/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/030812.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, August 12, 2003, Vol. 7, No. 158 Headlines A NOVO: Committee Brings-In Navigant as Forensic Accountants ACT MANUFACTURING: Court to Consider Liquidating Plan Tomorrow ACTERNA CORP: Overview & Summary of Joint Chapter 11 Plan AFC ENTERPRISES: Delivers Audit Investigation Report to Nasdaq AIR 2 US LLC: S&P Downgrades Ratings on All Series A to D Notes AIR CANADA: ALPA Wants Monitor to Handle Equity Solicitation ALAMOSA HOLDINGS: Second Quarter Net Loss Narrows to $19 Million ALLEGHENY ENERGY: Fitch Assigns BB- Rating to 11-7/8% Notes ALLIED PRODUCTS: Supplemental Sale Pact Hearing Set for Thursday ALLIANCE GAMING: Unit Strikes Supply Contract with Majestic Star AMERCO: Reiterates Intention to Repay Creditors in Full AMERCO: Committee Hires Shea & Carlyon as Local Counsel AMERICA WEST: Reports Best June Operating Statistics in a Decade AMERICAN CELLULAR: Consummates $900MM 10% Senior Notes Offering AMERICAN DAIRY: Shoos-Away HJ & Associates as External Auditors ARGONAUT: S&P Affirms & Removes Counterparty Ratings from Watch ARMSTRONG HOLDINGS: Second Quarter Operating Loss Tops $33 Mill. ARMSTRONG: Lease Decision Period Extended Until Dec. 15, 2003 BIO-RAD LABS.: Selling $225 Million of Senior Subordinated Notes BRIDGEWATER SPORTS ARENA: Case Summary & 20 Unsecured Creditors BRIGGS & STRATTON: S&P Revises BB+ Rating Outlook to Positive BURLINGTON IND.: Plan's Classification and Treatment of Claims COCHRAN CORP: Voluntary Chapter 11 Case Summary COLLINS & AIKMAN: Weak Credit Measures Spur S&P to Cut Ratings COLUMBIA LABORATORIES: June 30 Net Capital Deficit Hits $13 Mil. CONSECO FINANCE: Settles Green Tree Class Action Litigations CONSECO INC: Wants Lease Decision Time Extended Until Dec. 14 COVANTA ENERGY: Intends to Assume Lake County Service Agreement CROMPTON: Weak Earnings Prompt S&P to Cut Credit Rating to BB+ DEX MEDIA: S&P Assigns BB- Corp. Credit & $2B Facility Ratings DILMUN CAPITAL: S&P Hatchets Mezzanine Notes' Rating to B DOBSON COMMS: Exchange Offer for 9.50% Notes Expires Today DOMAN INDUSTRIES: Tricap's Restructuring Proposal Lapses DOW CORNING: Professional Fees Top $200 Million Mark DUNHILL RESOURCES: Involuntary Chapter 11 Case Summary DYNEGY: S&P Assigns B- Rating to New Senior Secured Notes EAGLE-PICHER: Completes New $275 Million Senior Credit Facility ELCOM INT'L: June 30 Balance Sheet Upside-Down by $1 Million FLEMING: SUPERVALU Inks LOI to Acquire Fleming Assets from C&S FLEMING COS.: Keen Realty Selling Fleming Stores at 61 Locations FLEMING COMPANIES: Court Approves Termination Pact with Glass GAP INC: Reports Improved Net Sales Results for July 2003 GMAC COMMERCIAL: Fitch Drops Class N Notes Rating to D GRAPHIC PACKAGING: Completes Merger Transaction with Riverwood GRAPHIC PACKAGING: S&P Assigns Ratings After Merger Completion HEALTHSOUTH CORP: Selling Doctors' Hospital to Baptist Health HOUSTON EXPLORATION: Elects Stephen McKessy to Board of Directors ICOS CORP: $279MM Convertible Subordinated Notes Gets CCC Rating K & F INDUSTRIES: S&P Affirms BB- Corporate Credit Rating KAYDON: S&P Assigns BB+ Corp. Credit and BB- Sub. Debt Ratings KINGSWAY FINANCIAL: Reports Improved June Quarter Fin'l Results KMART HOLDINGS: Files Q1 Financial Statements on SEC Form 8-K LAIDLAW INC: Resolves Bank of New York's Allowed Claims LANCE TRUST: Fitch Hatchets 2 Leveraged Asset Notes Rating to B- LEAP WIRELESS: Cricket Wants Edge Designated as 'Stalking Horse' LORAL SPACE: Successfully Lauches Exchostar IX/Telstar Satellite LYONDELL: Says Financials Unaffected by Millenium's Restatement MANGUM FUNERAL HOME: Case Summary & 13 Largest Unsec. Creditors MIRANT CORP: Court Approves GECF Mastercard Secured Credit Pact MOBILE COMPUTING: Convertible Debentures to Mature Today MOTIENT CORP: Unit Inks Pact to Sell Assets to Nextel Comms. MOUNTAIN RIDGE ESTATES: Case Summary & 3 Largest Unsec. Creditors MSX: Reports Improved Ops. Results Due to Cost Cutting Efforts NATIONSRENT INC: Court Approves Caterpillar Financing Agreement NEUCOM INC: Case Summary & 10 Largest Unsecured Creditors NEXTMEDIA OPERATING: Second Quarter Net Loss Narrows to $3 Mill. NLINE CORPORATION: Case Summary & 20 Largest Unsecured Creditors NQL INC: Files Chapter 11 Plan and Disclosure Statement in N.J. NRG ENERGY: Secures Court's Nod to Use Lenders' Cash Collateral NVIDIA CORP: Second Quarter 2004 Results Show Better Performance ONE PRICE CLOTHING: Reports Weaker Second Quarter Sales Results OREGON STEEL: S&P Withdraws Ratings at Company's Request OWENS CORNING: Wants Nod to Assume Amended BOC Supply Agreement OXFORD AUTOMOTIVE: S&P Assigns Various Lower-B Level Ratings PAYLESS SHOESOURCE: July Same-Store Sales Increased 2.8 Percent PG&E NATIONAL: US Trustee Appoints Senior Noteholders' Committee PILLOWTEX CORP: Hires Logan & Company as Claims & Noticing Agent PRINCETON VENTURES: Hires Epstein Weber as New External Auditors PUBLICARD INC: June 30 Net Capital Deficit Narrows to $920,000 RELIANCE GROUP: Friede Goldman Wants to Commence Rule 2004 Exams REUNION INDUSTRIES: Has Until Nov. 23 to Meet Nasdaq Guidelines SAFETY-KLEEN CORP: Post-Confirmation Directors for New Holdco SATCON TECHNOLOGY: Ability to Continue Operations Uncertain SEA CONTAINERS: Completes Asset Sale Transaction with Windwood SK GLOBAL: Final Hearing on Togut Segal Engagement on August 20 SPEIZMAN IND.: Listing on Nasdaq SmallCap Extended to Sept. 29 STORAGENETWORKS: Nasdaq to Delist Shares Effective August 18 SUN HEALTHCARE: June 30 Balance Sheet Upside-Down by $196 Mill. TECSTAR INC: Files Liquidating Plan and Disclosure Statement TELESYSTEM INT'L: S&P Upgrades Junk Corp. Credit Rating to B- TELETECH HOLDINGS: Will Publish Second Quarter Results Thursday UNICCO SERVICE: Arranges Credit Facility Refinancing with CIT UNIFORET INC: Satisfies All Conditions to Implement CCAA Plan UNITED AIRLINES: Wants Approval to Continue Mercer's Engagement UNITED INDUSTRIES: June 30 Net Capital Deficit Narrows to $63MM U.S. ENERGY: Subsidiary to Sell Certain Assets to Cactus Group WACKENHUT CORRECTIONS: Reports Improved Second Quarter Results WESTAR ENERGY: Second Quarter Results Show Marked Improvement WILLIAMS SCOTSMAN: Proposed $150MM Senior Notes Get B+ Rating WINSTAR: Ch. 7 Trustee Asks Court to Clear P&T Supply Settlement WORLDCOM INC: Wants Nod to Rationalize International Operations XM SATELLITE RADIO: Second Quarter Net Loss Balloons to $164MM * Large Companies with Insolvent Balance Sheets ********* A NOVO: Committee Brings-In Navigant as Forensic Accountants ------------------------------------------------------------ The Official Committee of Unsecured Creditors of A Novo Broadband, Inc., asks for authority from the U.S. Bankruptcy Court to retain Navigant Consulting, Inc. as its forensic accountants. In this case, as in many other cases, one important estate asset is the right to pursue avoidance actions under Chapter 5 of the Bankruptcy Code and other applicable laws. Another important estate asset is the right to pursue actions to equitably subordinate or recharacterize certain claims against the Debtor's estate. The Committee -- whose constituency has a significant interest in the outcome of such litigation -- is willing and well- suited to pursue these actions. The Committee indicates it will also file a motion seeking authority to pursue the Debtor's avoidance actions. The Committee notes that Litigation of this nature requires an analysis of the Debtor's books and records, various public and private financial documents, and a fair amount of forensic accounting work. In order for the Committee to perform properly the functions and duties vested in it by the Bankruptcy Code, and specifically to meaningfully assist in the process of bringing these actions, it is essential that it have the expertise and advice of experienced forensic accountants. The Committee believes Navigant is well-suited -- far more so than the Committee's lawyers -- to conduct these analyses. To that end, the Committee desires to employ Navigant to perform these services. Navigant will be compensated for its work at its standard hourly rates of: directors $350 to $400 per hour principals $275 to $350 per hour Navigant has indicated that its hourly rate will likely average $200 per hour. A Novo Broadband, Inc., a business engaged primarily in the repair and servicing of broadband equipment for equipment manufacturers and operators of cable and other broadband systems in North America, filed for chapter 11 petition on December 18, 2002 (Bankr. Del. Case No. 02-13708). Brendan Linehan Shannon, Esq., M. Blake Cleary, Esq., at Young, Conaway, Stargatt & Taylor represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $12,356,533 in total assets and $10,577,977 in total debts. ACT MANUFACTURING: Court to Consider Liquidating Plan Tomorrow -------------------------------------------------------------- On June 18, 2003, the U.S. Bankruptcy Court for the District of Massachusetts, Western Division, ruled on the adequacy of the Second Amended Disclosure Statement prepared by ACT Manufacturing and its debtor-affiliates to explain their Second Amended Joint Chapter 11 Liquidating Plan. The Court found that the Disclosure Statement contains the right kind and amount of information, pursuant to Sec. 1125 of the Bankruptcy Code, to allow creditors to make informed decisions about whether to accept or reject the Debtors' Plan. The Honorable Joel B. Rosenthal will convene a hearing tomorrow at 9:00 a.m. Eastern Time to consider confirmation of the Debtors' Plan. Act Manufacturing, Inc., is a global provider of value-added electronic manufacturing services to original equipment manufacturers in the networking and telecommunications, high-end computer and industrial and medical equipment markets. The Debtors filed for chapter 11 protection on December 21, 2001 (Bankr. Mass. Case No. 01-47641). Richard E. Mikels, Esq., at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $374,160,000 in total assets and $231,214,000 in total debts. ACTERNA CORP: Overview & Summary of Joint Chapter 11 Plan --------------------------------------------------------- Prior to filing for chapter 11 protection, Acterna Corp. and its debtor-affiliates concluded that all parties-in-interest would be best served by a pre-negotiated Chapter 11 case that would permit them to emerge with minimal additional disruption to operations. As a result, the Debtors and their professionals engaged in extensive negotiations with the steering committee for the Senior Lenders regarding the terms of a pre-negotiated reorganization plan. The Debtors believe that the Plan adequately outlines the means for satisfying claims against and equity interests in them and will enable them to successfully reorganize and accomplish the objectives of Chapter 11. Pursuant to the Plan, the Secured Lenders under a May 23, 2000 Bank Credit Agreement, among Acterna LLC, as borrower and a consortium of lenders led by JPMorgan Chase Bank, as administrative agent, Credit Suisse First Boston, as syndication agent and JPMorgan Chase Bank and Deutsche Bank Trust Company Americas, as co-documentation agents, will apportion among themselves: (i) 100% of the shares of the New Common Stock; and (ii) $75,000,000 in principal amount of the New Secured Term Notes. The Debtors entered into the Bank Credit Agreement to finance the acquisition of Wavetek Wandel Golterman -- at the time, the world's second largest communications test company -- and to provide additional working capital. The Bank Credit Agreement originally consisted of: * $585,000,000 in term loans; * $175,000,000 in revolving credit facility, including $35,000,000 in letters of credit; and * EUR108,375,000 in an additional term loan -- German Term Loan Facility -- pursuant to which a EUR110,000,000 letter of credit was issued as collateral for the German Term Loan. The Senior Lender Claims aggregate $700,915,210. On the Effective Date, the Senior Lenders will become the new owners of Acterna and any excess cash available on the Effective Date will be distributed ratably to the Senior Lenders. In the event that the Debtors receive net cash proceeds from the sale of substantially all of the equity or assets of Itronix or da Vinci Corporation, a portion of the net cash proceeds will be distributed pro rata to each Senior Lender. Unsecured Creditors will receive their Ratable Proportion of the lesser of $5,000,000 and 10% of the aggregate Allowed General Unsecured Claims. However, the amount distributed for Allowed General Unsecured Claims will not be less than $3,500,000. Holders of the Debtors' 12% Convertible Senior Secured Notes due 2007 and May 21, 1998 Subordinated Notes may swap debts for new warrants to purchase up to 5.0% of the shares of New Common Stock if they vote to accept the Plan. Otherwise, they get nothing. All other prepetition creditors, including, Securities Litigation Claimants and Equity Interest holders, recover nothing. The Debtors deem that the financial restructuring contemplated under the Plan will reduce their outstanding debt obligations to levels more consistent with their business operations and projected financial performance. The financial restructuring contemplated under the Plan will enhance the Debtors' ability to effectively compete and maintain critical relationships with their suppliers and retail vendors. Acterna Corporation Projected Balance Sheet Assuming an October 1, 2003 Emergence Date (dollars in thousands) Pre-Emergence Post-Emergence ------------- -------------- ASSETS Current Assets Cash and equivalents $95,076 $50,000 Trade accounts receivable 48,141 48,141 Inventories, net 45,294 49,294 Other current assets 35,717 29,231 ------------- -------------- Total current assets 224,228 176,666 Property plant and equipment, net 78,428 51,928 Reorganization value in excess of identifiable assets - 216,770 Other assets 29,862 8,564 ------------- -------------- Total non-current assets 108,290 277,262 ------------- -------------- Total assets $332,518 $453,928 ============= ============== LIABILITIES AND EQUITY Current Liabilities Accounts payable and accrued liabilities $74,914 $70,643 Accrued interest 1,617 1,617 Other current liabilities 20,846 20,846 ------------- -------------- Total current liabilities 97,377 93,106 Restructured German Term Debt 94,874 91,572 New Secured Term Notes - 75,000 Other debt 20,003 20,003 Deferred compensation 74,209 74,209 Other long-term liabilities 6,613 6,613 ------------- -------------- Total liabilities 293,076 360,503 Liabilities subject to compromise Accounts payable 25,307 - Accrued interest 19,265 - Debt 842,574 - Other 75,128 - ------------- -------------- Total liabilities subject to compromise 962,274 - Shareholders' equity (deficit) (922,832) 93,425 ------------- -------------- Total liabilities & equity $332,518 $453,928 ============= ============== Issuance of New Securities Pursuant to the Plan, existing promissory notes, share certificates, bonds and all other instruments or documents evidencing any Claim or Equity Interest will be cancelled. On the Effective Date, the Reorganized Debtors will issue new securities. All shares of the New Common Stock will be issued to holders of Senior Lender Claims. These shares will constitute 100% of the shares of the New Common Stock outstanding as of the Effective Date, subject to dilution by (i) any shares issued in connection with the New Warrants, and (ii) Employee Equity to be issued in connection with the New Management Incentive Plan. New three-year Warrants to purchase up to 5% of the Acterna Common Stock may be issued. Each Warrant will be exercisable to acquire one share of Acterna Common Stock. $75,000,000 New Secured Term Notes Reorganized Acterna LLC will issue secured term notes for $75,000,000 on the Effective Date pursuant to the Plan, with these terms: Agent: JPMorgan Chase Bank Maturity: Five years after the Effective Date Interest rate: 12.00%, to accrue and compound monthly -- 2% paid currently in Cash, 10% accrued and payable at maturity Excess Cash Flow: 50% of excess cash flow from domestic operations will be applied as a mandatory prepayment, on an annual basis Covenants: Minimum EBITDA, total leverage ratio and interest coverage; baskets for asset sales, permitted liens and other standard covenants Reporting: Standard monthly reporting, quarterly delivery of 26-week rolling cash flow statement Ranking: Pari passu with the obligations of the guarantors under the Restructured German Term Debt Collateral: If Exit Facility is in effect on the Effective Date, a second priority lien on and security interest in substantially all of the Debtors' assets, including a pledge of (i) 100% of the equity interests of the Reorganized Debtors, and (ii) not more than 66% of the equity interest of any foreign subsidiaries. Otherwise, a first priority lien on and security interest in substantially all of the Debtors' assets. Governing Law: State of New York EUR82,498,945 Restructured German Term Debt Acterna International GmbH (Germany), a non-Debtor affiliate, is the borrower under the German Term Loan and the primary obligor under the German L/C. Acterna International GmbH owns the primary foreign subsidiaries in the Communications Test business. The Plan contemplates the restructuring of the German Term Loan for EUR82,498,945 on the Effective Date pursuant to these terms; Issuer: Acterna International GmbH or a new entity to be determined with Senior Lenders' consent Agent: JPMorgan Chase Bank Lenders: Each German L/C Participant on the Effective Date Maturity: Co-terminus with maturity of the New Secured Term Notes, i.e., five years after the Effective Date Amortization: Bullet amortization on the fifth anniversary of the Effective Date Excess Cash Flow: On an annual basis, 50% of excess cash flow, if any, from the German Borrower's operations will be applied as a mandatory prepayment Interest rate: Period Rate ------ ---- From the Effective Date through 3/31/05 LIBOR plus 2.00% From 4/1/05 through 3/31/06 LIBOR plus 2.50% From 4/1/06 through 9/30/06 LIBOR plus 3.00% From 10/1/06 through 3/31/07 LIBOR plus 3.50% From 4/1/07 through Maturity Date LIBOR plus 4.50% Covenants: Covenants for international operations to be agreed upon by JPMorgan and the Debtors Reporting: To be determined Ranking: Pari passu with the obligations of the guarantors under the New Secured Term Notes Senior unsecured obligation of German Borrower Collateral: Second priority lien on and security interest in all of the Debtors' assets, including, without limitation, up to 100% of the equity interest of any first tier subsidiaries of the Reorganized Debtors, provided, however, that in the event the Debtors do not enter into an Exit Facility, the lien on all of the Debtors' assets will be first priority, Additional collateral to be agreed upon by the Debtors and JPMorgan Governing Law: State of New York Valuation of Communications Test Business At the Debtors' request, Miller Buckfire Lewis Ying & Co., LLC, the Debtors' financial advisors, prepared an estimated enterprise value of the Reorganized Debtors' Communications Test business unit, inclusive of all Communications Test operations. Miller Buckfire's valuation analysis excludes the Itronix and da Vinci business units since the Debtors are currently marketing and may divest them before the Effective Date. This valuation analysis aims to determine value available for distribution to creditors. The valuation of the Reorganized Debtors' Communications Test business unit assumes an October 1, 2003 Effective Date and is based on an enterprise valuation analysis Miller Buckfire prepared in July 2003. Miller Buckfire calculated the enterprise value of Communications Test to be within a range of $200,000,000 to $300,000,000, with a mid-point value of $250,000,000. Subject to the divestitures of the Debtors' Itronix and da Vinci business units, the Debtors project that they will be able to retain $50,000,000 in cash upon emergence from Chapter 11. The Debtors assumed that $30,000,000 of this amount is excess cash, above amounts necessary to operate the business, resulting in an estimated enterprise value of the Reorganized Debtors of $230,000,000 to $330,000,000, with a $280,000,000 mid-point value. Based on the estimated enterprise value, the $75,000,000 principal amount of the New Secured Term Notes to be issued pursuant to the Plan, the $91,572,000 principal amount of the Reinstated German Term Debt and the $20,003,000 principal amount of other Non-Debtor Affiliate debt outstanding on the Effective Date, the Reorganized Debtors' equity value, at the midpoint of Miller Buckfire's enterprise valuation range, is assumed to be $93,425,000. Based on the distribution of 5,000,000 shares of New Common Stock to holders of Senior Lender Claims under the Plan, the value per share of New Common Stock, at the midpoint of the enterprise valuation range, is $18.68 per share. Distributions Under the Plan Payments and distributions to holders of Allowed Administrative Expense Claims, Allowed Priority Tax Claims, Allowed Non-Tax Priority Claims, Allowed Other Secured Claims, Allowed General Unsecured Claims, Allowed Convertible Notes Claims, Allowed Subordinated Notes Claims and Senior Lender Claims will be made on the Effective Date. All Plan distributions will be made by a Disbursing Agent. The Disbursing Agent will not be required to provide any bond, surety or other security for the performance of its duties and, in the event that the Disbursing Agent is so otherwise ordered, all costs and expenses of procuring any bond, surety or other security will be borne by Reorganized Acterna. Termination of the DIP Agreement On the Effective