,
partially offset by the gain on sale of the Denver radio assets of
$8.9 million included in the prior year.
Net income (loss):
With respect to Emmis, net income was $0.4 million for the three
months ended May 31, 2003, compared to a net loss of $167.8
million in the prior year. The increase in net income is mainly
attributable to (1) the inclusion in the prior year of a $167.4
million impairment charge, net of a deferred tax benefit, under
the cumulative effect of accounting change as an accumulated
transition adjustment attributable to the adoption on March 1,
2002 of SFAS No. 142, "Goodwill and Other Intangible Assets" and
(2) better operating results at its stations and a reduction in
interest expense as a result of the factors described above,
partially offset by the gain on sale of the Denver radio assets of
$8.9 million included in the prior year, all net of tax. With
respect to EOC, net income was $6.8 million for the three months
ended May 31, 2003, compared to a net loss of $160.5 million in
the prior year. The increase in net income is mainly attributable
to (1) the inclusion in the prior year of a $167.4 million
impairment charge, net of a deferred tax benefit, under the
cumulative effect of accounting change as an accumulated
transition adjustment attributable to the adoption on March 1,
2002 of SFAS No. 142, "Goodwill and Other Intangible Assets" and
(2) better operating results at its stations and a reduction in
interest expense as a result of the factors described above,
partially offset by the gain on sale of the Denver radio assets of
$8.9 million included in the prior year, all net of tax.
Liquidity and Capital Resources
Our primary sources of liquidity are cash provided by operations
and cash available through revolver borrowings under our credit
facility. Our primary uses of capital have been historically, and
are expected to continue to be, funding acquisitions, capital
expenditures, working capital and debt service and, in the case of
ECC, preferred stock dividend requirements. Since we manage cash
on a consolidated basis, any cash needs of a particular segment or
operating entity are met by intercompany transactions. See
Investing Activities below for a discussion of specific segment
needs.
At May 31, 2003, we had cash and cash equivalents of $9.4 million
and net working capital for Emmis and EOC of $37.3 million and
$38.4 million, respectively. At February 28, 2003, we had cash and
cash equivalents of $16.1 million and net working capital for
Emmis and EOC of $28.0 million and $29.1 million, respectively.
The increase in net working capital primarily relates to lower
accrued interest, since semi-annual interest on our senior
subordinated notes was paid in March 2003, and lower accrued
salaries and commissions, since year-end bonuses were paid prior
to May 31, 2003.
As previously reported in Troubled Company Reporter, Standard &
Poor's Ratings Services assigned its single-'B'-plus bank loan
rating to the $500 million senior secured term loan B of Emmis
Operating Co. All other ratings on Emmis and its parent company,
Emmis Communications Corp., including the single-'B'-plus
corporate credit rating, were affirmed. The outlook is stable.
ENRON: Reaches Settlement with Marlin Water Trust Noteholders
-------------------------------------------------------------
Enron has reached a settlement resolving certain claims and
disputes relating to notes issued by the Marlin Water Trust, a
special purpose vehicle established by Enron.
Under the proposed settlement, holders of Marlin notes would
receive approximately $127.5 million in cash. The cash portion of
the settlement includes the proceeds of certain collateral held by
The Bank of New York, as Indenture Trustee, and the payment of
amounts owed by Azurix Corp., a non-debtor affiliate of Enron.
Additionally, The Bank of New York, as Indenture Trustee, at the
direction of holders of 69 percent of the Marlin notes, has agreed
to reduce its $1.1 billion claim to a $507.5 million general
unsecured claim.
"We are pleased to have reached a settlement, which will help
avoid lengthy and costly litigation," said Stephen F. Cooper,
acting CEO of Enron. "We remain hopeful that we will also be
successful in settling claims that have arisen from other special
purpose entities."
Enron has filed a motion with the U.S. Bankruptcy Court seeking
approval of the settlement. The parties to the settlement are
Enron, the Official Unsecured Creditors' Committee, The Bank of
New York, as Indenture Trustee, and holders of approximately 69
percent of the Marlin notes. The full motion and proposed
settlement agreement can be viewed at
http://www.enron.com/corp/pressroom/Marlin9019Motion.pdf
Marlin Water Trust is a special purpose entity established by
Enron in 1998 to refinance a portion of the purchase price of
Wessex Water, which was the cornerstone asset in Azurix Corp.
For more information on Enron, visit http://www.enron.com
ENRON CORP: Provides Summary and Overview of Chapter 11 Plan
------------------------------------------------------------
Given the diverse creditor body and the myriad of complex issue
imposed by these Chapter 11 cases, Enron Corporation and debtor-
affiliates, and the Creditors' Committee, along with the ENA
Examiner, spent the past year conducting extensive due diligence
and negotiations regarding the Chapter 11 Plan and related
matters. Thus, Stephen F. Cooper, Acting President, Acting Chief
Executive Officer and Chief Restructuring Officer of Enron Corp.,
asserts that the Plan represents the culmination of these efforts
and reflects agreements and compromises reached, among which are:
A. Substantive Consolidation
The Plan Currency to be distributed to each holder of an
Allowed General Unsecured Claim against each Debtor will equal
to the sum of:
(a) 70% of the distribution the holder would receive if the
Debtors were not substantively consolidated; and
(b) 30% of the distribution the holder would receive if all
of the Debtors' estates were substantively consolidated.
The term Plan Currency is defined as the mixture of Cash,
InternationalCo Common Stock, CrossCountry Common Stock and
PGE Common Stock to be distributed to holders of Allowed
General Unsecured Claims, Allowed Enron Guaranty Claims,
Allowed Wind Guaranty Claims and Allowed Intercompany Claims
pursuant to the Plan; provided, however, that, if jointly
determined by the Debtors and the Creditors' Committee, "Plan
Currency" may include InternationalCo Trust Interests,
CrossCountry Trust Interests, PGE Trust Interests and the
Remaining Asset Trust Interests.
B. Related Issues
The compromise and settlement of the substantive consolidation
issue the Plan sets encompasses a global settlement of
numerous issues related to or impacted by substantive
consolidation, including, without limitation, characterization
of Intercompany Claims, treatment of Enron Guaranty Claims and
Wind Guaranty Claims, transactions involving certain of the
Debtors' tax-related structures and ownership of certain
claims and causes of action.
C. Intercompany Claims
The Plan Currency to be distributed to each holder of an
Intercompany Claim against another Debtor will equal 70% of
the distribution that holder would receive if the Debtors
were not substantively consolidated.
D. Enron Guaranty Claims/Wind Guaranty Claims
The Plan Currency to be distributed to each holder of an
Allowed Enron Guaranty Claim or an Allowed Wind Guaranty
Claim will equal the sum of:
(a) 70% of the distribution the holder would receive if the
Debtors were not substantively consolidated; and
(b) 15% of the distribution the holder would receive if all
of the Debtors' estates were substantively consolidated.
E. Ownership of Certain Assets
For purposes of calculating the Distributive Assets of ENE and
ENA, the Debtors will take, or cause to be taken, an action as
is appropriate to reflect that:
(a) ENA's Assets will include ENE's preferred stock interests
in Enron Canada, either through a capital contribution or
otherwise;
(b) The preferred stock interests in Enron Canada ECPC held
and the preferred stock interests in ECPC held by Enron
Canada will be deemed cancelled or otherwise returned to
their issuers; provided, however, that, if the
cancellation or return leaves ECPC with insufficient funds
to satisfy third-party obligations, Enron Canada will
contribute the monies to ECPC as are necessary as to
satisfy those third-party obligations;
(c) To the extent that proceeds are received in connection
with the sale or contribution of CPS, ENE and ENA Assets
will each include 50% of the proceeds thereof, net of the
payment of third-party obligations; and
(d) To the extent that proceeds are received in connection
with the sale or contribution of CPS, ENA's Assets will
include all the proceeds thereof, net of the payment of
third-party obligations.
F. Ownership of Certain Litigation Claims
The Litigation Trust Claims and the Special Litigation Trust
Claims will be deemed owned by all of the Debtors and the
proceeds therefrom, if any, will be distributed ratably, on a
Consolidated Basis, to holders of Allowed General Unsecured
Claims.
G. Plan Currency
By virtue of and integral to the compromise and settlement of
the substantive consolidation issue set forth in the Plan,
except as provided in Section 7.2 of the Plan with respect to
ENA and certain of its subsidiaries, each holder of an Allowed
General Unsecured Claim against each Debtor will receive the
same Plan Currency regardless of the asset composition of that
Debtor's estate on or subsequent to the Effective Date.
H. Inter-Debtor Waivers
By virtue of and integral to the compromise and settlement of
the substantive consolidation issue set forth in the Plan, on
the Effective Date:
(a) each Debtor will waive any defense, including, without
limitation, defenses arising under Sections 502(d) and
553(a) of the Bankruptcy Code, to Intercompany Claims
asserted by another Debtor,
(b) Intercompany Claims between reciprocal Debtors will be
deemed to be mutual claims arising prior to the Initial
Petition Date for purposes of set-off, and
(c) each of the Debtors will waive its right to receive
distributions on any claims and causes of action the
Debtor may have against another Debtor arising in
accordance with Sections 509, 544, 547, 548 and 553(b) of
the Bankruptcy Code, without waiving or releasing any
claims and causes of action against non-Debtor parties.
Mr. Cooper clarifies that on the Effective Date, the Debtors'
estates will not be deemed to be substantively consolidated for
Plan purposes; provided, however, that, as part of the compromise
and settlement embodied in the Plan, Allowed Claims and Allowed
Equity Interests holders will receive a portion of their
distributions based on the hypothetical pooling of the Debtors'
assets and liabilities. Any Claims against one or more of the
Debtors based on a guaranty, indemnity, co-signature, surety or
otherwise, of Claims against another Debtor will be treated as
separate and distinct Claims against the Debtors' Estate and will
be entitled to distributions under the Plan in accordance with
the Plan provisions.
After Plan confirmation, Mr. Cooper tells the Court that a five-
member board of directors of Reorganized ENE will be appointed.
The Debtors will designate four of the directors after
consultation with the Creditors' Committee while the Debtors will
designate one of the directors after consultation with the ENA
Examiner. The roles of the ENE Examiner and the ENA Examiner
will be phased out after Plan confirmation, and the Creditors'
Committee will be dissolved on the Plan Effective Date.
The Debtors and the Creditors' Committee believe that the Plan is
fair and reasonable because:
(a) The benefits obtained from avoiding an estate-wide
litigation by Creditors with conflicting interests cannot
be overemphasized. If a compromise had not been reached,
the cost, delay, and uncertainty attendant to litigating
the complex inter-estate issues resolved by the Plan would
have resulted in substantially lower recoveries for most,
if not all, Creditors;
(b) The Plan Currency feature of the global compromise
promotes efficiency without being unfair or inequitable;
and
(c) The allocation of the Litigation Trust Interests and
Special Litigation Trust Interests on a pro rata basis
to holders of Allowed General Unsecured Claims of the
Debtors is a feature of the global compromise that
provides significant benefits to Creditors that may not
otherwise have shared in the potential proceeds from the
litigation. (Enron Bankruptcy News, Issue No. 75;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
EXIDE: Court Okays Payment of Exit Financing Due Diligence Fees
---------------------------------------------------------------
Exide Technologies and its debtor-affiliates obtained permission
from the Court to pay up to $750,000 to the Proposed Exit Facility
Lenders, or $250,000 for each Proposed Exit Facility Lender, to
cover these costs.
Backgrounder
Since the Petition Date, Exide Technologies and its debtor-
affiliates have been diligently working to move their cases
forward. The Debtors are currently in the process of formulating
their plans of reorganization. Pursuant to the contemplated plan
of reorganization, the Debtors will emerge from these Chapter 11
cases as competitive companies with a de-leveraged capital
structure.
Pursuant to the terms of any plan, the Reorganized Debtors
anticipate that they will be funded with post-confirmation
financing comprised of:
A. a term loan facility amounting to $450,000,000;
B. a revolving credit facility ranging from $100,000,000 to
$150,000,000;
C. unsecured senior note financing amounting to $200,000,000;
and
D. other facilities as are customary under these
circumstances.
These financings will be used to fund confirmation of the Plan and
provide the Reorganized Debtors with the working line of credit
that they will need to seamlessly continue with their daily
operations.
The Debtors have kept the identity of these Proposed Exit Facility
Lenders confidential. (Exide Bankruptcy News, Issue No. 27;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
EXODUS COMMS: Millennium Tech. Acquires More Equity in Aventail
---------------------------------------------------------------
Millennium Technology Ventures, L.P., has acquired shares of
Series E Convertible Preferred stock in Seattle-based Aventail
Corporation that were previously held by EXDS, Inc., formerly
known as Exodus Communications Inc. Aventail is the recognized
leader in providing secure, mobile, anywhere access to corporate
data and websites through SSL VPN technology and a variety of
extranet products and services.
Both Millennium Technology Ventures, L.P., as well as Exodus
Communications, Inc., participated in Aventail's Series E
financing that closed in 2001. Approximately $55 million was
raised in that round two years ago from a strong group of new and
existing investors. Aventail still has substantial cash resources
from that prior financing.
"We are pleased to have this opportunity to add to our existing
interest in Aventail," said Sam Schwerin, a Managing Partner of
Millennium Technology Ventures Advisors, LLC. Schwerin, who
negotiated the transaction on behalf of the New York-based venture
capital fund, added, "Aventail is a proven leader, experiencing
substantial sales traction with customers who are among the most
sophisticated buyers of information technology products and
services. Acquiring additional shares from a distressed seller is
likely to be highly additive to returns on our investment in this
high quality company. It is also consistent with an initiative we
have undertaken at Millennium to work creatively with distressed
sellers as well as others whose strategies have changed and who
now wish to find an exit from the difficult venture capital
environment."
Dan Burstein, Founder and Managing Partner of Millennium noted,
"We have been investing in Aventail through Millennium and its
predecessor funds for over five years. The company is now well-
positioned at the intersection of the two great trends in IT--
security and mobility--to achieve breakout success. I believe
there are more than a few diamonds in the rough to be found in the
wreckage of the post-bubble environment. We are actively looking
at ways Millennium can work with distressed and otherwise
motivated sellers to add good quality companies to our portfolio."
FLEETWOOD: Intends Vigorously Assert Claims in Coleman Lawsuit
--------------------------------------------------------------
Fleetwood Enterprises (NYSE: FLE) and Fleetwood Folding Trailers
announced that while they had not intended to further comment on
the pending Coleman litigation, they believe it is necessary to
correct The Coleman Company's press release Monday.
Fleetwood indicated that Coleman had taken a quote out of context
and that the judge has not in fact ruled on the issues between the
parties. As Fleetwood had previously announced, the judge denied
both sides' requests for injunctions, including Coleman's request
for an order that Fleetwood cease any further use of the Coleman
name and logo. Instead, the judge ruled that the parties' rights
and obligations should be resolved at a future trial.
Fleetwood confirmed that it intends to vigorously assert its
claims, including its right to use the Coleman name and logo, as
well as its claim that Coleman does not have the right to license
other RV manufacturers to use the Coleman name. Fleetwood stated
that it would take all appropriate legal action against any other
RV manufacturer that may attempt to license the Coleman name until
the issues between Fleetwood and Coleman are properly resolved.
As reported in Troubled Company Reporter's March 28, 2003 edition,
Fleetwood Enterprises' lenders in its syndicated revolving line of
credit agreed to restate the financial covenant relating to
earnings before interest, taxes, depreciation and amortization
(EBITDA).
The Company had previously indicated that it did not expect to
meet that covenant following its fourth fiscal quarter ending
April 27, 2003. Fleetwood now anticipates that it will meet the
revised covenant through the remaining term of the credit
facility, which is scheduled to expire in July 2004. Fleetwood
also amended its inventory financing agreement with Textron
Financial, which incorporated the same covenant.
HARBISON-WALKER: Seeks Stay Extension Until September 30, 2003
--------------------------------------------------------------
Halliburton (NYSE: HAL) reached an agreement with DII Industries,
Harbison-Walker Refractories Company and the Official Committee of
Asbestos Creditors that was presented for the Harbison-Walker
bankruptcy court's approval at a Status Conference yesterday at
1:00 p.m. As of press time, no Court decision has been made.
The agreement provides for the extension, subject to bankruptcy
court approval, of the court's temporary restraining order until
September 30, 2003. The temporary restraining order will expire if
a pre-packaged Chapter 11 filing by Halliburton's subsidiaries DII
Industries, Kellogg Brown & Root and certain of their subsidiaries
is not made on or prior to September 30, 2003. The parties to the
agreement, however, retain the right to request the bankruptcy
court to extend the stay beyond September 30, 2003. The court's
temporary restraining order, which was originally entered on
February 14, 2002, stays more than 200,000 pending asbestos claims
against DII Industries.
Other terms of the agreement, which are not subject to bankruptcy
court approval, require DII Industries to fund the remaining $30
million under the existing debtor-in-possession financing to
Harbison-Walker by July 31, 2003 and DII Industries to purchase an
approximately $50 million insurance receivable from Harbison-
Walker. The agreement requires DII Industries to purchase the
insurance receivable on the earliest of the effective date of a
Harbison-Walker plan of reorganization, the effective date of a
DII Industries plan of reorganization, or December 31, 2003.
In December 2002, Halliburton announced that it had reached an
agreement in principle that, if and when consummated, would result
in a settlement of asbestos and silica personal injury claims
against DII Industries, Kellogg Brown & Root and their current and
former subsidiaries with U.S. operations.
Halliburton, founded in 1919, is one of the world's largest
providers of products and services to the petroleum and energy
industries. The company serves its customers with a broad range of
products and services through its Energy Services Group and
Engineering and Construction Group business segments. The
company's World Wide Web site can be accessed at
http://www.halliburton.com
HASBRO INC: Second Quarter 2003 Results Reflect Strong Growth
-------------------------------------------------------------
Hasbro, Inc. (NYSE: HAS) reported strong second quarter results.
Worldwide net revenues were $581.5 million, up 7% from $546.0
million a year ago. The net income for the quarter was $11.4
million, compared to a loss of $25.9 million last year, and the
net income per diluted share was $0.06, compared to a loss of
$0.15 per diluted share in 2002. The 2002 results include a net,
after-tax charge of $21.0 million, or $0.12 per diluted share,
related to a decline in the value of the Company's investment in
Infogrames Entertainment SA, as partially offset by interest
income on a tax settlement from the Internal Revenue Service. The
Company reported second quarter Earnings Before Interest, Taxes,
Depreciation and Amortization (EBITDA) of $66.8 million for the
quarter, compared to $29.4 million in 2002. The attached schedules
provide a reconciliation of EBITDA to net income for the second
quarter and year to date.
For the first half, worldwide net revenues were $1.043 billion,
compared to $998.3 million a year ago. Net income for the first
half was $12.6 million or $0.07 per diluted share, compared to a
loss of $42.9 million or $0.25 per diluted share a year ago before
the effect of an accounting change. First half EBITDA was $114.2
million, compared to $64.3 million last year.
"I am pleased with our second quarter performance and our progress
for the first half of the year," said Alfred J. Verrecchia,
Hasbro's President and Chief Executive Officer. "We had good
growth in many of our core brands, as well as in new products such
as BEYBLADE and FURREAL FRIENDS. All of this increases my
confidence in our ability to deliver on our plan for the year."
"Our innovation is paying off as we create and enter new
categories and segments in both toys and games, and reinvent
existing brands. With new products running the gamut from BEYBLADE
to the latest in TRANSFORMERS and VIDEO NOW -- a personal, disc
based video player, we are successfully gaining shelf space and
growing the top line," Verrecchia concluded.
Revenues in the U.S. Toys segment increased in the quarter to
$208.4 million, compared to $199.6 million a year ago. The segment
reported operating profit of $12.9 million compared to $14.6
million last year. The expected revenue decline due to STAR WARS
was offset by strength in BEYBLADE and sales of certain core
product lines including TRANSFORMERS and PLAYSKOOL, as well as
continuing strong sales of FURREAL FRIENDS.
Revenues in the Games segment were $148.6 million for the quarter,
compared to $152.0 million a year ago. Board game revenues
remained strong, led by TRIVIAL PURSUIT 20TH ANNIVERSARY EDITION.
Non-licensed trading card games were up, but licensed trading card
games including POKEMON were down. The Games segment reported
improved operating profit of $25.4 million compared to $22.4
million last year.
International segment revenues were $203.8 million for the
quarter, compared to $174.3 million a year ago. This increase of
17% includes the positive impact of foreign exchange of $23.6
million. Absent this impact, revenues increased 3% to $180.3
million. The segment experienced strength in BEYBLADE and sales of
certain core product lines including MAGIC: THE GATHERING trading
card games, TRANSFORMERS and PLAYSKOOL. The International segment
operating loss declined to $4.8 million compared to a loss of
$17.3 million a year ago.
"We are pleased with the financial progress we have made this year
and we remain on target with our cost cutting and debt reduction
initiatives," said David Hargreaves, Hasbro's Chief Financial
Officer.
"Our second quarter revenue growth of 7% was a significant
achievement given the difficult year-over-year comparison
associated with the decline in revenues from major entertainment
properties. In fact, the growth in our core brands and new
products more than offset the anticipated -- and realized --
reduction in Star Wars revenue."
"Looking forward, because of the challenging economic and retail
environments and with approximately two-thirds of our business yet
to ship, we have not significantly changed our expectations for
the year," Hargreaves concluded.
Hasbro is a worldwide leader in children's and family leisure time
and entertainment products and services, including the design,
manufacture and marketing of games and toys ranging from
traditional to high-tech. Both internationally and in the U.S.,
its PLAYSKOOL, TONKA, SUPER SOAKER, MILTON BRADLEY, PARKER
BROTHERS, TIGER and WIZARDS OF THE COAST brands and products
provide the highest quality and most recognizable play experiences
in the world.
As reported in Troubled Company Reporter's May 5, 2003 edition,
Hasbro, Inc.'s $380 million 'BB+' rated secured bank credit
facility and 'BB' rated senior unsecured debt were affirmed by
Fitch Ratings.
As of March 30, 2003, Hasbro had total debt outstanding of
approximately $876 million. The Rating Outlook was revised to
Stable from Negative, reflecting the progress Hasbro has made in
reducing debt as well as the apparent stabilization of revenues
following significant declines in 2000 and 2001.
The ratings reflected Hasbro's strong market presence and its
diverse portfolio of brands coupled with its improved financial
profile. The ratings also considered the challenges Hasbro
continues to face in refocusing its strategy on its core brands
and the dynamic nature of the toy industry.
HEXCEL CORP: June 30 Net Capital Deficit Narrows to $91 Million
---------------------------------------------------------------
Hexcel Corporation (NYSE/PCX: HXL) reported net sales for the
second quarter, 2003 of $234.1 million as compared to $221.2
million for the 2002 second quarter. Had the same U.S. dollar,
British pound and Euro exchange rates applied in the second
quarter of 2003 as in the second quarter of 2002, revenues for the
second quarter of 2003 would have been $12.1 million lower at
$222.0 million.
Net income for the quarter was $4.8 million compared to net income
of $5.3 million for the same quarter of 2002. In the second
quarter, 2003 the Company recorded other income of $3.2 million,
while second quarter, 2002 results included a $9.8 million
litigation gain. After reflecting deemed preferred dividends and
accretion associated with our issuance in March 2003 of
mandatorily redeemable convertible preferred stock, net income
available to common shareholders for the second quarter of 2003
was $1.8 million, or $0.05 per diluted common share, compared to
$0.14 per diluted common share for the second quarter of 2002.
Gross margin for the second quarter of 2003 was $47.6 million
compared with $44.8 million for the same period last year. In both
periods, gross margin as a percentage of sales was 20.3%.