Date, all obligations of the Debtors under the DIP Agreement will be refinanced under an Exit Financing Facility or otherwise satisfied in full in accordance with the terms of the DIP Agreement. Any letters of credit issued pursuant to the DIP Agreement that have not expired will be: (i) replaced with letters of credit issued as a part of the refinancing or any other Exit Facility; or (ii) cash collateralized at 105% of the face amount of the letters of credit. Upon satisfaction in full of all obligations under the DIP Agreement, all liens and security interests granted to secure the obligations will be deemed terminated and will be of no further force and effect. Alternatives to Plan Confirmation If the Plan is not confirmed and consummated, the Debtors' alternatives include: (A) Liquidation Under Chapter 7 The Chapter 11 cases may be converted to cases under Chapter 7 of the Bankruptcy Code in which a trustee would be elected or appointed to liquidate the Debtors' assets. The Debtors believe that liquidation under Chapter 7 would result in: -- smaller distributions being made to creditors than those provided for in the Plan because of additional administrative expenses attendant to the appointment of a trustee and the trustee's employment of attorneys and other professionals; -- additional expenses and claims, which would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with the cessation of the Debtors' operations; and -- the failure to realize the greater, going concern value of the Debtors' assets. The Debtors have prepared a Liquidation Analysis which estimates the net proceeds that would be realized if their assets were liquidated under Chapter 7. The Liquidation Analysis assumes a 12-month liquidation period and is based on the projected book values as of September 30, 2003. Any difference in the values between the projected values and the actual values on the start of the liquidation process would result in a variance to the estimated recoveries. Projected Book Value Average Estimated As of Estimated Liquidation 9/30/2003 Recovery Rate Value ---------- ------------- ----------- COMMUNICATIONS TEST PROCEEDS FROM LIQUIDATION Cash & equivalents $35,192 100% $35,192 Trade accounts receivable, net 22,614 68% 15,474 Inventories, net 17,144 48% 8,167 Deferred income taxes - 0% - Taxes receivable - 0% - Prepaids & other current assets 8,246 16% 1,351 PP&E, net 22,532 27% 6,179 Goodwill & intangibles (1,448) n/a 3,000 Deferred debt issuance costs, net 16,862 0% - Other assets 3,436 8% 279 --------- --------- Total assets $124,578 $69,643 ========= --------- Other proceeds: Itronix net liquidation proceeds 10,289 da Vinci net liquidation proceeds 489 Proceeds from liquidation of non-debtors subs - Proceeds from avoidance and preference actions - --------- Gross Asset Liquidation Value 80,421 Less costs associated with liquidation: Corporate expenses (33,000) Retention (3,750) Other professional fees (3,750) --------- 39,921 Chapter 7 Trustee fees (1,357) --------- Net estimated proceeds available for creditor distribution 38,564 --------- Less Super Priority Liens - DIP fees (123) Net estimated proceeds available for secured creditor distribution 38,442 --------- Estimated Senior Lender Claims 700,915 % Recovery 5.48% --------- Net estimated proceeds After senior lender distribution - --------- Estimated other secured claims 89,253 % Recovery 0% --------- Net estimated proceeds after secured creditor distribution - --------- Less Chapter 11 Administrative Expense Claims Net estimated proceeds available for unsecured creditor distribution - --------- Estimated unsecured claims 225,822 Secured claim deficiency 751,726 --------- Total other secured, unsecured and deficiency claims 977,548 % Recovery 0% ========= (B) Alternative Reorganization Plans If the proposed Plan is not confirmed, the Debtors or any other party-in-interest could attempt to formulate a different plan of reorganization. This new plan might involve either a reorganization and continuation of the Debtors' business or an orderly liquidation of their assets. The Debtors have concluded that the Plan represents the best alternative to protect the interests of creditors and other parties-in-interest. In a Chapter 11 liquidation, the Debtors' assets would be sold in an orderly fashion which could occur over a more extended period of time than in a liquidation under Chapter 7, but a trustee need not be appointed. Accordingly, creditors would receive greater recoveries than in a Chapter 7 liquidation. But even if a Chapter 11 liquidation is preferable to a Chapter 7 liquidation, the Debtors believe that a Chapter 11 liquidation is a much less attractive alternative to creditors. Still the proposed Plan provides a greater return to creditors. (Acterna Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) AFC ENTERPRISES: Delivers Audit Investigation Report to Nasdaq -------------------------------------------------------------- AFC Enterprises, Inc. (Nasdaq: AFCEE), the franchisor and operator of Popeyes(R) Chicken & Biscuits, Church's Chicken(TM) and Cinnabon(R) and the franchisor of Seattle's Best Coffee(R) in Hawaii, on military bases and internationally, announced that the independent counsel to the Audit Committee of its Board of Directors has delivered to the Nasdaq Listing Qualifications Panel a report on its investigation into certain accounting issues, as requested by the Listing Qualifications Panel. AFC Enterprises, Inc. is the franchisor and operator of 4,006 restaurants, bakeries and cafes as of July 14, 2003, in the United States, Puerto Rico and 35 foreign countries under the brand names Popeyes(R) Chicken & Biscuits, Church's Chicken(TM), Cinnabon(R) and the franchisor of Seattle's Best Coffee(R) in Hawaii, on military bases and internationally. AFC's primary objective is to be the world's Franchisor of Choice(R) by offering investment opportunities in highly recognizable brands and exceptional franchisee support systems and services. AFC Enterprises had system-wide sales of approximately $2.7 billion in 2002 and can be found on the World Wide Web at http://www.afce.com * * * As reported in Troubled Company Reporter's July 18, 2003 edition, Standard & Poor's Ratings Services placed its 'BB' corporate credit and senior secured bank loan ratings of AFC Enterprises Inc., on CreditWatch with negative implications. AIR 2 US LLC: S&P Downgrades Ratings on All Series A to D Notes --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on all series of enhanced aircraft notes issued by Air 2 US LLC. Ratings on the Series A enhanced equipment notes were lowered to 'BB-' from 'BBB-'; Series B to 'B-' from 'B'; Series C to 'CCC-' from 'B-'; and Series D to 'CC' from 'CCC+'. All ratings remain on CreditWatch with negative implications. This special-purpose entity relies on lease rental payments on planes leased to United Air Lines Inc. (rated 'D') and American Airlines Inc. (B-/Negative/--). "The downgrade of Air 2 US notes reflects the likelihood that ongoing negotiations to restructure leases to United Air Lines will materially reduce cash flows available to repay the notes," said Standard & Poor's Ratings Services credit analyst Philip Baggaley. "Although the reduced lease rentals may be sufficient, along with contracted payments from American Airlines, to repay one or more classes of more senior notes, excess cash flow coverage may be significantly reduced," the credit analyst continued. Although American Airlines narrowly avoided bankruptcy in April 2003, it appears that it would either return the planes that it leases from Air 2 US or seek significantly reduced rental rates if it were to enter Chapter 11 in the future. Air 2 US is a Cayman Islands-based limited liability company that in 1999 issued more than $1.1 billion of enhanced aircraft notes whose repayment depends, among other factors, on the level of lease rentals paid by United Air Lines to various financing subsidiaries of Airbus Industries SAS. United leases 22 A320-200 jet aircraft from those Airbus units, representing more than half of the total rentals related to this transaction, with the remainder paid by American Airlines to lease 19 A300-600R planes (one of which has since been removed due to its loss in an accident) from other units of Airbus. In contrast to an enhanced equipment trust certificate, planes repossessed from a bankrupt airline lessee would not be sold, and therefore might later generate higher lease revenues when the aircraft market recovers. Airbus would direct the repossession and re-leasing of any aircraft rejected in a bankruptcy of United or American. Ratings remain on CreditWatch with negative implications, and could be lowered further if negotiations with United lead to terms that are less favorable than anticipated. AIR CANADA: ALPA Wants Monitor to Handle Equity Solicitation ------------------------------------------------------------ Air Line Pilots Association, International asks Mr. Justice Farley to direct Ernst & Young Inc., the Court-appointed Monitor in Air Canada bankruptcy proceedings, to conduct, supervise and manage the process by which the Applicants may solicit parties to act as equity plan sponsor in their plan of arrangement. ALPA wants to prohibit the Applicants' management from engaging in any communications, contact or investigation, with parties in relation to soliciting, screening, planning or otherwise becoming involved as an equity plan sponsor, unless Ernst & Young is advised in advance and participates in any such communications, contact or investigation. Ken Rosenberg, Esq., at Paliare Roland Rosenberg Rothstein LLP, in Toronto, Ontario, explains that any potential equity plan sponsor will, in effect, become the "new owner" of the Applicants and will necessarily be involved in developing the terms of the Applicants' plan of arrangement. The plan of arrangement will necessarily affect the interests of ALPA's members as parties to profit-sharing arrangements with the Applicants, and as stakeholders with an interest in various pension, labor and other issues that are affected by the Applicants' restructuring. As a result, the ultimate plan of arrangement will have a direct and significant impact on ALPA's members, who have a real and material interest in the ownership, equity structure and governance of the Applicants, and hence, an interest in the equity solicitation process. Mr. Rosenberg points out that ALPA has a reasonable and bona fide concern with respect to the ability of the Applicants' incumbent management to conduct an equity solicitation process that balances competing interests in the manner required in the CCAA proceedings. The equity solicitation process brings into play various issues, which gives ALPA cause for concern. All stakeholders are conflicted to the extent that they seek to maintain -- or if possible, enhance -- their positions within the CCAA proceedings. As an example, Mr. Rosenberg cites that labor and other issues ALPA and other unions raised against the Applications, and the manner in which the Applicants have responded, shows that the Applicants' incumbent management face significant challenges in balancing various stakeholder interests. The incumbent management and the Applicants' Board of Directors are themselves stakeholders in the process who may face conflicting interests in dealing with potential investors. ALPA is the trade union that acts as the collective bargaining agent for pilots employed by Jazz Air Inc. On June 3, 2003, ALPA and Air Canada Jazz entered into a Letter of Understanding regarding the allocation of aircraft between mainline and Jazz operations as well as various productivity enhancements. The LOU provides that ALPA's member would participate in a profit-sharing arrangement with the Applicants. Although the particular terms of the profit-sharing arrangement are yet to be determined, ALPA holds final approval with respect to the terms of any such arrangement. "The equity solicitation process is an integral part of the Applicants' restructuring, and necessarily requires a balancing of competing interests. As such, the equity solicitation process must be fair, transparent, and open to key stakeholders such as ALPA," Mr. Rosenberg says. According to Captain Monty Allan, Vice Chairman of ALPA's Master Executive Council, it is necessary that the terms of the profit- sharing arrangement between ALPA and the Applicants be fleshed out in advance of the plan of arrangement to ensure that the profit-sharing arrangement will be the one that is a useful and valuable incentive for ALPA members and sustainable on the Applicants' part. It is also critical to ensure that labor, pension and operational issues will be addressed in a manner that facilitates the successful development and implementation of the Applicants' plan of arrangement. While Ernst & Young is involved in a limited extent, ALPA understands that the Monitor is not participating at every stage of the equity solicitation process -- nor does it have control. "It is a company process and the Monitor may not be involved in all discussions. No other stakeholders are involved in the equity solicitation process," Mr. Allan says. Capt. Allan is an Air Canada Jazz pilot. In any event, ALPA wants the Applicants to advise interested labor unions, in writing, of the identity and contact information of any party the Applicants approached, or who approaches the Applicants, in relation to the equity solicitation process. ALPA also wants the Applicants to be precluded from taking any steps to prohibit, restrict, prevent or otherwise interfere with the ability of any party involved in the equity solicitation process, including those parties who are potential equity plan sponsors, from communicating with any interested labor group. (Air Canada Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) ALAMOSA HOLDINGS: Second Quarter Net Loss Narrows to $19 Million ---------------------------------------------------------------- Alamosa Holdings, Inc. (OTC Bulletin Board: ALMO), the largest (based on number of subscribers) PCS Affiliate of Sprint (NYSE: FON, PCS), which operates the largest all-digital, all-CDMA Third- Generation (3G) wireless network in the United States, reported customer and financial results for the second quarter ended June 30, 2003. The Company reported net subscriber additions of approximately 24,000 during the second quarter of 2003, a 20 percent increase over net subscriber additions in the second quarter of 2002. Total subscribers at June 30, 2003, were approximately 677,000, a 4 percent increase for the quarter. The net loss for the second quarter was $18.7 million compared to $30.5 million in the first quarter of 2003 and a net loss of $28.7 million for the second quarter of 2002. The Company reported $30.2 million of EBITDA for the second quarter of 2003 versus $17.1 million in the first quarter of 2003 and $6.4 million in the same quarter one year ago. This represents a 77 percent increase over first quarter 2003 EBITDA and also exceeds the total reported EBITDA for all of 2002. The Company also reported customer churn of approximately 2.5 percent for the second quarter of 2003, a decline from 3.0 percent in the first quarter of 2003. Due to the decline in customer churn, the Company now expects customer churn to average less than 3.0 percent for 2003. Fixed asset additions were $3.3 million during the second quarter. In other second quarter news, the Company announced the successful swap of spectrum, by the PCS Division of Sprint with AT&T Wireless, in the Company's Wisconsin markets for spectrum in its New Mexico/Colorado markets. "We are very pleased with our reduction in churn and our financial results," said David E. Sharbutt, Chairman and Chief Executive Officer of Alamosa Holdings, Inc. "We are continuing to focus on executing in every phase of our business and our positive performance in the first half of 2003 continued to move our company forward in the competitive operating environment of wireless." FINANCIAL HIGHLIGHTS Total revenue for the second quarter was approximately $155.4 million, including subscriber revenue of $114.6 million, roaming revenue of $35.0 million and product sales of $5.8 million. The Company reported a net loss for the second quarter of $18.7 million compared to $30.5 million in the first quarter of 2003 and a net loss of $28.7 million for the second quarter of 2002. EBITDA was approximately $30.2 million for the second quarter of 2003 compared to approximately $17.1 million for the first quarter of 2003 and approximately $6.4 million for the second quarter of 2002. Revenue continues to be positively impacted by non-PCS roaming revenues, which accounted for approximately 30 percent of roaming revenue in the second quarter. Expenses were also positively impacted by a reduction in bad debt expense to approximately 3.1 percent of subscriber revenues, due to the decline in customer churn during the second quarter of 2003. At the end of the second quarter of 2003, Alamosa had available funding of approximately $124 million. This included approximately $89 million of cash and cash equivalents, approximately $10 million in restricted cash escrowed for the payment of bond interest, and committed but unused credit facilities at the end of the first quarter of $25 million, subject to certain restrictions. Alamosa Holdings' June 30, 2003 balance sheet shows that its total shareholders' equity has further shrunk to about $86 million from about $134 million six months. SPECTRUM SWAP The Company benefited from a limited spectrum swap by the PCS Division of Sprint with AT&T Wireless (NYSE: AWE) during the second quarter of 2003. The swap consisted of Sprint successfully negotiating the exchange of 10 MHz of spectrum in the Wisconsin markets of Appleton-Oshkosh, Green Bay, Madison, Sheboygan, Fond du Lac and Manitowoc in exchange for AWE giving 10 MHz in Albuquerque, Santa Fe and Farmington, New Mexico and Durango, Colorado. Prior to the swap, the Company operated with only 10 MHz in the Albuquerque, Santa Fe and Farmington, New Mexico and Durango, Colorado markets. The total average spectrum for the company remains at 27MHz and allows for greater use in one of the larger markets (Albuquerque-Santa Fe) served by Alamosa. "With the help of the PCS Division of Sprint, we were able to gain additional access to spectrum and to better position ourselves in these markets," said Mr. Sharbutt. "The reallocation allows us to continue to focus on opportunities for growth without sacrificing quality for our customers." BUSINESS OUTLOOK Alamosa is providing the following revised business outlook for 2003 which may be materially affected by competitive conditions, continued development and acceptance of new 3G products and services, changes in pricing plans, wireless number portability and general economic conditions, among other things: * Full year 2003 EBITDA of approximately $90 million, revised upward from $80 million * Free cash flow positive for the full year of 2003, excluding cash interest to be paid out of escrow * Capital expenditures of $40-50 million * Penetration of Alamosa markets to be in the range of 6.2 to 6.5 percent by year-end 2003 * Churn averaging less than 3.0 percent for the year of 2003, revised from averaging 3.0 percent for the year of 2003 Alamosa Holdings, Inc., is the largest PCS Affiliate of Sprint based on number of subscribers. Alamosa has the exclusive right to provide digital wireless mobile communications network services under the Sprint brand name throughout its designated territory located in Texas, New Mexico, Oklahoma, Arizona, Colorado, Utah, Wisconsin, Minnesota, Missouri, Washington, Oregon, Arkansas, Kansas, Illinois and California. Alamosa's territory includes licensed population of 15.8 million residents. Sprint operates the largest, 100-percent digital, nationwide PCS wireless network in the United States, already serving more than 4,000 cities and communities across the country. Sprint has licensed PCS coverage of more than 280 million people in all 50 states, Puerto Rico and the U.S. Virgin Islands. In August 2002, Sprint became the first wireless carrier in the country to launch next generation services nationwide delivering faster speeds and advanced applications on Vision-enabled Phones and devices. For more information on products and services, visit http://www.sprint.com/mr PCS is a wholly-owned tracking stock of Sprint Corporation trading on the NYSE under the symbol "PCS." Sprint is a global integrated communications provider serving more than 26 million customers in over 100 countries. With approximately 70,000 employees worldwide and nearly $27 billion in annual revenues, Sprint is widely recognized for developing, engineering and deploying state-of-the art network technologies. * * * As reported in Troubled Company Reporter's June 16, 2003 edition, Standard & Poor's Ratings Services affirmed its 'CCC+' corporate credit rating on Alamosa Holdings Inc., and removed the rating from CreditWatch, where it had been placed on June 26, 2002, because of liquidity concerns stemming from operating weakness and tightening bank covenants. The outlook is negative. Total debt was about $877.4 million at the end of March 2003. ALLEGHENY ENERGY: Fitch Assigns BB- Rating to 11-7/8% Notes ----------------------------------------------------------- Fitch Ratings has assigned a 'BB-' rating to Allegheny Energy Inc.'s $300 million 11-7/8% convertible notes due 2008 and Allegheny Capital Trust I's $300 million preferred securities. The trust was formed to hold and pass through to the holders of the preferred securities all of the economics and legal rights associated with the notes and warrants issued by AYE to purchase