Operating income for the second quarter of 2003 was $18.8 million
as compared to $19.5 million for the same quarter last year.
Business consolidation and restructuring expenses for the quarter
were $0.7 million compared to $0.1 million in the second quarter
of 2002. Depreciation expense for the quarter at $12.9 million was
$1.2 million higher than the second quarter of 2002 expense of
$11.7 million, due to the changes in exchange rates and
accelerated depreciation associated with certain of the Company's
restructuring actions.
During the 2003 second quarter, the Company recognized a $1.8
million gain on the sale of certain assets and a $1.4 million gain
resulting from the expiration of a contingent liability resulting
from the prior sale of a business. In the second quarter 2002,
reported results included a $9.8 million litigation gain in
connection with a contract dispute arising from a prior
acquisition. These items are reported as other income. Excluding
these nonrecurring items and business consolidation and
restructuring expenses, the Company's pretax income for the second
quarter of 2003 was $5.6 million, compared to pretax income of
$4.3 million in the comparable 2002 quarter.
The provision for income taxes was $2.9 million in the quarter
compared to $3.1 million in the second quarter of 2002. The
Company will continue to increase its tax provision rate through
the establishment of a non-cash valuation allowance attributable
to currently generated U.S. net operating losses until its U.S.
operations have returned to consistent profitability.
Hexcel Corp.'s June 30, 2003 balance sheet shows a total
shareholders' equity deficit of about $91 million, as opposed to
$127 million recorded six months ago.
Chief Executive Officer Comments
Commenting on Hexcel's second quarter results, Mr. David E.
Berges, Chairman, President and Chief Executive Officer, said, "On
a constant currency basis, our revenues this quarter were
approximately the same as last year. Before the impact of higher
depreciation and restructuring expenses, operating profitability
improved year-on-year. We continue to focus on controlling cost
with our headcount as of June 30, 2003 down to 4,180 employees,
2.5% lower than March 31, 2003 and 9.7% lower than June 30, 2002.
Improvements in operating costs and productivity offset the impact
of upward cost pressures in areas such as energy, insurance and
pension expense."
Mr. Berges continued, "We had another solid quarter of cash
generation reducing total debt net of cash by almost $22 million.
We will continue to focus on generating cash to reduce
indebtedness and to provide the resources for future investment."
Mr. Berges concluded, "After adjusting for changes in foreign
exchange rates, our first half revenues came within 2% of last
year, on the high end of our expectations. While we remain
cautious due to uncertainty in some of our markets, we now expect
revenues to be in the $850 - $900 million range if exchange rates
continue at present levels. The impact of the changes in foreign
exchange rates on operating profitability has been more modest. We
estimate the year to date net impact on operating income to be
insignificant; with the gross impact on reported revenues,
expenses and working capital balances estimated to be greater."
Revenue Trends
While reported consolidated revenues for the quarter were 5.8%
higher than the second quarter of 2002, in constant currency
terms, they were at approximately the same level. Commercial
aerospace revenues were lower in constant currency terms than last
year primarily due to lower sales by the Structures business
segment. Space and Defense revenues increased year-on-year in both
the U.S. and Europe, in part due to demand from the F-22 and the
Eurofighter programs. Our Industrial market showed pockets of both
strength and weakness, while our Electronics market performed
consistently with the past quarters.
The second quarter is often the seasonally strongest revenue
quarter of the year for the Company, while the third quarter is
usually the Company's lowest revenue quarter due to factors
including the European vacation period.
Investments in Affiliated Companies
Equity in losses of affiliated companies was $0.4 million for the
second quarter of 2003, reflecting primarily losses reported by
the Company's joint ventures in China and Malaysia as they
continue to ramp up production of aerospace composite structures.
Equity in losses of affiliated companies was $5.6 million in the
second quarter of 2002, which included a non-cash write-down of
$4.0 million. These losses by affiliated companies do not affect
the Company's cash flows.
In July 2003, the Company exercised its previously disclosed
option to sell the remaining ownership interest in its Japanese
electronics joint venture for $23.0 million in cash. Hexcel
received the cash proceeds on July 14, 2003, and anticipates
utilizing these proceeds to reduce debt. The Company expects to
continue to work with its former joint venture partner on
initiatives in the electronics business.
Debt and Convertible Preferred Stock
Total debt, net of cash, decreased in the quarter by $21.9 million
to $496.9 million as of June 30, 2003. The cash inflow in the
quarter resulted from operating profitability, $3.0 million of
asset sales and reductions in working capital. Accounts receivable
measured as days sales outstanding as of June 30, 2003 were
comparable to the second quarter 2002. Inventory measured as days
on hand at the end of the quarter was 7% lower than as of June 30,
2002.
Interest expense during the quarter was $13.9 million compared to
$15.3 million in the second quarter of 2002, reflecting, in part,
lower debt balances after refinancing the Company's capital
structure and lower interest rates.
Deemed preferred dividends and accretion relating to the
mandatorily redeemable convertible preferred stock was $3.0
million in the second quarter of 2003. A description of the
accounting for these securities can be found in the Company's Form
8-K filed on April 7, 2003.
Hexcel Corporation is the leading advanced structural materials
company. It develops, manufactures and markets lightweight, high-
performance reinforcement products, composite materials and
composite structures for use in commercial aerospace, space and
defense, electronics, and industrial applications.
I2 TECHNOLOGIES: March 31 Net Capital Deficit Narrows to $260MM
---------------------------------------------------------------
i2 Technologies, Inc. (OTC:ITWO) announced its results for the
quarter ended March 31, 2003 and preliminary results for the
second quarter ended June 30, 2003. These announcements were made
in conjunction with the Company's filing of its 2002 Annual Report
on Form 10-K. All comparables presented in this release are based
upon i2's restated consolidated financial statements.
First Quarter 2003 Results
The Company reported GAAP earnings of $0.09 per share for the
first quarter of 2003, compared to earnings of $0.03 per share in
the fourth quarter of 2002 and a loss of $0.03 per share in the
first quarter of 2002. This includes the impact of recognition of
restated deferred revenue.
i2 reported total revenues of $158 million in the first quarter of
2003, compared to $169 million in the fourth quarter of 2002 and
$203 million in the first quarter of 2002. Total revenues included
$66 million in contract revenue consisting of $57 million in
revenue deferred from earlier periods as a result of the Company's
recent restatement and $9 million in revenue attributable to
development services projects.
Software license revenues totaled $19 million for the first
quarter of 2003 as compared to $22 million in the fourth quarter
of 2002 and $26 million in the first quarter 2002.
Total costs and operating expenses for the first quarter were $110
million, including approximately $4 million of audit and legal
fees related to the company's re-audits and investigations.
Operating income for the quarter totaled $48 million.
License deals were spread across all regions and all major
industry sectors, with high tech and consumer goods and retail
(CG&R) continuing to be leading industries for i2.
The Company's March 31, 2003 balance sheet shows a working capital
deficit of about $5 million, and a total shareholders' equity
deficit of about $260 million.
Preliminary Estimated Second Quarter 2003 Results
i2 expects to report GAAP preliminary estimated earnings of
between a loss of $0.02 per share and breakeven for the second
quarter of 2003, compared to earnings of $0.09 per share in the
first quarter of 2003 and a loss of $2.18 per share in the second
quarter of 2002. This includes the impact of recognition of
restated deferred revenue.
i2 expects to report preliminary estimated total revenues of
between $114 million and $122 million for the second quarter of
2003, compared to $158 million in the first quarter of 2003 and
$162 million in the second quarter of 2002.
Total revenues for the second quarter of 2003 are estimated to
include between $25 million and $30 million in contract revenue,
which consists of revenue deferred from earlier periods as a
result of the Company's recent restatement and revenue
attributable to development services projects. The Company expects
contract revenue derived from revenue deferred from earlier
periods to decline.
Preliminary software license revenue is expected to be between $14
million and $17 million for the second quarter as compared to $19
million in the first quarter of 2003 and $19 million in the second
quarter 2002.
Preliminary estimated total costs and operating expenses for the
second quarter are expected to be between $117 million and $122
million, including approximately $9 million of audit and legal
fees related to the company's re-audits and investigations.
As previously disclosed, i2 ended the first quarter with $441
million in cash and investments. This cash balance was unaffected
by the restatement of results from prior years. Subsequently, in
the second quarter, the Company prepaid its $60.9 million senior
convertible note for $59.2 million, representing a 5.5 percent
discount to principal and interest accrued. This note was due in
September 2003. In addition, i2 settled a lease obligation for a
facility no longer in use for $7.6 million in cash and a non-
negotiable promissory note of $6.8 million. The Company ended the
second quarter with approximately $355 million in cash and
investments.
The company intends to file its Form 10-Q for the first quarter in
August 2003.
First Half 2003 Recap
i2 achieved over 85 go-lives over the past two quarters. The
company sold into the consumer goods and retail, automotive and
industrial, high technology and process industries. However, the
Company experienced challenging conditions, in part resulting from
the re-audits.
"Customers have continued to show support for i2 and interest in
our next generation closed-loop supply chain management solutions
and services in the past two quarters," said Sanjiv Sidhu, i2
Chairman and CEO. "For 15 years, we have been providing leading
supply chain management solutions to businesses around the world.
With the re-audits behind us, we look forward to building on that
heritage and helping customers solve their most difficult business
problems."
Additional details can be found on the company's Web site at
http://www.i2.com/investors
A leading provider of next generation closed-loop supply chain
management solutions, i2 designs and delivers software that helps
customers optimize and synchronize activities involved in
successfully managing supply and demand. i2 has more than 1,000
customers worldwide--many of which are market leaders--including
seven of the Fortune global top 10. Founded in 1988 with a
commitment to customer success, i2 remains focused on delivering
value by implementing solutions designed to provide a rapid return
on investment. To learn more about the Company, visit
http://www.i2.com
I2 TECHNOLOGIES: Completes Re-Audits and Files SEC Form 10-K
------------------------------------------------------------
i2 Technologies, Inc. (OTC:ITWO), has completed its audit of its
consolidated financial statements for the year ended December 31,
2002 and the re-audits of its consolidated financial statements
for the years ended December 31, 2001 and 2000, and that it has
filed with the Securities and Exchange Commission its annual
report on Form 10-K for 2002. This Form 10-K includes the
company's restated consolidated financial statements for the years
ended December 31, 2001 and 2000, for the first three quarters of
2002 and for each of the quarters in 2001 and 2000. i2 reported
that it has also adjusted the preliminary consolidated financial
statement information as announced on January 27, 2003, for the
quarter ended December 31, 2002. Additionally, i2 restated on an
un-audited basis its consolidated financial statements for the
years ended December 31, 1999 and 1998.
Net Effect of the Restatement
In summary, the net effect of the restatement is to increase total
revenue by $385.8 million in 2002 and to decrease total revenue by
$137.6 million, $477.0 million and $130.9 million in 2001, 2000
and 1999, respectively. The Company also made certain deferrals
and reversals to expenses in connection with these revenue
adjustments and has made certain other adjustments to expenses.
The net effect of these expense adjustments is to increase
expenses by $45.8 million in 2002, decrease expenses by $195.6
million, $34.6 million and $5.4 million in 2001, 2000 and 1999,
respectively. The statement of operations impact of these
adjustments is to decrease net loss by $104.8 million and $32.4
million in 2002 and 2001, respectively, increase net loss by
$275.5 million in 2000, decrease net income by $74.0 million in
1999 and increase net income by $5.2 million in 1998. The balance
sheet impact of these adjustments is to decrease stockholders'
equity by $204.7 million, $310.4 million, $328.2 million and $65.4
million at December 31, 2002, 2001, 2000 and 1999, respectively,
and increase stockholders' equity by $6.7 million in 1998.
The cumulative impact of the revenue adjustments is to reduce
revenue by $359.7 million which is comprised of $127.3 million of
revenue which has been reversed and $232.4 million of revenue that
has been deferred and may be recognized in the future. The
cumulative impact to net loss of the revenue and expense
adjustments is to increase net loss by $207.1 million. To the
extent that revenue that has been deferred is subsequently
recognized, it will reduce the impact of the adjustments to net
loss. i2's cash balances as of December 31, 2002 and March 31,
2003 were unaffected by the restatement.
Improved Process and Controls
"We believe that the examination was thorough and complete, and it
has led us to take actions that we believe will improve our
processes," said Sanjiv Sidhu, i2 chairman and CEO.
i2 announced that it has begun installing various process controls
and procedures designed to ensure that future transactions are
accounted for accurately. They include:
-- increased review of the facts and circumstances surrounding the
Company's transactions, implementations and products;
-- expansion of transaction sign-off procedures to include certain
field personnel;
-- enhanced training with respect to revenue recognition policies
and procedures for field personnel and personnel in its
services and development organizations;
-- modification of the incentive compensation structure of certain
field personnel to eliminate compensation based upon recognized
revenue;
-- expansion of quarterly sign-off procedures;
-- enhanced release management review and approval processes;
-- enhancement of post-transaction monitoring of implementations;
-- expansion of the responsibilities of its internal audit team;
-- enhanced analysis and support for the accounting used when
recording business acquisition transactions; and
-- enhanced analysis and support for accrued liability accounts.
The Company is also considering further actions in order to
improve its processes.
A leading provider of next generation closed-loop supply chain
management solutions, i2 designs and delivers software that helps
customers optimize and synchronize activities involved in
successfully managing supply and demand. i2 has more than 1,000
customers worldwide--many of which are market leaders--including
seven of the Fortune global top 10. Founded in 1988 with a
commitment to customer success, i2 remains focused on delivering
value by implementing solutions designed to provide a rapid return
on investment.
At March 31, 2003, the Company's balance sheet shows a total
shareholders' equity deficit of about $260 million.
IMCLONE SYSTEMS: Harlan W. Waksal Resigns as CSO and Director
-------------------------------------------------------------
ImClone Systems Incorporated (NASDAQ: IMCL) announced that Harlan
W. Waksal, M.D., Chief Scientific Officer of ImClone Systems, has
resigned from the Company effective July 22, 2003. Dr. Waksal has
also resigned from his position as a Director of ImClone Systems'
Board effective July 22, 2003.
"From the Company's inception, Harlan has been instrumental in
building ImClone Systems into a successful biopharmaceutical
company with an advanced stage drug candidate in ERBITUX(TM)
nearing submission for marketing approval with the FDA," stated
David Kies, Lead Director of ImClone Systems Incorporated's Board
of Directors. "We are indebted to him and thank him for his many
years of service and dedication to the Company. ImClone Systems is
today well positioned to make the transition from a development
stage company to a fully-integrated commercial organization, and
has a strong management team that will enable this transformation
to be properly executed."
"I have enjoyed my tenure at the Company and am immensely proud of
what ImClone Systems has achieved and will achieve," stated Dr.
Waksal. "I chose to leave the Company now, because given the
Board's decision in late April to give me the duties of Chief
Scientific Officer, I feel that this is the right time in my life
to pursue new challenges. My departure has nothing to do with any
concern about ERBITUX, its testing or its regulatory process. From
the Company's earliest days, it was my hope that we could provide
new treatment options for patients with cancer. I continue to have
great confidence that ImClone Systems' employees will soon reach
this goal."
ImClone Systems Incorporated, whose March 31, 2003 balance sheet
shows a total shareholders' equity deficit of about $220 million,
is committed to advancing oncology care by developing a portfolio
of targeted biologic treatments, designed to address the medical
needs of patients with a variety of cancers. The Company's three
programs include growth factor blockers, angiogenesis inhibitors
and cancer vaccines. ImClone Systems' strategy is to become a
fully integrated biopharmaceutical company, taking its development
programs from the research stage to the market. ImClone Systems'
headquarters and research operations are located in New York City,
with additional administration and manufacturing facilities in
Somerville, New Jersey.
IMPERIAL PLASTECH: Secures Court Protection Under Section 304
-------------------------------------------------------------
Imperial PlasTech Inc. (TSX: IPQ) announced that Mr. Peter J.
Perley, in his capacity as Chief Restructuring Officer of the
PlasTech Group, comprised of Imperial PlasTech and its
subsidiaries, Imperial Pipe Corporation, Imperial Building
Products Corporation, Ameriplast Inc. and Imperial Building
Products (U.S.) Inc., made application for a Preliminary
Injunction and obtained on July 18, 2003, an Order to Show Cause
and Temporary Restraining Order under Section 304 of the
Bankruptcy Code in the United States Bankruptcy Court, Northern
District of Georgia, Atlanta Division.
The Court ordered that any parties seeking to oppose the
Petitioner's application for a Preliminary Injunction shall show
cause at the hearing to be held in the United States Bankruptcy
Court, Northern District of Georgia on August 4, 2003. Pending the
determination of the Petitioner's request for a Preliminary
Injunction, the Court ordered, among other matters, the
reconnection of utilities, and enjoined and restrained all persons
from:
(i) interfering with or terminating any long-term or
existing agreement for the supply of goods or services
to the PlasTech Group,
(ii) discontinuing any contract or arrangement with the
PlasTech Group,
(iii) commencing or continuing any action or proceeding in the
United States against the PlasTech Group; and
(iv) in respect of certain named creditors, from enforcing
judgments and from continuing certain outstanding legal
suits.
The PlasTech Group is a diversified plastics manufacturer
supplying a number of markets and customers in the residential,
construction, industrial, oil and gas and telecommunications and
cable TV markets. Currently operating out of facilities in
Edmonton, Alberta and Atlanta Georgia, the PlasTech Group intends
to focus on the growth of its core businesses while assessing any
non-core businesses. For more information, access the groups Web
site at http://www.implas.com
INTEGRATED HEALTH: Resolves Sysco Corp.'s $5.8MM Unsecured Claim
----------------------------------------------------------------
Alfred Villoch, III, Esq., at Young, Conaway, Stargatt & Taylor,
LLP, in Wilmington, Delaware, recounts that:
Prior to the Petition Date, Sysco Corporation provided food
distribution services to hospitals and skilled nursing facilities
operated by the Integrated Health Debtors throughout the country.
These services include coordination of the deliveries of foods
that the Debtors purchased from third parties and directly from
Sysco.
On July 27, 2000, the Sysco Entities filed 40 proofs of claim,
which asserted $1,159,754.31 in secured claims and $5,845,179.67
in unsecured, non-priority claims. The secured portion of the
Claims was premised on the Sysco Entities' alleged reclamation
claims against the Debtors. The Debtors and the Sysco Entities
resolved the secured/reclamation portion of the Claims in a
stipulation approved by the Court on June 6, 2000. Pursuant to
the Reclamation Stipulation, the Debtors were required to pay the
Sysco Entities $1,216,149.29 in full and complete satisfaction of
the secured/reclamation portion of the Sysco Claims.
The Debtors and the Claimants have agreed to settle the Sysco
Entities' remaining prepetition claims rather than bear the costs
and risks associated with litigation. Accordingly, the parties
have agreed that the Sysco Entities will have an allowed, general
unsecured claim for $3,387,562.58. Thus, the Debtors ask the
Court to approve the Sysco Stipulation settling the remaining
Sysco prepetition claims.
Pursuant to the Stipulation, except for the Allowed Claims, all
other debts or obligations evidenced by the Sysco Claims and the
Debtors' schedules, and any and all other prepetition claims that
the Sysco Entities may have against the Debtors, are disallowed.
The parties have further agreed that all distributions made on
account of the Allowed Claims will be made to Sysco Corporation.
The Sysco Entities agree that Sysco Corporation will, in turn,
make distributions to the Sysco Entities pro rata based on the
amount of each Sysco Entities' claim. The Sysco Entities further
agree that they will hold the Debtors harmless for any failure on
Sysco Corporation's part to distribute any Distributions received
from the Debtors.
Mr. Villoch asserts that the resolution enables the Debtors to
receive substantially all of the relief which they could have
reasonably expected to receive if formal objections had been
filed as to each of the Sysco Claims and if the objections had
proceeded to trial, yet without the necessity of spending what
could only be an exorbitant amount of money on the litigation.
In addition, the aggregate unsecured claims filed by the Sysco
Entities will be reduced from $5,845,179.67 to $3,387,562.58,
representing $2,457,617.09 in savings to the bankruptcy estates.
(Integrated Health Bankruptcy News, Issue No. 61; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
LEAP WIRELESS: Committee Signs-Up Kramer Levin as Co-Counsel
------------------------------------------------------------
The Official Committee of Unsecured Creditors of Leap Wireless
International Inc., sought and obtained the Court's authority to
retain Kramer Levin Frankel & Naftalis LLP as its counsel, nunc
pro tunc to April 28, 2003.
Committee Chairman Neil Subin tells the Court that the Committee
selected Kramer Levin primarily because the Firm's Bankruptcy
Department has extensive experience in the fields of bankruptcy
and creditors' rights and, in particular, has represented
official creditors' committees and other creditor groups in many
of the largest and most complex Chapter 11 reorganization cases
of recent years, including Dow Corning Corporation, Owens Corning
Corporation, Bethlehem Steel Corporation, Adelphia Business
Solutions, Inc., Genuity, Inc., Borden Chemicals and Plastics,
American Architectural Products, SGL Carbon Corporation, Big V
Holdings, Inc., VF Brands, Inc. also known as Vlasic Foods,
London Fog Industries, Inc., MMH Holdings, Inc., Edison Brothers,
Olympia & York, SLM International, Inc., Buddy L, Integrated
Resources, Inc. and Financial News Network, Inc.
Furthermore, Mr. Subin notes that Kramer Levin's broad-based
practice, which includes expertise in the areas of corporate and
commercial law, litigation, tax, intellectual property, employee
benefits and real estate, will permit it to represent fully the
Committee's interests in an efficient and effective manner.
Finally, prior to the Petition Date, Kramer Levin represented the
Prepetition Committee in negotiations with Leap and the Vendor
Committee regarding a restructuring of the Debtors' capital
structure. The Committee believes that due to the nature of the
services rendered by Kramer Levin to the Prepetition Committee,
the retention of Kramer Levin by the Committee is critically
important to a successful reorganization in these cases.
Kramer Levin is expected to render legal services as the
Committee may consider desirable to discharge the Committee's
responsibilities and further the interests of the Committee's
constituents in these cases. In addition to acting as primary
spokesman for the Committee, it is expected that Kramer Levin's
services will include, without limitation, assisting, advising
and representing the Committee with respect to these matters:
A. The administration of these Cases and the exercise of
oversight with respect to the Debtors' affairs including
all issues arising from the Debtors, the Committee or these
Cases;
B. The preparation on the Committee's behalf of necessary
applications, motions, memoranda, orders, reports and other
legal papers;
C. Appearances in Court and at statutory meetings of creditors
to represent the Committee's interests;
D. The negotiation, formulation, drafting and confirmation of
a plan or plans of reorganization and related matters;
E. Any investigation as the Committee may desire concerning,
among other things, the assets, liabilities, financial
condition and operating issues concerning the Debtors that
may be relevant to these Cases;
F. Communication with the Committee's constituents and others
as the Committee may consider desirable in furtherance of
its responsibilities; and
G. The performance of all of the Committee's duties and powers
under the Bankruptcy Code and the Bankruptcy Rules and the
performance of other services that are in the interests of
those represented by the Committee.
Kramer Member Robert T. Schmidt assures the Court that:
(i) Kramer Levin is a "disinterested person" within the
meaning of Section 101(14) of the Bankruptcy Code;
(ii) neither Kramer Levin nor its professionals have any
connection with the Debtors, the creditors or any other
party-in-interest; and
(iii) Kramer Levin does not hold or represent any interest
adverse to the Committee in the matters for which it is
to be retained.
However, Mr. Schmidt discloses that Kramer Levin rendered
services in unrelated matters to these parties -- Alliance
Capital Management Corp., Aquitania Partners L.P., Bank One N.A.,
Bear Sterns & Co., Brown Brothers Harriman & Co., Capital
Research Co., Citibank N.A., Columbia Asset Management, Credit
Suisse First Boston, David Babson & Co., Deloitte & Touche LLP,
Deutsche Bank, Goldman Sachs & Co., Indosuez Capital Funding, ING
Capital LLC, JPMorgan Chase, Nortel Networks, Royal Bank of
Canada, Societe Generale, The Bank of New York, UBS Warburg AG,
and Wilmington Trust Corp.
The principal attorneys expected to represent the Committee in
this matter and their current hourly rates are:
Kenneth H. Eckstein $675
Robert T. Schmidt 495
Matthew J. Williams 415
Jamie H. Tadelis 295
Marc P. Schwartz 235
In addition, other attorneys and paraprofessionals may from time
to time provide services to the Committee in connection with
these bankruptcy proceedings. The range of Kramer Levin's hourly
rates for its attorneys and legal assistants are:
Partners $485 - 700
Counsel 495 - 560
Associates 235 - 475
Legal Assistants 160 - 220
Kramer Levin's hourly billing rates are subject to periodic
adjustments to reflect economic and other conditions.
Prior to the formation of the Committee, Mr. Schmidt relates that
Kramer Levin served as counsel to the Prepetition Committee. In
respect of these services, prior to the Petition Date, Kramer
Levin received a $125,000 retainer from Leap under a prepetition
agreement dated October 21, 2002 pursuant to which Leap agreed to
pay the fees and expenses of counsel to the Prepetition Committee.
Kramer Levin tendered invoices to Leap and received $361,000 in
fees and $33,000 in reimbursed expenses, in accordance with the
terms of the Agreement. Kramer Levin intends to apply the
retainer against the unpaid balance of its invoices in respect of
prepetition services, which aggregate $40,000. Kramer Levin will
hold the balance of the retainer amounting to $85,000 and apply
this amount to a final award of compensation in this case. It is
also possible that certain prepetition fees and expenses had not
been identified as of the Petition Date, and Kramer Levin intends
to apply any amounts against the retainer for which the Firm
reserves the right to seek payment. (Leap Wireless Bankruptcy
News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
LEARNING LIBRARY: Secures Working Capital Loan from Lowenstein
--------------------------------------------------------------
Learning Library Inc., (TSX-Venture: LLI) announces that David
Lowenstein, a director, President and Chief Executive Officer and
the principal shareholder of Learning Library has entered into a
grid promissory note with the Learning Library dated as of
June 19, 2003 to evidence certain amounts loaned to the Learning
Library by Mr. Lowenstein and to provide it with financial
resources to assist it in sustaining operations in the short term
while it continues to review its alternatives.
As noted in the Learning Library's Management Discussion and
Analysis for the year ended December 31, 2002, Learning Library's
working capital is insufficient to fund its ongoing operations and
cash commitments.
To date, Mr. Lowenstein has advanced $190,000 to the Learning
Library under the Note. The principal amount outstanding under
from time to time under the Note will bear interest at a rate
equal to twelve percent per annum. The repayment of all amounts of
principal and interest accrued thereon is secured against the
assets of Learning Library.
While Mr. Lowenstein may be willing to extend additional funding
for the Corporation to sustain operations in the short term,
Learning Library will need to raise additional cash in order to
maintain operations in the foreseeable future. Learning Library
continues to review its strategic and financing alternatives,
which could include an equity financing, selling a component of
the Learning Library, or attracting a strategic investor that
would assist in building its business. Discussions with some
potential sources of financing have taken place, however, no
financing commitments have been arranged at this time.
As a result of Learning Library's current working capital
situation and its need to conserve cash for operations, it has not
yet filed its financial statements for the three-month period
ended March 31, 2003. In response to Learning Library's late
filing, the Ontario Securities Commission issued a cease trade
order against Learning Library on June 13, 2003, extending a
temporary cease trade order that had been made against Learning
Library on June 3, 2003. Learning Library anticipates filing its
financial statements and making application to revoke the cease
trade order made against it in the near future as it reviews its
strategic and financing alternatives.
In accordance with Ontario Securities Commission Rule 61-501, the
independent directors of Learning Library have determined that
Learning Library is insolvent or in serious financial hardship,
that the transaction with Mr. Lowenstein is designed to improve
the financial position of the Learning Library and that the terms
of the transaction are reasonable in the circumstances of the
Learning Library.
Since it's founding in 1998, Learning Library has provided cost-
effective e-learning and e-communication application services and
solutions to professionals and their organizations. Learning
Library's customer's represent a wide variety of industries and
include: associations, corporations, training organizations,
academic institutions, quasi-government and government
organizations generally seeking to reduce costs or create a profit
center through the reach, relevance and context of internet
enabled learning and communication. Learning Library currently
provides its application solutions to over 2 million of its
customer's most trusted stakeholders.
LIQUIDIX INC: Sellers & Andersen Expresses Going Concern Doubt
--------------------------------------------------------------
Currently Liquidix Inc.'s principal activity is to manufacture and
sell specialty chemicals, cleaning agents, odor eliminators,
repellents, treatments, purification and decontamination processes
for the commercial laundry and cleaning industries. Its business
is conducted through three segments: chemical & additive
technology for cleaning and coatings of textiles; filtration &
equipment that extends the life of traditional cleaning chemicals
through a recycling process; commercialization venture leveraging
aerospace technology and distribution in order to move from
laboratory to commercial products quickly, extending the company's
knowledge to deliver solutions to protect people, property and the
environment. Liquidix has its operations in New Jersey,
California and Quebec. The Company sells to over 300 distributors
and 7,000 end-users worldwide. Chemicals & Additives products
accounted for 78% of Anscott Industries, Inc. (subsidiary) 2002
revenues; Filtration & Equipment, 20%; Commercialization, 2%.
Revenues for the year ended March 31, 2003 were $2,480,727 as
compared to $2,312,579 for the year ended March 31, 2002. Sales
remained stable even with the continuing downturn in the market.
Cost of sales for the year ended March 31, 2003 were $1,421,889 as
compared to $1,336,082 in 2002. As a percentage of sales, cost of
sales decreased 1% for 2003. This was due to the stability of
sales and prices.
General and administrative expenses were $1,599,787 for 2002 as
compared to $1,915,803 for 2003. As a percentage of sales,
general and administrative expenses increased from 69% for 2002 to
77% for 2003. The increase was primarily due to a one-time charge
from the issuance of common stock for consulting services and
additional personnel in the United Kingdom and rent for a larger
facility.
For the year ended March 31, 2003, Liquidix incurred a net
operating loss of $925,133 compared to a net operating loss of
$1,139,529 for the year ended March 31, 2002. The net loss
resulted primarily from stagnant business operations.
The primary roadblock facing Liquidix' plans for growth is its
need for capital. The Company is actively seeking additional
capital resources through the sale of equity. With additional
capital resources Liquidix expects to be able to expand its
services and products. At the present time the Company states it
has adequate working capital for its immediate business.
Additional capital is needed for any and all expansion. The
Company has no long-term debt, which assists in not needing
additional immediate working capital. Historically, the Company's
primary source of cash has been from operations and debt financing
by related parties.
Cash provided by operating activities during 2003 declined by
$708,578, primarily the result of increases in accounts
receivable in the amount of $107,622 and a decrease in accrued
liabilities and accrued expenses of $231,727. Cash provided by
operating activities during 2002 amounted to $252,212, primarily
the result of increases in accounts receivables and inventory of
$413,490 and 100,360 respectively.
Cash received in financing activities during 2003 amounted to
$397,000 related primarily to an increase in notes payable.
Cash used by financing activities during 2002 amounted to $21,686
related primarily to the prepayment of debt from the prior year.
The Company's independent auditing firm, Sellers & Andersen, LLC,
Certified Public Accountants of Salt Lake City, Utah, in its July
11, 2003, Auditors Report concerning the Company's financial
condition stated: "The accompanying financial statements have
been prepared assuming that the Company will continue as a going
concern. As discussed in the Notes to the financial statements,
the Company has a net loss in the current year and an accumulated
deficit. This condition raises substantial doubt about its
ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome
of this uncertainty."
LNR PROPERTY: JV Venture with Lennar to Acquire Newhall Land
------------------------------------------------------------
The Newhall Land and Farming Company (NYSE: NHL), a leading
planner of master-planned communities, Lennar Corporation (NYSE:
LEN and LEN.B), one of the nation's largest homebuilders, and LNR
Property Corporation (NYSE: LNR), one of the nation's leading real
estate investment, finance and management companies, announced
that Newhall Land and an entity owned 50% by Lennar and 50% by LNR
have entered into an agreement for the Lennar/LNR entity to
acquire Newhall Land. Under the terms of the agreement, Newhall
Land's unitholders will receive $40.50 per partnership unit in
cash, which will increase at the rate of 5% per annum commencing
270 days from today. The total purchase consideration, after
giving effect to payment of employee options, will be
approximately $990 million plus liabilities. The transaction is
subject to approval of the California Public Utilities Commission,
due to the change of control of Valencia Water Company that will
result from the purchase, and customary closing conditions. The
parties expect the transaction to close by the middle of 2004.
Simultaneous with the closing of the transaction, LNR will
purchase existing income producing commercial assets and Lennar
will option certain current homesites from the venture.
Lennar and LNR have 45 days to perform due diligence regarding
Newhall Land and its properties, and during this period will have
the right to terminate the agreement and forfeit a $5 million
deposit. After the 45 day due diligence period, Lennar and LNR
will deposit in total an additional $25 million into escrow to
secure their obligations under the agreement.
The transaction will take the form of a merger, and is subject to
approval of Newhall Land's unitholders. Morgan Stanley acted as
financial advisors to Newhall Land and provided a fairness opinion
to its board of directors. Newhall Land's board of directors has
approved the transaction and voted to recommend that the
unitholders vote in favor of the merger. The boards of directors
of Lennar and LNR also have approved the transaction.
Newhall Land intends to make a filing on Form 8-K with the
Securities and Exchange Commission, which will include a copy of
the Agreement of Plan of Merger.
Commenting on the transaction, Gary M. Cusumano, President and
Chief Executive Officer of The Newhall Land and Farming Company,
said, "The combined expertise and resources provided by the
Lennar/LNR partnership will allow our management team to continue
its stewardship of Newhall Land's landholdings while implementing
the vision for Valencia and Newhall Ranch."
Jeffrey Krasnoff, President and Chief Executive Officer of LNR
Property Corporation and Robert Strudler, Chief Operating Officer
of Lennar Corporation, jointly stated, "On behalf of the venture,
we look forward to welcoming the Newhall associates when the
transaction is completed. Newhall Land is an excellent franchise,
which will be a wonderful complement to the operations of the
venture partners."
Mr. Strudler and Mr. Krasnoff continued, "This venture provides a
unique opportunity to combine the residential and commercial
expertise of Lennar and LNR, respectively, as we have done in many
ventures to date. With our combined expertise in residential and
commercial development, we will continue to develop this premier
master-planned community in one of the fastest growing and most
land constrained markets in the country. This transaction also
gives the partners, individually, the opportunity to access future
residential and commercial sites in the highly desirable Los
Angeles market."
Newhall Land is a premier community planner in north Los Angeles
County. Its primary activities are planning the communities of
Valencia and Newhall Ranch, which together form one of the
nation's most valuable landholdings. They are located on Newhall
Land's 36,000 acres, 30 miles north of downtown Los Angeles.
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. Lennar's Financial Services Division provides
mortgage financing, title insurance, closing services and
insurance agency services for both buyers of Lennar's homes and
others.
LNR Property Corporation is a market leader in real estate
finance, management and development, with proven expertise in
adding value to commercial real estate assets, including real
estate properties, loans collateralized by real estate properties
and securities backed by loans on real estate properties.
Detailed information about the proposed merger will be contained
in a Proxy Statement that will be filed with the Securities and
Exchange Commission. Other materials relating to that transaction
also will be filed with the Securities and Exchange Commission.
Investors are urged to read the relevant documents filed with the
Securities and Exchange Commission, because they will contain
important information.
Materials filed with the Securities and Exchange Commission will
be available electronically, without charge, at an Internet site
maintained by the Securities and Exchange Commission. The address
of that site is http://www.sec.gov In addition, Newhall Land
will be sending the Proxy Statement to their unitholders and will
make copies available to others, without charge, upon request.
LNR Property Corporation is a real estate investment, finance and
management company. As previously reported in Troubled Company
Reporter, Fitch Ratings assigned a 'BB-' rating to LNR Property
Corp's $350 million ten year 7.625% senior subordinated notes. The
notes have a final maturity of July 15, 2013 and are pari passu
with LNR's existing senior subordinated debt. The Rating Outlook
is Stable. Partial proceeds from the transaction will be used to
fully refinance LNR's $200 million of 9.375% senior subordinated
notes due in 2008.
MEGO FINANCIAL: Will Liquidate All Assets in 6 or 8 Months
----------------------------------------------------------
Mego Financial Corp., doing business as Leisure Industries
Corporation of America (Pink Sheets:LESR), which filed for
reorganization on July 9, 2003 in the United States Bankruptcy
Court, District of Nevada in Reno, announced that it will
liquidate all of the assets of the company in an orderly manner
over the next six to eight months.
The company also announced the appointment of C. Alan Bentley as
Trustee. Mr. Bentley, a partner with Mackinac Partners, has more
than two decades of turnaround and restructuring experience with a
strong emphasis on strategic planning, financial transactions,
mergers and acquisitions, and corporate restructuring. Mackinac
Partners is a merchant bank specializing in restructuring and
turnaround management, investing, capital markets services, merger
and acquisition advisory services, strategic planning services and
litigation advisory services. Mackinac Partners will also serve as
reorganization consultants to Leisure Industries.
Mr. Bentley said, "I want to emphasize that it is anticipated that
Leisure Industries' homeowners will continue to use the resorts
without interruption during the sales processes. I also want to
emphasize that the liquidation will be a process and in no way
should be construed as a fire sale."
Additionally, Mr. Bentley pointed out, "The structured process of
liquidation notwithstanding, it is unlikely that there will be
sufficient assets remaining to fulfill the entire liability owed
the general unsecured creditors. Moreover, it is not expected that
there will be any recovery for the equity owners of Leisure
Industries."
MIRANT: Fitch Says Company May Less Likely Reject PEPCO Contract
----------------------------------------------------------------
Despite the potential for default by Mirant Corp. (senior
unsecured rated 'DD' by Fitch Ratings) on its power supply
contract with Potomac Electric Power Co. (PEPCO, senior secured
rated 'A', Rating Outlook Stable), Fitch does not view the
circumstances as warranting any rating action at the current time.
Mirant's subsidiary is obliged under the contract to serve 100% of
PEPCO's customers' energy demand for standard offer service
(standard-offer) through June 2004 in Maryland and January 2005 in
Washington D.C. at a price considerably below current forward
market prices. While Mirant could reject the contract in
bankruptcy and thereby expose PEPCO to higher replacement power
costs, Fitch has examined both the relative likelihood of contract
rejection and the potential impact upon PEPCO should Mirant choose
to do so.
There are several reasons why Mirant may be less likely to reject
the existing contract as part of its bankruptcy strategy. First,
though current wholesale market prices remain above the contract
price (of $34/MWh on average) sales under the agreement still
provide positive cash flow to Mirant. Mirant has access to power
from relatively low-cost coal-fired power capacity in the region
to supply PEPCO's load, providing for positive cash flow even at
prices below the current forward price curve. Second, the PEPCO
contract does not require Mirant to post collateral, whereas
Mirant would likely have to post significant collateral with
counterparties or suffer the unhedged volatility of the spot
market if it opts to reject the PEPCO agreement. Third, debtor-in-
possession lenders supporting Mirant are likely to prefer a
contracted revenue stream, rather than dependence on spot market
sales, even at the cost of some potential upside. Of further note,
in Mirant's earlier prepackaged bankruptcy plan circulated on June
2, 2003, the company indicated it intended to honor the PEPCO
contract.
However, Fitch recognizes that a possibility still exists that
Mirant may choose to take advantage of Section 365 of the US Code
to reject its contract with PEPCO. If that occurs, Fitch will
again review the current ratings and outlook of PEPCO and the
PEPCO Holdings parent. If the contract were rejected, PEPCO would
have to purchase and pay for replacement power at market prices or
solicit bids for replacement power for the balance of the contract
term. While it is possible that some or all of these costs would
ultimately be recovered from Maryland and D.C. consumers, it is
also possible that PEPCO would incur additional expenses for the
duration of the contract period. Such increased expenses may
require further borrowings or reduced dividend payments by PEPCO
to its parent, PEPCOH, impacting the credit profile of both
entities.
Exposure to potentially high replacement power costs is greatest
during the summer months, when power prices are most volatile and
can reach elevated peaks during periods of extreme demand.
Therefore, Fitch foresees that risk to PEPCO will decline if the
SOS contract is terminated after the 2003 summer. The risk of high
replacement power costs for PEPCO diminishes in 2004, since the
Mirant contract ends by June 2004 in Maryland, where approximately
two-thirds of PEPCO's expected standard-offer load is generated.
Positively, PEPCO and the PEPCOH group currently have ample
corporate liquidity. PEPCO currently has $172 million available
under its shared revolving credit facility, is expected to
generate significant cash flows from operations, and could obtain
additional liquidity from its parent in the form of intercompany
loans or equity contributions.
Fitch will continue to monitor the status of the power contract in
Mirant's bankruptcy proceedings and any related regulatory
proceedings in Maryland and the District of Columbia.
MOLECULAR DIAGNOSTICS: Files 2002 Annual Report on Form 10-K
------------------------------------------------------------
Molecular Diagnostics, Inc. (OTC: MCDG) filed Monday its 2002
Annual Report on Form 10-K wherein the company reported increased
revenues in 2002 of $1,746,000, an increase of over 100% in
revenues from 2001. Simultaneously, despite the Company's
continued investments in its global clinical trials for its
InPath(TM) System, losses were reduced in 2002 to $11,960,000 from
$16,630,000 in 2001, reflecting the Company's cutbacks and
finalization of its basic research.
"We are very pleased to not only have audited results that show
our progress last year, but to finally have this filing behind
us," said Peter Gombrich, Chairman and CEO of MDI. He added, "Our
change in auditors, in conjunction with the financing initiatives
we've been focused on, have interrupted our operational progress.
With the filing of our 10-Q for the first and second quarters to
occur in the very near future, we can return to our primary focus
of completing our financing and bringing the InPath System to
market."
Despite early results from studies around the world indicating
that the InPath Systems outperforms the Pap test and HPV DNA
screening as a means of screening women for cervical cancer, the
Company has effectively had its clinical trials on hold for the
past 9 months as it worked on its fund-raising and restructuring
efforts. Subject to completion of its restructuring and financing
initiatives, clinical trials are expected to commence again in the
next several months, and be concluded in early 2004, at which time
the results will be submitted to the FDA for marketing clearance.
"We continue to believe in the company's technology portfolio and
value, including our groundbreaking InPath System," said Peter
Gombrich. "We look forward to completing the studies, and
launching the global commercialization of InPath, so that women
can benefit from its effectiveness," he added.
Molecular Diagnostics develops cost-effective cancer screening
systems, which can be utilized in a laboratory or at the point-of-
care, to assist in the early detection of cervical,
gastrointestinal, and other cancers. The InPath System is being
developed to provide medical practitioners with a highly accurate,
low-cost, cervical cancer screening system that can be integrated
into existing medical models or at the point-of-care. Other
products include SAMBA(TM) Telemedicine software used for medical
image processing, database and multimedia case management,
telepathology and teleradiology. Molecular Diagnostics also makes
certain aspects of its technology available to third parties for
development of their own screening systems. More information is
available at: http://www.Molecular-Dx.com
As reported in Troubled Company Reporter's April 10, 2003 edition,
Molecular Diagnostics, Inc., signed an agreement with Greenwood
Village, Colorado based Bathgate Capital Partners LLC to provide a
broad range of financial and investment banking services. MDI has
worked with BCP previously on a project-to-project basis, and
based on that success, as well as BCP's experience in the in vitro
diagnostics industry, has opted to solidify the relationship for
the long term.
Molecular Diagnostics' September 30, 2002 balance sheet shows a
working capital deficit of about $12 million, and a total
shareholders' equity deficit of about $4 million.
NATIONAL STEEL: Resolves St. Paul & Marine $49.8MM Admin. Claim
---------------------------------------------------------------
Before the Petition Date, National Steel Corporation and its
debtor-affiliates obtained six surety bonds issued by St. Paul
Fire & Marine Insurance Company to a number of obligees in the
ordinary course of business. The aggregate penal amount of the
Bonds is $49,800,000. The Bonds were issued to the obligees to
satisfy various financial requirements imposed on the Debtors.
The St. Paul Fire & Marine surety bonds are:
(A) Bond No. KA 2926 -- Illinois Bond -- $17,725,000 in penal
amount, names the Illinois Industrial Commission as obligee
and secures National Steel's obligations as a self-insurer
for workers compensation under Illinois law;
(B) Bond No. KA 3408 -- Minnesota Bond -- $4,827,130 in the penal
amount, names the State of Minnesota Department of Commerce
as obligee and secures National Steel's obligations as a
self-insurer for workers compensation under Minnesota law;
(C) Bond No. KA3372 -- Old Republic Bond -- $15,000,000 in the
penal amount, names Old Republic Insurance Company as obligee
and secures National Steel's obligation to contribute its
self-insured or deductible obligations for black lung and
workers compensation benefits;
(D) Bond No. KA3409 -- UMWA Bond -- $9,338,994 in the penal
amount, names the United Mine Workers of America 1992 Benefit
Plan as obligee and secures National Steel's obligation to
provide retiree health benefits;
(E) Bond No. KA3419 -- IDEM Bond -- $2,532,169 in the penal
amount, names Indiana Department of Environmental Management
as obligee and secures National Steel's obligation to close
out hazardous waste facilities operated in Indiana; and
(F) Bond No. KG5627 -- Buckeye Bond -- $375,200 in the penal
amount, names Buckeye Reclamation Landfill Remedial Action
Trust as obligee and secures National Steel's obligation to
close and waste facility in the State of Ohio.
On May 20, 2002, the Court entered an Agreed Final Order
authorizing the continuation of Surety Credit, extension of
Secured Surety Credit, granting liens and administrative claims,
and providing adequate protection. Under the Surety Order, the
Debtors agreed to post a $16,000,000 letter of credit to secure
St. Paul's obligations under the Bonds. In addition, under the
Surety Order, to the extent that the amount St. Paul paid under
the Bonds to the various obligees exceeded $16,000,000, St. Paul
would be deemed to hold an allowed administrative claim against
the Debtors' estate pursuant to Sections 503(b) and 507(a) of the
Bankruptcy Code.
Under the Surety Order, National Steel was required to continue
paying the underlying obligations covered by the Bonds so long as
St. Paul maintained or continued them. In addition, St. Paul was
prohibited from terminating the Bonds for a period of two years
unless an event of default occurred. Under the Surety Order, an
Event of Default included "National Steel . . . [having] disposed
of substantially all of its assets through a sale, reorganization
plan, or otherwise." In this Event of Default, St. Paul is
entitled to immediately terminate all the Bonds and cause all
postpetition surety claims to automatically accelerate and become
immediately due and payable.
In view of the sale of substantially all of their assets, the
Debtors are in default under the Bonds. To induce St. Paul not
to terminate or delay the termination of the Bonds, the parties
engaged in arm's-length negotiations and came up with a
stipulation. The Debtors now ask the Court to approve their
stipulation with St. Paul. The stipulation will enable them to
fix the amount and treatment of St. Paul's administrative claim
and reduces uncertainty as they wind-down their estates.