common stock of AYE. The trust preferred securities will be convertible to shares of AYE common stock at the option of the holder at a conversion price of $12 per share. If AYE's share price reaches $15 for a specified period of time, the securities will be mandatorily converted at $12 per share. Payment obligations under the new notes that provide the cash flows to support the trust preferred securities are senior unsecured obligations of AYE but subordinated to the AYE's existing credit facilities announced on Feb. 25, 2003. Fitch rates AYE's bank credit facilities and senior unsecured notes 'BB'. The trust is placed on Rating Watch Evolving, reflecting the status of AYE. AYE's ratings consider the parent's continuing exposure to the elevated default risk and liquidity issues afflicting unregulated subsidiary Allegheny Energy Supply Co. LLC. (AE Supply). AYE's Rating Watch Evolving status mainly reflects the current status of AE Supply. AYE's ratings will be affected by events at AE Supply through year-end 2003. The AYE group has yet to complete its restatements of quarterly financial results for 2002 and issue its 2002 annual and 2003 quarterly statements. Without financial statements, AYE or AE Supply cannot access the public markets, sell certain assets or obtain Securities and Exchange Commission approval to issue additional secured debt. Positively, AE Supply has been making progress toward bolstering its liquidity position to meet its 2003 year-end debt amortization and working capital needs. The net proceeds of this trust preferred transaction will be used to repay debt at AYE and AE Supply, and for general corporate purposes. Recently, AE Supply signed a definitive agreement to sell its energy supply contract with the California Department of Water Resources and associated hedge transactions to a division of The Goldman Sachs Group for approximately $405 million. The closing of the transaction by year-end 2003, as expected by the company, will clear a significant liquidity hurdle for AE Supply and will have a positive effect for the AYE group. Allegheny Energy Inc. is a registered utility holding company, which owns three regulated utilities, Monongahela Power, Potomac Edison and West Penn Power and two non-utility subsidiaries. The utilities deliver electric and gas service to 1.5 million customers in parts of Maryland, Ohio, Pennsylvania, Virginia, and West Virginia and 230,000 customers in West Virginia, respectively. AYE's non-utility subsidiaries consist of Allegheny Energy Supply Co. LLC, which develops, acquires, owns and operates generating plants and is a marketer of electricity and other energy products and Allegheny Ventures which is involved in telecommunications and energy related projects. ALLIED PRODUCTS: Supplemental Sale Pact Hearing Set for Thursday ---------------------------------------------------------------- Allied Products Corporation will appear on Thursday before the Honorable Eugene Wedoff, U.S. Bankruptcy Court Judge for the Northern District of Illinois, to seek approval of a Supplemental Agreement to sell the Debtor's Prepetition Liability Insurance Policies. The Motion asks the Court to approve Allied's sale of some general liability insurance policies back to its general liability insurance carriers for $3.5 million. The Sale Proceeds will be used to pay claims asserted against the Debtor that are determined by the Court to be covered by one or more of the policies. Allied filed for Chapter 11 protection on October 2, 2000, (Bankr. N.D. Ill. Case No. 00-28798). Steven B. Towbin, Esq., and Matthew Swanson, Esq., at Shaw Gussis Fishman Glantz Wolfson & Towbin LLC represent the debtor in its restructuring efforts. ALLIANCE GAMING: Unit Strikes Supply Contract with Majestic Star ---------------------------------------------------------------- Alliance Gaming Corp.'s (NYSE: AGI) Bally Gaming and Systems business unit has entered into a corporate agreement with The Majestic Star Casino, LLC and its subsidiaries to supply the company's casino properties in four jurisdictions with a complete slot accounting, cashless and professional services solution. Along with slot accounting and casino management solutions, the agreement calls for Majestic Star to feature Bally eTICKET(TM), the industry's leading single-wire, ticket-in, ticket-out cashless product that will displace a competitive ticketing system at its Majestic Star Casino in Gary, Ind. Marketing and bonusing products such as ePROMO(TM) and eBONUS(TM) are also part of the agreement. Work on displacing the current casino management systems at Majestic Star and Fitzgeralds Casino in Tunica, Miss., will begin in the coming weeks, followed by installations at Fitzgeralds Casinos in Las Vegas and Black Hawk, Colo. The casino company operates a total of approximately 4,500 slot machines at its four properties in Nevada, Indiana, Mississippi and Colorado. Recognized as the industry leader with approximately 240,000 game monitoring units and 194 casino customers worldwide, the Bally Systems product line offers slot machine cash monitoring, accounting, security, maintenance, marketing, promotional and bonusing capabilities, enabling operators to accurately analyze performance and accountability while providing an enhanced level of customer service. Alliance Gaming is a diversified gaming company with headquarters in Las Vegas. The Company is engaged in the design, manufacture, operation and distribution of advanced gaming devices and systems worldwide, and is the nation's largest gaming machine route operator and operates two casinos. Additional information about the Company can be found at http://www.alliancegaming.com As reported in Troubled Company Reporter's July 7, 2003 edition, Standard & Poor's Ratings Services affirmed Alliance Gaming Corp's 'BB-' corporate credit rating following Alliance's announcement that it signed a definitive agreement to sell both its slot route operations (United Coin Machine Co. and Video Services, Inc.) and its German wall machine manufacturing (Bally Wulff) segments. The 'BB-' bank loan and 'B' subordinated debt ratings also were affirmed. The outlook is stable. AMERCO: Reiterates Intention to Repay Creditors in Full ------------------------------------------------------- Responding to inquiries resulting from the filing of Statements and Schedules required by the United States Bankruptcy Court in Reno, Nevada, AMERCO (Nasdaq: UHAEQ) reiterated its intention to repay its creditors in full, pursuant to a full-value plan of reorganization, without diluting the interests of its shareholders. The Statements and Schedules are not prepared on a GAAP basis and do not reflect stockholders equity or net worth, because of the inclusion in such Schedules of the Company's maximum potential exposure under contingent and unliquidated lease guaranty claims and the exclusion of the underlying leased assets held by non- debtor subsidiaries. AMERCO believes that the fair value of such underlying leased assets exceeds the related contingent lease guaranty claims. While these claims are required to be included in the Statements and Schedules under applicable bankruptcy rules, they do not constitute debt of the Company, as was incorrectly stated in some press reports. If the contingent lease guaranty claims, which do not represent GAAP indebtedness, were excluded, the Statements and Schedules would reflect assets that are significantly in excess of the Company's liabilities. For the GAAP presentation of the Company's financial condition, interested parties should review the Company's annual report on Form 10-K for the fiscal year ended March 31, 2003, which will be filed shortly with the Securities and Exchange Commission. The Company has received a commitment from Wells Fargo Foothill for a $300 million debtor-in-possession (DIP) financing facility, and for a $650 million bankruptcy emergence facility. These commitments provide the foundation upon which the Company will build its reorganization plan. For more information about AMERCO, visit http://www.amerco.com AMERCO: Committee Hires Shea & Carlyon as Local Counsel ------------------------------------------------------- The Official Committee of Unsecured Creditors of AMERCO seeks the Court's authority to retain Shea & Carlyon, Ltd. as its local counsel pursuant to Sections 327 and 328 of the Bankruptcy Code and Rule 2014 of the Federal Rules of Bankruptcy Procedure, nunc pro tunc to June 20, 2003. As local counsel, Shea will: (a) protect and preserve the claims of the unsecured creditors as a class; (b) advise the Committee on the requirements of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Bankruptcy Rules and the requirements of the U.S. Trustee pertaining to administration of a case under Chapter 11 of the Bankruptcy Code; (c) prepare motions, applications, answers, orders, memoranda, reports and papers in connection with representing the interests of the Committee; and (d) render other necessary advice and services as the Committee may require in connection with the bankruptcy case. Ty E. Kehoe, Esq., at Shea & Carlyon, Ltd., in Las Vegas, Nevada, relates that Shea is an expert in insolvency, business reorganization and other debtor/creditor matters. Members of Shea have served as bankruptcy counsel to committees, creditors and debtors in a number of insolvency cases. According to Mr. Kehoe, Shea will seek compensation pursuant to its hourly fees and reimbursement of its out-of-pocket expenses. Shea's current hourly rates are: Professional Position Rate ------------ -------- ---- James Patrick Shea shareholder $400 Candace C. Carlyon shareholder 400 Ty E. Kehoe shareholder 300 Denise Abramow counsel 310 Randon Hansen associate 240 Shawn Miller associate 225 Jamieson N. Poe associate 260 Lissa Treadway paralegal 150 Anne Marie Boehmer paralegal 150 Leslie Dahl legal assistant 125 Jennifer Foskey legal assistant 150 Jennifer White legal assistant 120 To the best of his knowledge, Mr. Kehoe informs Judge Zive that neither Shea, nor any of its shareholders have any present connection with the Committee, the Debtor, any creditor of the estate, any party-in-interest, their attorneys or accountants, the U.S. Trustee and any person employed in the Office of the U.S. Trustee other than: (i) Candace C. Carlyon is married to Deputy District Attorney Robert J. Gower. Mr. Gower works in the civil division of the Clark County District Attorney's Office wherein certain county agencies are or may become claimants of Amerco's estate. However, Mr. Gower does not personally render services related to the bankruptcy claims; (ii) Wells Fargo Bank, NA is a client of Shea on matters unrelated to Amerco's bankruptcy case; (iii) IBJ Whitehall Bank & Trust Co. was a client of Shea in matters unrelated to Amerco's bankruptcy case; (iv) CIT Equipment Financing, Inc. was a client of Shea in matters unrelated to Amerco's bankruptcy case; (v) MBIA is a client of Shea on a matter unrelated to Amerco's bankruptcy case; and (vi) Shea has represented General Electric Capital Corporation in the bankruptcy case of Aladdin Gaming, LLC. That representation has not concluded but is unrelated to Amerco's bankruptcy case. Moreover, Shea is not a prepetition creditor and has never represented Amerco. Shea is also not an equity security holder or an insider of Amerco. * * * Judge Zive authorizes the Committee to retain Shea & Carlyon as local counsel effective as of June 20, 2003. (AMERCO Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392- 0900) AMERICA WEST: Reports Best June Operating Statistics in a Decade ---------------------------------------------------------------- America West Airlines (NYSE: AWA) ranked in the top three major airlines in all operational statistics as stated in today's U.S. Department of Transportation Air Travel Consumer Report. As a result, all 12,000 America West employees will receive the first incentive bonus payment for meeting operational goals. America West's on-time performance was 85.2 percent for the month of June 2003, which is the best June performance since 1993. Customer complaints to the DOT dramatically declined 68.1 percent to 0.61 per 100,000 passengers, which represents the airline's best performance in this category since June 1996. America West also had a record 12 days with zero flight cancellations, which resulted in the airline canceling only 0.2 percent of its flights during the month of June. Additionally, America West reported 3.12 mishandled bags per 1,000 passengers, a significant improvement of 15.7 percent from June 2002. "Our employees know that providing consistently strong operational performance is important for the airline's success, and they have proven once again that with their teamwork and dedication, America West is an industry leader," said Jeff McClelland, executive vice president and chief operating officer. The airline implemented an incentive program in March 2003 to reward employees based on operational performance statistics as posted in the DOT monthly report. The program is designed to reward employees with a $50 payment every month in which America West ranks among the top three major airlines in either on-time performance and/or customer complaints. Additionally, for every month America West ranks number one in on-time performance, employees will be rewarded with $100. "Our employees are very deserving of the performance bonuses they will receive for the airline's outstanding operation in June. We look forward to making many more payments in the future," added McClelland. Founded in 1983 and proudly celebrating its 20-year anniversary in 2003, America West Airlines is the nation's second largest low- fare airline and the only carrier formed since deregulation to achieve major airline status. Today, America West serves 92 destinations in the U.S., Canada and Mexico. As reported in Troubled Company Reporter's July 30, 2003 edition, Standard & Poor's Ratings Services assigned its 'CCC' rating to America West Airlines Inc.'s $75 million 7.25% senior exchangeable notes due 2023, offered under Rule 144A with registration rights. The notes are guaranteed by America West Airlines' parent, America West Holdings Corp. (both rated B-/Negative/-). "The ratings on America West reflect risks relating to the adverse airline industry environment, a weak balance sheet, and limited financial flexibility," said Standard & Poor's credit analyst Betsy Snyder. "After significant losses incurred since 2001, which almost resulted in its filing for Chapter 11 bankruptcy protection, the company finally reported a profit in the second quarter of 2003, even before the inclusion of an $81 million refund from the federal government," the credit analyst continued. America West Holdings' major subsidiary is America West Airlines Inc., the eighth-largest airline in the U.S, with hubs located at Phoenix and Las Vegas. America West benefits from a low cost structure, among the lowest in the industry. However, it competes at Phoenix and Las Vegas against Southwest Airlines Co., the other major low-cost, low-fare, operator in the industry and financially the strongest. As a result, due to the competition from Southwest, as well as America West's reliance on lower-fare leisure travelers, its revenues per available seat mile also tend to be among the lowest in the industry. In addition, America West Holdings owns the Leisure Co., one of the nation's largest tour packagers. AMERICAN CELLULAR: Consummates $900MM 10% Senior Notes Offering --------------------------------------------------------------- American Cellular and ACC Escrow Corp., jointly announced that they had consummated a private offering of $900 million aggregate principal amount of 10% senior notes due 2011. The senior notes will be issued at a price of 100 percent of par. The notes were issued by ACC Escrow Corp., a recently formed corporation that was organized to merge into American Cellular Corporation as part of a previously announced plan to restructure American Cellular's capital and indebtedness. Upon completion of the restructuring, including the merger, the net proceeds from the offering will be used to fully repay American Cellular's existing bank credit facility and to pay all or a portion of the expenses of the restructuring, with any remaining net proceeds to be used for general corporate purposes. Until the restructuring of American Cellular is completed or terminated, net proceeds from the notes offering will be placed in escrow. American Cellular is jointly owned by Dobson Communications (Nasdaq:DCEL) and AT&T Wireless (NYSE:AWE). The notes were sold only to qualified institutional buyers under Rule 144A and to persons outside the United States under Regulation S. The notes have not been registered under the Securities Act of 1933 or under 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. Dobson Communications is a leading provider of wireless phone services to rural markets in the United States. Headquartered in Oklahoma City, the Company owns or manages wireless operations in 16 states. For additional information on the Company and its operations, visit its Web site at http://www.dobson.net As reported in Troubled Company Reporter's July 17, 2003 edition, Standard & Poor's Ratings Services lowered the corporate credit rating on American Cellular Corp. to 'SD' from 'CC' and the subordinated debt rating on the company to 'D' from 'C'. The ratings have been removed from CreditWatch, where they were placed April 5, 2002. The rating actions followed the company's announcement of its proposed restructuring, which would involve a tender offer of less than full value for the company's approximately $700 million of 9.5% senior subordinated notes due 2009. The deal also proposes a prepackaged bankruptcy plan if the tender offer is not successful. The 'CC' bank loan rating on the company had been affirmed and was also removed from CreditWatch. The outlook on the bank loan rating is negative. The debt exchanged is viewed by Standard & Poor's as tantamount to a default on the original debt issue terms. AMERICAN DAIRY: Shoos-Away HJ & Associates as External Auditors --------------------------------------------------------------- On August 5, 2003, HJ & Associates, L.L.C., the independent certified public accountants and auditors of American Dairy, Inc. for fiscal 2002, were dismissed by the Company from further audit services to the Company. The dismissal was approved by the Board of Directors of the Company. The report dated March 7, 2003, of HJ & Associates, L.L.C. for such fiscal year indicated conditions which raised substantial doubt about the Company's ability to continue as a going concern. Effective August 5, 2003, Weinberg & Company, P.A., located at 6100 Glades Road, Suite 314, Boca Raton, Florida 33434 was engaged by the Company to audit the consolidated financial statements of the Company for its fiscal year ending December 31, 2003, and the related statements of income, stockholders' equity, and cash flows for the year then ending. American Dairy's operations are conducted through its wholly-owned subsidiary, Feihe Dairy, and Feihe Dairy's subsidiary, Sanhao Dairy, both of which are enterprises organized and operating in the People's Republic of China. Feihe Dairy engages in the production and distribution of milk powder, soybean milk powder and dairy products in the PRC. The principal activity of Sanhao Dairy is the production and supply of processed milk to Feihe Dairy. ARGONAUT: S&P Affirms & Removes Counterparty Ratings from Watch --------------------------------------------------------------- Standard & Poor's Ratings Services removed from CreditWatch and affirmed its 'BB+' counterparty credit rating on Argonaut Group Inc. (NASDAQ:AGII) and its 'BBB+' counterparty credit and financial strength ratings on Argonaut's property/casualty insurance subsidiaries because of Argonaut's substantially improved capital position since the beginning of the year and the expectation of further improvement in the second half of 2003. Standard & Poor's also said that the outlook on all these companies is negative. "Underwriting results, which are benefiting from the improved pricing environment, are expected to improve further in the second half of 2003 and into 2004," said Standard & Poor's credit analyst John Iten. "The resulting surplus growth will be required to support increased business volume, particularly at the Colony Group, which is benefiting from the very favorable pricing environment in the excess and surplus lines market. However, if other factors--such as additional reserve strengthening--offset the expected benefit to surplus from improved underwriting performance, the ratings would come under downward pressure, which is why the outlook is negative." Argonaut's acquisition of the Colony Insurance Group, which writes surplus lines business, in mid-2001 has greatly reduced its historical dependence on workers' compensation. Surplus lines premiums constituted 41% of total gross written premium in 2002 and 49% in the first quarter of 2003. Argonaut expanded its surplus lines presence in April 2002 with the acquisition of the renewal rights of Fulcrum Insurance Co. from SCOR Group. Argonaut's expansion into surplus lines appears to have been well timed, and most of the company's future growth and earnings are expected to come from these operations. Workers' compensation is a decreasing portion of Argonaut's book of business. The company is implementing a restructuring plan to focus on upper-middle-market, loss-sensitive accounts and, effective March 31, 2003, it exited the wrap-up and small commercial businesses. Argonaut posted a $21 million pretax loss for 2002 versus a $3 million profit in 2001. Last year's results were hurt by reserve strengthening for asbestos of $59.8 million and a $70 million write-down of its deferred tax asset. Pretax income for the first half of 2003 was $67.0 million, up from $20.1 million in the prior-year period. Net income rose to $53.3 million from $13.6 million in the same period a year earlier, including net realized gains of $44.1 million and $9.1 million in the respective years. Earnings in the first half of 2003 included a reserve strengthening charge for lines of business the company is exiting, restructuring charges, and an increase in allowance for doubtful reinsurance recoverables. ARMSTRONG HOLDINGS: Second Quarter Operating Loss Tops $33 Mill. ---------------------------------------------------------------- Armstrong Holdings, Inc. (OTC Bulletin Board: ACKHQ) reported second quarter 2003 net sales of $826.9 million that were 0.1% higher than second quarter net sales of $825.7 million in 2002. Excluding the favorable effects of foreign exchange rates of $42.1 million, consolidated net sales decreased by 4.7%, primarily due to lower sales volume. An operating loss of $33.4 million was recorded for the second quarter of 2003 compared to operating income of $55.6 million in the second quarter of 2002. The decline in operating income was primarily due to a non-cash charge in the second quarter of 2003 of $73 million related to management's current assessment of probable asbestos-related insurance asset recoveries. Also contributing to the decline in operating results were lower net sales, excluding the effect of foreign exchange rates, and higher raw material costs, particularly lumber, petroleum-based materials, natural gas and higher costs of foreign sourced products. In addition, there was a $7.1 million decrease in the U.S. pension credit in the second quarter of 2003 as compared to the prior year. Partially offsetting these costs increases were lower selling, general and administrative costs. At June 30, 2003, Armstrong Holdings' balance sheet shows a total shareholders' equity deficit of about $1.3 billion. Segment Highlights Resilient Flooring net sales were $308.3 million in the second quarter of 2003 and $304.0 million in the second quarter of 2002. 