Under the Stipulation, the Debtors and St. Paul agree that:
(1) With respect to the Illinois Bond, the Debtors ceased
payments to the workers' compensation claimants in the
State of Illinois on June 20, 2003. To date, St. Paul
began administering and paying all the Debtors' workers
compensation claims in Illinois. St. Paul's claim arising
out of the Illinois Bond, in full payment of any
reimbursement of losses related to the Illinois Bond, will
be $15,000,000, which will be paid by applying the
$16,000,000 letter of credit amount available to St. Paul.
(2) With respect to the Minnesota Bond, National Steel ceased
payments to the workers' compensation claimants in the
State of Minnesota on June 14, 2003. St. Paul will pay to
the State of Minnesota Department of Commerce the full
penal amount of the Minnesota Bond pursuant to its terms.
St. Paul's claim arising out of the Minnesota Bond, in
full payment of any reimbursement of losses related to
this Bond, will be $4,827,130 and paid by applying the
remaining amounts available to St. Paul under the Letter
of Credit after the payment of St. Paul's claim arising
out of the Illinois Bond, plus payment in cash of balance.
(3) The Debtors will try to reach an agreement within the next
six months after the Court approves the Stipulation to
terminate the IDEM Bond without any draw by IDEM on such
bond. Within this period, the Debtors will obtain a
complete release and discharge of St. Paul's obligations
on the Bond. If the Debtors have not secured an agreement
from IDEM within that six months, St. Paul will be
authorized to terminate the IDEM Bond pursuant to its
terms and St. Paul's claim, in full payment of any
reimbursement of losses, arising out of the IDEM Bond,
will be equal to the amount drawn on the IDEM Bond. The
claim will be fully paid by the Debtors in cash within
three business days of any draw.
(4) Within three months after the Stipulation is approved, the
Debtors will agree with the Buckeye Trustee to terminate
the Buckeye Bond without any draw. Within this period,
Debtors will obtain a complete release and discharge of
St. Paul's obligations on the Bond. During this period,
St. Paul will not terminate the Buckeye Bond. If the
Debtors have not secured an agreement from the Buckeye
Trustee on the specified date, St. Paul will be authorized
to terminate the Buckeye Bond pursuant to its terms. St.
Paul will have a claim, in full payment of any
reimbursement of losses related to the Buckeye Bond. The
claim will be equal to the amounts, if any, drawn on the
Buckeye Bond, and will be fully paid by the Debtors in
cash within three business days of any draw.
(5) The Debtors will attempt to reach an agreement with the
UMWA Trustee to terminate the UMWA Bond without any draw.
Within a six-month period, Debtors will obtain a complete
release and discharge of St. Paul's obligations on this
Bond. During this time, St. Paul will not terminate the
UMWA Bond and the Debtors will attempt to reach a
standstill agreement with the UMWA not to draw or make
demand against the Bond until there is an adjudication or
settlement of the Debtors and St. Paul's obligations under
the bond. The Debtors will provide St. Paul 10 days
written notice before they stop making the payments
secured by the bond. If the Debtors have not secured an
agreement from the UMWA on the specified date, St. Paul
will be authorized to terminate the UMWA Bond pursuant to
its terms. Upon approval of the Stipulation, the Debtors
will escrow the penal sum of the UMWA Bond and an
additional $200,000 with a third party reasonably
acceptable to St. Paul. The Debtors will indemnify St.
Paul for all costs, attorneys' fees and interest that
might be assessed against it by the UMWA in connection
with the Bond, even if the award or judgment against St.
Paul for the costs, fees and interest is in excess of the
penal sums of the UMWA Bond. The Debtors' liquidating
plan will provide that any claim for indemnification by
St. Paul for a later award of the fees, costs and interest
will be treated as an allowed administrative claim.
(6) With respect to the Old Republic Bond, within six months
upon approval of the Stipulation, the Debtors will try to
reach an agreement with Old Republic to terminate the Old
Republic Bond without any draw. The Debtors will also
attempt to obtain a complete release and discharge of St.
Paul's obligations on the Bond. During this period, St.
Paul will not terminate the Old Republic Bond and the
Debtors will attempt to reach a standstill agreement with
Old Republic not to draw or make demand against the bond
until there is an adjudication or settlement of the
Debtors and St. Paul's obligations under the bond. The
Debtors will provide St. Paul 10 days written notice
before they stop making the payments secured by the Bond.
If the Debtors have not secured an agreement from Old
Republic on the specified date, St. Paul will be
authorized to terminate the Old Republic Bond pursuant to
its terms. On the Approval Date, the Debtors will escrow
the penal sum of the Old Republic Bond with a third party
reasonably acceptable to St. Paul in the Escrow Account.
(7) To the extent that St. Paul makes any payment due to the
execution of the Old Republic Bond and UMWA Bond, it will
be paid on account of payments from funds held in the
Escrow Account within three business days of the date of
any payment by St. Paul. However, in the event the other
allowed administrative expense claimants have not been
paid in full at the time of the distribution of the Escrow
Account, an amount not exceeding $2,400,000 will be
distributed from the Escrow Account to pay creditors
holding ordinary administrative expense claims. In this
event, St. Paul agrees that its administrative claim will
be paid pro rata with other administrative claims. St.
Paul, nevertheless, will not be required to disgorge any
funds previously paid. (National Steel Bankruptcy News,
Issue No. 32; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
NEXIA HOLDINGS: Liquidity Concerns Raise Going Concern Doubt
------------------------------------------------------------
Nexia Holdings Inc.'s consolidated financial statements are
prepared using accounting principles generally accepted in the
United Stated of America applicable to a going concern which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has
incurred cumulative operating losses through March 31, 2003 of
$9,413,705 and has a working capital deficit of $3,280,197 at
March 31, 2003 all of which raise substantial doubt about the
Company's ability to continue as a going concern.
Primarily, revenues have not been sufficient to cover the
Company's operating costs. Management's plans to enable the
Company to continue as a going concern include the following:
o Increasing revenues from rental properties by
implementing new marketing programs
o Making certain improvements to certain rental
properties in order to make them more marketable
o Reducing negative cash flows by selling rental
properties that do not at least break even
o Refinancing high interest rate loans
o Increasing consulting revenues by focusing on
procuring clients that pay for services rendered
in cash or highly liquid securities
o Reducing expenses through consolidating or
disposing of certain subsidiary companies
o Raising additional capital through private
placements of the Company's common stock
There can be no assurance that the Company can or will be
successful in implementing any of its plans or that they will be
successful in enabling the Company to continue as a going concern.
The Company's consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
NORSKE SKOG: Extends Exchange Offer for 8-5/8% Notes to July 31
---------------------------------------------------------------
Norske Skog Canada Limited (TSE: NS), extends the expiration date
for its offer to exchange U.S.$400,000,000 aggregate principal
amount of its 8-5/8% Series D Senior Notes Due 2011, which have
been registered under the Securities Act of 1933, as amended, for
U.S.$250,000,000 aggregate principal amount of its
8-5/8% Senior Notes Due 2011 and U.S.$150,000,000 aggregate
principal amount of its 8-5/8% Series C Senior Notes Due 2011
until 5:00 p.m. New York City time on July 31, 2003, unless
further extended by Norske Skog Canada Limited prior to such time.
The original expiration date for the Exchange Offer was 5:00 p.m.,
New York City time, on July 21, 2003, at which point,
approximately U.S.$207,705,000 of the U.S.$250,000,000 aggregate
principal amount of the outstanding 8-5/8% Senior Notes Due 2011
and U.S.$145,990,000 of the U.S.$150,000,000 aggregate principal
amount of the outstanding 8-5/8% Series C Senior Notes Due 2011
had been tendered for exchange.
The extension is intended to allow additional time for the holders
of the remaining outstanding Old Notes to tender in exchange for
the New Notes. As a result of the extension, tenders of the Old
Notes, received to date, may continue to be withdrawn at any time
on or prior to the new expiration date.
This announcement shall serve to amend and supplement the
Prospectus, dated June 18, 2003, relating to the Exchange Offer,
and the related letter of transmittal and other documentation,
solely with respect to the extension of the expiration date
referred to herein. All other terms of the Exchange Offer
Prospectus, the letter of transmittal and other documentation
shall remain in full force and effect.
Capitalized terms used herein which are not otherwise defined
shall have the meanings given to them in the Exchange Offer
Prospectus. Holders of Old Notes can obtain copies of the Exchange
Offer Prospectus, and the related letter of transmittal and other
documentation from the exchange agent, Wells Fargo Bank Minnesota,
National Association, attention: Joseph O'Donnell at (860) 704-
6217.
* * *
In February 2003, Standard & Poor's lowered its credit rating of
the Company's long-term corporate and senior unsecured debt by
one level, from BB+ to BB, and affirmed its existing debt on its
senior secured debt as BB+. S&P's outlook for the Company's
business is stable.
OWENS CORNING: Court Okays Disallowance of $40MM Disputed Claims
----------------------------------------------------------------
Owens Corning and its debtor-affiliates objected to eight proofs
of claim filed by Mars Incorporated, Modern Way Refuse Container
Service, Browning-Ferris Industries of Elizabeth, New Jersey,
Inc., Conwed Corporation, Borden, Inc., Atlantic Metals
Corporation, and HCR Manor Care, each for $40,000,000.
The Debtors asked the Court to disallow and expunge these Disputed
Claims.
J. Kate Stickles, Esq., at Saul Ewing LLP, in Wilmington,
Delaware, informs the Court that each of the Disputed Claims
relates to the Burlington Environmental Management Services, Inc.
Landfill site located in Southampton Township, Burlington County,
New Jersey. The Burlington Landfill site covers 108 acres and
was operated as a commercial landfill beginning some time in the
1970s until 1982. In March 2002, the New Jersey Department of
Environmental Protection filed suit against 23 former landfill
customers, including these Claimants and a predecessor of Owens
Corning, seeking to recover from them, jointly and severally,
under the Spill Compensation and Control Act, the NJDEP's past
and future investigation, cleanup and removal costs related to
the site.
In its Complaint, the NJDEP did not allege the amount of past
costs it had incurred or estimate the costs it would incur in the
future. The Claimants estimate the total remedial action cost
required at the Burlington site at $40,000,000 and each seeks
that entire amount in its Proof of Claim.
Ms. Stickles asserts that the Claimants' designation of their
claims as "environmental" and "indemnification or contribution"
provides no basis for recovery from the Debtors of the entire
cleaning up cost of the Burlington Landfill. First, the
Claimants have not asserted any relationship between the Debtors
and any Claimant that would create liability based on either
common law or contractual indemnification. The Claimants are, if
the Environmental Protection Department's allegations are true,
simply former customers of the same landfill. Second, neither
state nor federal environmental statutes, nor New Jersey's
general contribution statute, authorize recovery against the
Debtors on a joint and several basis. Although both the Spill
Act and its federal analogue, the Comprehensive Environmental
Response, Compensation, and Liability Act provide a private right
of action for contribution, joint and several liability is not
available under either statute to a private plaintiff which is
seeking contribution from other potentially liable parties.
New Jersey's Joint Tortfeasors Contribution Law, which, in any
case, is only applicable if there has been a judgment, only
authorizes recovery against a joint tortfeasor by a plaintiff of
"the excess paid over his pro rata share."
Ms. Stickles believes that there is no basis for the conclusion
that the Debtors' equitable share of the cost of cleanup of the
Burlington Landfill should be 100%. Owens Corning's predecessor
was only one of hundreds of parties that disposed of waste at
that landfill during the more than 20 years it operated
commercially and is only one of 23 industrial users, in addition
to the site operator, from whom the Environmental Protection
Department has chosen to seek recovery. Neither has any Claimant
alleged its own equitable share or that it has actually incurred
costs in excess of that amount.
Apart from that, according to Ms. Stickles, the Claimants have
submitted inadequate documentation in support of their estimation
of the cost of remedial action with respect to the Burlington
Landfill. Each Claimant relies on the supporting documents
submitted on behalf of HCR Manor Care's Proof of Claim, which
relies on a series of cost estimates used in selecting among
remedial alternatives, some of which estimates are well over a
decade old.
Moreover, reliance on estimates is inappropriate to the extent
that the Environmental Protection Department has actually
performed remedial work and incurred real costs. Accordingly,
the Disputed Claims should be disallowed as a matter of law.
In the event the Court does not disallow the Disputed Claims as a
matter of law for the reasons stated, the Debtors demand strict
proof of the claims asserted.
The Debtors further object to Proof of Claim No. 7308 filed by
Borden, Inc. against Debtor Owens-Corning Fiberglas Technology,
Inc. The Environmental Protection Department Complaint does not
allege and the Debtors do not believe that Owens-Corning
Fiberglas Technology, Inc., or any predecessor of that entity,
was ever a customer of the Burlington Landfill or that there is
any other basis for that entity being liable for remedial costs
with respect to the Burlington Landfill.
In addition, the Disputed Claims are claims for reimbursement or
contribution asserted by creditors that are potentially liable
with the Debtors, and are contingent within the meaning of
Section 502(e)(1)(B) of the Bankruptcy Code.
Thomas Merlino, the Debtors' Environmental Liabilities Resolution
Director, informs the Court that he has first-hand knowledge of
these matters. Mr. Merlino assures Judge Fitzgerald that he is
willing to testify if called upon as a witness. Mr. Merlino
supports the Debtors' objection and insists that the Disputed
Claims are not valid obligations of the Debtors.
Claimants Object
Warren T. Pratt. Esq., at Drinker Biddle & Reath LLP, in
Wilmington, Delaware, relates that in essence, the Debtors are
seeking to disallow the Claimants' claims pursuant to Section
502(e)(1) of the Bankruptcy Code, which allows a claim for
reimbursement or contribution to be disallowed where it is
contingent. However, Section 502(e)(2) allows a claim for
reimbursement or contribution, which becomes fixed postpetition,
to be treated as though the claim had been fixed prior to the
Petition Date.
Mr. Pratt asserts that the Debtors' objection is misleading, as
it is clear that the New Jersey Department of Environmental
Protection is entitled to seek to recover this fixed amount from
any of the contributing parties, jointly and severally, under the
New Jersey Spill Act.
More specifically, Section 58:10-23.11g.c.(1) of the New Jersey
Spill Act provides that:
"[a]ny person who has discharged a hazardous substance,
or is in any way responsible for any hazardous substance,
shall be strictly liable, jointly and severally, without
regard to fault, for all cleanup and removal costs no
matter by whom incurred. Such person shall also be
strictly liable, jointly and severally, without regard
to fault, for all cleanup and removal costs incurred by
the department or a local unit pursuant to subsection b.
of section 7 of P.L.1976, c. 141 (C.58:10-23.11f)."
The Environmental Protection Department duly filed a Proof of
Claim, Claim No. 7212, seeking reimbursement from the Debtors for
restoration and replacement costs, including assessment costs, as
well as for three times the clean-up and removal costs that will
be incurred.
The Environmental Protection Department has taken several
measures to cleanup the Burlington Landfill including interim
remedial measures designed to control the migration of
contamination from the site in 1990. In November 1991, the
Environmental Protection Department selected remedial actions
including capping the landfill with a several foot thick solid
cap and the design of an active gas and leachate collection
system. Additionally, the Environmental Protection Department
intends to remediate the groundwater. In June 1995, the
Environmental Protection Department issued supplemental
directives concerning Canterbury Lake the cleanup and advised of
the implementation of the proposed groundwater remedy.
The costs for cleanup to date are quantifiable. On October 8,
2002, the Environmental Protection Department provided an updated
cost package for the Burlington site. The Analysis of
Expenditures breaks down the costs incurred through August 23,
2002:
DEP Cleanup Costs $19,648.463.48
DEP Administrative Costs (Salary) 4,787,094.44
DEP Administrative Costs (Non-Salary) 894.64
Environmental Claims Administration Charges 0.00
Division of Law Costs 626,324.10
--------------
Total $25,062,776.66
These costs represent actual costs incurred by the Environmental
Protection Department and invoices paid to contractors. Mr.
Pratt contends that the Claimants are not seeking a windfall from
the bankruptcy court. Rather, they are seeking to ensure that
the Debtors are held liable for that portion of the Burlington
Landfill cleanup that is appropriate.
The Debtors contend that there is "no basis for the conclusion
that the Debtors' equitable share of the Burlington Landfill
cleanup cost should be one hundred percent." At the same time,
the Debtors admit that the Debtors disposed waste in the
Burlington Landfill. The Debtors, therefore, are potentially
100% responsible to the Environmental Protection Department for
all cleanup costs. The Claimants, Mr. Pratt contends, merely
seek to have their claims allowed, based on presently available
cost information and an anticipated equitable allocation process.
If the claims are later modified after the allocation is
completed then the claims will be modified.
Assuming arguendo that the Debtors are not to be held 100% liable
for the entire cleanup costs, an allocation between the
responsible parties must be done to ascertain the appropriate
percentage owing to the Environmental Protection Department. To
accomplish this, the Environmental Protection Department and the
Claimants had lengthy negotiations and have agreed to a Proposed
Alternate Dispute Resolution Process. This proposed process was
forwarded to the judge handling this matter in the Superior Court
of New Jersey, Burlington County for approval, with copies being
sent to all parties.
The purpose of the proposed Alternate Dispute Resolution Process
is to come to a resolution as to the allocation between the
potentially responsible parties. The Owens Corning bankruptcy
has always been a factor in the negotiations. In fact, Section
15 of the Proposed Alternate Dispute Resolution Process pertains
to Owens Corning only and provides, inter alia, that any
agreement involving this party is subject to the Bankruptcy
Court's approval.
To resolve this matter with the Debtors, the Claimants suggested
a Proposed Consent Order, which disallowed and expunged the
disputed claims provided that the Consent Order does not impair,
modify or constitute a waiver of any rights held by the Claimants
concerning fault, liability, damages, or otherwise, arising out
or related to the litigation, and any amendment thereto, or any
other complaint, action or proceeding commenced by the
Environmental Protection Department concerning the same or
similar claims as are asserted in the Environmental Protection
Department Complaint, and an Alternative Dispute Resolution
Process in the Environmental Protection Department litigation,
including, without limitation, the Claimants' right to pursue an
equitable share from the Debtors under the New Jersey Spill
Compensation and Control Act.
The resolution of this dispute deals only with the issue of
allocation as to the Claimants. It does not impair, impede or
affect in any manner the Claimants' liability. In essence, the
Proposed Consent Order sought to allow the Alternate Dispute
Resolution Process to go forward for purposes of determining
allocation without impairing or affecting any other rights of the
Claimants or the Debtors. The Proposed Consent Order sought to
clarify for the State Court Judge, and arbitrator in the
Alternate Dispute Resolution Process, that he has free and
unfettered ability to make a determination as to the equitable
allocation of liability.
Mr. Pratt informs the Court that the Debtors rejected the
Proposed Consent Order and appeared unwilling to resolve this
dispute.
Thus, the Claimants ask the Court to overrule the Debtors'
objection and allow their claims.
* * *
After negotiations, the Debtors and the Claimants reached a
stipulation disallowing the Disputed Claims, which the Court
approved.
While the New Jersey Department of Environmental Protection
claims against the Claimants and the Debtors for reimbursement of
its response costs at the Burlington site are still pending in
the Superior Court of Burlington County, the Environmental
Protection Department and several of the potentially liable
parties, including the Claimants, have agreed to a proposed
Alternate Dispute Resolution process for allocation of liability
among the potentially responsible parties, which has been
submitted to the Superior Court for approval.
The Debtors will participate in the Alternate Dispute Resolution
process as approved by the Superior Court subject to the same
terms and limitations as other potentially responsible parties.
The Debtors will be bound by the percentage of liability
allocated to them as a result of the Alternate Dispute Resolution
process or by litigation of the Superior Court case; provided,
however, that as to the Debtors, the percentage of liability so
allocated will be applied solely for the purpose of establishing
the amount of an allowed general unsecured claim.
The Claimants will otherwise have no right to pursue cost
recovery or an equitable share from the Debtors under the
Comprehensive Environmental Response, Compensation and Liability
Act, Public Health and Welfare Code Section 9613, the New Jersey
Spill Compensation and Control Act, and the New Jersey Joint
Tortfeasors Contribution Law, or any other provision of statutory
or common law; and in all other respects this will not prejudice
or otherwise affect the application of the automatic stay of
Section 362(a) of the Bankruptcy Code to the Superior Court case.
If there is liability allocated to Owens Corning either as a
result of the Alternate Dispute Resolution process or by the
Superior Court, and the Environmental Protection Department fails
to seek a recovery in the Bankruptcy Court consistent with its
rights as the holder of an allowed general unsecured claim in
that amount, then the Claimants jointly will have a single,
allowed, general unsecured claim against Owens Corning in the
amount of this OC Allocated Share Amount. (Owens Corning
Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
OWENS & MINOR: Board Approves Third Quarter 2003 Cash Dividend
--------------------------------------------------------------
Owens & Minor's (NYSE: OMI) board of directors approved the
payment of the third quarter 2003 cash dividend in the amount of
$0.09 per share. The cash dividend is payable on September 30,
2003 to shareholders of record as of September 15, 2003. The
company currently has approximately 33,727,194 common shares
outstanding.
Owens & Minor, Inc. (S&P/BB+/Stable), a Fortune 500 company
headquartered in Richmond, Virginia, is the nation's leading
distributor of national name brand medical/surgical supplies. The
company's distribution centers throughout the United States serve
hospitals, integrated healthcare systems and group purchasing
organizations. In addition to its diverse product offering, Owens
& Minor helps customers control healthcare costs and improve
inventory management through innovative services in supply chain
management and logistics. The company has also established itself
as a leader in the development and use of technology. For news
releases, more information about Owens & Minor, and virtual
warehouse tours, visit the company's Web site at
http://www.owens-minor.com
PACIFIC GAS: Earns Approval to Deposit $3.7 Mill. with Bank One
---------------------------------------------------------------
Pacific Gas and Electric Company sought and obtained the Court's
authority, pursuant to a credit card agreement with Bank One,
N.A., to provide the Bank a $3,700,000 cash collateral deposit.
Bank One, in turn, will continue providing credit services to
Pacific Gas.
PG&E and Bank One are parties to a December 22, 1994 Procurement
Card Agreement. Pursuant to the Agreement, PG&E issues credit
cards to its employees. Those cards can be used to purchase
goods and services on PG&E's behalf, within certain limits.
Barbara Gordon, Esq., at Howard, Rice, Nemerovski, Canady, Falk &
Rabkin, relates that about 9,000 Cards are in use under the
program. PG&E employees typically use the Cards to purchase
small-dollar expense items, parts, supplies, freight, postage,
"non-coded" material, equipment rental, film and meeting
expenses. Pursuant to PG&E's internal policies, the per-purchase
limit for an employee using a Card is normally $500 per item,
with a maximum of $2,000 for a single purchase. The Card system
enables PG&E to make small purchases in a convenient, efficient
manner, resulting in cost savings to the estate due, in part, to
reduced paperwork. Further, PG&E is entitled to receive a rebate
from Bank One according to an incentive schedule based on the
amount spent through the program.
In December 2001, Bank One was unwilling to proceed with the
arrangements for providing credit under the Agreement unless,
among other things, PG&E deposited $2,200,000 as cash collateral
and pay its prepetition outstanding balance. In this regard,
PG&E on December 3, 2001 obtained permission from the Court to
incur postpetition secured debt by posting up to $2,200,000 in
cash collateral with Bank One and pay the prepetition balance.
Recently, PG&E has decided to transition all equipment rental
payments from purchase order to the Card. The current usage of
the Cards results $5,000,000 per month in charges. The
approximate increase in charges resulting from the additional
usage is estimated at $1,000,000 million per month. But in
response, Bank One has required that PG&E post another $1,500,000
in cash collateral.
According to Ms. Gordon, the additional deposit is necessary to
ensure that PG&E has access to increased funds under the
Agreement. PG&E currently has no other source of similar
financing. Ms. Gordon explains that the benefits of paying
equipment rental expenses by Card include the resolution of
blocked invoices, hence, reducing the dollar amount outstanding
to the suppliers and the elimination of open purchase orders with
no activity or remaining funds. In addition, accounting options
can be allocated and cost savings achieved. Rebates from Bank
One will also increase due to an incentive schedule based on the
amount spent through the use of the Cards. (Pacific Gas Bankruptcy
News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
PANGEO PHARMA: Accepts Jamieson Labs.' Offer to Acquire Assets
--------------------------------------------------------------
PanGeo Pharma Inc., has accepted an offer to sell its natural
health products business to Jamieson Laboratories Ltd.. Jamieson
Laboratories will acquire PanGeo Pharma's "Quest" and "Wampole"
branded vitamin and herbal lines. Jamieson Laboratories will also
acquire PanGeo Pharma's manufacturing operations in Vancouver,
Canada.
Jamieson Laboratories -- http://www.jamiesonvitamins.com-- is
Canada's largest manufacturer and distributor of advanced natural
health-care products. The company is a world leader in the vitamin
and nutrition industry, exporting to over 30 countries including
the United States, China, Japan, Korea and Singapore.
PanGeo Pharma -- http://www.pangeopharma.com-- is a specialty
pharmaceutical company with core competencies in pharmaceutical
manufacturing and marketing. The company manufactures and supplies
a range of specialty pharmaceutical products and services to
Canadian and international markets.
On July 10, 2003 PanGeo Pharma filed for protection under the
Companies' Creditors Arrangement Act (Canada) in order to
facilitate restructuring efforts. PanGeo Pharma continues to carry
on business in the ordinary course. The sale of the natural health
products business is part of the company's restructuring and
PanGeo Pharma is confident that it will be able to effect an
operational and financial restructuring that will enable it to
continue to operate as a going concern on a reduced basis for the
benefit of its unsecured trade creditors, employees and other
stakeholders. National Bank, PanGeo Pharma's primary lender,
continues to be supportive of the company's restructuring efforts.
PORT WEST: Taps Keen Realty & CB Richard to Sell Certain Assets
---------------------------------------------------------------
Frederick L. Ransier, as Chapter 11 Trustee for Port West
Associates, L.P., has retained Keen Realty, LLC and CB Richard
Ellis to assist in the sale of 1280 units known as Lincoln Park
Apartments in Columbus, OH.
Keen Realty specializes in the sale of excess assets and the
restructuring of real estate and lease portfolios. The CB Richard
Ellis office in Columbus is the largest property management
company and the largest brokerage firm in the area, completing
over 351 sale and lease transactions last year. The available Port
West units are situated in 118 buildings on 73.7 acres. Amenities
include a fitness center, indoor pool, clubhouse, and large
spacious suites. Port West, LP filed for Chapter 11 bankruptcy
court protection on August 30, 2002 in the Southern District of
Ohio.
"This auction represents a terrific investment opportunity," said
Harold Bordwin, Keen Realty's President. "We are encouraging
prospective purchasers to submit their bids as soon as possible,
as the auction date of September 10, 2003 is rapidly approaching.
Interested parties should contact our office immediately for due
diligence materials."
For over 20 years, Keen Realty, LLC has had extensive experience
solving complex problems and evaluating and selling real estate,
leases and businesses in bankruptcies, workouts and
restructurings. Keen Realty is a leader in identifying strategic
investors and partners for businesses, has consulted with hundreds
of clients nationwide, and has evaluated and disposed of over 200
million square feet of properties.
For more information regarding the auction of the Lincoln Park
Apartments, please contact Keen Realty, LLC, 60 Cutter Mill Road,
Suite 407, Great Neck, NY 11021, Telephone: 516-482-2700, Fax:
516-482-5764, e-mail: krc@keenconsultants.com, Attn: Harold
Bordwin or CB Richard Ellis, 200 E Campus View Blvd, Suite 100,
Columbus, OH 43235, Telephone: 614-430-5008, Fax: 614-847-1327, e-
mail: ejoseph@cbre.com, Attn: Ed Joseph.
QUAIL PIPING: Selling Assets to J-M Acquisition for $6 million
--------------------------------------------------------------
Quail Piping Products, Inc., seeks approval from the U.S.
Bankruptcy Court for the Northern District of Texas to sell
substantially all of its assets to J-M Acquisition Corp., for $6
million.
The Debtor assures the Court that the Asset Purchase Agreement
with J-M was negotiated at arm's length and in good faith. The
Debtor believes that the consideration to be received from the
sale will result in the highest and best value for the Debtor's
estate and its creditors.
The APA provides that the Debtor will sell Assets including:
-- real property,
-- fixtures,
-- equipment,
-- books and records,
-- intellectual property rights,
-- permits,
-- related assets, and
-- an assignment of those executory contracts and leases
that will be identified in the APA.
Expressly excluded from the Asset Sale are:
-- accounts receivable,
-- certain inventory, and
-- certain equipment related to the manufacture of
corrugated pipe.
J-M Acquisition agreed to purchase the Assets in for $6,000,000,
payable at the Closing by wire transfer or certified check from J-
M Acquisition.
J-M Acquisition will also make a promissory note in favor of the
Debtor, in the principal amount of $5,200,000 in the form of an
Assignable Note. The Assignable Note will accrue interest at the
rate of 3%, and require annual payments equal to approximately 1/3
of the outstanding principal and all unpaid interest.
Additionally, a promissory note, made by J-M Acquisition in favor
of the Debtor, in the principal amount $775,000, in the form of an
Offset Note subject to offset by Purchaser in respect of
indemnification claims asserted by Purchaser.
The Offset Note shall accrue interest at the rate of 3%, and
require annual payments equal to approximately 1/3 of the
outstanding principal and all unpaid interest. Both Notes will be
secured by a letter of credit.
If the Debtor terminates the APA following the Bankruptcy Court's
entry of the Sale Order, the Debtor is obligated to pay to J-M
Acquisition, a break-up fee of $300,000 in order to reimburse J-M
Acquisition for its reasonable out-of pocket expenses.
Moreover, the APA specifically recognizes the solicitation of
overbids for the Assets in accordance with the Bidding Procedures
to be established by the Bankruptcy Court. A minimum initial
overbid shall be in an amount of at least $200,000 in cash
consideration greater than the amount offered by the Buyer plus
the amount of the Break-up Fee. All additional bid increments
thereafter must increase the Purchase Price by not less than the
amount of the Overbid Increment.
Quail Piping Products, Inc., headquartered in Wichita Falls,
Texas, manufactures pressure pipes and corrugated pipes. The
Company filed for chapter 11 protection on July 15, 2003 (Bankr.
N.D. Tex. Case No. 03-70583). Charles A. Dale, III, Esq., at
Gadsby Hannah, LLP, represents 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.
QWEST COMMS: Inks Pact with DIRECTV to Offer Satellite Services
---------------------------------------------------------------
Qwest Communications International Inc. (NYSE: Q) -- whose
December 31, 2002 balance sheet shows a net capital deficit of
about $1 billion -- has signed a strategic marketing agreement
with DIRECTV, Inc. With this alliance, Qwest will make satellite
TV services available to its customers in single family homes in
Phoenix and Tucson, Arizona, and Seattle through DIRECTV. The
company expects to rollout these services to more markets
throughout the remainder of 2003 and into 2004.
This joint marketing agreement represents the first step in the
process to bundle video with Qwest's other communications
services. Additionally, the partners are exploring ways to
further enhance this relationship with next-generation services as
well as migrating to a more integrated model in the first half of
2004 where Qwest will be the primary interface for various
customer interactions including service and billing.
Through Qwest, residential customers in these markets can now make
one phone call to order competitively-priced local, long-distance,
DSL, wireless and now television service. Beginning in early
August, Qwest will introduce additional package savings allowing
Qwest customers to enjoy all of the programming that DIRECTV
offers including news, movies, sports, commercial-free audio music
channels and a host of other programming selections.
In addition, Qwest and DIRECTV have extended their existing
agreement for DIRECTV to be the exclusive digital satellite TV
provider for multiple dwelling unit properties in those
territories where Qwest provides video programming services.
"We're a major step closer to providing customers with a true one-
stop shopping experience -- one bill, one number to call and one
Web site to visit for all of their communications and programming
needs," said Richard C. Notebaert, Qwest chairman and CEO.
"Recent reports by J.D. Power and Associates show that between
2002 and 2003 an additional 10 million households chose to bundle
their services. Our goal is to meet customers' needs; our
commitment is to work with DIRECTV to provide customers with these
benefits."
"We look forward to providing Qwest customers in Phoenix, Tucson
and Seattle with a compelling alternative to their local cable
provider and are pleased to have extended our existing MDU
partnership with Qwest," said Steve Cox, executive vice president
of Sales, Distribution and Customer Acquisition for DIRECTV, Inc.
"We believe that DIRECTV's position as the nation's leading
digital multi-channel television service provider, in conjunction
with Qwest's Spirit of Service, will provide a tremendous value
proposition for consumers within the Qwest territories."
According to a 2002 Yankee Group survey, satellite providers
scored significantly higher than cable across a broad range of
criteria from overall satisfaction and value for the money to
timely resolution of problems and customer service and support.
Satellite TV customers enjoy 100 percent digital signals, which
result in superior picture quality as well as greater channel
selection in most cities -- particularly for sports, foreign
language and international programming.
"It is becoming increasingly important for service providers to
deliver a bundle of residential entertainment and communication
services," said Yankee Group Analyst Adi Kishore. "Video is an
important component of this bundle, and today Qwest has a partner
that has regularly provided a high standard of customer service
for multi-channel video services. Our research has shown that
satellite has consistently outperformed cable across a range of
customer satisfaction metrics."
Qwest currently offers multi-channel video entertainment to
approximately 64,000 customers through a variety of delivery
options including very high-speed digital subscriber line (VDSL),
satellite, and hybrid fiber-coaxial cable. With its first-hand
knowledge of numerous multi-channel video delivery systems, Qwest
is one of the most advanced providers in the U.S. with regard
to its video deployments. The agreement announced today further
strengthens Qwest's breadth of knowledge and experience in
deploying video services. Backed by DIRECTV's advanced technology
and commitment to service quality, Qwest is able to provide a
premier customer experience and excellent customer value, while
ensuring a seamless system and process set-up between itself and
DIRECTV.
DIRECTV is the nation's leading digital multi-channel television
service provider with more than 11.5 million customers. DIRECTV
and the Cyclone Design logo are registered trademarks of DIRECTV,
Inc., a unit of Hughes Electronics Corporation. Hughes
Electronics Corporation, a unit of General Motors Corporation, is
a world-leading provider of digital television entertainment,
broadband satellite networks and services, and global video and
data broadcasting. The earnings of HUGHES are used to calculate
the earnings attributable to the General Motors Class H common
stock (NYSE: GMH).
Qwest Communications International Inc. (NYSE: Q) is a leading
provider of voice, video and data services to more than 25 million
customers. The company's 50,000 employees are committed to the
"Spirit of Service" and providing world-class services that exceed
customers' expectations for quality, value and reliability. For
more information, visit the Qwest Web site at http://www.qwest.com
RIBAPHARM: ICN Amends and Extends Tender Offer for Co.'s Shares
---------------------------------------------------------------
ICN Pharmaceuticals, Inc. (NYSE: ICN) amends its previously
announced cash tender offer for shares of common stock of
Ribapharm Inc. (NYSE: RNA) to add a condition that the rights
under Ribapharm's recently adopted stockholder rights plan must
have been redeemed or made inapplicable to the offer. Accordingly,
ICN is extending the expiration date of the offer to 5:00 p.m.,
New York City time, on Tuesday, July 29, 2003.
ICN stated that it is continuing to assess the status of its offer
in light of the recent adverse summary judgment decision in the
ribavirin patent litigation with generic drug manufacturers, as
well as concerns over Ribapharm's ribavirin royalties in light of
Schering-Plough Corporation's July 7, 2003 earnings warning.
Under the terms of its tender offer, ICN is offering $5.60 per
share in cash for all of the outstanding shares of common stock of
its subsidiary, Ribapharm, that ICN does not already own. The
offer was previously scheduled to expire at 12:00 midnight, New
York City time, on Tuesday, July 22, 2003.
According to American Stock Transfer & Trust Company, the
Depositary for the offer, as of 5:00 p.m. New York City time on
Monday, July 21, 2003, approximately 1,031,745 Ribapharm shares
had been tendered and not withdrawn pursuant to the offer.
ICN's Offer to Purchase and certain other documents are on file
with the Securities and Exchange Commission. Ribapharm
stockholders and other interested parties are urged to read ICN's
Offer to Purchase and other relevant documents filed with the SEC
because they contain important information. These offering
materials, together with a letter of transmittal, have been mailed
to Ribapharm stockholders. Ribapharm stockholders will be able to
receive such documents free of charge at the SEC's Web site --
http://www.sec.gov-- or from ICN at 3300 Hyland Avenue, Costa
Mesa, CA 92626, Attn: Investor Relations.
The Depositary for the tender offer is the American Stock Transfer
& Trust Company, 59 Maiden Lane, Plaza Level, New York, NY 10038.
The Dealer Manager for the tender offer is Goldman, Sachs & Co.,
85 Broad Street, New York, NY 10004. The Information Agent for
the tender offer is Georgeson Shareholder Communications Inc., 17
State Street, 10th Floor, New York, NY 10004. Banks and brokers
call collect (212) 440-9800. All others call toll free (800) 965-
5215.
ICN is an innovative, research-based global pharmaceutical company
that manufactures, markets and distributes a broad range of
prescription and non-prescription pharmaceuticals under the ICN
brand name. Its research and new product development focuses on
innovative treatments for dermatology, infectious diseases and
cancer.
Ribapharm, whose March 31, 2003 balance sheet shows a total
shareholders' equity deficit of about $335 million, is a
biopharmaceutical company that seeks to discover, develop, acquire
and commercialize innovative products for the treatment of
significant unmet medical needs, principally in the antiviral and
anticancer areas.
SAFETY-KLEEN CORP: Assuming Amended CIT Transportation Lease
------------------------------------------------------------
The Safety-Kleen Debtors ask Judge Walsh to authorize Safety-Kleen
Systems, Inc., to assume an unexpired Master Lease Agreement
entered into on February 29, 2000, as recently amended.
On February 29, 2000, SK Systems, Safety-Kleen (TG), Inc., and
Safety-Kleen (FS), Inc., entered into a lease agreement with CIT
for certain transportation equipment described in the schedules to
the Lease Agreement. In connection with the Lease Agreement,
Safety-Kleen Services, Inc., executed a guaranty in CIT's favor
guaranteeing various obligations under the Lease Agreement.
As part of the Debtors' efforts to streamline operations, reduce
costs, and resolve whether to assume or reject existing
prepetition executory contracts prior to emergence from
bankruptcy, the Debtors entered into negotiations with their
leased transportation equipment vendors. The specialized nature
and use -- i.e. hazardous material movement -- of the Debtors'
fleet limits their ability to rent or enter into short- term lease
arrangements. As such, the fleet has traditionally been owned or
leased under financial leasing arrangements.
To facilitate the streamlining process, SK Systems desires to
continue utilizing a designated portion of its leased fleet, which
consists of newer vehicles with lower annual maintenance costs and
less risk of service disruption than most of its older owned
vehicles. Accordingly, SK Systems undertook a comprehensive
review and renegotiation of its lease arrangements. During the
review process, SK Systems reviewed its relationship with CIT.
Upon completing a review of its relationship with CIT, SK Systems
entered into significant negotiations with CIT regarding the terms
and conditions of their ongoing contractual arrangement.
Ultimately, SK Systems was able to achieve substantial concessions
across a number of areas, including expiration dates, interest
rates, lease-end residual payment, and the release of various
claims, including any cure payments. More specifically, the
Amendment provides for:
(a) Fair Market Value Adjustment. The current fair market
value of the vehicles under the Lease Agreement will
be reduced to $1,200,000;
(b) Extension of Lease Terms. The lease terms will be
extended by eight quarters;
(c) Lease Schedule Revision. CIT will release SK Systems
from any and all future liabilities for nine vehicles;
(d) Release of Co-Lessees. CIT will release
Safety-Kleen (TG) and Safety-Kleen (FS), effective
upon the earlier of the effective date of the Plan
-- provided that the Plan provides for the dissolution
of both Safety-Kleen (TG) and Safety-Kleen (FS)) or
the actual date of dissolution of both Safety-Kleen
(TG) and Safety-Kleen (FS) under applicable state law,
from any and all liability to CIT in connection with
the Lease Agreement;
(e) Release of Guarantor. CIT agrees that SK Services,
effective upon the earlier of the effective date of
the Plan -- provided that the Plan provides for the
dissolution of SK Services -- or the actual date of
dissolution of SK Services under applicable state law,
will no longer be guarantor under the Lease Agreement
and CIT will release SK Services from any and all
liability to CIT in connection with the guaranty
entered into by SK Services related to the Lease
Agreement;
(f) Release by Obligors. The Obligors release and forever
discharge CIT and its affiliates, successors, and
assigns from any and all claims arising from the
beginning of time to the date of execution of the
Amendment, including, but not limited to, any and all
claims relating to or arising from the leasing
relationship between CIT and the Obligors;
(g) Conditions Precedent. The Amendment will be deemed
effective only after the Obligors deliver certain
documents to CIT, including:
(i) a final, non-appealable order executed by the
Court authorizing the assumption of the Amended
Lease;
(ii) certificates of insurance naming CIT as
additional loss payee; and
(iii) corporate authorization documents; and
(h) Costs and Expenses. The Obligors will promptly pay
all reasonable costs and expenses, which CIT has or may
incur in connection with the reproduction,
interpretation, and enforcement of the Amendment.
The Benefits
As a result of the negotiations, and primarily due to a reduction
in the agreed-upon underlying vehicle value, SK Systems was able
to reduce its annual lease payments by approximately 52%. The
lease terms also have been extended by eight quarters, allowing SK
Systems to obtain a more strategic cycling of the costs for
vehicle replacements and allowing the vehicles to be utilized
throughout their full life cycle. Moreover, as a result of the
negotiations, the lease-end residual payment was reduced by over
$1,000,000. SK Systems will not pay any cure costs and CIT will
release all claims against Safety-Kleen (TG) and Safety-Kleen (FS)
related to the Lease Agreement and the corresponding guaranty
entered into by SK Services in connection with the Lease
Agreement.
The revised lease rates under the Amended Lease are market rates
or better and will provide approximately $322,000 in annual cost
savings. SK Systems also avoids the cost of replacing the vehicles
with new vehicles -- as there has not traditionally been a used
market -- which it likely would have been forced to do in the
event the Debtors rejected the Lease Agreement. New vehicles are
more costly to buy or lease and are not likely to provide
substantial cost savings over the leased vehicles to justify their
immediate purchase.
Moreover, SK Systems avoids substantial return and replacement
costs and service disruptions by continuing to utilize the lease
vehicles. Due to the specialized nature of the vehicles and the
nature of their use, many of the types of vehicles that SK Systems
employs could not be temporarily replaced with rental or short-
term lease vehicles. Also, rejection of the vehicles would likely
require SK Systems to incur additional cleaning, repair, and
return costs.
The Debtors have determined in the exercise of their business
judgment that SK Systems' assumption of the Amended Lease will
result in significant savings and will be beneficial to the
Debtors, their estates, their creditors, and other parties-in-
interest in these cases.
Judge Walsh agrees and permits the Debtors to assume the Lease.
(Safety-Kleen Bankruptcy News, Issue No. 60; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
SAGENT: Special Stockholders Meeting Adjourned Until July 28
------------------------------------------------------------
Sagent (OTCBB:SGNT) announced that a quorum was not present at
Monday's Special Stockholders' Meeting and accordingly, the
Special Meeting was adjourned to July 28, 2003. As such, the next
stockholders meeting will be held on July 28, 2003 at 2:00 p.m.
PDT, at the offices of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, at 650 Page Mill Road, Palo Alto,
California.
Andre Boisvert, Chairman of the Board said, "There is no doubt
that my board colleagues and I are very disappointed in the low
shareholder voting to date". "Our disappointment does not stem
from any movement to block the proposed transactions, since to
date there has been a 25:1 ratio in favor among the shareholders
that have exercised their right to vote" added Boisvert, "but
rather a concern that shareholder apathy seems to have set in".
Votes can be placed in accordance with the instructions on the
Proxy Cards and should continue to be voted telephonically via
888-897-6096 or voted electronically no later than 9:00 a.m. July
28th.
At the meeting, the stockholders will be asked to vote on the
following three proposals:
1. To approve the proposed sale of all of Sagent's operating
assets to Group 1 Software, Inc., described in more detail in
the proxy statement.
2. To approve the Plan of Complete Liquidation and Dissolution of
Sagent Technology, Inc.
3. Following consummation of the asset sale in Proposal 1, to
amend Sagent's Amended and Restated Certificate of
Incorporation to remove the name "Sagent".
4. To transact such other business as may properly come before the
Special Meeting and any adjournments thereof.
If the sale of assets and dissolution is approved at the special
stockholders meeting, the closing of the sale will be held
promptly following the stockholders meeting, and the dissolution
is expected to be completed by year-end, at which point
distribution would be paid out to the shareholders as described in
the proxy statement. If the sale of assets and dissolution is not
approved at the special stockholders meeting, the $7 million loan
from Group 1 will be due on July 31, 2003, and Sagent will not be
in a position to make the payment. At that point, Group 1 would
have the right to declare an event of default, exercise its
remedies as a secured creditor and commence a foreclosure sale. If
this were to happen, it is uncertain what amount, if any, would be
received upon the sale of our assets and if there would be any
funds available to distribute to stockholders.
Sagent has fixed the close of business on May 28, 2003 as the
record date for determining stockholders entitled to notice of,
and vote at, the Special Meeting. Information regarding the
identity of the persons who may, under SEC rules, be deemed to be
participants in the solicitation of stockholders of Sagent in
connection with the transaction, and their direct and indirect
interests, by security holding or otherwise, in the solicitation
is set forth in the proxy statement as filed by Sagent with the
SEC.
Sagent Technology, Inc.'s March 31, 2003 balance sheet shows a
working capital deficit of about $8 million, while its total
shareholders' equity dwindled to about $1.7 million from $6.3
million recorded three months ago.
SEITEL INC: Case Summary & 25 Largest Unsecured Creditors
---------------------------------------------------------
Lead Debtor: Seitel, Inc.
10811 South Westview Circle Drive
#100, Building C
Houston, TX 77043
Bankruptcy Case No.: 03-12227
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Seitel Management, Inc. 03-12228
N360X, LLC 03-12229
Seitel Delaware, Inc. 03-12230
Seitel Data Corp. 03-12231
Seitel Data Ltd. 03-12232
Seitel Offshore Corp. 03-12233
Datatel, Inc. 03-12234
Seitel Solutions, Inc. 03-12235
Seitel Solutions, LLC 03-12236
Seitel Solutions, Ltd. 03-12237
SI Holdings, G.P. 03-12238
Seitel Solutions Holdings LLC 03-12239
Seitel Canada Holdings, Inc. 03-12240
SEIC, Inc. 03-12241
SEIC, LLC 03-12242
DDD Energy, Inc. 03-12243
Energy Venture Holdings, LLC 03-12244
Endeavor Exploration, LLC 03-12245
Seitel Geophysical, Inc. 03-12246
Seitel Gas & Energy Corp. 03-12247
Seitel Power Corp. 03-12248
Geo-Bank, Inc. 03-12249
Alternative Communication Enterprises, Inc. 03-12250
EHI Holdings, Inc. 03-12251
Exsol, Inc. 03-12252
Seitel IP Holdings, LLC 03-12253
Seitel Natural Gas, Inc. 03-12254
Seitel Canada, LLC 03-12255
Matrix Geophysical, Inc. 03-12256
Express Energy, LLC 03-12257
Type of Business: Seitel markets its proprietary seismic
information/technology to more than 400
petroleum companies, licensing data from its
library and creating new seismic surveys under
multi-client projects.