2003 sales compared to 2002 were favorably impacted by $12.8 million from the effects of foreign exchange rates in translation. Operating income of $19.1 million in the quarter compared to operating income in the second quarter of 2002 of $20.8 million. This decrease was due to increases in raw material costs and sourced product costs, and a shift in demand to lower margin products, partially offset by lower SG&A expenses. Additionally, 2002 included $2.2 million of net restructuring charges. Wood Flooring net sales of $181.6 million in the second quarter of 2003 decreased 4.4% from $190.0 million in the prior year. This decrease was primarily driven by lower sales volume. Operating income of $5.7 million in the second quarter of 2003 compared to $18.5 million in the second quarter of 2002. The decline in operating income was primarily attributable to increases in lumber and manufacturing costs and lower sales volumes, partially offset by lower selling expenses. Textiles and Sports Flooring net sales of $67.1 million increased in the second quarter of 2003 compared to $60.1 million in the second quarter of 2002. Excluding the favorable effects of foreign exchange rates of $15.3 million, net sales decreased 11.0% due to weak European markets. An operating loss of $3.1 million in the second quarter of 2003 was incurred compared to an operating loss of $0.3 million in the second quarter of 2002. The increased loss was due to lower sales volume and competitive pricing pressures, partially offset by lower selling and advertising costs. Building Products net sales of $216.7 million in the second quarter of 2003 increased from $205.1 million in the prior year. Excluding the favorable effects of foreign exchange rates of $14.1 million, sales would have decreased by 1.1%, primarily due to lower sales volume in the commercial markets. Operating income increased to $27.8 million from operating income of $24.5 million in the second quarter of 2002. This increase resulted from improved production expenses and lower SG&A spending, partially offset by increased natural gas costs. Cabinets net sales in the second quarter of 2003 of $53.2 million decreased from $66.5 million in 2002 due primarily to reductions in volume. An operating loss of $2.4 million in 2003 compared to operating income of $0.6 million in the prior year. The operating loss was predominantly due to the negative effects of lower volume. Included in the 2002 operating income was a $2.5 million write-down, resulting from the completion of a book-to- physical inventory analysis, and an additional accrual for product claims of $1.0 million. Year-to-Date Results For the six-month period ending June 30, 2003, net sales were $1,601.8 million, an increase of 1.8% from the $1,573.7 million reported for the first six months of 2002. Increases in Building Products, and Resilient and Textiles and Sports Floorings were partially offset by decreases in Cabinets and Wood Flooring. Excluding the favorable effects of foreign exchange rates of $77.4 million, consolidated net sales decreased 3.0%. An operating loss in the first half of 2003 of $22.1 million compared to operating income of $96.1 million for the first six months of 2002. This reduction was primarily due to the previously mentioned non-cash charge related to management's current assessment of probably asbestos-related insurance asset recoveries. Also contributing to the decline were increased raw material costs, a $13.5 million decreased U.S. pension credit and lower sales volume, partially offset by decreased selling and advertising expenses and lower production costs. More details on the Company's performance can be found in its Form 10-Q, filed with the SEC Friday. Armstrong Holdings, Inc. is the parent company of Armstrong World Industries, Inc., a global leader in the design and manufacture of floors, ceilings and cabinets. In 2002, Armstrong's net sales totaled more than $3 billion. Based in Lancaster, PA, Armstrong has 59 plants in 14 countries and approximately 16,500 employees worldwide. More information about Armstrong is available on the Internet at http://www.armstrong.com ARMSTRONG: Lease Decision Period Extended Until Dec. 15, 2003 ------------------------------------------------------------- For the fifth time, Armstrong World Industries and its debtor- affiliates obtained the Court's approval extending their deadline by which they must decide whether to assume, assume and assign, or reject unexpired non-residential real property leases. The Debtors' Lease Decision Period is now extended until December 15, 2003. (Armstrong Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-0900) BIO-RAD LABS.: Selling $225 Million of Senior Subordinated Notes ---------------------------------------------------------------- Bio-Rad Laboratories, Inc. (Amex: BIO; BIO.B), a multinational manufacturer and distributor of life science research products and clinical diagnostics, agreed to sell $225 million aggregate principal amount of its 7.50% Senior Subordinated Notes due 2013 in a private offering. The Company intended to use the net proceeds from this offering to fund the purchase of its outstanding 11-5/8% Senior Subordinated Notes due 2007 pursuant to the tender offer announced by the Company on July 17, 2003 and for general corporate purposes, which may include acquisitions. The new Senior Subordinated Notes have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws, and will be offered only to qualified institutional buyers in reliance on Rule 144A and in offshore transactions pursuant to Regulation S under the Securities Act of 1933, as amended. Unless so registered, the new Senior Subordinated Notes may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws. As reported in Troubled Company Reporter's July 30, 2003 edition, Standard & Poor's Ratings Services assigned a 'BB-' rating to Bio- Rad Laboratories Inc.'s $200 million senior subordinated debentures due 2013 to be privately placed in reliance on Rule 144A. This new issue will be used to retire high-cost debt used to fund the Pasteur Sanofi Diagnostics acquisition and to boost cash balances. The 'BB+' corporate credit and 'BBB-' senior secured ratings are affirmed. The outlook is stable. BRIDGEWATER SPORTS ARENA: Case Summary & 20 Unsecured Creditors --------------------------------------------------------------- Debtor: Bridgewater Sports Arena, L.P. 1425 Frontier Road Bridgewater, New Jersey 08807 Bankruptcy Case No.: 03-35809 Type of Business: Recreational facility in Central New Jersey Chapter 11 Petition Date: August 5, 2003 Court: District of New Jersey (Trenton) Judge: Kathryn C. Ferguson Debtor's Counsel: Brian L. Baker, Esq. Morris S. Bauer, Esq. Ravin Greenberg, PC 101 Eisenhower Parkway Roseland, NJ 07068 Tel: 973-226-1500 Estimated Assets: $10 Million to $50 Million Estimated Debts: $10 Million to $50 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ United Trust Bank $210,783 Kent Doyle $202,976 Gerard Chiara $162,000 John Mele $100,000 Villa Pizza $34,126 Fras-Air Contracting Inc. $30,961 Frieri Conroy & Lombardo $25,037 PSE&G $20,713 Best way Electric $18,499 Tricorp Amusements Inc. $13,435 Wollmuth Maher & Deutsch LLP $12,436 Township of Bridgewater Sewer $11,973 Resurfix, Inc. $9,064 Reps Fitness Supply $5,752 Elizabethtown Water Company $4,941 AHC $4,152 Wincross Warer Services, Inc. $3,136 Access Locksmith, Inc. $3,049 Zone Systems, Inc. $2,712 Atlantic Janitorial Services $2,439 BRIGGS & STRATTON: S&P Revises BB+ Rating Outlook to Positive ------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on air- cooled gasoline engine maker Briggs & Stratton Corp., to positive from stable. The company's 'BB+' corporate credit and senior unsecured debt ratings were affirmed. Briggs & Stratton had about $505 million of debt outstanding as of June 29, 2003. The outlook revision reflects the company's stronger than expected financial performance and credit protection measures for the year ended June 29, 2003. The ratings on Wauwatosa, Wis.-based Briggs & Stratton reflect the company's position as the world's largest producer of air-cooled gasoline engines used primarily for the mass merchandise lawn and garden power equipment market. This factor is offset by the mature and competitive nature of the company's end markets and the high degree of seasonality in its business. Briggs & Stratton's financial profile improved in fiscal 2003 after the company previously experienced significant weakness resulting from its May 2001 debt-financed acquisition of Generac Portable Products Inc., a manufacturer of portable generators, pressure washers, and related accessories. "Briggs & Stratton's market share continues to be strong; the company holds an estimated 50% share of the worldwide market for 3 to 25 horsepower (hp) engines, and its products are used in more than 50% of all residential lawn mowers in North America," said Standard & Poor's credit analyst Jean C. Stout. "Still, the industry is mature and competitive, characterized by slow growth in end markets and by the increasing concentration of mass merchandisers, which handle the distribution of more than 75% of lawn and garden equipment in the U.S." In addition, the company's performance is subject to substantial seasonality. Historically, about one-third of sales and about one- half of its income is generated during the fiscal third quarter ending March. Consumer demand is affected by weather conditions, which create uncertainty about replacement orders and inventory levels. The Generac acquisition allowed Briggs & Stratton to enter two end-market product lines, but it also added volatility to Briggs & Stratton's business profile as the purchases of generators and pressure washers are somewhat discretionary. Moreover, generator sales are generally tied to severe weather conditions. BURLINGTON IND.: Plan's Classification and Treatment of Claims -------------------------------------------------------------- Burlington Industries, Inc.'s First Amended Plan interchanged two Classes of Claims: A. Class 2: Other Secured Claims These are secured claims against any Debtor that are not classified in Class 3: (a) the Bank of America Claims for the Hedging Agreements, (b) secured property Tax Claims, and (c) secured mechanic's lien Claims. This is an unimpaired claim. B. Class 3: Prepetition Bank Claims These are secured claims, consisting of principal and interest at the non-default rate, arising under the Debtors' Prepetition Credit Facility. This Class is being deemed impaired because the holders of Class 3 Claims have asserted a right to interest at the default rate under the Debtors' Prepetition Credit Facility. Summary of Classification and Treatment of Claims As amended, the Claims and Interest Class will be treated as: Estimated Aggregate Class Liability Claim Treatment ----- --------- --------------- 1 $1,700,000 to Each holder of an Unsecured Priority Claim $2,000,000 will receive cash from BII Distribution Trust equal to the amount of the Allowed Claim 100% Estimated Recovery 2 $8,200,000 to Each holder of an Other Secured Claim will $8,500,000 receive cash from BII Distribution Trust equal to the amount of the Allowed Claim. 100% Estimated Recovery 3 $379,000,000 to Each holder of a Prepetition Bank Claim, $382,000,000 consisting of principal and interests at the non-default rate will receive cash from BII Distribution Trust equal to the amount of the Allowed Claim arising under the Debtors' Prepetition Credit Facility. 100% Estimated Recovery 4 $405,000,000 to Each holder of a General Unsecured Claim $425,000,000 will receive in full satisfaction of all of its Claims, cash from BII Distribution Trust in the amount of the holder's Pro Rata share of the Remaining Proceeds 42% Estimated Recovery 5 $600,000 to Each holder of a Convenience Claim will $800,000 receive cash from BII Distribution Trust equal to 45% of the claim amount in full satisfaction of the allowed Claim, subject to an aggregate cap of $350,000 to be distributed to Class 5 Holders. 45% Estimated Recovery 6 N/A No property will be distributed to Penalty Claims. 0% Estimated Recovery 7 N/A No property will be distributed to or retained by Burlington Companies on account of Intercompany Claims. 0% Estimated Recovery 8 N/A No property will be distributed to or retained by the holders of Equity Interests. 0% Estimated Recovery (Burlington Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-0900) COCHRAN CORP: Voluntary Chapter 11 Case Summary ----------------------------------------------- Debtor: Cochran Corporation 4311 Oak Lawn Avenue Suite 640 Dallas, Texas 75219 Bankruptcy Case No.: 03-37944 Chapter 11 Petition Date: August 4, 2003 Court: Northern District of Texas (Dallas) Judge: Barbara J. Houser Debtor's Counsel: Paul C. Allred, Esq. Paul C. Allred, P.C. 6440 N. Central Expwy., Suite 501 Dallas, TX 75206 Tel: 214-448-9496 Fax: 214-826-8270 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million COLLINS & AIKMAN: Weak Credit Measures Spur S&P to Cut Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Collins & Aikman Corp., to 'B+' from 'BB-'. At the same time, Standard & Poor's lowered the ratings on the company's senior secured bank credit facility to 'B+' from 'BB-' and on its senior unsecured debt and subordinated notes to 'B-' from 'B'. All ratings were removed from CreditWatch where they were placed on May 16, 2003. The outlook is negative. The downgrade reflects weakened credit protection measures for the Troy, Michigan-based auto-supply company as a result of lower- than-expected financial performance combined with difficult market conditions. "We do not see favorable prospects for significantly improved credit measures over the near term, given expected pricing pressures in the markets and the company's very high leverage," said Standard & Poor's credit analyst Nancy Messer. Collins & Aikman is a major producer of interior trim products, such as instrument panels, cockpits, carpet and floor mats, door and luggage trim, convertible tops, and plastic components, sold primarily to North American automotive original equipment manufacturers (OEMs) for installation on light vehicles. It is the No. 1 North American supplier of garnish trim and instrument panel components and of integrated cockpit modules, a market that is expected to show above-average growth during the next few years. It is the No. 3 supplier of door trim and floor consoles. The company will be challenged in the near-to-intermediate term by the uncertain outlook for automotive production volumes, continuing severe pricing pressure from manufacturers, and the long-term market share decline of the U.S. OEMs. Mitigating these risks are the favorable market positions held by Collins & Aikman's products, a large installed manufacturing base that gives the company sufficient scale to evoke significant operating efficiencies, and strong positions on many of the top-selling North American light vehicle platforms. Standard & Poor's expects results to improve gradually at underperforming facilities. Nevertheless, it appears that the company's credit measures will remain under pressure through 2003, given the extent of the challenges at troubled plants, production volumes that are expected to fall below the 2002 level, and pricing pressures. Standard & Poor's does not expect Collins & Aikman to undertake any significant acquisitions until its existing operations are performing to appropriate levels for the rating. COLUMBIA LABORATORIES: June 30 Net Capital Deficit Hits $13 Mil. ---------------------------------------------------------------- Columbia Laboratories (Amex: COB) announced financial results for the second quarter and six months ended June 30, 2003. For the second quarter of 2003, the Company reported a loss of $4,366,608, or $0.12 per share, on sales of $4,919,800, as compared to a net loss of $4,855,498, or $0.14 per share, on sales of $2,455,149 in the second quarter of 2002. Second quarter 2003 net revenues reflected a 36% increase in sales over first quarter 2003, as a result of increased sales of Prochieve(TM) 8% (progesterone gel), Prochieve(TM) 4% (progesterone gel), RepHresh(TM) Vaginal Gel and Advantage-S(R) Bioadhesive Contraceptive Gel in direct response to the Company's targeted promotion to OB/GYNs as well as increased sales of products to marketing partners. For the six-month period ended June 30, 2003, the net loss was $9,070,678 or $0.26 per share on sales of $8,525,346 as compared to a net loss of $8,236,441 or $0.25 per share on sales of 3,031,960 in the six months ended June 30, 2002. The 2002 second quarter and six-month results reflect one-time expenses of $3,610,511 resulting from a product recall in 2001 and a litigation settlement in 2002. Striant(TM) (testosterone buccal system) was approved by the FDA on June 19, 2003 and launched in early third quarter. Second quarter and six-month results do not reflect any sales of Striant, as initial shipments occurred in July, 2003. Columbia ended the second quarter with $6.9 million in cash and in July 2003, raised $26.3 million through the sale of 2,244,783 shares of its common stock to a group of institutional investors. At June 30, 2003, Columbia's balance sheet shows a total shareholders' equity deficit of about $13 million. "The second quarter of 2003 was a very exciting quarter for Columbia highlighted by the FDA approval of Striant(TM) on June 19, 2003," said Columbia Laboratories CEO, President and Chairman Fred Wilkinson. "Based on this approval, Columbia successfully completed the expansion of its existing sales force from 55 to 135 sales professionals and trained and deployed this group behind our Women's Healthcare product line in early July. Our expanded Columbia sales force will commence marketing Striant to endocrinologists, urologists and a select group of primary care physicians who are critical to the success of Striant in early September. Distribution, managed care and thought leader programs are already underway in support of this important product launch. We plan to leverage all the knowledge and commercial expertise behind the solid launches of our Women's Healthcare line for the launch of Striant." Columbia Laboratories, Inc. is a U.S.