Chapter 11 Petition Date: July 21, 2003
Court: District of Delaware
Judge: Peter J. Walsh
Debtors' Counsel: Scott D. Cousins, Esq.
Greenberg Traurig LLP
Brandywine Bldg
1000 West St.
Suite 1540
Wilmington, DE 19801
Tel: 302-661-7000
Fax: 302-661-7360
Total Assets: $379,406,000
Total Debts: $345,525,000
Debtor's 25 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Ranch Capital LLC Note $258,806,673
12730 High Bluff Drive
Suite 180
Sam Diego, CA 92130
Attn: Larry Hershfield
Fax: 858-523-1899
Geophysical Pursuit, Inc. Trade $370,759
3501 Allen Parkway
Houston, Texas 77019
Attn: Jeff Springmeyer
Fax: 713-529-5805
Resolve Geo Sciences, Inc. Trade $204,600
Geokinetics Inc. Trade $150,000
Westerngeco LLC Trade $134,289
General Electric Capital Contract $92,740
Geocenter, Inc. Trade $87,276
Venus Oil Company Trade $54,791
Hunt Oil Co. Trade $42,453
Pennzoil E&P Co. Trade $42,318
n/k/a Devon Energy Corp.
The Estate of Douglas Former Employee $15,069
Maier
Kerr McGee O&G Onshore Trade $10,936
Franklin, Cardwell & Jones Services $86,903
TLC Data Processing/Earney Trade $51,355
Lawrence
PGS (USA), Inc. Trade $13,600
Law Offices of Cynthia Services $8,453
R. Levin Moulton
Ham's Aviation Maintenance Trade $6,769
Service, Inc.
Shell Western E&P Inc. Trade $5,657
Seismic Exchange Trade $5,648
Zilkha Energy Co. Trade $3,638
n/k/a El Paso Production
Company
Triton Data Services Trade $3,221
Fairfield Industries Trade $1,705
American Bank/Boone Trade $0
Geophysical
Boone Geophysical Trade $0
General Electric Capital Possible Deficiency unknown
SELECT MEDICAL: Prepares to Offer $175 Million Senior Sub. Notes
----------------------------------------------------------------
Select Medical Corporation (NYSE: SEM) intends to issue $175
million in aggregate principal amount of Senior Subordinated Notes
due 2013. The Company stated that it intends to use the proceeds
of the offering, together with existing cash and, to the extent
necessary, borrowings under its senior credit facility, to
complete its previously announced acquisition of Kessler
Rehabilitation Corporation.
The securities to be offered will not be registered under the
Securities Act of 1933, as amended, or any state securities laws,
and unless so registered, may not be offered or sold in the United
States except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities
Act and applicable state securities laws.
As reported in Troubled Company Reporter's July 14, 2003 edition,
Standard & Poor's Ratings Services revised the outlook on Select
Medical Corp. to stable from positive. The 'BB-' corporate credit
and 'B' subordinated ratings on the company were affirmed.
The new outlook reflects the impact on Select Medical's credit
profile after the company's larger-than-expected $230 million
acquisition of inpatient rehabilitation provider Kessler
Rehabilitation Corporation. The revision also reflects Standard &
Poor's revised view of Select Medical's future acquisition
prospects.
SPIEGEL GROUP: Brings-In Sachnoff & Weaves as Insurance Counsel
---------------------------------------------------------------
The Spiegel Inc. Debtors want to employ Sachnoff & Weaver, Ltd. as
special insurance coverage counsel nunc pro tunc to June 1, 2003.
The Debtors selected Sachnoff & Weaver as their insurance coverage
counsel because of its expertise in representing policyholders in
insurance coverage matters. The Debtors inform the Court that the
firm's Insurance Coverage Group frequently assists public and
private companies, non-profits, individual policyholders,
insurance brokers, risk managers, in-house and outside counsel,
and human resource professionals in evaluating and enhancing
insurance coverage and resolving insurance disputes.
As the Debtors' insurance counsel, Sachnoff & Weaver is expected
to:
(a) advise and counsel the Debtors regarding their directors'
and officers' liability insurance coverage;
(b) prepare pleadings and documents as necessary with regard
to insurance coverage for the Debtors;
(c) appear and represent the interests of the Debtors with
respect to insurance coverage issues; and
(d) take other action and perform other services as the
Debtors may require of Sachnoff & Weaver in connection
with insurance coverage matters.
The Debtors will compensate Sachnoff & Weaver for its services
and expenses consistent with the firm's billing practices. The
professionals who will primarily work for the Debtors and their
customary hourly rates are:
Carolyn H. Rosenberg Partner $425
Mark S. Hersh Partner 370
Duane F. Sigelko Partner 360
Charles P. Schulman Partner 350
Arlene N. Gelman Associate 265
J. Andrew Moss Associate 225
Sachnoff & Weaver Partner Carolyn H. Rosenberg assures the Court
that the firm has no connection with any of the Debtors' creditors
or other parties-in-interest and does not hold or represent any
interest adverse to the Debtors. (Spiegel Bankruptcy News, Issue
No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900)
STEEL DYNAMICS: Reports Weaker Second Quarter Ops. Performance
--------------------------------------------------------------
Steel Dynamics, Inc. (Nasdaq: STLD) (S&P, BB- Corporate Credit
Rating) announced second quarter earnings of $5.4 million, or $.11
per diluted share, compared to earnings of $17.7 million, or
earnings per diluted share of $.37 in the second quarter of 2002.
Net sales for the second quarter of 2003 were $219 million,
compared to $214 million in the second
quarter of 2002.
Compared to the year-ago quarter, SDI's lower second quarter 2003
earnings resulted primarily from higher scrap costs coupled with
the lower selling prices associated with a softer steel
marketplace. SDI's average consolidated selling price per ton
declined to $335 per ton, compared to $340 per ton in the second
quarter of 2002 and $363 per ton in the first quarter of 2003.
Lower prices resulted primarily from weaker pricing in flat-rolled
products, as the average price per ton of structural products
increased $18 per ton from the first to the second quarter. Second
quarter scrap prices increased $8 per ton, compared to the first
quarter of 2003, but were $25 per ton higher than in the second
quarter of 2002.
SDI's second quarter consolidated shipments were 653,000 tons, 4
percent higher than the 628,000 tons shipped in the second quarter
of 2002, and about one percent higher than the first quarter's
648,000 tons. Production at SDI's steel operations was 720,000
tons, compared to 600,000 tons in the second quarter of 2002 and
685,000 tons in the first quarter of 2003. Finished goods
inventories increased moderately, primarily in flat-rolled
products.
"We are satisfied with the quarter's results in light of soft
market conditions," said Keith Busse, president and chief
executive officer. "Comparing the second quarter to the first
quarter of 2003, the combination of weaker flat-rolled steel
prices and modestly higher steel-scrap prices resulted in lower
earnings, much in line with our April prediction. Nonetheless, I
am pleased with our continued strong operating results. We
believe the company's operating profit of $29 per ton shipped is
notable, considering our Structural and Rail Division is still in
the midst of its start-up and is producing at only about 50
percent of its capacity. This new division's operating losses are
moderating and it is likely that it will turn cash-positive by
year-end.
"In the second quarter, the Structural and Rail Division increased
its beam shipments by more than 40 percent from the first quarter
and continued commissioning new products. Installation of
equipment for the manufacture of rail sections was completed and
initial production trials are expected to take place in July. We
are excited about the progress that has been made by the Columbia
City team in their first twelve months of manufacturing and
selling structural products," Busse said.
"The Butler Flat Roll Division continued to perform very well.
First-half volume basically matched the first half of 2002, which
means Butler has maintained a strong order book in spite of a more
competitive environment. During the quarter, the company concluded
its export shipments to China, and no additional orders are in
hand," Busse said. "The Division's newly acquired Jeffersonville,
Indiana, galvanizing facility has begun production, which will
allow us to diversify our cold-rolled, galvanized steel production
to include lighter gauges, thereby gaining entry into a variety of
new construction materials markets. In addition, Butler's new
paint line is expected to begin production tests in the third
quarter, and painted products are expected to begin shipping in
the fourth quarter."
Work is proceeding well at SDI's new Bar Products Division in
Pittsboro, Indiana, toward a planned start-up early in 2004. An
environmental permit that is required before mill modifications
and improvements can be made is now under review by the Indiana
Department of Environmental Management (IDEM). Barring any
unforeseen complications, the new air permit could be in place by
the end of the third quarter. Construction is set to begin as soon
as the permit is approved and work will continue into 2004. With
the added manufacturing capabilities, the mill's portfolio of
products will be expanded to include merchant shapes, such as
angles, channels, flats, and rebar. Special-bar-quality (SBQ)
steels should represent 50 percent of the expanded mill's
capacity, which is expected to reach 500,000 to 600,000 tons per
year.
Business is improving at New Millennium Building Systems, LLC,
which has recently experienced increased demand and orders for its
building products. New Millennium is expected to be profitable in
the second half of this year. Now a wholly owned subsidiary, New
Millennium supplies girders, trusses and decking to the steel
building construction marketplace.
SUMMIT NATIONAL: Asks Court to Dismiss of Chapter 11 Proceeding
---------------------------------------------------------------
Summit National Consolidation Group, Inc. (Pink Sheets:SMNC)
announces a motion for the dismissal of the Chapter 11 bankruptcy
proceeding has been entered on July 17th, 2003 in United States
Bankruptcy court for the Southern District of Texas, Houston
Division.
SUMMIT NATIONAL CONSOLIDATION GROUP, INC.
CASE NO. 02- 39372 - H1- 11
Manuel Leal
United States Bankruptcy Judge
The Chapter 11 Proceeding above entitled and numbered is on file;
a response must be filed within twenty days of the 17th, otherwise
the court may treat it as unopposed and grant relief.
In a related matter, SMNC has resolved the first creditor
judgement against the company. A group with a $267,500 judgement
against the company as of June 16th, 2000 has agreed to a
settlement in lieu of cash and will receive an undisclosed amount
of common restricted voting shares; upon the issuance of the
shares, the judgement lien will be released to SMNC.
"The settlement is in place, and the motion to dismiss Chapter 11
proceedings has been submitted," said Mario Quenneville, President
and CEO of SMNC. "We're moving swiftly to resolve any outstanding
creditor judgements. It's a show of faith in the future of SMNC
that our creditors are accepting restricted stock in the company."
SMNC conceives, designs and formulates unique cosmetic and
cleaning products from organic materials with a variety of
applications including fingernail polish remover, make up remover,
sneaker cleaner wipes, instant shoe shine wipes, acne treatment
wipes, eye glass, cleaner and defogger, car interior leather
cleaning pads, vitamin E applicators, etc. Superwipe(R) products
are sold in leading food, drug, convenience and beauty supply
stores throughout North America and Europe.
SYSTECH RETAIL: Wants August 21 Administrative Bar Date Fixed
-------------------------------------------------------------
Systech Retail Systems (U.S.A.), Inc., and its debtor-affiliates
want the U.S. Bankruptcy Court for the Eastern District of North
Carolina to schedule a bar date for all creditors asserting
administrative claims and cure defaults to file their proofs of
claims against the Debtors.
The Court approves the Debtors' Disclosure Statement and schedules
the Plan Confirmation Hearing on September 3, 2003 at 10:00 a.m.
The Debtors point out that they operated their business in Canada
and various states in the United States from and after the
Petition Date. In order to determine the entire universe of
potential Administrative Claims that could be asserted against the
Debtors' estates, the Debtors require that the Court establish a
bar date for the filing of motions by creditors or parties in
interest seeking the allowance or payment of such Administrative
Claims. Upon the filing of such motions, the Debtors will be able
to evaluate all such Administrative Claims, and either agree to
such claims, settle such claims or contest such claims in this
Court.
Consequently, the Debtors will have sufficient information so as
to enable them to reserve monies in connection with confirmation
of the Plan in respect of such Administrative Claims. The ability
to reserve for such Administrative Claims will enable the Debtors
to make other distributions under the Plan upon confirmation.
As such, the Debtors request that the Court set August 21, 2003 as
the last date for creditors or parties in interest to file motions
for the allowance or payment of Administrative Claims under
Section 503(b)(1) and entitled to priority under section 507(a)(1)
of the Bankruptcy Code, with the exception of professionals
employed.
Furthermore, the Debtors want the Court to establish a bar date
for the filing of cure claims under executory contracts and
unexpired leases, on the same date, August 21, 2003.
Under the Plan, the Debtors propose to assume certain executory
contracts and unexpired leases in connection with confirmation of
the Plan. In order to determine whether any disputes exist in
respect of the cure payments that may be due in connection with
the assumption of the Assumed Contracts, the Debtors require that
the Court establish a bar date for the filing of notices by the
other parties to such Assumed Contracts setting forth the amounts,
if any, that such parties assert are required to be paid in
connection with the assumption of their respective Assumed
Contract. If such other party does not file any such Cure Notice
by the bar date to be established by this Court, then the amount
asserted by the Debtors to be due and payable in connection
therewith will govern.
Systech Retail Systems (USA) Inc., along with two other affiliates
filed for chapter 11 protection on January 13, 2003, (Bankr.
E.D.N.C. Case No. 03-00142). Systech, headquartered in Raleigh,
North Carolina, is an independent developer and integrator of
retail technology, including software, systems and services to
supermarket, general retail and hospitality chains throughout
North America. N. Hunter Wyche, Esq., at Smith Debnam Narron
Wyche & Story represents the Debtors in their restructuring
efforts. When the Company filed for protection from its
creditors, it listed estimated debts and assets of over $50
million.
TECO ENERGY: Completes Final 2 Units at Gila River Power Station
----------------------------------------------------------------
TECO Energy's (NYSE: TE) TECO Power Services subsidiary has
completed the final two units at its Gila River Power Station,
marking the end of major construction activity at the 2,145-
megawatt facility.
TECO Energy Senior Vice President and CFO Gordon L. Gillette said,
"This is a major milestone in our construction program. The highly
efficient Gila River Power Station has been constructed ahead of
schedule, which gives the facility more capacity for the peak
summer months. Also, this reduces the amount of security TECO
Energy is required to post to the project's lenders, which
improves the company's liquidity position."
As a result of this milestone, the letter of credit postings
required under the project completion undertaking will be reduced
by $44 million to $66 million. Upon final acceptance of both
plants, expected in the fall of 2003, the amount outstanding will
be reduced to $8 million.
TECO Energy, Inc. (NYSE: TE) is a diversified, energy-related
holding company based in Tampa. Its principal businesses are Tampa
Electric, Peoples Gas, TECO Power Services, TECO Transport, TECO
Coal and TECO Solutions.
As reported in Troubled Company Reporter's April 29, 2003 edition,
Fitch Ratings downgraded the outstanding ratings of TECO Energy,
Inc. and Tampa Electric Company as shown below. The Rating Outlook
for both issuers has been revised to Negative from Stable.
TECO Energy, Inc.:
-- Senior unsecured debt lowered to 'BB+' from 'BBB';
-- Preferred stock lowered to 'BB' from 'BBB-'.
TECO Finance (guaranteed by TECO)
-- Medium term notes lowered to 'BB+' from 'BBB';
-- Commercial paper withdrawn.
Tampa Electric Company:
-- First mortgage bonds lowered to 'A-' from 'A';
-- Senior unsecured debt lowered to 'BBB+' from 'A-';
-- Unsecured pollution control revenue bonds
(Hillsborough County, Florida IDA for Tampa Electric)
lowered to 'BBB+' from 'A-';
-- Commercial paper unchanged at 'F2';
-- Variable rate mode unsecured pollution control
revenue bonds (Hillsborough County, Florida IDA for
Tampa Electric) unchanged at 'F2'.
The downgrade of TECO Energy's ratings reflect the higher-than-
expected debt leverage on a cash flow basis (gross debt measured
against earnings before interest taxes depreciation and
amortization), and the negative impact on earnings and cash flow
measures from increased interest expense, weaker projected
earnings and higher-than-anticipated capital expenditures.
TERAYON COMMS: Will Publish Second Quarter Results on July 30
-------------------------------------------------------------
Terayon Communication Systems, Inc. (Nasdaq: TERN), a leading
provider of broadband solutions, will release financial results
for its second quarter ended June 30, 2003, on Wednesday, July 30
after the market closes.
Terayon will host a conference call to discuss its financial
results at 2 p.m. Pacific Time that day. Participants interested
in listening to the call live should dial 866-406-3488 (U.S.) or
630-691-2772 (international). A live audio webcast of the call
will also be available to the public from Terayon's Web site at
http://www.terayon.com
In addition to the webcast, a replay of the conference call will
be available via telephone beginning Wednesday, July 30 at
approximately 4 p.m. Pacific Time, and will be available through
the close of business on August 30, 2003. Listeners can access
the replay by dialing 877-213-9653 (U.S.) or 630-652-3041
(international). The access code for the replay is 7472602.
Terayon Communication Systems, Inc. provides innovative broadband
systems and solutions for the delivery of advanced voice, data and
video services that are deployed by the world's leading cable
television operators. Terayon, headquartered in Santa Clara,
California, has sales and support offices worldwide, and is traded
on the Nasdaq under the symbol TERN. Terayon can be found on the
Web at http://www.terayon.com
* * *
As previously reported, Standard & Poor's revised its outlook on
cable Internet equipment company Terayon Communications Systems
Inc., to negative from stable after Terayon said that it expected
lower revenues for the June 2002 quarter than it had previously.
At the same time, Standard & Poor's affirmed Santa Clara,
California-based Terayon's single-'B'-minus corporate credit
rating and triple-'C' subordinated debt rating.
Terayon lowered its revenue expectations following a drop in sales
of proprietary cable products. The company also faces cable modem
pricing pressures and customer financial difficulties.
TROPICAL SPORTSWEAR: Defaults on BofA $7 Mill. Real Estate Loan
---------------------------------------------------------------
Tropical Sportswear Int'l Corporation (Nasdaq:TSIC) announced its
third quarter results.
Net sales for the third quarter of fiscal 2003 were $96.7 million
as compared with $116.3 million in the same period last year. The
Company incurred a net loss for the third quarter of fiscal 2003
of $30.6 million as compared with a net loss of $5.6 million in
the same period last year. Results for the third quarter of fiscal
2003 were negatively impacted by a number of unusual items
including a non-cash valuation allowance against the Company's net
deferred tax assets, the sale of higher than normal amounts of
excess inventory at reduced prices, significant increases in
reserves for excess inventory, higher than normal levels of
returns and sales allowances, charges related to disposing of one
of the Company's corporate aircraft, charges related to the
partial closure of the Duck Head(R) retail outlet store business,
reserves for certain contract disputes/litigation and investment
banking advisory fees. These items were offset, in part, by a gain
on the sale of the Duck Head(R) trademarks. Other charges for the
third quarter of fiscal 2002 related to the consolidation and
reorganization of the Company's Savane division, internally
referred to as "Project Synergy."
Gross margin for the third quarter of fiscal 2003 was 9.3% as
compared with 27.0% for the same period last year. Gross margins
were negatively impacted by substantially higher than normal
levels of closeout sales and higher levels of sales allowances.
Additionally, as the market for excess inventory deteriorated
during the quarter, the required reserve for remaining excess
inventory was increased significantly.
Excluding other charges, operating expenses for the third quarter
of fiscal 2003 were $20.6 million as compared with $24.3 million
for the same period last year.
The Company currently has $19.5 million of net deferred tax assets
comprised of temporary timing differences of future deductible
expenses and net operating losses available to offset future
taxable income in the US. After review of the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" and guidelines issued by regulatory agencies,
the Company has provided a full valuation allowance against these
assets. That valuation allowance of $19.5 million is reflected in
the Company's third quarter income tax provision as a non-cash
increase to tax expense. The use of these deferred tax assets to
offset taxable profits in future years will result in a reduction
in the Company's effective tax rate in those years.
Net sales for the first nine months of fiscal 2003 were $308.5
million compared with $346.9 million for the same period last
year. Gross margin for the first nine months of fiscal 2003 was
17.1% as compared with 28.0% for the same period last year.
Excluding other charges, operating expenses for the first nine
months of fiscal 2003 were $63.2 million, as compared with $72.7
million, for the same period last year. Charges incurred in the
first nine months of fiscal 2003 included Project Synergy sales
allowances, costs resulting from the separation of the Company's
former chief executive officer, reductions in previous Project
Synergy cost estimates and the above noted third quarter charges.
As mentioned above, the first nine months of fiscal 2002 contained
a charge related to Project Synergy.
Christopher B. Munday, CEO and President commented, "The Company
continues its realignment through disposition of unprofitable
businesses and reduction of operating expenses. We are pleased
that we were able to complete the sale of the Duck Headr business,
dispose of one corporate aircraft and transition out of the
Victorinox business. We have also completed the transition of our
Mexico production to the Dominican Republic. Additionally, we have
made considerable progress in reducing operating expenses. In the
last two quarters, operating expenses have been reduced by $7.7
million, or 16%, over the comparable prior year period."
Mr. Munday continued, "We anticipate another quarter of re-
alignment activities including disposal of additional excess
inventory, the remaining Duck Head(R) retail store closures,
elimination of an unfavorable interest rate swap agreement and
continued efforts to dispose of the remaining corporate aircraft.
Once completed, these changes will provide a platform for
profitability in fiscal 2004."
The Company anticipates charges in the 4th quarter will include
costs associated with the final closure of Duck Head retail stores
estimated at $1.5 to $2.0 million as well as a fee to terminate an
unfavorable interest rate swap agreement estimated at $1.2
million. The Company continues to pursue the sale of its one
remaining corporate aircraft, with an anticipated loss of $2.0 to
$2.5 million.
During the quarter, the Company renewed its revolving line of
credit. The new revolver is for a maximum of $95 million. Fleet
Capital continues as the lead agent and participating banks
include Bank of America and Wachovia. Under the terms of the new
revolver, the Company is only subject to financial covenants when
the availability drops below $20 million. As a result of a
financial covenant violation in a $7.0 million real estate loan
through Bank of America the Company is in technical default. Fleet
Capital has agreed to assume the loan and eliminate all financial
covenants in the agreement. Additionally, the other lenders in the
new revolving line of credit have agreed to waive the cross
default provision that was triggered by the situation with the
real estate loan.
The Company's most current releases may be viewed on the Worldwide
Web at the Company's Web site at http://www.tropicalsportswear.com
TSI is a designer, producer and marketer of high-quality branded
and retailer private branded apparel products that are sold to
major retailers in all levels and channels of distribution.
Primary product lines feature casual and dress-casual pants,
shorts, denim jeans, and woven and knit shirts for men, women,
boys and girls. TSI distinguishes itself by providing major
retailers with comprehensive brand management programs and uses
advanced technology to provide retailers with customer, product
and market analyses, apparel design, and merchandising consulting
and inventory forecasting with a focus on return on investment.
UNITED AIRLINES: Committee Wants to Hire Cognizant as Consultant
----------------------------------------------------------------
The Official Committee of Unsecured Creditors of United Airlines
Debtors seek the Court's authority to retain Cognizant Associates
of Dallas, Texas, as its airline industry consultant, effective
June 10, 2003, the date the parties entered into an Engagement
Agreement.
According to Dana J. Lockhart, representative of Airbus North
America Holdings and Chairperson of the Committee, Cognizant
provides consulting services to the airline industry with a focus
on technology issues. Michael J. Durham is the sole employee and
shareholder of Cognizant. Mr. Durham was employed by American
Airlines for 16 years as Treasurer and later, Chief Financial
Officer. As CFO, Mr. Durham served as a member of the Planning
Committee and worked on major strategic and operational issues.
In March 1995, Mr. Durham became President of The Sabre Group, a
division of American Airlines. After Sabre's successful Initial
Public Offering in October 1996, Mr. Durham served as President
and Chief Executive Officer and a member of the Board until 1999.
As the Debtors' consultant, Cognizant will:
1) evaluate and seek to enhance the Debtors' business plans;
2) assess airline strategic planning;
3) communicate with the Committee's legal counsel every week;
4) evaluate management effectiveness and potential candidates;
5) review the Debtors' proposed material expenditures and
provide an assessment for coherence with operating strategy;
6) review and provide a strategic assessment of proposed
Chapter 11 plans and assist the Committee in developing a
Plan of Reorganization;
7) assist the Committee in negotiations with the Debtors or any
other group affected by a Plan;
8) assist the Committee in analyses, interpretations and
negotiations with regulatory and administrative agencies;
9) assist the Committee in preparing documentation in
connection with supporting or opposing a Plan, including a
liquidation;
10) participate in hearings before the Bankruptcy Court;
11) prepare for, attend and participate in meetings of the
Committee; and
12) provide other services as mutually agreed upon.
Cognizant will be paid $700 per hour. Daily compensation will
not exceed $7,000. Monthly fees will not exceed $65,000. All
out-of-pocket expenses will be reimbursed by the Debtors,
including up to $15,000 in legal fees and costs.
Michael J. Durham assures the Court that Cognizant is well
qualified to serve as the Committee's airline consultant.
Neither Mr. Durham nor Cognizant has any connection with the
Debtors, their creditors, the U.S. Trustee or any other party-in-
interest in these cases that would jeopardize applicable
professional standards. (United Airlines Bankruptcy News, Issue
No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900)
WABASH NAT'L: Wins $120-Million Order Contract with U.S.Xpress
--------------------------------------------------------------
Wabash National Corp. (NYSE: WNC) and ArvinMeritor Inc. (NYSE:
ARM) confirmed a three-year order agreement for over 7,000 Wabash
National DuraPlate(R) branded trailers with U.S.Xpress Enterprises
Inc. (Nasdaq: XPRSA), the nation's fifth-largest publicly-owned
truckload carrier in the United States.
The new trailers, featuring Wabash National's flagship product,
will be equipped with ArvinMeritor's RideStar(TM) Highway
Parallelogram (RHP) air suspension system, Meritor(R) TL trailer
axles with long-life cartridge bearing hub assemblies, Q Plus
brakes with MA212 brake linings, SteelLite X30(TM) brake drums,
and Meritor automatic slack adjusters. The complete undercarriage
system will be fully assembled at ArvinMeritor's facility in
Frankfort, Ky., and shipped to Wabash National's main
manufacturing plant in Lafayette, Ind.
According to officials at Wabash National, the value of the order
is in excess of $120 million. It marks the second time in less
than three months that a major carrier has placed an order of this
magnitude with the Lafayette, Ind.-based trailer manufacturer.
"The opportunity to energize our fleet with new equipment from
Wabash National and ArvinMeritor underscores the uncompromising
commitment we have to our customers to deliver the freight --
entrusted to us -- safely and on time," said Max Fuller, co-
chairman and vice president/secretary, U.S.Xpress Enterprises Inc.
The trailers will also be equipped with GeoLogic, a new asset
monitoring and tracking system provided by Aether Systems Inc.
(Nasdaq: AETH), in conjunction with Transcommunications Inc.
GeoLogic will allow U.S.Xpress to monitor thousands of its
trailers in the field simply and easily by utilizing a proprietary
reporting system. The low-cost asset management and tracking
solution incorporates the use of "geo-fences" and pre-determined
events such as arrivals, departures, entry into the trailer, and
disconnection from the truck to help provide a secure solution for
load planning.
"This renewed relationship is a landmark customer indication that
ArvinMeritor is achieving our goal of moving to full trailer
systems integration," said Tom Gosnell, president, Commercial
Vehicle Systems, ArvinMeritor. "Plus, the agreement proves that
U.S.Xpress and Wabash National recognizes the value of our ongoing
technology, our low-maintenance products and our full-service
DriveTrain Plus support capabilities."
"We're grateful for the opportunity to continue our relationship
with U.S.Xpress Enterprises and we appreciate the value
ArvinMeritor's products and services add to this order," said
Wabash National CEO Bill Greubel.
Wabash National Corp.'s March 31, 2003 balance sheet shows that
its total current liabilities exceeded its total current assets
by about $205 million.
As reported in Troubled Company Reporter's April 16, 2003
edition, Wabash National completed the amendment of its credit
facilities, which includes its revolving line of credit, its
senior notes, its receivables facility and its lease facility.
The amendment revises certain of the Company's financial
covenants and adjusts downward the required monthly principal
payments during 2003.
In another previous report, the Company said it was not prepared
to predict that first quarter results, or any other future
periods, would achieve net income, and did not expect to announce
further results before the first quarter would be completed, given
the softness in demand and other factors.
The Company remains in a highly liquidity-constrained environment,
and even though its bank lenders have waived current covenant
defaults, there is no certainty that the Company will be able to
successfully negotiate modified financial covenants to enable it
to achieve compliance going forward, or that, even if it does, its
liquidity position will be materially more secure.
WEIRTON STEEL: Lease Decision Time Extension Hearing on August 4
----------------------------------------------------------------
Weirton Steel Corporation is lessee to at least two unexpired
nonresidential real property leases, relating to its operating
facilities:
Expiration of
Lessor Location/Use Current Term
------ ------------ -------------
Solid Waste Services, Inc. Brooke County 9/24/2008
d/b/a J.P. Mascaro & Sons Landfill, Colliers,
West Virginia
Use: Dedicated
industrial waste
disposal cell
Teramana LTD #1 Weirton, West Virginia 7/31/2004
Use: Rehab center
and vision center
Section 365(d)(4) of the Bankruptcy Code provides, in pertinent
part:
"[I]f the trustee does not assume or reject an unexpired
lease of nonresidential real property under which the debtor
is a lessee within 60 days after the date of the order for
relief, or within such additional time as the court, for
cause, within such 60-day period, fixes, then such lease is
deemed rejected, and the trustee shall immediately surrender
such nonresidential real property to the lessor."
At this early stage of its Chapter 11 case, James H. Joseph,
Esq., at McGuireWoods LLP, in Pittsburgh, Pennsylvania, asserts
that the Debtor should not be compelled to make a determination
of assumption or rejection in respect of its Leases within the
60-day period. The effect of assuming the Leases at the
beginning of the case would unfairly elevate the Lease obligations
from prepetition unsecured claims to administrative priority
expense claims to the prejudice of all non-Lessor creditors of the
Debtor's estate should any of the Leases ultimately be rejected.
In the alternative, if the Debtor was to reject the Leases at this
time, it could lose facilities that it needs as a reorganized
Debtor.
Mr. Joseph assures Judge Friend that the Debtor is paying its
postpetition rent timely, so as not to prejudice its Lessors.
Currently, it is not clear which Leases will be assumed, which
will be assumed and assigned, and which will be rejected. The
Debtor needs to evaluate each of the Leases and make the
appropriate determinations as to which Leases will contribute to
the Debtor's restructuring efforts and how each Lease will be a
part of the reorganized Debtor's ongoing business operations.
By this motion, pursuant to Section 365(d)(4), the Debtor asks
the Court to extend the time within which it must assume or
reject each of the Leases through and including the Confirmation
Date of a Chapter 11 plan, subject, however, to:
(1) each Lessor's right to request the extension of time be
shortened, and
(2) the Debtor's retention of the burden of proof on the issue
of why extension of time should not be shortened.
Mr. Joseph informs the Court that the requested extension will
not prejudice the Lessors under the Leases, with all of their
rights preserved. Similarly, this request will not constitute
the Debtor's admission that any Lease is a true lease.
Since the Petition Date, the Debtor and its business personnel
have been working diligently to:
(1) operate the Debtor's business,
(2) handle the vast number of crucial administrative and
business decisions, which they faced in the initial
phases of its Chapter 11 case, and
(3) comply with the several filing requirements imposed by the
Bankruptcy Code and the Office of the U.S. Trustee.
Hence, Mr. Joseph says, the Debtor simply has not had an
adequate opportunity to:
(1) completely review each of the Leases,
(2) determine the economics of each Lease,
(3) determine whether or not a particular Lease is burdensome
to the estate, and
(4) determine how each Lease will fit in with the reorganized
Debtor's ongoing business operations.
Accordingly, an extension of the 60-day period will allow the
Debtor the opportunity to study and determine which properties it
will need for a successful reorganization.
* * *
The Court will convene a hearing on August 4, 2003 to consider
the Debtors' request. Accordingly, Judge Friend extends the
Debtor's lease decision period until the conclusion of that
hearing. (Weirton Bankruptcy News, Issue No. 6; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WESTERN WIRELESS: Redeeming All 10.50% Senior Subordinated Notes
----------------------------------------------------------------
Western Wireless Corporation (Nasdaq:WWCA), a leading provider of
wireless communications services to rural America, has elected to
redeem all of its 10-1/2% Senior Subordinated Notes due 2006 and
10-1/2% Senior Subordinated Notes due 2007 on August 16, 2003.
The redemption price for the 10-1/2% Senior Subordinated Notes due
2006 will be paid in cash in an amount equal to 101.75% of the
principal amount of the Notes together with accrued interest from
June 1, 2003, to but excluding August 16, 2003. The redemption
price for the 10-1/2% Senior Subordinated Notes due 2007 will be
paid in cash in an amount equal to 103.5% of the principal amount
of the Notes together with accrued interest from August 1, 2003,
to but excluding the August 16, 2003.
The aggregate principal amount outstanding of the 10-1/2% Senior
Subordinated Notes due 2006 is $187,050,000. The aggregate
principal amount outstanding of the 10-1/2% Senior Subordinated
Notes due 2007 is $196,000,000.
Since August 16, 2003, the redemption date is not a business day,
the redemption price will be paid (without additional accrued
interest) on August 18, 2003, with respect to any notes
surrendered by the redemption date. Notices of Redemption which
contain specific instructions regarding the redemptions are being
sent by the trustee, The Bank of New York, to all registered
holders of the notes as of July 17, 2003.
Western Wireless Corporation, located in Bellevue, Washington, was
formed in 1994 through the merger of previously unrelated rural
wireless companies. Following the merger, Western Wireless
continued to invest in rural cellular licenses, acquired six PCS
licenses in the original auction of PCS spectrum in 1995 through
its VoiceStream subsidiary, and made its first international
investment in 1996. Western Wireless went public later in 1996 and
completed the spin-off of VoiceStream in 1999. Western Wireless
now serves over 1.2 million subscribers in 19 western states under
the Cellular One(R) and Western Wireless(R) brand names. Through
its subsidiaries and operating joint ventures, Western Wireless is
licensed to offer service in eight foreign countries.
As reported in Troubled Company Reporter's June 9, 2003 edition,
Standard & Poor's Ratings Services assigned its 'CCC' rating to
Western Wireless Corp.'s $100 million convertible subordinated
notes due June 15, 2023, issued under Rule 144A with registration
rights. The rating has been placed on CreditWatch with negative
implications. The company's 'B-' corporate credit and secured bank
loan ratings, as well as its 'CCC' subordinated debt rating,
remain on CreditWatch with negative implications.
The CreditWatch listing is expected to be resolved within the next
two months. In its review, Standard & Poor's will focus on
industry fundamentals and Western Wireless' ability to meet debt
maturities and financial covenants.
Bellevue, Washington-based Western Wireless is one of the largest
rural wireless carriers in the U.S., providing service to 1.2
million subscribers in 19 western states. As of March 31, 2003,
total domestic debt outstanding was about $2.2 billion.
WESTPOINT STEVENS: Wants Lease Decision Time Extended to Dec. 1
---------------------------------------------------------------
Section 365(d)(4) of the Bankruptcy Code gives a debtor 60 days
after filing for Chapter 11 protection to determine which non-
residential real property leases to assume, assume and assign or
reject. The 60-day deadline, however, may be extended by the
bankruptcy court for cause.
WestPoint Stevens Inc., and its debtor-affiliates are parties to
82 leases as of the Petition Date. John J. Rapisardi, Esq., at
Weil, Gotshal & Manges LLP, in New York, tells Judge Drain that
the Debtors have been working diligently with their advisors to
formulate their business plan and determine which of their
unexpired leases should be assumed or rejected. However, they are
still in the early stages and have not yet completed their
analysis. Because their cases are large and complex, the Debtors
more need time to complete their evaluation of each lease.
In this regard, the Debtors ask the Court to extend their lease
decision deadline to December 1, 2003. Absent an extension, Mr.
Rapisardi says, the Debtors will forced to assume all leases in
order to avoid rejecting valuable assets. Thus, the Debtors will
incur substantial administrative expenses.
Mr. Rapisardi assures the Court that the requested extension will
not prejudice parties-in-interest. In compliance with Bankruptcy
Code Section 365(d)(3), the Debtors have remained current and
fully intend to remain current with respect to all outstanding
postpetition obligations under the leases. The Debtors' request
also does not prejudice the ability of a lessor to seek an
earlier date by which the Debtors must reject that lessor's
unexpired lease. (WestPoint Bankruptcy News, Issue No. 5;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
WINSTAR: Chapter 7 Trustee Sues Winstar Holding to Recoup $3.3MM
----------------------------------------------------------------
To recall, on December 18, 2001, Winstar Holdings, LLC and the
Winstar Communications Debtors entered into an asset purchase
agreement. Under that Agreement, Winstar Holdings acquired
certain of the Debtors' assets and the Debtors received certain
stock and cash amounting to $42,500,000, and a residual 5%
interest in Winstar Holdings. In addition, the Debtors retained
certain "Excluded Assets". The Court approved the Asset Purchase
Agreement on December 19, 2001.
Pursuant to paragraph 2.2(a) of the Asset Purchase Agreement, the
"Excluded Assets" include cash, cash equivalents and bank
deposits existing as of the Closing Date. The "Excluded Assets"
also include, among other things, "the Excess Inventory and
Equipment." The term "Excess Inventory and Equipment" includes:
"such inventory and other assets owned by
[Debtors] . . . which (x) has been sold by
the [Debtors] prior to [December 18, 2001]
or (y) was under binding contract dated prior
to [December 18, 2001] to be sold and is
subsequently sold pursuant thereto."
Prior to the execution of the Asset Purchase Agreement, Sheldon
K. Rennie, Esq., at Fox Rothschild O'Brien & Frankel LLP, in
Wilmington, Delaware, relates that Debtors executed an agreement
with OLS Trading Co., Inc., whereby OLS agreed to sell certain
assets for the Debtors in exchange for a fee.
The "Excluded Assets" further include, among other things, "the
rights of [Debtors] under the AON Sublease."
On September 25, 2001, the Debtors and AON Service Corporation
executed an Assignment and Assumption of Lease Documents whereby,
among other things, AON agreed to acquire certain equipment and
furniture from the Debtors.
Pursuant to the Asset Purchase Agreement, Winstar Holdings was
granted the right to enter into a sublease with the Debtors for
the rental of office space on the 10th and 31st floors of an
office building located at 685 Third Avenue in New York.
Specifically, Winstar Holdings and the Debtors agreed to execute
a Management Agreement whereby IDT agreed to manage certain
aspects of the business on the Debtors' behalf.
On December 18, 2001, Winstar Holdings and Debtors executed a
Management Agreement, which, among other things, provided that
Winstar Holdings will perform certain services on the Debtors'
behalf during the time certain FCC licenses remained in the name
of the Debtors. Pursuant to the Asset Purchase Agreement, the
parties agreed to reimburse each other for various costs and
expenses incurred on behalf of one another. Winstar Holdings
agreed to assume and pay, among other things, "all liabilities
and obligations under the Management Agreement."
Prior to the execution of the Asset Purchase Agreement, the
Debtors posted a letter of credit with Hartford Insurance Company
to secure the payment of claims under existing workman's
compensation and automobile policies, effective August 1, 2001
through July 31, 2002. Pursuant to the parties' agreement, this
insurance policy remained in effect after the acquisition of the
assets by Holdings until the end of the policy period. At the
conclusion of the policy period, Winstar Holdings obtained
substitute coverage elsewhere.
At the same time, Hartford drew on the letter of credit for
claims paid, taxes and other fees. The Debtors, in an effort to
obtain their collateral, have entered into an agreement with
Hartford to buyout the policy claims runoff period liability.
The payment of claims paid, taxes and other fees plus the buyout
fee resulted in a $381,551.64 charge attributable to the time
period in which the policy was in place for the benefit of
Winstar Holdings.
Pursuant to the Sale Order, the Court retained jurisdiction to,
inter alia:
1. compel performance of the obligations due to the Debtors
under the Asset Purchase Agreement;
2. resolve any disputes arising from it; and
3. interpret, implement and enforce the provisions of the
Asset Purchase Agreement and the Sale Order.
On January 24, 2002, the Court converted the Debtors' Chapter 11
cases to cases under Chapter 7 of the Bankruptcy Code. On
January 28, 2002, Christine C. Shubert was appointed as Trustee
in the Debtors' Chapter 7 cases.
Mr. Rennie relates that since the Trustee's appointment, the
Trustee, her employees and her professionals have been involved
in extensive negotiations with Winstar Holdings concerning the
amounts due by and between the Debtors' estate and Winstar
Holdings pursuant to the parties' obligations under the Sale
Order and the Asset Purchase Agreement.
In July 2002, the Trustee's counsel and employees met with
Winstar Holdings and its counsel on at least two occasions in an
effort to discuss the parties' rights and obligations under the
Asset Purchase Agreement, Sale Order and related agreements. The
Trustee's counsel presented Winstar Holdings with a
reconciliation, which demonstrated that, after deducting from the
excluded cash assets all legitimate amounts payable from the
Debtors' estate to Winstar Holdings under the Asset Purchase
Winstar Agreement, Holdings owes the Debtors' estate significant
amounts pursuant to the Asset Purchase Agreement and the Sale
Order. Subsequent to the July meetings, the parties have had
informal discussions to settle this matter. Despite demand,
Holdings has avoided recommencing negotiations and has failed to
adequately respond and pay the Debtors all amounts due and owing.
Accordingly, the Trustee commences an adversary proceeding
against Winstar Holdings on these counts:
1. turn-over of assets;
2. breach of contract;
3. conversion; and
4. unjust enrichment.
Section 541 of the Bankruptcy Code defines property of the estate
as "all legal or equitable interests of the debtor in property as
of the commencement of the case." Section 542 of the Bankruptcy
Code gives a trustee the power to seek turnover of all property
of the debtor's estate.
Section 542 states, in pertinent part, that:
"entity, other than a custodian, in possession,
custody, or control, during the case, of property
that the trustee may use, sell, or lease under
Section 363 of the title, or that the debtor may
exempt under Section 522 of this title, shall deliver
to the trustee, and account for, such property or the
value of such property, unless such property is of
inconsequential value or benefit to the estate."
This section requires that any property of a debtor's estate held
by any entity must be turned over to the trustee. To obtain
turnover under Section 542, the Trustee must establish these
elements:
(1) that the property which the [T]rustee seeks to recover is
property of the estate; and
(2) that the [T]rustee is entitled under Section 363 to use,
sell, or lease the property.
The Trustee submits that at least $3,301,625.24 currently in
Winstar Holdings' possession is the balance of the cash or cash
equivalents held by the Debtors on the Closing Date, as well as
other amounts due and owing Debtors, which constitute "Excluded
Assets" under the Asset Purchase Agreement, and intrinsically
constitute property of the estate within the meaning of
Bankruptcy Code Section 541. In accordance with the
reconciliation provided to Winstar Holdings, the Trustee asks the
Court to require Winstar Holdings to turnover no less than
$3,301,625.24 in estate property to the Trustee.
Mr. Rennie insists that the Asset Purchase Agreement is a valid,
binding and enforceable contract supported by adequate
consideration. Winstar Holdings has breached the Asset Purchase
Agreement by:
1. failing to remit to the Debtors' estate all cash, cash
equivalents and bank deposits in violation of paragraph
2.2(a);
2. failing to remit to the Debtors' estate monies paid by OLS
Trading to Winstar Holdings for the sale of excess
equipment, in violation of paragraph 2.2(o);
3. failing to remit to the Debtors' estate monies paid by AON
to Winstar Holdings, in violation of paragraph 2.2(n);
4. failing to pay the Debtors' estate the fair market value of
the rental payments due under the AON Sublease, in
violation of paragraph 2.7;
5. overcharging the Debtors' estate for costs and expenses
incurred pursuant to the Management Agreement and Asset
Purchase Agreement;
6. refusing to reimburse the Debtors' estate for amounts drawn
by Hartford Insurance Company on a letter of credit for
expenses partly attributable to Winstar Holdings;
7. refusing to pay the Debtors' estate all amounts properly
due and owing the Debtors' estate by improperly claiming
credits for monies that Winstar Holdings has no legal right
to receive; and
8. committing other breaches as may be uncovered through
discovery.
The breaches of the Asset Purchase Agreement have caused the
Debtors' estate to incur damages amounting to $3,301,625.24.
Mr. Rennie asserts that Winstar Holdings has unlawfully and
wrongfully converted the Debtors' assets. Winstar Holdings has
also wrongfully secured a benefit from the Debtors and the
Debtors' estate without paying for it.
Accordingly, the Trustee asks the Court for a judgment in her
favor and against Holdings in an amount in excess of
$3,301,625.24, together with costs and attorneys' fees. (Winstar
Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
WORLD WIRELESS: Hires Barnett & Maxwell as Independent Auditors
---------------------------------------------------------------
World Wireless Communications, Inc. (Amex: XWC), a developer of
wireless and internet based telemetry systems, retained Hansen,
Barnett & Maxwell, based in Salt Lake City, Utah, as its
independent auditors.
Such firm had served as the Company's auditors prior to calendar
year 2000. The accountants will commence their field services upon
the Company's payment of an agreed amount to it, which is
contingent upon the Company's obtaining of its financing, which it
is currently seeking, although the results thereof are not
assured.
The Company filed its Form 10-K on May 6, 2002, although the
filing thereof was incomplete pending engagement, review, and
audit by the independent accountants. The Company plans to file
an amended report on Form 10-K to include the independent
accountants' opinion or by approximately August 31, 2003 based on
the Company's anticipated timetable. The Company further plans to
file an amended report on Form 10-Q for the quarter ended March
31, 2003 to reflect the independent accountants' review or by
August 31, 2003 based on the Company's anticipated timetable.
Greenwood Village-based World Wireless Communications, Inc. was
founded in 1995 and is a developer of wireless and internet
systems, technology and products. World Wireless focuses on
spectrum radios in the 900MHz band and has developed the X-traWeb
(TM) system -- an Internet based product designed for remote
monitoring and control devices. X-traWeb's many applications
included utility meters, security systems, vending machines, asset
management, and quick service restaurants.
World Wireless' December 31, 2002 balance sheet shows a working
capital deficit of about $9 million, and a total shareholders'
equity deficit of close to $9 million.