-based international pharmaceutical company dedicated to the development and commercialization of women's health care and endocrinology products, including those intended to treat male hypogonadism, infertility, dysmenorrhea, endometriosis and other hormonal deficiencies. Columbia is also developing a buccal delivery system for peptides. Columbia's products primarily utilize the company's patented Bioadhesive Delivery System (BDS) technology. For more information, visit http://www.columbialabs.com Columbia Laboratories is listed on AMEX Stock Market under the trading symbol "COB". CONSECO FINANCE: Settles Green Tree Class Action Litigations ------------------------------------------------------------ Conseco Finance Corp., and its debtor-affiliates ask Judge Doyle to approve a settlement agreement to resolve class actions against Conseco Finance Company that relate to its purchase of Green Tree Financial Corp. The Stipulation proposes to release all claims against the Debtors while not requiring any funds from the estate. The entire $12,450,000, constituting the proposed settlement fund, has already been funded by Conseco's non-debtor insurer, St. Paul Mercury Insurance Company. As the relevant claims period on the St. Paul Mercury directors and officers liability policy expired five years ago, the cash funded by St. Paul would not be available for any other claims against the Debtors. (1) The Stock Class Litigation Around December 2, 1997, entities who purchased Green Tree Financial common stock filed at least 25 actions. In June 1998, the Court consolidated the actions into the Stock Litigation and appointed Lead Plaintiffs and Lead Counsel. On August 28, 1998, the Stock Lead Plaintiffs filed a Consolidated Amended Complaint asserting claims against Conseco directors and officers and the Individual Stock Defendants. (2) The Options Class Litigation On December 3, 1997 the lawsuit entitled Stuart I. Friedman, et al. v. Green Tree Financial Corp., et al., Civil Action No. 97- 2894 (JRT/RLE), was filed. The Lawsuit asserted claims connected to the purchase or sale of options in Green Tree common stock. In June 1998, the Court appointed Options Lead Plaintiffs and Options Lead Counsel. In September 1998, the Options Lead Plaintiffs filed an Amended and Consolidated Complaint asserting claims against Conseco directors and officers and against the Individual Options Defendants. All Defendants moved to dismiss the Stock Complaint and the Options Complaint and the Court granted the motion to dismiss with prejudice. The Plaintiffs appealed to the United States Court of Appeals for the Eighth Circuit. The Court of Appeals reversed the dismissal and remanded the action to the district court for further proceedings. On April 2, 2002, Green Tree and the Individual Stock Defendants answered the Stock Complaint. Subsequently, the Court certified the Litigation as a class action. On April 8, 2002, Green Tree and the Individual Options Defendants moved to dismiss the Options Complaint. On July 29, 2002, the Court denied the motion to dismiss. Thereafter, the Stock Lead Plaintiffs, the Options Lead Plaintiffs and the Defendants commenced negotiations concerning a potential settlement of the Actions. In the Stipulation, the Parties agree that: (a) every Litigation Participant fully and forever releases Conseco and all Defendants; (b) each Plaintiff acknowledges that it may have sustained Released Claims which may give rise to additional damages in the future. Plaintiffs waive all rights to the releases of unknown claims; (c) each Plaintiff agrees not to sue any of the Released Persons; (d) St. Paul Mercury Insurance Company, on behalf of Green Tree and the Individual Defendants will fund the Settlement with $12,450,000; and (e) if the Settlement is terminated, the Settlement Fund will be returned to St. Paul Mercury with interest. James H.M. Sprayregen, Esq., at Kirkland & Ellis, tells Judge Doyle that the Stipulation, as funded by St. Paul Mercury, requires no payment by the Debtors. Litigating the dispute with the Stock Class and the Options Settlement Class would be time consuming and costly with an uncertain outcome. (Conseco Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONSECO INC: Wants Lease Decision Time Extended Until Dec. 14 ------------------------------------------------------------- James H.M. Sprayregen, Esq., at Kirkland & Ellis, tells Judge Doyle, that the Conseco Debtors continue to evaluate each of their numerous unexpired non-residential real property leases to determine which leases to assume or reject. Given the complexity of the Debtors' cases and considering the protracted nature of the recent confirmation hearings on the Holding Company Debtors' restructuring plan and the CFC Debtors' liquidating plan, Mr. Sprayregen maintains that the Debtors will need additional time to ensure that reasoned, fully informed decisions are made regarding the assumption or rejection of Unexpired Leases. The Debtors ask the Court to extend their lease decision deadline through and including the earlier of: -- the effective date of the CFC Debtors' liquidating plan, with respect to the CFC Debtors' leases; -- the effective date of the Holding Company Debtors' plan with respect to the Holding Company Debtors' leases; or -- December 14, 2003. The Debtors assure the Court that another extension will not adversely affect the landlords. The Debtors have made and anticipate continuing to make monthly rent payments attributable postpetition as required under Section 365(d)(3) of the Bankruptcy Code. If each of the Debtors' plans are confirmed, Mr. Sprayregen also notes that the extension period will be brief, minimizing any potential loss to the landlords. Judge Doyle will consider the Debtors' request at a hearing on August 20, 2003 at 11:00 a.m. in Chicago, Illinois. (Conseco Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., 609/392-0900) COVANTA ENERGY: Intends to Assume Lake County Service Agreement --------------------------------------------------------------- Vincent E. Lazar, Esq., at Jenner & Block, LLC, in Chicago, Illinois, tells the Court that in the mid-1980s, Lake County, a municipal entity under the laws of the State of Florida, found it increasingly difficult to provide adequate, environmentally sound solid waste disposal services at a reasonable cost. After studying this problem, Lake County determined that the combustion of solid waste to produce energy represented an environmentally sound solid-waste disposal solution. Because Lake County lacked the ability to design, construct and operate a waste-to-energy facility, it sought out Covanta Energy's expertise, and in 1988, the parties entered into a waste-to-energy service agreement. Under the Service Agreement, the Debtors were obligated to design, construct and then operate a waste-to-energy facility in Lake County. The Debtors are required to make substantial up- front performance, to be recouped by Lake County's continued performance of its obligations under the Service Agreement through the end of the 26-year term. In exchange, Lake County agreed to annually deliver a minimum amount of waste to the WTE facility and to pay Covanta Lake for services provided. In 1992, Lake County voted to continue with the Service Agreement. Mr. Lazar reports that between 1988 and 2000, Lake County accepted the Debtors' performance without protest or complaint. However, in the late 1990s and 2000, there was a change both in the political makeup of the Lake County Board and the waste disposal conditions in and around Lake County. With those changes, the members of the Lake County Board attempted to escape their unambiguous obligations under the waste-to-energy Service Agreement. As part of those efforts, Lake County filed a lawsuit in 2000 seeking a declaration that the Service Agreement is illegal, unconstitutional and against public policy. Lake County asserted that the Agreement illegally contracted away some of their governmental powers and that the Agreement is unconstitutional because it requires them to implement "flow control" ordinances. Mr. Lazar argues that Lake County's assertions concerning the validity of the Agreement must be rejected because: (1) Lake County was, and is, fully authorized under Florida law to enter into a proprietary contract with the Debtors to handle solid waste disposal through the operation of a waste-to-energy facility; (2) Even assuming, contrary to fact and for purposes of argument only, that Lake County's authority was invalid for some reason, it is now estopped from asserting that invalidity because over the course of the past 12 years, Lake County reaffirmed its obligations under the Service Agreement on at least five separate occasions. Most importantly, for more than 14 years, Lake County accepted the Debtors' performance of obligations that were heavily front-loaded in the Agreement; and (3) Lake County's argument based on supposed flow control violations lacks any merit. Lake County cannot challenge the constitutionality of its own actions and statutes because it has suffered no cognizable injury as the result of the flow control ordinance it enacted. Furthermore, the Debtors did not cause -- nor can it redress -- any supposed injury to Lake County. In fact, the Service Agreement makes clear that if the ordinance is invalidated, it is Lake County's responsibility to find proper means of ensuring that waste continues to be delivered to the waste-to-energy facility. Mr. Lazar points out that the Debtors' operation of the Lake County WTE facility generates a positive cash flow and is economically sound. Without the Service Agreement, the Debtors will be unable to economically operate the WTE facility that constitutes Covanta Lake's only business operation. And because Covanta Lake is one of the Debtors, assumption of the agreement is therefore critical to the Debtors' overall reorganization. Furthermore, Section 365(a) of the Bankruptcy Code authorizes the Debtors to assume the Service Agreement upon Court approval. Mr. Lazar informs the Court that the Debtors have not defaulted on any of its operational obligations under the Service Agreement. In fact, it is Lake County that is actually in arrears to the Debtors of more than $8,500,000. Mr. Lazar explains that even if there was a default on the Debtors' part, the Debtors would still be authorized to assume the Service Agreement under Section 365(b) as: (1) No cure is necessary because any default by the Debtors would only be technical in nature and would not implicate its performance. It is undisputed that the Debtors continue to perform its operational obligations and that those obligations do not include the payment of funds to Lake County; (2) There is no actual pecuniary loss suffered by any party because the Debtors' performance has continued under the Service Agreement; and (3) Lake County has adequate assurance of the Debtors' future performance under the Service Agreement because there has been no default in prior performance. Even during the Debtors' bankruptcy, no implication arises that future performance may not be possible. More importantly, assuming that Lake County lives up to its obligations under the Service Agreement, the Debtors' performance is self-sustaining; that is, the Debtors' operations generate a positive cash flow and are not in danger of future insolvency. In addition, because the Debtors are seeking to assume the Agreement effective on confirmation of a plan of reorganization, no administrative expense claim will arise in the event that they are unable to perform their obligations under the Agreement, or for some other reason the Agreement with Lake County is not assumed. Therefore, the Debtors ask the Court to: -- authorize them to assume the Service Agreement; and -- find no cure amount due under the Service Agreement. The Debtors also filed an adversary proceeding against Lake County implicating many of the issues raised in the Florida Litigation. Lake County Objects Thomas E. Pitts, Jr., Esq., at Sidley Austin Brown & Wood LLP, in New York, relates that in conversations between counsels to the parties, Covanta Lake indicated that it intends to resolve the issues raised in the Florida Litigation. Mr. Pitts reminds the Court that the Second Circuit provides that a motion to assume must be considered a summary proceeding intended to efficiently review the trustee's or debtor's decision to adhere to or reject a particular contract. It is not the time or place for prolonged discovery or a lengthy trial with disputed issues. Consequently, the present issues must be resolved in the context of the Florida Litigation or, if the Florida Litigation is not permitted to proceed, in the context of the Adversary Proceeding. If Covanta wants the issues resolved before the Court authorizes assumption, Mr. Pitts says, Covanta is free to wait for the conclusion of the Florida Litigation or the Adversary Proceeding. More so that even if the motion is granted immediately, assumption of the Service Agreement would not be effective until the confirmation of Covanta Lake's plan of reorganization. However, Mr. Pitts points out that failure to resolve the issues raised in the Florida Litigation is no impediment to assumption of the Service Agreement. Therefore, Lake County asks that if the Court decides to grant the Debtors' request, it will do so without determining any of the issues raised by the Florida Litigation or the Adversary Proceeding, including those relating to the validity of the Service Agreement or its enforceability against Lake County. (Covanta Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900) CROMPTON: Weak Earnings Prompt S&P to Cut Credit Rating to BB+ -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on specialty chemicals and polymer products producer Crompton Corp. out of investment grade to 'BB+' from 'BBB-' based on ongoing earnings weakness. At the same time, Standard & Poor's said that it removed the ratings from CreditWatch where they were placed on July 24, 2003. The current outlook is negative. Standard & Poor's said that the downgrade reflects the likely near-term continuation of the Middlebury, Connecticut-based company's recent weak earnings performance, which is affecting its already depressed financial profile. "The difficult business environment has reduced earnings predictability and stalled the expected recovery of credit quality measures, which remain substandard despite proceeds from the recent sale of the company's organosilicones business," said Standard & Poor's credit analyst Wesley E. Chinn. "Over the intermediate-term, profitability will need to rebound substantially before key credit quality measures are likely to strengthen to appropriate levels adjusted for the lower ratings." DEX MEDIA: S&P Assigns BB- Corp. Credit & $2B Facility Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' corporate credit rating to Dex Media West LLC. At the same time, Standard & Poor's assigned its 'BB-' rating to the company's planned $2.11 billion senior secured credit facilities. In addition, 'B' ratings were assigned to the planned $535 million senior unsecured notes due 2010 and to the $780 million senior subordinated notes due 2013 to be issued by Dex Media West and its subsidiary, co-issuer Dex Media West Finance Co. The outlook is stable for the Englewood, Colorado- headquartered company. Dex Media West is the fourth largest directory publisher in the United States. The company will have about $3.4 billion of pro forma debt outstanding. "The ratings reflect Dex Media West's substantial pro forma debt levels and a meaningful debt amortization schedule. In addition, the company faces mature industry conditions, revenue concentrations in its major metropolitan markets (top 10 account for 74% of revenues), and a relatively short operating history as a stand-alone entity," said Standard & Poor's credit analyst Donald Wong. Dex Media West's relatively stable revenues and EBITDA compared to other media companies temper these factors. Also, with modest capital expenditure requirements, free operating cash flow generation is healthy and fairly predictable. In August 2002, The Carlyle Group and Welsh, Carson, Anderson & Stowe, agreed to acquire Qwest Communications International Inc.'s yellow pages directory businesses for $7.05 billion, consisting of approximately $3 billion for the eastern region (Dex Media East) and $4 billion for the western region (Dex Media West), of which Dex Media East would provide $210 million. The sponsors created a holding company, Dex Media Inc., to acquire these directory businesses in two stages with two separate borrowers, Dex Media East and Dex Media West. In the first phase, Qwest's seven-state (Colorado, Iowa, Minnesota, Nebraska, New Mexico, North Dakota and South Dakota) eastern region (Dex Media East) was closed in November 2002. This second phase will consist of the seven-state acquisition of Arizona, Idaho, Montana, Oregon, Utah, Washington and Wyoming and is expected to close by the end of 2003. DILMUN CAPITAL: S&P Hatchets Mezzanine Notes' Rating to B --------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the mezzanine notes issued by Dilmun Capital II Ltd., a high-yield arbitrage CBO transaction managed by AIG Global Investments Corp., and removed it from CreditWatch with negative implications where it was placed April 24, 2003. At the same time, the 'AAA' rating on the senior class notes is affirmed, based on a financial guarantee insurance policy issued by MBIA Insurance Corp. AIG Global Investments Corp. assumed management of the deal March 25, 2003. The lowered rating on the mezzanine notes reflects factors that have negatively affected the credit enhancement available to support the notes since the last rating action Jan. 7, 2003. These factors include continuing par erosion of the collateral pool securing the rated notes and a negative migration in the credit quality of the performing assets in the pool. As of the most recently available monthly trustee report (June 16, 2003), the deal holds $17.55 million worth of securities that are in default, approximately $14.80 million of which defaulted since the last rating action. Standard & Poor's noted that as a result of asset defaults, the overcollateralization ratios for the transaction have suffered since the last rating action. According to the June 16, 2003 trustee report, the overcollateralization ratio for the mezzanine class notes was 93.82%, versus the minimum required ratio of 105.10%, and compared to a ratio of 102.51% at the time of the last rating action. The overcollateralization ratio for the senior class notes was 98.72%, versus the minimum required ratio of 109.60%, and compared to a ratio of 107.51% at the time of the last rating action. The credit quality of the collateral pool has also deteriorated since the last rating action. Currently, $21.25 million (or approximately 10%) of the performing assets in the collateral pool come from obligors whose ratings are on CreditWatch negative. Of the performing assets in the pool, $8.50 million (or approximately 4%) come from obligors with ratings in the 'CCC' range. Standard & Poor's has reviewed current cash flow runs generated for Dilmun Capital II Ltd. to determine the level of future defaults the rated class can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. After comparing the results of these cash flow runs with the projected default performance of the performing assets in the collateral pool, Standard & Poor's determined that the rating assigned to the mezzanine notes was no longer consistent with the credit enhancement available, resulting in the lowered rating. Standard & Poor's will continue to monitor the future performance of the transaction to ensure that the ratings assigned to the notes remain consistent with the credit enhancement available. RATING LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE Dilmun Capital II Ltd. Rating Balance (mil. $) Class To From Prior Current Mezz notes B BB-/Watch Neg 10.55 11.14 RATING AFFIRMED Dilmun Capital II Ltd. Balance (mil. $) Class Rating Prior Current Senior notes AAA 201.72 198.61 DOBSON COMMS: Exchange Offer for 9.50% Notes Expires Today ---------------------------------------------------------- Dobson Communications Corporation (Nasdaq:DCEL) and American Cellular Corporation jointly announced an extension of their previously announced exchange offers and solicitation of consents in connection with the proposed restructuring of American Cellular's indebtedness and equity ownership. On July 14, 2003, Dobson Communications and American Cellular initiated offers to exchange an aggregate of up to $50 million in cash, 45,054,800 shares of Dobson Communications Class A common stock and 700,000 shares of a new series of Dobson Communications convertible preferred stock having an aggregate liquidation preference of $125 million, convertible into a maximum of 14,285,714 shares of Dobson Communications Class A common stock, for $700 million outstanding principal amount of American Cellular's outstanding 9-1/2% Senior Subordinated Notes (CUSIP No. 025058AF5). The exchange offers and consent solicitation were originally scheduled to expire at 5:00 p.m. on August 8, 2003. As of that time, $675.1 million principal amount of Notes had been tendered. The expiration time for the exchange offers has been extended until 5:00 p.m. EDT, today, to permit additional tenders to be received in order to reach the announced 99.5% minimum tender condition, which condition must be satisfied or waived in order to consummate the exchange offers. The terms and conditions of the exchange offers and consent solicitation will continue in full force and effect through the new expiration date. Everett R. Dobson, chairman and chief executive officer of Dobson, stated: "It is a condition of the exchange offers that holders of at least 99.5% of the aggregate principal amount of American Cellular's outstanding Notes accept our exchange offers and tender their Notes. As of the close of business on August 8, 2003, the Notes tendered represented approximately 96.4% of the outstanding principal amount of the Notes, which we believe is sufficiently close to the minimum tender requirement to justify extending our exchange offers." American Cellular also announced that it received substantially more than the required vote for its prepackaged plan of reorganization by the August 8, 2003 voting deadline, which deadline is not being extended. As a result, if the minimum tender condition is not achieved, or waived, American Cellular and Dobson Communications will be able to pursue the restructuring through the prepackaged plan of reorganization. Neither the common and preferred shares to be issued by Dobson Communications, nor any equity securities that may be issued by American Cellular in the exchange offers will be registered under the Securities Act of 1933. Any shares of Dobson Communications common and preferred stock, and any equity securities of American Cellular that are issued in the exchange offers may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act of 1933. Dobson Communications (S&P, B- Corporate Credit Rating, Stable) is a leading provider of wireless phone services to rural and suburban markets in the United States. Headquartered in Oklahoma City, the rapidly growing Company owns or manages wireless operations in 16 states. For additional information on the Company and its operations, visit its Web site at http://www.dobson.net DOMAN INDUSTRIES: Tricap's Restructuring Proposal Lapses -------------------------------------------------------- Doman Industries Limited announced that the proposal recently received from the Tricap Restructuring Fund, a significant holder of the Company's secured and unsecured notes, outlining restructuring terms it was prepared to support, has lapsed. The Court in the proceedings under the Companies Creditors Arrangement Act has extended the protective order staying proceedings against the Company to September 22, 2003 in order to allow the Company an opportunity to examine other potential financing alternatives. 