WORLDCOM INC: Wants Blessing to Assume Amended New York Lease
-------------------------------------------------------------
Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, in New
York, informs the Court that pursuant to a lease dated Feb. 9,
2000 between MCI Metro Access Transmission Services, LLC,
predecessor-in-interest to MCI WorldCom Network Services, as
lessee, and 32 AA Associates LLC, predecessor-in-interest to 32
Sixth Avenue Company LLC, as lessor, the Debtors lease the entire
10th and 11th floors and a portion of the 15th floor and second
basement level in the building located at 32 Avenue of the
Americas in New York. The Lease commenced on March 15, 2000 and
will expire by its terms on September 30, 2015. The Lease
provides for $325,056 in total monthly Fixed Rent. The Premises
are used as a local and long distance terminal to support growth
in downtown Manhattan.
During these Chapter 11 cases, Ms. Goldstein relates that the
Debtors have undertaken an extensive real estate rationalization
program. Included among the facets of the rationalization
program is the review of the Debtors' leasehold interests to make
determinations regarding the assumption or rejection of their
leases. Additionally, the Debtors engaged in efforts to
negotiate amended lease terms with many of their landlords.
In this regard, the Debtors seek the Court's authority to assume,
pursuant to Section 365 of the Bankruptcy Code, the Lease, as
amended.
The Debtors and their real estate professionals, Hilco Real
Estate, LLC, have engaged in discussions with the Lessor with
respect to the renegotiation of the Lease on terms more favorable
to the Debtors. As a result of these negotiations, the Lessor
and the Debtors have executed an amendment to the Lease.
The terms of the Amendment include:
A. Rent: Commencing as of March 1, 2003, the Debtors will be
entitled to a credit against the Fixed Rent accruing under
the Lease in these amounts and applied in this manner:
1) $1,000,000 per annum for the period from March 1, 2003
through and including February 28, 2006, which rent
credit will be applied against the next accruing monthly
installments of Fixed Rent for the period at $83,333 per
month;
2) $750,000 per annum for the period from March 1, 2006
through and including February 28, 2013, which rent
credit will be applied against the next accruing monthly
installments of Fixed Rent for the period at $62,500 per
month; and
3) $500,000 per annum for the period from March 1, 2013
through and including September 30, 2015, which rent
credit will be applied against the next accruing monthly
installments of Fixed Rent for the period at $41,666.67
per month.
The Lessor's agreement to accept reduced rent is
conditioned on the assumption of the Lease in Bankruptcy
Court. In the event that the Debtors do not assume the
Lease, the Debtors will be responsible for all of the
amounts credited against Fixed Rent as if the Amendment had
not been executed.
B. Rights for Additional/Option Spaces: Provided that the
Debtors are not then in default under any of the terms,
covenants or conditions of the Lease, and they then be in
occupancy of at least 60% of the space leased, the Debtors
will have the option to lease and add to the Demised
Premises any space on any floors of the Building, which are
contiguous to any floor comprising a portion of the Demised
Premises that becomes, or is about to become, available for
lease during the Demised Term. The Additional Option
Rights are subject to further requirements regarding
notice, available vacancy and additional rent as detailed
in the Amendment.
C. Cure Amount: In full and complete satisfaction of the
Debtors' obligation to cure all monetary defaults under the
Lease and provide adequate assurance of future performance,
the Debtors will pay to the Lessor $370,707.50 without
further delay.
The Debtors believe that assumption of the Lease is an exercise
of their sound business judgment. Ms. Goldstein points out that
the Premises is the Debtors' newest terminal created to support
all new local and long distance growth in downtown Manhattan.
This site contains local and long distance telecommunication
transport equipment where fiber optic routes merge and signals
are sent. It is being used to support the off-load and
decommissioning of several other sites in New York City, as well
as being used to support network collocation and expansion in New
York City as a result of the rejection of 3020 Thomson, a site
recently closed in Long Island City. As a result, the Premises
is important to the Debtors' ongoing business operations, long-
term business growth and their reorganization efforts.
Based on its market analysis, Hilco says the renegotiation of the
Lease brings the annual rent payable will reflect to fair market
rental value. Specifically, base rent for 2003 is reduced from
$325,056 per month to $241,722 per month. Hilco computes that
the renegotiation results in $9,400,000 in aggregate savings and
$833,000 in rent savings in 2003 alone. (Worldcom Bankruptcy News,
Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900)
WORKFLOW MANAGEMENT: Lenders Agree to Forbear Until July 31
-----------------------------------------------------------
Workflow Management, Inc. (Nasdaq:WORK), reported results for the
fiscal year and three months ended April 30, 2003.
Fiscal Year End and Fourth Quarter Financial Results
After giving effect to the costs and write-offs discussed below,
Workflow today reported a GAAP net loss for the fiscal year ended
April 30, 2003 of $39.9 million or $3.02 per diluted share versus
net income of $9.2 million or $0.70 per diluted share in fiscal
2002. The net loss during fiscal 2003 consisted of a $29.4 million
loss from continuing operations, or $2.23 per diluted share, and a
$10.5 million loss from discontinued operations, or $0.79 per
diluted share.
Revenues for fiscal 2003 increased 0.6% to $622.7 million versus
$619.0 million in the prior year. Fiscal 2003 EBITDA was $40.1
million before certain items discussed below compared to EBITDA of
$38.7 million last fiscal year. Income from continuing operations,
excluding the after-tax impact of the items listed below, for
fiscal 2003 was $6.2 million or $0.47 per diluted share versus
income from continuing operations of $8.9 million or $0.68 per
diluted share a year ago.
During fiscal 2003, Workflow recorded certain costs totaling
approximately $41.2 million. The pre-tax effected items recorded
in the results from continuing operations include:
-- $18.0 million in a non-cash goodwill impairment charge
-- $1.1 million inventory write-off included within cost of
revenues
-- $3.4 million in restructuring costs
-- $2.7 million in asset write-downs
-- $0.7 million in uncollectible notes receivable
-- $4.0 million in severance and other employment costs
-- $6.0 million loss from an interest rate hedge
-- $1.8 million in fees for an unexecuted debt offering
-- $3.5 million in financing fees and other banking related costs
After applying a 26.0% effective tax rate to the items listed
above and recording $5.1 million in additional tax expense
associated with the deemed dividend treatment of pledging the
Company's Canadian assets against the U.S. based credit facility,
income from continuing operations was reduced by $35.6 million, or
$2.70 per diluted share.
"We continue to be encouraged about our core business. Workflow
Management achieved steady revenues and an increase in EBITDA
before certain items in 2003 notwithstanding a sluggish economy,
weakness in the printing industry, uncertainty surrounding the
Company's capital structure, and changes in executive management.
This is further evidence of the value of Workflow's products and
services to current and potential customers, the soundness of our
strategy, the quality of our deliverables, and the capability of
Workflow's managers and staff," stated Gary W. Ampulski, President
and Chief Executive Officer. "Workflow's relationships with the
business community continue to be strong. We and our suppliers are
ready to meet the needs of an expanding customer base with our
continued high standards of excellence. The Company is not in
arrears with suppliers nor has our supply chain to our customers
been interrupted as a result of current business conditions."
For the three months ended April 30, 2003, the Company reported a
GAAP net loss from continuing operations of $21.3 million, or
$1.60 per diluted share, and $639,000 income from discontinued
operations, or $0.04 per diluted share. Fourth quarter revenues
decreased 3.9% to $152.5 million versus $158.7 million in the
prior year. Fourth quarter EBITDA was $10.2 million, before $22.0
million in charges for restructuring, asset write-downs, severance
costs and the goodwill impairment of the types discussed above,
compared to EBITDA of $10.6 million last year. Income from
continuing operations, excluding the after-tax impact of the
foregoing items and the tax impact of pledging Canadian assets
against U.S. debt, for the fourth quarter was $1.6 million or
$0.12 per diluted share versus income from continuing operations
of $2.8 million or $0.21 per diluted share in the comparable
period a year ago. After applying a 17.6% effective tax rate to
the foregoing items and recording $5.1 million in additional tax
expense associated with the deemed dividend treatment of pledging
the Company's Canadian assets against the U.S. based credit
facility, income from continuing operations was reduced by $22.9
million, or $1.72 per diluted share.
"Workflow has made great progress in recent times, successfully
integrating operations in the New York, Toronto and Los Angeles
areas, and is well underway with the amalgamation of our SFI and
iGetSmart businesses. Going forward, our ongoing consolidation
efforts will be combined with an increased focus on customer
profitability and sales effectiveness. We believe this should
result in additional cash flows to operate the business, improved
operating margins and increased earnings," said Ampulski.
This discussion of Workflow's financial results includes a number
of non-GAAP financial measures. Specifically, EBITDA, EBITDA
before certain items, and income from continuing operations
excluding the after tax impact of restructuring costs and certain
other charges are all non-GAAP financial measures. For all non-
GAAP financial measures, the Company has presented in the summary
financial information included with this press release the most
directly comparable GAAP financial measures and has reconciled the
non-GAAP financial measures with these most directly comparable
GAAP financial measures.
The Company believes that these non-GAAP financial measures
provide useful information to assist in understanding the ongoing,
underlying operational performance of the Company. Specifically,
the Company believes that these non-GAAP financial measures allow
those interested to more easily assess quarter-to-quarter and
year-to-year comparisons of the Company's financial performance.
In addition, the lenders under the Company's credit facility have
requested and utilize certain of these non-GAAP financial measures
in their analysis of the Company's ongoing business performance.
Mahoney elected new Chairman;
D'Agostino resigns as Chairman
The Company also announced that Thomas B. D'Agostino, Sr., the
Chairman of the Board of Directors, has resigned from the Board
and as Chairman, and has released the Company from any obligation
to pay severance or other amounts under his employment agreement
with the Company. At April 30, 2003, the Company had accrued $2.6
million for obligations under Mr. D'Agostino's agreement. Based on
the results of an investigation conducted by the Audit Committee
of the Board with the assistance of forensic auditors and special
counsel, the Audit Committee determined that Mr. D'Agostino failed
to comply with Company policies and procedures, including those
relating to expenses and personal business activities, that Mr.
D'Agostino failed to furnish complete information to the Board
regarding certain transactions, and that Mr. D'Agostino should
reimburse the Company for certain expenses paid by the Company.
While not admitting to any wrongdoing, Mr. D'Agostino has paid
$400,000 to the Company in settlement of these matters. The
results of the Audit Committee investigation did not reveal any
matters that would have a material impact on the financial
statements of the Company for any prior historical period.
Following Mr. D'Agostino's resignation, the Board elected Gerald
F. Mahoney as the Chairman of the Board. Mr. Mahoney was elected
to the Board in October 2002 and later served as the Company's
interim CEO while the Board conducted a search that resulted in
the hiring of Gary Ampulski, the current CEO. Mr. Mahoney was a
founder, and from 1994 to 2001 served as the Chairman, Chief
Executive Officer and as a member of the board of directors of
Mail-Well, Inc., a New York Stock Exchange Company and one of the
largest commercial printers in North America. Mr. Mahoney
commented, "I am pleased to be Chairman of a company in a good
business with an outstanding management team in place in whom I
have great trust and confidence."
Credit Facility Status and Update
Workflow also announced today that the Company has reached an
agreement in principle with its senior lenders on the terms of an
amendment to the Company's credit facility. The amendment is still
subject to final approval by both parties and the execution of
definitive legal documents, which is anticipated in the next few
weeks. In addition to addressing various financial covenant issues
discussed below, the agreement reached with the lenders would
amend the maturity dates of the various components of the credit
facility debt in order to provide the Company greater flexibility
to pursue strategic alternatives, as previously announced and as
discussed below.
The Company had previously announc"d its expectation that the
Company's fiscal 2003 audited financial statements would include a
going concern opinion as a result of the $50 million of credit
facility debt due December 31, 2003. However, in the event the
maturity dates of the credit facility are modified in a manner
consistent with the agreement in principle reached by the Company
and its lenders, the Company anticipates that its auditors'
opinion for its fiscal 2003 financial statements will not include
an uncertainty related to the Company's ability to continue as a
going concern. "We are very pleased with our lenders' approach and
their willingness to work with us to accommodate the needs of our
business as we go forward," said Ampulski.
At April 30, 2003, the Company had exceeded covenants in its
credit facility that limited capital expenditures and the
incurrence of restructuring costs. As a result of the Company's
integration of certain operations earlier than anticipated, the
Company exceeded the capital expenditure covenant by approximately
$600,000 and due to the Company's decision to more aggressively
restructure its operations than originally anticipated, the
Company exceeded its restructuring cost covenant by $1.1 million.
The Company's lenders have agreed to forebear from exercising any
remedies related to these covenants through July 31, 2003 and, as
part of the agreement in principle discussed above, the Company is
working with its lenders to obtain appropriate amendments to the
credit facility with respect to these and other covenants. In
addition to amendments and waivers related to the capital
expenditure and restructuring cost covenants discussed above, the
Company is also working with its lenders to amend the calculation
of EBITDA for credit facility covenant purposes to exclude the
impact of goodwill impairment and the results of discontinued
operations.
Exploration of Refinancing
and other Strategic Alternatives
As previously announced in a release dated June 25, 2003, the
Company has been contacted by a large number of third parties who
have expressed a desire to explore transactions ranging from
investments in Workflow to an acquisition of the Company at a
premium to the current market price. In light of these inquiries,
the Board and the financial advisor to the Company and the Board's
Special Committee, Jefferies & Company, Inc., are exploring a
number of potential strategic alternatives to improve the
Company's capital structure, including a potential
recapitalization or sale of the Company. The Special Committee has
directed Jefferies & Company to vigorously explore available
alternatives and to actively engage in discussions with interested
third parties. However, the Company is not a party to any written
agreements with any third parties regarding these potential
transactions nor is the Company negotiating any specific
transaction terms with any particular third party at this time.
There can be no assurance that any transaction will occur, and, if
any transaction occurs, what the structure or terms of such
transaction would be. Unless otherwise required by applicable
securities laws, the Company does not expect to make any further
public announcements regarding any potential transactions.
Workflow Management, Inc. is a leading provider of end-to-end
print outsourcing solutions. Workflow services, from production of
logo-imprinted promotional items to multi-color annual reports,
have a reputation for reliability and innovation. Workflow's
complete set of solutions includes document design and production
consulting; full-service print manufacturing; warehousing and
fulfillment; and iGetSmart(TM) - one the industry's most
comprehensive e-procurement, management and logistics systems.
Through custom combinations of these services, the Company
delivers substantial savings to its customers - eliminating much
of the hidden cost in the print supply chain. By outsourcing
print-related business processes to Workflow, customers streamline
their operations and focus on their core business objectives. For
more information, go to http://www.workflowmanagement.com
W.R. GRACE: Has Until Jan. 31, 2004 to Move Actions to Delaware
---------------------------------------------------------------
W.R. Grace & Co. and debtor-affiliates obtained an extension of
time for them to remove a prepetition lawsuit to the District of
Delaware for continued litigation and resolution. U.S. Bankruptcy
Court Judge Fitzgerald extended the Debtors' removal period to and
including January 31, 2004.
The Debtors are named defendants in 65,000 asbestos-related
lawsuits in various state and federal courts involving 232,000
different individual claims. The Debtors are also defendants in
eight asbestos-related fraudulent conveyance actions in various
state and federal courts that involve large numbers of individual
claims. There are numerous other lawsuits, including, but not
limited to environmental actions, in which one or more of the
Debtors and their non-debtor affiliates are named defendants in
various state and federal courts. Many of these Asbestos Actions,
Fraudulent Conveyance Actions and Miscellaneous Actions were filed
prior to the Petition Date.
Since the Petition Date, a number of additional Asbestos Actions,
Fraudulent Conveyance Actions and Miscellaneous Actions have been
filed and continue to be filed. The Debtors and their non-debtor
affiliates believe that these Postpetition Actions are void
because they were filed in violation of the automatic stay. (W.R.
Grace Bankruptcy News, Issue No. 43; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
* Fitch Expresses Concern about Risks for Airport Bondholders
-------------------------------------------------------------
For the first time in more than a decade, a prominent rating
factor for U.S. airport bonds has become the willingness of U.S.
airlines to honor leases and contracts while under financial
stress, according to a new report published Monday by Fitch
Ratings. Fitch is especially concerned by bankrupt airlines that
are pursuing legal strategies in bankruptcy court that would
effectively divert revenues away from airport bondholders.
"Fitch Ratings is following bankruptcy court decisions closely to
see whether major rating actions for U.S. airport bonds need to be
taken," said Jim Gilliland, director, Fitch Ratings. "If
bankruptcy courts rule in favor of airlines in landmark cases,
these rulings could set an extraordinary precedent."
In the new report, Fitch notes that bankruptcy rulings are
currently relevant in all three classes of airport bonds - general
airport revenue bonds (GARBS), special facility bonds and
passenger facility charge (PFC) bonds - and cites examples
involving carriers US Airways and United Airlines as well as John
F. Kennedy International Airport, Pittsburgh International
Airport, Denver International Airport, Chicago O'Hare
International Airport and others.
'Bankruptcy courts are empowered with very wide latitude to take
actions that are deemed necessary to facilitate the successful
reorganization of a bankrupt entity,' said Gilliland. 'Also, in
bankruptcy, airlines have the ability to reject certain contracts
and cancel contractual obligations that are no longer advantageous
for the reorganizing airline's ongoing business.'
The new report 'Airline Bankruptcies and Airport Bonds: 2003-2006'
can be found on the Fitch Ratings Web site at
http://www.fitchresearch.comby linking to the 'Public Finance'
sector and clicking on 'Special Reports'.
* Meetings, Conferences and Seminars
------------------------------------
July 30-Aug. 2, 2003
AMERICAN BANKRUPTCY INSTITUTE
Southeast Bankruptcy Workshop
The Ritz-Carlton, Amelia Island, FL
Contact: 1-703-739-0800 or http://www.abiworld.org
July 31, 2003
FOUNDATION FOR ACCOUNTING EDUCATION
Bankruptcy and Financial Reorganization Conference
New York, NY
Contact: 1-800-537-3635 or visit www.nysscpa.org
September 18-21, 2003
AMERICAN BANKRUPTCY INSTITUTE
Southwest Bankruptcy Conference
The Venetian, Las Vegas, NV
Contact: 1-703-739-0800 or http://www.abiworld.org
September 12, 2003
AMERICAN BANKRUPTCY INSTITUTE
ABI/GULC "Views from the Bench"
Georgetown Univ. Law Center, Washington, DC
Contact: 1-703-739-0800 or http://www.abiworld.org
October 2-3, 2003
EUROFORUM INTERNATIONAL
European Securitisation
Hilton London Green Park
Contact: http://www.euro-legal.co.uk
October 10 and 11, 2003
AMERICAN BANKRUPTCY INSTITUTE
Symposium on 25th Anniversary of the Bankruptcy Code
Georgetown Univ. Law Center, Washington, DC
Contact: 1-703-739-0800 or http://www.abiworld.org
October 15-18, 2003
NATIONAL CONFERENCE OF BANKRUPTCY JUDGES
Seventy Sixth Annual Meeting
San Diego, CA
Contact: http://www.ncbj.org/
October 16-17, 2003
EUROFORUM INTERNATIONAL
Russian Corporate Bonds
Renaissance Hotel, Moscow
Contact: http://www.ef-international.co.uk
November 12-14, 2003
AMERICAN BANKRUPTCY INSTITUTE
Litigation Skills Symposium
Emory University, Atlanta, GA
Contact: 1-703-739-0800 or http://www.abiworld.org
December 1-2, 2003
RENAISSANCE AMERICAN MANAGEMENT, INC.
Distressed Investing
The Plaza Hotel, New York City, NY
Contact: 800-726-2524 or
http://renaissanceamerican.com
December 3-7, 2003
AMERICAN BANKRUPTCY INSTITUTE
Winter Leadership Conference
La Quinta, La Quinta, California
Contact: 1-703-739-0800 or http://www.abiworld.org
February 5-7, 2004
AMERICAN BANKRUPTCY INSTITUTE
Rocky Mountain Bankruptcy Conference
Westin Tabor Center, Denver, CO
Contact: 1-703-739-0800 or http://www.abiworld.org
March 5, 2004
AMERICAN BANKRUPTCY INSTITUTE
Bankruptcy Battleground West
The Century Plaza, Los Angeles, CA
Contact: 1-703-739-0800 or http://www.abiworld.org
April 15-18, 2004
AMERICAN BANKRUPTCY INSTITUTE
Annual Spring Meeting
J.W. Marriott, Washington, D.C.
Contact: 1-703-739-0800 or http://www.abiworld.org
April 29-May 1, 2004
ALI-ABA
Partnerships, LLCs, and LLPs: Uniform Acts, Taxation,
Drafting, Securities, and Bankruptcy
Fairmont Hotel, New Orleans
Contact: 1-800-CLE-NEWS or http://www.ali-aba.org
May 3, 2004
AMERICAN BANKRUPTCY INSTITUTE
New York City Bankruptcy Conference
Millennium Broadway Conference Center, New York, NY
Contact: 1-703-739-0800 or http://www.abiworld.org
June 2-5, 2004
AMERICAN BANKRUPTCY INSTITUTE
Central States Bankruptcy Workshop
Grand Traverse Resort, Traverse City, MI
Contact: 1-703-739-0800 or http://www.abiworld.org
June 24-26,2004
AMERICAN BANKRUPTCY INSTITUTE
Hawaii Bankruptcy Workshop
Hyatt Regency Kauai, Kauai, Hawaii
Contact: 1-703-739-0800 or http://www.abiworld.org
July 15-18, 2004
AMERICAN BANKRUPTCY INSTITUTE
The Mount Washington Hotel
Bretton Woods, NH
Contact: 1-703-739-0800 or http://www.abiworld.org
July 28-31, 2004
AMERICAN BANKRUPTCY INSTITUTE
Southeast Bankruptcy Workshop
The Ritz-Carlton Reynolds Plantation, Lake Oconee, GA
Contact: 1-703-739-0800 or http://www.abiworld.org
September 18-21, 2004
AMERICAN BANKRUPTCY INSTITUTE
Southwest Bankruptcy Conference
The Bellagio, Las Vegas, NV
Contact: 1-703-739-0800 or http://www.abiworld.org
October 10-13, 2003
NATIONAL CONFERENCE OF BANKRUPTCY JUDGES
Seventy Seventh Annual Meeting
Nashville, TN
Contact: http://www.ncbj.org/
December 2-4, 2004
AMERICAN BANKRUPTCY INSTITUTE
Winter Leadership Conference
Marriott's Camelback Inn, Scottsdale, AZ
Contact: 1-703-739-0800 or http://www.abiworld.org
April 28- May 1, 2005
AMERICAN BANKRUPTCY INSTITUTE
Annual Spring Meeting
J.W. Marriot, Washington, DC
Contact: 1-703-739-0800 or http://www.abiworld.org
July 14 -17, 2005
AMERICAN BANKRUPTCY INSTITUTE
Ocean Edge Resort, Brewster, MA
Contact: 1-703-739-0800 or http://www.abiworld.org
July 27- 30, 2005
AMERICAN BANKRUPTCY INSTITUTE
Southeast Bankruptcy Workshop
Kiawah Island Resort and Spa, Kiawah Island, SC
Contact: 1-703-739-0800 or http://www.abiworld.org
November 2-5, 2005
NATIONAL CONFERENCE OF BANKRUPTCY JUDGES
Seventy Eighth Annual Meeting
San Antonio, TX
Contact: http://www.ncbj.org/
December 1-3, 2005
AMERICAN BANKRUPTCY INSTITUTE
Winter Leadership Conference
Hyatt Grand Champions Resort, Indian Wells, CA
Contact: 1-703-739-0800 or http://www.abiworld.org
The Meetings, Conferences and Seminars column appears in the
Troubled Company Reporter each Wednesday. Submissions via
e-mail to conferences@bankrupt.com are encouraged.
*********
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
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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
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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.
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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.
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for the term of the initial subscription or balance thereof are
$25 each. For subscription information, contact Christopher
Beard at 240/629-3300.
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