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. DOW CORNING: Professional Fees Top $200 Million Mark ---------------------------------------------------- Professional fees in Dow Corning Corporation's on-going chapter 11 proceeding have topped the $200 million mark. As of July 31, 2003, Dow Corning reports that it's shelled-out $201,616,692.66 to more than 100 lawyers, accountants, financial advisors and other restructuring professionals representing the company and its creditor constituencies. The million-dollar club members -- professional firms receiving more than $1,000,000 during Dow Corning's now eight-year chapter 11 proceeding -- are: $28.9 million -- Sheinfeld Maley & Kay 18.9 million -- PricewarterhouseCoopers 17.6 million -- Kramer Levin Naftalis & Frankel, LLP 14.7 million -- Davis, Polk & Wardwell 10.9 million -- Verner, Liipfert, Bernhard, McPherson & Hand 8.7 million -- The Feinberg Group 8.2 million -- Blackstone Group, L.P. 7.2 million -- Kirkland & Ellis 6.8 million -- Ernst & Young, LLP 6.8 million -- Covington & Burling 6.7 million -- Dresdner Kleinwort Wasserstein, Inc. 6.1 million -- Jones Day 5.0 million -- Kilpatrick Stockton LLP 5.0 million -- Honigman, Miller, Schwartz and Cohn 4.8 million -- Blizzard, McCarthy & Nabers, L.L.P. 3.6 million -- Burson-Marsteller 3.2 million -- Bavol Bush Graziano & Rice, P.A. 3.0 million -- Benesch, Friedlander, Coplan & Aranoff 2.9 million -- Francis E. McGovern 2.6 million -- Legla Analysis Systems, Inc. 2.1 million -- Neligan, Tarpley, Andrews & Foley, LLP 1.9 million -- Smith & Zuccarini, P.S. 1.9 million -- Williams Mullen Clark Taylor & Dobbins 1.9 million -- Anderson, Kill & Olick 1.8 million -- Dickstein Shapiro Morin & Oshinsky 1.8 million -- D.F. King 1.7 million -- Kaye Scholer LLP 1.6 million -- Navigant Consulting, Inc. 1.5 million -- The Altman Group 1.1 million -- Haynes & Boone, LLP Dow Corning filed for chapter 11 protection on May 15, 1995 (Bankr. E.D. Mich. Case No. 95-20512), to resolve silicone implant-related tort liability. Judge Spector confirmed Dow Corning's Plan of Reorganization in the bankruptcy court years ago. Judge Hood in the U.S. District Court for the Eastern District of Michigan now presides over Dow Corning's chapter 11 cases. Four appeals from the Dow Corning's bankruptcy cases remain to be resolved in the District Court or by the United States Court of Appeals for the Sixth Circuit. Dow Corning -- http://www.dowcorning.com-- develops, manufactures and markets diverse silicon-based products and services, and currently offers more than 7,000 products to more than 25,000 customers around the world. Dow Corning is a global leader in silicon-based materials with shares equally owned by The Dow Chemical Company and Corning Inc. More than half of Dow Corning's $2.7 billion in annual sales are outside the United States. DUNHILL RESOURCES: Involuntary Chapter 11 Case Summary ------------------------------------------------------ Alleged Debtor: Dunhill Resources Inc 730 N Post Oak Rd Suite 400 Houston, Texas 77024 Involuntary Petition Date: August 4, 2003 Case Number: 03-41264 Chapter: 11 Court: Southern District of Texas Judge: Karen K. Brown (Houston) Petitioners' Counsel: Counsel for Schlumberger & Baker Hughes Philip F. Snow, Jr, Esq. Ware, Snow, Fogel & Jackson, LLP 2929 Allen Pkwy 42nd Floor Houston, TX 77019 Tel: 713-659-6400 Counsel for Newpark Drilling Fluids Mary Frances Vonberg, Esq. Fransworth & Vonberg, LLP 333 N Sam Houston Pkwy Suite 300 Houston, TX 77019 Tel: 713-659-6400 Petitioners: Schlumberger Technology Corporation 1325 S Dairy Ashford Houston, TX 77077 Baker Hughes Oilfield Operations Inc 3900 Essex Lane Suite 1200 Houston, TX 77027 Newpark Drilling Fluids LLP 333 N Sam Houston Pkwy Suite 300 Houston, TX 77060 Amount of Claim: $2,257,181 DYNEGY: S&P Assigns B- Rating to New Senior Secured Notes -------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' rating to Dynegy Holdings Inc.'s second priority senior secured notes. The notes were issued in three tranches: a $225 million floating rate due 2008, $525 million at 9.875% due 2010, and $700 million at 10.125% due 2013. These notes have a second priority lien on substantially the same collateral package as Dynegy Holdings' credit facility. Also, Standard & Poor's assigned its 'CCC+' rating to Dynegy Inc.'s $175 million 4.75% convertible subordinated debentures due 2023. Furthermore, Standard & Poor's raised its bank loan rating on Dynegy Holdings' $1.3 billion credit facility and term loan B to 'BB-' from 'B+'. The ratings on the second priority debt and the senior secured bank loan reflect Standard & Poor's determination of the quality of the collateral package pledged to this debt. Standard & Poor's determined that not only did the collateral package provide sufficient coverage for the first priority debt, but did provide some coverage to the second priority obligations. This gives the second priority debt an advantage over the senior unsecured debt and therefore is rated above the senior unsecured level. The rating on the subordinated convertible issue reflects a guarantee from Dynegy Holdings that is pari passu to its senior unsecured debt. The proceeds of this transaction will pay off the $200 million term loan A and a portion of the $360 million term loan B, which were part of the credit facility transaction in April 2003; repay the $696 million of the Black Thunder secured facility, and $583 million (as of July 24, 2003) of the $650 million in senior unsecured bonds maturing in 2005 and 2006. Also, Dynegy restructured its $1.5 billion series B preferred security held by ChevronTexaco Corp. due in November 2003 in exchange for $225 million in cash, $400 million in a new preferred issue, and $225 million in subordinated debt, both issued by Dynegy Inc. The bank facility and the second priority debt are guaranteed by Dynegy Inc. and substantially all of Dynegy Inc.'s direct and indirect subsidiaries, excluding Illinois Power Co. and Dynegy Global Communications and their respective subsidiaries, most foreign subsidiaries, and subsidiaries that are not able to be guarantors due to existing contractual or legal restrictions. Moreover, the bank facilities are collateralized by substantially all of Dynegy Holdings' available assets, to the extent permitted by existing indentures at Dynegy Holdings. With the elimination of the Black Thunder senior secured facility, the associated collateral will fold into the credit facility security pledge. Standard & Poor's values the collateral pool to be about $2.4 billion and is based on Dynegy's midstream and generation assets. The analysis assessed the value of Dynegy's midstream assets based on comparable recent asset sales and applying a conservative EBITDA multiple. Also, the valuation of the generation assets used more conservative price and inflation assumptions when compared with valuations based on more volatile NYMEX prices. The assumptions are consistent with those used in Standard & Poor's credit assessment of merchant energy generators. Moreover, the elimination of term loan A, expected to occur when the second priority debt offering closes, which shared a first priority lien on the assets enhances the collateral coverage. Standard & Poor's now estimates collateral coverage to be about 1.6x first priority debt, meaning about $2.4 billion in collateral covers roughly $1.5 billion in debt. This debt includes the $1.1 billion in bank credit, about $200 million in term loan B, and $232 million associated with the resolution of Project Alpha. Standard & Poor's views these transactions as an enhancement to credit quality because it provides clarity regarding the $1.5 billion convertible preferred security due in November 2003. Furthermore, because the tender offer for the 2005-2006 bonds was approximately 90% successful, near-term refinancing risk has been reduced. These transactions mitigate some concern regarding Dynegy's financial flexibility and near-term liquidity position, which is about $1.6 billion in cash and availability under its credit facility, but do not facilitate a change in overall credit quality. Still, Standard & Poor's views Dynegy's ability to generate stable, sustainable cash flow as a key concern for credit quality. Furthermore, the firm will be challenged to generate a sufficient level of cash flow to repair its leveraged balance sheet. EAGLE-PICHER: Completes New $275 Million Senior Credit Facility --------------------------------------------------------------- EaglePicher Incorporated, a wholly-owned subsidiary of EaglePicher Holdings, Inc., has completed a new $275 million senior secured credit facility and sold $250 million of 9.75% Senior Notes due 2013 at 99.2% of par to yield 9-7/8%. The proceeds of these transactions have been used to refinance EaglePicher's existing senior credit facility and purchase $209.5 million, or approximately 95%, of its 9-3/8% Senior Subordinated Notes due 2008 pursuant to a previously announced cash tender offer, which expired at 11:59 pm, New York City time, on August 6. The new senior secured credit facility comprises a $150 million term loan that matures in 2009 and a $125 million revolving credit facility that terminates in 2008, in each case subject to termination in mid-2007 if the 11.75% Preferred Stock of EaglePicher Holdings is then outstanding. EaglePicher also announced the extension of its accounts receivable asset securitization facility to the earlier of January 2008 or 90 days prior to termination of the senior secured credit facility. "This refinancing provides EaglePicher with a solid financial foundation that will allow us to pursue numerous strategic growth opportunities," commented John H. Weber, President and Chief Executive Officer of EaglePicher. "EaglePicher's experience and intellectual assets, coupled with the refinancing, will allow us to accelerate the delivery of superior customer solutions through the application of innovation." EaglePicher Incorporated, founded in 1843 and headquartered in Phoenix, Arizona, is a diversified manufacturer and marketer of innovative, advanced technology and industrial products and services for space, defense, environmental, automotive, medical, filtration, pharmaceutical, nuclear power, semiconductor and commercial applications worldwide. The company has 4,000 employees and operates more than 30 plants in the United States, Canada, Mexico, the U.K. and Germany. Additional information on the company is available on the Internet at http://www.eaglepicher.com * * * As reported in Troubled Company Reporter's July 24, 2003 edition, Standard & Poor's Ratings Services assigned its 'B+' senior secured bank loan rating to the $275 million senior secured credit facilities of Eagle-Picher Inc., formerly Eagle-Picher Industries Inc. Standard & Poor's also assigned its 'B-' senior unsecured debt ratings to the company's $220 million senior unsecured notes due 2013. Proceeds will be used to repay existing debt, refinance the company's existing $220 million subordinated notes due 2008, and for working capital and general corporate purposes. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating on the company and its 'CCC+' preferred stock ratings on Eagle-Picher Holdings Inc. The outlook remains stable. ELCOM INT'L: June 30 Balance Sheet Upside-Down by $1 Million ------------------------------------------------------------ Elcom International, Inc., announced operating results for its second quarter ended June 30, 2003. As a result of the sale of certain assets and the assignment of the Company's United States information technology products and services business in March 2002, the operating and balance sheet information and financial summary table contained herein has been prepared with all historical results of the IT Products and services business included in discontinued operations. As a result, net sales, gross profit, operating profit and net loss from continuing operations reflect the Company's ongoing U.S. and U.K. ePurchasing and eMarketplace technology licensing and consulting businesses. Net sales from continuing operations for the quarter ended June 30, 2003, which represented ePurchasing and eMarketplace technology license and related services fees, were $531,000 compared to $1,334,000 in the comparable quarter of 2002, a decrease of $803,000 or 60%. Professional Services fees in the U.S. and U.K. decreased by $323,000, while License and associated fees decreased by $480,000. These reductions can be attributed to the Company's revenue recognition of license fees from the Scottish Executive contract for the quarter ended June 30, 2003 compared to the second quarter of 2002 ($220,000 and $635,000, respectively), and to slower than anticipated installations of PECOS by Scottish government agencies. Gross profit for the quarter ended June 30, 2003 decreased to $396,000 from $907,000 in the comparable 2002 quarterly period, a decrease of $511,000 or 57%, as a result of lower revenues. The Company reported an operating loss from continuing operations of $2,129,000 for the quarter ended June 30, 2003 compared to $2,565,0000 reported in the comparable quarter of 2002, a decrease of $436,000 or 17%. This smaller operating loss from continuing operations in the second quarter of 2003 compared to the 2002 quarter was primarily due to reductions in selling, general and administrative expenses. A significant portion of the decline in SG&A resulted from the Company's on-going cost containment measures designed to realign its infrastructure costs to reflect lower than anticipated license revenue. Reductions in personnel resulted in a decrease in compensation expense in the second quarter of 2003 of approximately $980,000 compared to the second quarter of 2002. The Company recorded a net loss from continuing operations for the second quarter of 2003 of $2,186,000 compared to a net loss from continuing operations of $2,573,000 in the second quarter of 2002, representing a decrease of $387,000, or 15%. The Company reported net income from discontinued operations of $423,000 in the second quarter of 2003 compared to a net loss from discontinued operations in the 2002 quarter of $86,000. Included in discontinued operations for the second quarter of 2003 is a $345,000 tax refund from the U.K. related to the sale of the Company's U.K. services operations in 1999 and a bad debt recovery of approximately $110,000. The 2003 quarterly net loss from total operations (including both discontinued and continuing operations) was $1,763,000 compared to $2,427,000 in the 2002 quarter. Net sales from continuing operations for the six months ended June 30, 2003, which represented ePurchasing and eMarketplace technology license and related services fees, were $1,200,000 compared to $1,933,000 in the comparable six months of 2002, a decrease of $733,000 or 38%. Professional Services fees in the U.S. and U.K. decreased by $127,000, while License and associated fees decreased by $606,000. These reductions can be attributed to the Company's revenue recognition of license fees from the Scottish Executive contract for the six months ended June 30, 2003 compared to the six months ended June 30, 2002 ($340,000 and $857,000, respectively), and to slower than anticipated installations of PECOS by the Scottish Government's agencies during the first six months of 2003. Gross profit for the six months ended June 30, 2003 decreased to $871,000 from $1,413,000 in the comparable 2002 quarterly period, a decrease of $542,000 or 38% as a result of lower revenues. The Company reported an operating loss prior to asset impairment charges from continuing operations of $4,063,000 for the six months ending June 30, 2003 compared to $6,395,0000 reported in the comparable six month period of 2002, a decrease of $2,332,000 or 36%. This smaller operating loss from continuing operations in the second six months of 2003 compared to the 2002 was due primarily to reductions in selling, general and administrative expense. The Company recorded a net loss from continuing operations for the first six months of 2003 of $3,631,000 compared to a net loss from continuing operations of $6,747,000 in the same period of 2002, representing a decrease of $3,116,000, or 46%. The Company recorded a tax benefit of $492,000 from the reversal of a tax accrual, as payment was deemed no longer probable. The Company reported net income from discontinued operations of $307,000 in the six month period ended June 30, 2003 compared to a net loss from discontinued operations in the same period of 2002 of $1,507,000. Included in discontinued operations in 2003 is a $345,000 tax refund from the U.K. related to the sale of the Company's U.K. services business in 1999 and a bad debt recovery of approximately $110,000. These were offset somewhat by expenses for facilities vacated by the Company. The 2003 year to date net loss from total operations (including both discontinued and continuing operations) was $3,324,000 compared to $7,342,000 in the 2002 six month period. Basic net loss from continuing operations per share for the six month period of 2003 were ($0.12), compared with a basic and fully diluted net loss from continuing operations per share of ($0.22) in the first half of 2002. Cash and cash equivalents as of June 30, 2003 were $0.6 million. Although the Company recorded a net loss from total operations of $3.3 million for the six month period ended June 30, 2003, cash and cash equivalents decreased by $1.7 million between December 31, 2002 and June 30, 2003. The principal differences between the net loss and the decrease in cash and cash equivalents during the period included the increase in long term liabilities via the Company's issuance of convertible debentures in the amount of $0.9 million and the advance of a license fee (treated as a loan) of $0.8 million, and the recording of non-cash expenses of $0.8 million. Other items contributing to the use of cash were a capital expenditure of $0.2 million on software, a reduction in working capital of $0.5 million and payments on capital leases of $0.2 million. The Company continues to implement cost containment programs and has reduced the Company's cash expenditures compared to previous periods. The Company believes that it will continue to incur losses throughout 2003. On April 3, 2003, the Company signed an agreement with Cap Gemini Ernst & Young UK Plc ("CGEY") whereby CGEY would advance $980,000 in license fees to the Company. The Company believes this license fee(s) will become due during 2003 via its contract with CGEY for the Scottish Executive. Each payment was contingent upon the Company providing assistance to CGEY to set up a duplicate back-up system in Toronto, Canada in order for CGEY to be able to provide Disaster Recovery and Business Continuity Services for Elcom's clients and the Scottish Executive. These Services would be made available to Elcom's clients for a fee and would provide a back-up system to allow CGEY to provide Business Continuity Services (to host, operate and manage), Elcom's ePurchasing system if Elcom was unable to do so for any reason. As of June 30, 2003, the Company had received $795,000 from CGEY with the remaining $203,000 received on July 17, 2003. Therefore, as of this date, the Company has received all the funds as per in the agreement. As previously reported, on April 23, 2003, the Company closed a private placement of ten-year 10% Senior Convertible Debentures generating net cash proceeds of approximately $700,000 to the Company. Both outside institutional and accredited investors participated in the Offering, with the majority of the investment made by three of Elcom's senior executive team and one of its directors. Robert J. Crowell, the Company's Chairman and CEO, stated, "The Company has very strong and specific indications that activity will be increasing in Scottish Executive agencies in the near future. In addition, the Company has two specific eProcurement deals in the final stages and also believes one or two potentially large government contracts, one of which is currently in the request for proposal stage, will be responded to in the next two quarters. In addition, our existing clients are looking forward to the official release of PECOS Version 9.0, which is imminent. Version 9.0's enhanced capabilities will further enhance Elcom's ability to compete in the ePurchasing and eMarketplace arenas." Mr. Crowell added further, "Because activity at the Scottish Executive has been slower than expected to date, the Company continues to minimize its expenses and is actively seeking a strategic investor partner to add to the syndicate of existing investors in the previously announced round of convertible debenture financing. I believe very strongly that with specific increases in activity in the Scottish Executive, combined with the activation, after over eight months of effort, of an eMarketplace for a computer products and services company, Elcom will be able to raise the necessary funds to continue to support its operations until it achieves positive cash flow in 2004." At June 30, 2003, the Company's balance sheet shows a working capital deficit of about $2 million, and a total shareholders' equity deficit of about $1 million. Elcom International, Inc. (Nasdaq: ELCO), operates two wholly- owned subsidiaries: elcom, inc., a leading international provider of remotely-hosted eProcurement and Private eMarketplace solutions and Elcom Services Group, Inc., which is managing the transition of the recent sale of certain of its assets and customer base. elcom, inc.'s innovative remotely- hosted technology establishes the next standard of value and enables enterprises of all sizes to realize the many benefits of eProcurement without the burden of significant infrastructure investment and ongoing content and system management. PECOS Internet Procurement Manager, elcom, inc.'s remotely-hosted eProcurement and eMarketplace enabling platform was the first "live" remotely-hosted eProcurement system in the world. FLEMING: SUPERVALU Inks LOI to Acquire Fleming Assets from C&S -------------------------------------------------------------- SUPERVALU INC. (NYSE: SVU) has signed a letter of intent with C&S Wholesale Grocers, Inc., for certain assets that C&S may purchase from Fleming Companies. Final approval of C&S's purchase of the Fleming assets is anticipated to occur in the U. S. Bankruptcy Court within the next few weeks, and would enable SUPERVALU's purchase of the Fleming operations located in La Crosse and Milwaukee, Wisc., and Massillon, Ohio, and the assets associated with those locations. SUPERVALU also would assume ownership of the retail trade names Festival Foods and Sentry Foods, as well as licensing rights to the Jubilee Foods name in certain markets. Under the agreement, SUPERVALU would also acquire ownership of the Crestwood Bakery trademark and its related assets. The transaction is subject to regulatory approval. "We look forward to completing this unique opportunity to leverage our distribution network in the Midwest," said Jeff Noddle, SUPERVALU's chairman and CEO. "We are excited to form new and valuable partnerships with retailers in this area, and remain dedicated to supporting independent grocers and their important position in the marketplace." SUPERVALU is one of the largest companies in the United States grocery channel. With annual revenues approaching $20 billion, SUPERVALU holds leading market share positions with its 1,436 retail grocery locations, including licensed Save-A-Lot locations. Through its Save-A-Lot format, the company holds the number one market position in the extreme value grocery retail sector. In addition, SUPERVALU's highly efficient logistics operation provides the nearly $700 billion grocery channel with state of the art logistics support services. SUPERVALU currently has approximately 57,400 employees. SUPERVALU's retail store network consists of 1,436 stores in 40 states, including 1,170 Save-A-Lot extreme value stores - 794 licensed stores and 376 corporate owned stores, including 58 combination stores and 97 Deals stores; 266 regional banners including Cub Foods, Shop 'n Save, Shoppers Food Warehouse, bigg's, Farm Fresh, Scott's Foods and Hornbacher's stores. SUPERVALU serves as primary supplier to approximately 2,500 stores, 29 Cub Foods franchised locations, and SUPERVALU's own regional banner store network of 266 stores, while serving as secondary supplier to approximately 1,400 stores. FLEMING COS.: Keen Realty Selling Fleming Stores at 61 Locations ---------------------------------------------------------------- Keen Realty, LLC is marketing 61 locations for Fleming Companies, Inc., a leading supplier of consumer package goods to independent supermarkets, convenience-oriented retailers and other retail formats around the country. Available to users and investors are fourteen fee-owned locations consisting of warehouse, retail and vacant land, and thirteen Leaseholds consisting of retail and warehouse that will be auctioned October 14, 2003 with bids due by October 9, 2003. In addition, thirty-four leaseholds consisting of retail and warehouse are also available but not part of the auction. Offers on these leaseholds are being considered now. Keen Realty, LLC provides real estate consulting, valuation, disposition and restructuring services in bankruptcy and workout situations. "These locations represent an excellent opportunity for retailers to expand their business and for real estate investors to grow their portfolios" said Mike Matlat, Keen Realty's Vice President. "What we have here is some prime, prime real estate" Matlat added. A complete list of locations is available upon request. Founded in 1982, Keen Realty has assisted clients with over 220 million square feet of property and repositioned nearly 12,000 retail stores across the country. Other current and recent clients of Keen include Arthur Andersen, Big V Holdings, Cooker Restaurants, Country Home Bakers, Cumberland Farms, Eddie Bauer, Premcor, Spiegel, and Warnaco. For more information regarding these locations, please contact Keen Realty, LLC, 60 Cutter Mill Road, Suite 407, Great Neck, NY 11021, Telephone: 516-482-2700 x230, Fax: 516-482-5764, e-mail: mmatlat@keenconsultants.com or eleighton@keenconsultants.com FLEMING COMPANIES: Court Approves Termination Pact with Glass ------------------------------------------------------------- Fleming Companies, Inc., and its debtor-affiliates obtained the Court's approval for the interim employment of Glass & Associates, Inc., as restructuring advisor. The Debtors also secured the Court's approval of its Termination Agreement with Glass and to pay outstanding compensation and reimbursement obligations to Glass. The Debtors and Glass' Termination Agreement, in part, provides that: (1) Glass' services under the Management Services Agreement will terminate effective April 17, 2003; (2) The Debtors will file an application to approve Glass' employment nunc pro tunc to April 1, 2003 under the terms of the Management Services Agreement; (3) Glass will file a final application for compensation for services rendered and reimbursement of expenses incurred under the Management Services Agreement between April 2, 2003 and April 17, 2003 amounting to $450,000. The full amount compensation and reimbursement contemplated by the Termination Agreement will be paid from the $500,000 retainer that Glass held since the Petition Date pursuant to the Management Services Agreement. The balance of the retainer will be returned to the Debtors; and (4) Glass and the Debtors mutually release each other from any claims under the Management Services Agreement, with limited exceptions related to, among other things, the confidentially of information and use of work product. (Fleming Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) GAP INC: Reports Improved Net Sales Results for July 2003 --------------------------------------------------------- Gap Inc. (NYSE: GPS) reported net sales of $1.1 billion for the four-week period ended August 2, 2003, which represents a 12 percent increase compared with net sales of $956 million for the same period ended August 3, 2002. The company's comparable store sales for July 2003 increased 9 percent, compared with an 8 percent decrease in July 2002. Comparable store sales by division for July 2003 were as follows: -- Gap U.S.: positive 13 percent versus negative 19 percent last year -- Gap International: positive 8 percent versus negative 12 percent last year -- Banana Republic: positive 5 percent versus negative 6 percent last year -- Old Navy: positive 9 percent versus positive 6 percent last year "Customers responded well to our July summer promotional and clearance strategies and to transitional fall merchandise," said Sabrina Simmons, senior vice president, Treasury and Investor Relations. "Gap and Old Navy showed continued momentum, and we were excited to end the month with tremendous media attention surrounding the launch of Gap's fall corduroy product assortment supported by our Madonna and Missy Elliott marketing campaign." Second Quarter Sales Results and Earnings Guidance For the thirteen weeks ended August 2, 2003, net sales of $3.7 billion represent an increase of 13 percent compared with net sales of $3.3 billion for the same period ended August 3, 2002. The company's second quarter comparable store sales increased 10 percent compared with a decrease of 7 percent in the second quarter of the prior year. The company also announced that it expects to report on August 21 second quarter earnings per share of $0.20 to $0.22, compared with reported earnings of $0.06 per share for the second quarter of 2002. Comparable store sales by division for the second quarter of 2003 were as follows: -- Gap U.S.: positive 9 percent versus negative 13 percent last year -- Gap International: positive 13 percent versus negative 12 percent last year -- Banana Republic: positive 5 percent versus negative 4 percent last year -- Old Navy: positive 11 percent versus negative 1 percent last year Year-to-date sales of $7.0 billion for the 26 weeks ended August 2, 2003 represent an increase of 14 percent over sales of $6.2 billion for the same period ended August 3, 2002. The company's year-to-date comparable store sales increased 11 percent compared to a decrease of 12 percent in the prior year. As of August 2, 2003, Gap Inc. operated 4,230 store concepts compared with 4,261 store concepts last year. The number of stores by location totaled 3,095 compared with 3,139 stores by location last year. Gap Inc. will release its second quarter earnings via press release on August 21, 2003, at 1:30 p.m. Pacific Time. In addition, the company will host a summary of Gap Inc.'s second quarter results in a live conference call and webcast at approximately 2:00 p.m. Pacific Time. The conference call can be accessed by calling 800-374-0168 and international callers may dial 706-634-0994. The webcast can be accessed at gapinc.com. As reported in Troubled Company Reporter's July 30, 2003 edition, Standard & Poor's Ratings Services assigned its 'BBB' rating to apparel retailer The Gap Inc.'s $750 million senior secured bank loan that matures on June 24, 2006. The 'BB+' corporate credit and senior unsecured ratings on The Gap were also affirmed. The outlook is negative. The San Francisco, California-based company had about $2.9 billion of funded debt as of May 3, 2003. The revolving credit facility is rated two notches higher than the corporate credit rating based on a very strong likelihood of full recovery of principal in the event of default or bankruptcy. This rating is supported by collateral coverage of more than 2.0x at the company's seasonally low inventory period. The loan is secured by a first priority perfected security interest in all U.S. inventory of The Gap and the stock of its domestic subsidiaries. The credit agreement requires as a condition to new borrowings that there be no material adverse effect. Financial covenants include a maximum leverage ratio and a minimum fixed coverage ratio. Covenants also limit capital spending, prohibit increases in the common dividend and share repurchases, and limit debt repurchase. GMAC COMMERCIAL: Fitch Drops Class N Notes Rating to D ------------------------------------------------------ Fitch Ratings downgrades GMAC Commercial Mortgage Securities, Inc.'s mortgage pass-through certificates, series 2000-C2 as follows: -- $4.1 million class N to 'D' from 'C' In addition, Fitch affirms the following certificates: -- $96.8 million class A-1 'AAA'; -- $485.5 million class A-2 'AAA'; -- Interest-only class X 'AAA'; -- $31 million class B 'AA'; -- $28 million class C 'A'; -- $10.6 million class D 'A-'; -- $19.3 million class E 'BBB'; -- $9.7 million class F 'BBB-'; -- $4.8 million class M 'C'. Fitch does not rate classes G, H, J, K, L, and O certificates. The downgrade reflects losses incurred to the pool from the liquidation of two of the stand-alone Kmart properties. The certificates are collateralized by 127 mortgage loans and an $88.1 million Freddie Mac guaranteed multifamily gold mortgage participation certificate secured by two loans (12%) on five multifamily properties, considered to be 'AAA' in Fitch's analysis. The 2002 weighted average debt service coverage ratio, for 81% of the pool that reported is 1.44 times, compared to 1.36x at issuance for the same loans. Currently, five loans (3.5%) are in special servicing, of which the largest is secured by a hotel property in Hanover, MD (1.4%). The loan initially transferred to special servicing due to non- payment of January 2003 debt service, but has since been brought current. The next largest specially serviced loan (1.2%) is secured by a retail property in Meridian, CT and is 90 days delinquent. One of the anchor tenants vacated the property. The special servicer has commenced foreclosure on the property. Fitch will continue to monitor this transaction, as surveillance is ongoing. GRAPHIC PACKAGING: Completes Merger Transaction with Riverwood -------------------------------------------------------------- Graphic Packaging International Corporation closed its proposed merge transaction with Riverwood Holdings, Inc., to form a global paperboard packaging company with estimated annual sales of $2.2 billion. The new company will be known as Graphic Packaging Corporation (NYSE: GPK) and will be headquartered in Marietta, Georgia. Approximately 79% of Graphic Packaging's common shares and 100% of its preferred shares were voted for the merger during a special shareholders' meeting held Thursday last week at the Company's headquarters, exceeding the 66-2/3% required of each class to approve the transaction. The proposed merger was originally announced on March 26, 2003. Mr. Coors will be executive chairman of the new company. Stephen M. Humphrey, currently president and chief executive officer of Riverwood, will be president and chief executive officer, and David W. Scheible, currently chief operating officer of Graphic Packaging, will be executive vice president of commercial operations for the new company. Graphic Packaging International Corporation (NYSE: GPK) (S&P, B+ Corporate Credit Rating), with 2002 revenues of approximately $1.1 billion, is America's leading folding carton packaging supplier to the food, beverage and other consumable products markets. The company's customers include some of the most instantly recognized companies in the world. Graphic Packaging operates one large recycled paperboard mill and 19 modern converting facilities as well as three research and design centers located throughout the nation. The company holds over 150 U.S. patents for its printing and package converting processes. Additional information about the company can be found at http://www.graphicpkg.com GRAPHIC PACKAGING: S&P Assigns Ratings After Merger Completion -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to paperboard and folding carton manufacturer Graphic Packaging International Inc. Graphic Packaging, based in Marietta, Georgia, was formed through the merger of Riverwood International Corp. and Graphic Packaging Corp. At the same time, Standard & Poor's assigned its 'B-' senior unsecured debt rating to Graphic Packaging's $425 million 8.5% senior unsecured notes due 2011 and its 'B-' subordinated debt rating to Graphic Packaging's $425 million 9.5% subordinated notes due 2013. Standard & Poor's also assigned its 'B+' bank loan rating to the company's $1.6 billion senior secured credit facility. Proceeds from the notes and the new credit facility were used to repay debt outstanding of about $1.5 billion at RVW and about $500 million at GPC. Standard & Poor's said that at the same time, it removed its ratings on RVW and GPC from CreditWatch and then withdrew them. Total debt at GPI following the merger is about $2.3 billion. "Standard & Poor's believes the merger is a good strategic combination that should provide forward integration opportunities, a broader product line, the potential to accelerate revenue growth for new consumer packaging applications, and a reduction in customer concentration," said Standard & Poor's credit analyst Pamela Rice. "In addition, the potential realization of $52 million of synergies identified by the companies, the expected tax benefit of a significant portion of Riverwood's $1.2 billion of net operating losses, and lower interest expense following the debt refinancing should boost free cash flow generation above the current capabilities of the individual companies." HEALTHSOUTH CORP: Selling Doctors' Hospital to Baptist Health ------------------------------------------------------------- Baptist Health South Florida and HealthSouth Corporation (OTC Pink Sheets: HLSH) have reached a definitive agreement for Baptist Health to purchase HealthSouth Doctors' Hospital, a 281- bed acute care hospital located in Coral Gables, Fla. The transaction is subject to normal closing conditions, including satisfaction of requirements under the Hart-Scott Rodino Antitrust Improvements Act and applicable state laws, and is currently expected to close within 60 days. "We are delighted to add Doctors' Hospital to the group of outstanding hospitals and healthcare facilities operated by Baptist Health," said Brian E. Keeley, president and chief executive of Baptist Health South Florida. Baptist Health, headquartered in Coral Gables, is a faith-based, not-for- profit organization that includes Baptist Hospital, Baptist Children's Hospital, South Miami Hospital, Homestead Hospital, Mariners Hospital in Tavernier and Baptist Outpatient Services. Joel C. Gordon, Interim Chairman of HealthSouth, said, "Doctors' Hospital has earned an excellent reputation in South Florida throughout the years, built on outstanding patient care and dedication to the community. We are pleased that Doctors' Hospital will become an important part of Baptist's well-regarded integrated healthcare delivery system in South Florida. For HealthSouth, we believe that this decision will strengthen our financial position, helping to ensure the long-term viability and financial success of the company as we move forward with our restructuring." Included in the transaction are the hospital facility, parking garage, home health agency and physician office building. Under the agreement, Baptist Health is purchasing the assets of Doctors' Hospital, but not assuming its liabilities. "Our objective is to extend our not-for-profit mission to Coral Gables," Keeley said. He said that Baptist Health intends to maintain and expand the services offered at Doctors Hospital. "Our track record speaks for itself," he said. He noted that Baptist Health has improved facilities and services in its earlier acquisitions of South Miami, Homestead and Mariners Hospitals. Baptist Health has just embarked on a $130 million expansion and renovation of South Miami Hospital; it built a new hospital and outpatient center for Mariners Hospital; and will begin construction soon on a hospital to replace Homestead Hospital. Keeley said Baptist Health will finance the Doctors' Hospital transaction with a combination of cash and debt. HealthSouth, which is currently in default under its credit facility with JPMorgan Chase Bank and Wachovia Securities, is the nation's largest provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, with nearly 1,700 locations in all 50 states and abroad. Baptist Health South Florida is the largest not-for-profit healthcare organization in the region. It includes Baptist Hospital, Baptist Children's Hospital, South Miami Hospital, Homestead Hospital, Mariners Hospital, Miami Cardiac & Vascular Institute and Baptist Outpatient Services. Baptist Health has more than 9,100 employees and about 1,600 physicians on the medical staff. For more information on the Company, visit http://www.baptisthealth.net HOUSTON EXPLORATION: Elects Stephen McKessy to Board of Directors ----------------------------------------------------------------- The Houston Exploration Company (NYSE: THX) has elected Stephen W. McKessy to its board of directors, effective July 29, 2003. The addition of Mr. McKessy expands the size of the company's board of directors to 11 members. Mr. McKessy is a retired partner of PricewaterhouseCoopers. During his 37 years with the firm he held various management positions, including acting as vice chairman and serving as a member of the firm's management committee. He was also the regional managing partner for the firm's businesses in the New York area. A graduate of St. John's University in New York, Mr. McKessy currently serves on the advisory board for the college of business administration. In addition, he is a board member of KeySpan Energy Corporation. "Steve is a welcomed addition to the Houston Exploration board and is committed to the company's growth," said Robert B. Catell, chairman of the board for The Houston Exploration Company. "His understanding of accounting and financial reporting issues, combined with his general business acumen and leadership strengths will provide great value to the company." The Houston Exploration Company is an independent natural gas and oil company engaged in the development, exploitation, exploration and acquisition of natural gas and crude oil properties. The company's operations are focused in South Texas, the shallow waters of the Gulf of Mexico and the Arkoma Basin with additional production in East Texas, South Louisiana and West Virginia. For more information, visit the company's Web site at http://www.houstonexploration.com As reported in Troubled Company Reporter's June 6, 2003 edition, Standard & Poor's Ratings Services raised its long-term corporate credit ratings on The Houston Exploration Co., to 'BB' from 'BB-'. At the same time, Standard & Poor's assigned its 'B+' rating to Houston Exploration's proposed $150 million senior subordinated notes offering. The proceeds will be used to redeem the company's existing subordinated notes and repay short-term debt. The outlook is stable. Houston, Texas-based Houston Exploration's has about $175 million in outstanding debt. ICOS CORP: $279MM Convertible Subordinated Notes Gets CCC Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' corporate credit rating to emerging pharmaceutical company ICOS Corp. At the same time, Standard & Poor's assigned its 'CCC' subordinated debt rating to ICOS' $279 million 2% convertible subordinated notes due 2023. The outlook is positive. ICOS has approximately $279 million of debt outstanding. "The low speculative-grade ratings on the company reflect the operating losses and cash requirements of its significant collaborative R&D efforts," said Standard & Poor's credit analyst Arthur Wong. The company currently has one marketed product in Europe, Cialis, through its joint venture with Eli Lilly & Co. Losses are expected to continue for the next several years as ICOS invests in its marketing infrastructure and the development of its drug pipeline. These risks are partially mitigated by the financial cushion of on-hand cash and the promise of Cialis. Bothell, Washington-based ICOS focuses on the development and commercialization of pharmaceutical products. Cialis, an oral erectile dysfunction medication, is ICOS' most important near-term cash flow generating opportunity. The drug is currently marketed in Europe, and approval by the U.S. Food and Drug Administration (FDA) is expected in the second half of 2003. Profits from European Union and North American sales of the drug are shared through a 50/50 joint venture with Eli Lilly & Co called Lilly ICOS. Cialis is poised to compete against Pfizer Inc.'s well-established Viagra and another newcomer, Bayer AG's Levitra, in the multi- billion dollar impotence market. The drug may be differentiated by its longer duration of action and serve as an alternative therapy for patients who find Viagra ineffective. Nevertheless, a fierce marketing battle between the three competitors is expected, and the success of efforts to establish a new drug as a viable alternative to such a well-known drug like Viagra is uncertain. Furthermore, while the FDA's approval of Cialis is expected to occur in the second half of 2003, an approval is not guaranteed, and access to the large U.S. prescription market is essential to the success of the product. In addition, even if Cialis is a success, ICOS is not expected to be profitable for several years. K & F INDUSTRIES: S&P Affirms BB- Corporate Credit Rating --------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings, including the 'BB-' corporate credit rating, on K & F Industries Inc. The ratings are removed from CreditWatch, where they were placed on March 18, 2003. The outlook is stable. Rated debt is $435 million. "The affirmation is based on K & F Industries' adequate earnings and cash flow protection measures, despite very difficult conditions in most of the company's markets, and signs that the operating environment has begun to stabilize," said Standard & Poor's credit analyst Roman Szuper. The ratings on New York, N.Y.-based K & F reflect a fairly heavy debt burden, modest scale of operations (annual revenues about $350 million), and some cyclicality. Those factors are partly offset by K & F's defensible positions in niche commercial and military aerospace markets, efficient operations, and an expectation that the firm will employ its generally predictable free cash flow to reduce high debt levels. Privately held K & F is 50%-owned by Bernard Schwartz, Chairman and CEO, with the rest owned by four Lehman Brothers investment trusts. Lehman Brothers has the right to offer for sale its ownership interests to K & F at any time. However, such a transaction, which would cause K & F to be recapitalized again with potential for large additional borrowings, is not expected soon following the $200 million dividend in late 2002. The company is a leading supplier of braking systems--wheels, steel and carbon brakes, and anti-skid systems--and fuel tanks to the aerospace industry. Braking products (86% of sales and a higher percentage of profits in 2002) are on diverse civil and military programs, with a focus on short-haul, high-cycle aircraft. Demand from main airlines and general aviation customers weakened in the second half of 2002 and the first half of 2003, stemming from a soft global economy and the consequences of the Sept. 11, 2001, attacks, the Iraq war, and SARS, partially offset by increased orders from regional carriers and military sales. About 75% of its braking systems sales (65% of total sales) are to the replacement market, normally a stabilizing factor, although the accelerated retirement of older aircraft types by airlines has had a moderately adverse effect on that portion of the business. Still, recent program wins in the regional and corporate jet sector should enable K & F to grow its fleet over time. Also, the firm is the leader in the small global commercial and military market for aircraft fuel tanks (14% of sales). A diversified customer base of more than 175 airlines, airframe manufacturers, governments, and distributors, and an installed base of more than 28,000 aircraft (including helicopters), enhances stability. Moreover, increasing defense spending bodes well for K & F's military sales (30% of the total in 2002 and a likely higher proportion in 2003). K & F's healthy free cash flow generation and management's commitment to debt reduction should improve the credit profile to a level appropriate for the ratings in the intermediate term. KAYDON: S&P Assigns BB+ Corp. Credit and BB- Sub. Debt Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB+' corporate credit rating to Kaydon Corp. At the same time, Standard & Poor's assigned its 'BB-' subordinated debt rating to Kaydon's $200 million 4% convertible note issue due 2023. The outlook is stable. Ann Arbor, Michigan-based Kaydon's products include bearings, split roller bearings, and seals. It is a leading manufacturer of highly engineered components used in a modest-size industrial markets. "Leading market positions, a healthy amount of aftermarket sales, and a liquid balance sheet limit downside potential for the rating," said Standard & Poor's credit analyst Joel Levington. "At the same time, an aggressive growth appetite, litigation exposures, and the modest scale of operations limit financial flexibility and upside ratings potential." Because of continued weakness in the general industrial markets, particularly power generation and aerospace, Kaydon implemented lean manufacturing and disciplines that have enabled it to reduce manufacturing capacity and inventory levels and continue to generate free cash flow. Competitive advantages for Kaydon include a focus on customer service, good customer and end-market diversity, and fair geographic breadth. Kaydon supplements internal growth with niche and strategic acquisitions. "While external growth opportunities may come from markets new to the company, targets are expected to have similar manufacturing and marketing structures and to operate as independent units, which should minimize integration challenges," Mr. Levington said. KINGSWAY FINANCIAL: Reports Improved June Quarter Fin'l Results --------------------------------------------------------------- Kingsway Financial Services Inc., (TSE:KFS, NYSE:KFS) announced record financial results for the quarter and six months ended June 30, 2003. Net income increased by 68% to $27.3 million, compared to $16.2 million reported in the second quarter of last year. Net income for the six month period was a record $51.7 million, an increase of 59% over the $32.5 million reported last year. Return on equity on an annualized basis improved to 18.2% for the quarter and 17.2% for the six months compared to 11.8% and 11.9%, respectively for the same periods last year. Diluted earnings per share was 55 cents for the quarter, compared to 33 cents for the second quarter of 2002 last year. For the six month period, diluted earnings per share increased by 58% to $1.04. A significant portion of the Company's operations and net assets are denominated in U.S. dollars whereas the Company reports in Canadian dollars. During the second quarter and for the six month period the Canadian dollar appreciated significantly against the U.S. dollar thereby affecting the comparability to the same periods of 2002. Had the results of the U.S. operations been translated at the same exchange rates as the same periods last year, net income and earnings per share for the quarter would have been further increased by $3.2 million and 6 cents, respectively, and for the six month period by $4.4 million and 9 cents, respectively. "We are pleased to report record net income and earnings per share for the fourth consecutive quarter", said Bill Star, President & Chief Executive Officer. "We are very pleased with the results of our U.S. operations, and in particular, our non-standard auto results in Illinois which were exceptional. We achieved record earnings despite the impact of currency translation of our U.S. dollar earnings and the results of our Canadian operations." Premium Growth During the second quarter of 2003, gross premiums written increased 25% to $629.9 million compared with $502.6 million last year. For the year to date gross premiums written increased by 45% to $1.3 billion compared to $919.0 million last year. For the quarter, gross premiums written from U.S. operations increased 25% to $453.9 million compared with $362.2 million last year and Canadian operations grew 25% to $176.0 million. For the six months, gross premiums written by the U.S. operations were $1.0 billion, an increase of 50% over last year, and for the Canadian operations were $303.1 million, an increase of 30% over last year. For the six month period, gross premiums written from trucking and commercial automobile increased 69% over last year to $585.2 million. Gross premiums written from non-standard automobile increased 19% over last year to $465.1 million. Net premiums written increased 46% to $1.3 billion compared with $870.1 million for the first six months of last year. Net premiums earned increased 65% to a record $1.2 billion for the first six months of this year, compared with $709.6 million last year. Underwriting Profit & Combined Ratio The combined ratio of 99.2% for the second quarter produced an underwriting profit of $4.7 million, compared with $0.3 million reported in the second quarter of 2002. The combined ratio improved to 98.1% compared with 99.7% in the first six months of 2002, which produced a record six month underwriting profit of $22.5 million compared with $2.5 million in the first half of last year. The U.S. operations combined ratio improved to 96.1% compared to 96.6% in the first half of last year and for the Canadian operations improved to 105.4% compared to 108.4% for the same period last year. Investment Income Investment income increased to $19.2 million ($34.9 million year to date) compared with $17.0 million ($30.8 million year to date) for the second quarter of 2002. Realized gains amounted to $9.5 million ($8.8 million year to date) compared with $1.6 million ($5.3 million year to date) in the second quarter of 2002. Unrealized gains on the investment portfolio increased to $66.6 million ($1.36 per share outstanding) at June 30, 2003 compared with $21.9 million at March 31, 2003 as a result of the Company's increased investment in common shares during the first half of 2003. Net Income Net income for the quarter was $27.3 million, a 68% increase over the $16.2 million reported in the second quarter last year. In the fourth quarter of 2002, in order to be more consistent with the industry practice and its treatment of expenses on its program business, the Company commenced deferral of underwriting and marketing costs relating to the acquisition of premiums on its non-program business. The impact of this was an increase in net income of $2.8 million ($7.3 million year to date) or 6 cents per share diluted (15 cents per share diluted year to date) in the second quarter of 2003. Balance Sheet Total assets as at June 30, 2003 grew to $3.1 billion. During the quarter, shareholders' equity was reduced by $40.0 million ($74.0 million year to date) and book value by 82 cents ($1.51 year to date) as a result of the unrealized currency translation adjustment. Despite this adjustment, book value per share increased by 7% to $12.09 from $11.29 a year ago. The investment portfolio, including cash and accrued investment income, increased to $2,192.0 million (market value $2,258.6 million), compared to $2,094.9 million (market value $2,127.5 million) as at December 31, 2002. Investment portfolio per share increased 4% to $44.78 compared to $42.93 as at December 31, 2002. Subsequent Event The Company completed its previously announced common share offering in July 2003. In total, 6,710,000 common shares were issued for gross proceeds of $112,057,000. Kingsway's primary business is trucking insurance and the insuring of automobile risks for drivers who do not meet the criteria for coverage by standard automobile insurers. The Company currently operates through nine wholly-owned insurance subsidiaries in Canada and the U.S. Canadian subsidiaries include Kingsway General Insurance Company, York Fire & Casualty Insurance Company and Jevco Insurance Company. U.S. subsidiaries include Universal Casualty Company, American Service Insurance Company, Southern United Fire Insurance Company, Lincoln General Insurance Company, U.S. Security Insurance Company, American Country Insurance Company and Avalon Risk Management, Inc. The Company also operates reinsurance subsidiaries in Barbados and Bermuda. Kingsway Financial, Lincoln General Insurance Company, Universal Casualty Insurance Company, Kingsway General, York Fire, Jevco and Kingsway Reinsurance (Bermuda) are all rated "A-" Excellent by A.M. Best. The Company's senior debt is rated 'BBB' (investment grade) by Standard and Poor's and by Dominion Bond Rating Services. The common shares of Kingsway Financial Services Inc. are listed on the Toronto Stock Exchange and the New York Stock Exchange, under the trading symbol "KFS". * * * As previously reported in the Troubled Company Reporter, Standard & Poor's Ratings Services assigned its triple-'B' rating to Kingsway Financial Services's Canadian senior debt issue of approximately C$100 million. Standard & Poor's also assigned its double-'B'-plus preferred stock rating to Kingsway Financial Capital Trust I's trust preferred securities of up to US$75 million. In addition, Standard & Poor's affirmed its triple-'B' counterparty credit rating on KFS. The outlook is stable. KMART HOLDINGS: Files Q1 Financial Statements on SEC Form 8-K ------------------------------------------------------------- Kmart Holding Corporation (Nasdaq: KMRT) filed with the Securities and Exchange Commission on Form 8-K the Company's interim financial statements for the 13-week period ended April 30, 2003, audited by its independent accountants. These interim audited financial statements reflect the impact of "fresh start" accounting upon the emergence of Kmart Corporation from Chapter 11 protection. At the request of the Audit Committee of the Board of Directors, the Company's quarterly financial statements, previously filed with the SEC on June 16, 2003, were audited by the Company's independent accountants. The Company also filed with the SEC on Form 10-Q/A, an amendment to its previously filed Form 10-Q, filed on June 16, 2003. In an explanatory note included in the filing, the company said the purpose of the amendment is to update the unaudited financial statements filed June 16, 2003, to reclassify certain losses from discontinued operations to continuing operations. The Company, together with its subsidiaries, is a mass merchandising company that offers customers quality products through a portfolio of exclusive brands that include DISNEY, JACLYN SMITH, JOE BOXER, KATHY IRELAND, MARTHA STEWART EVERYDAY, ROUTE 66, SESAME STREET, and THALIA SODI. It operates more than 1,500 stores in 49 states and is one of the 10 largest employers in the country with 170,000 associates. For more information visit the Company's Web site at http://www.kmart.com LAIDLAW INC: Resolves Bank of New York's Allowed Claims ------------------------------------------------------- The Bank of New York is a successor trustee under a May 1, 1993 Indenture with the Industrial Development Board of the Metropolitan Government of Nashville and Davidson County, as Issuer, under which Series 1993 Bonds for $15,700,000 were issued. Pursuant to the Indenture, the Industrial Development Board's obligations under the Indenture were secured by the assignment of all rights under a May 1, 1993 Loan Agreement, a Deed of Trust and a Security Agreement between the Industrial Development Board and OSCO Treatment Systems, Inc., now named Safety-Kleen (Nashville), Inc. Under the Loan Agreement, the Industrial Development Board made a loan to Safety-Kleen for $15,700,000. Safety-Kleen Nashville promised to make installment payments sufficient to meet the debt service on the Bonds and to pay The Bank of New York's fees and expenses. Pursuant to a May 1, 1993 Guaranty Agreement, by and between Laidlaw Inc. and Bank of New York, as successor trustee under the Indenture, Laidlaw provided a guaranty with respect to the payment of the principal of, and interest on, the Bonds and all of the obligations of Safety-Kleen Nashville under the Loan Agreement. On June 9, 2000, Safety-Kleen Nashville and its affiliates filed for Chapter 11 in the U.S. Bankruptcy Code for the District of Delaware. Pursuant to the Loan Agreement, Safety-Kleen Nashville's Chapter 11 filing constituted an event of default, which likewise constitutes an event of default under the Indenture. Consequently, and under the Indenture, The Bank of New York became entitled to exercise all rights of the Industrial Development Board against Safety-Kleen Nashville under the Loan Agreement, the Security Agreement and the Deed of Trust to satisfy its claim under the Indenture and the Guaranty. Pursuant to the Indenture, the Deed of Trust and the Security Agreement, the liabilities to The Bank of New York as trustee were secured by a collateral, including real estate and the funds held in a construction fund The Bank of New York held. The net proceeds of the real estate sale and the balance in the Construction Fund, after payment of and reservation for the Bank's fees and expenses, were distributed to the Bondholders pursuant to the Delaware Bankruptcy Court's orders in the Safety- Kleen Nashville Chapter 11 case. The Bank of New York has received no additional funds from Safety-Kleen Nashville or its affiliates on account of the Loan Agreement, the Security Agreement and the Deed of Trust. On October 15, 2001, the Bank filed Proof of Claim Number 438 against the Debtors on behalf of itself and the bondholders for claims arising under the Indenture, the Loan Agreement and the Guaranty for $6,213,446, inclusive of principal and accrued interest. Consequently, however, the parties agreed to fix the allowed amount of Claim No. 438 with respect to the Indenture, the Loan Agreement and the Guaranty in accordance with the Plan, through a stipulation, which provides that: (a) Claim No. 438 will be allowed for $6,213,446 in full satisfaction of any and all claims that The Bank of New York and the bondholders have against the Debtors, whether asserted in Claim no. 438 or otherwise, arising under the Indenture, the Loan Agreement or the Guaranty; (b) Claim No. 438 will be satisfied in accordance with the treatment provided to General Unsecured Claims in Class 6 under the Plan; and (c) Distributions to be made pursuant to the Plan to the bondholders on account of Claim No. 438 will be made to the Bank, and after first deducting its fees and expenses, the Bank will then distribute the Property to the bondholders in accordance with the Indenture. (Laidlaw Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) LANCE TRUST: Fitch Hatchets 2 Leveraged Asset Notes Rating to B- ---------------------------------------------------------------- Fitch Ratings downgrades both the leveraged asset notes of LANCE Trust, series 1999-1 and series 00-1-A. Both trust series are synthetic collateralized loan obligations that allow investors to participate in the credit performance of diversified pools of bank loans originated by Chase Manhattan Bank (now JPMorgan Chase Bank), the swap counterparty. The following securities are downgraded: LANCE Trust, series 1999-1 -- $27,500,000 leveraged asset notes maturing Jan. 15, 2005 to 'B-' from 'B'. LANCE Trust, series 00-1-A -- $23,000,000 leveraged asset notes maturing Oct. 15, 2005 to 'B-' from 'B'. LANCE Trust, series 1999-1, which closed on Dec. 15, 1999, was established to provide credit protection on up to $550 million reference portfolio of senior bank loans. LANCE Trust, series 00-1-A, which closed on Oct. 17, 2000, was formed to provide credit protection on up to $460 million reference portfolio of senior bank loans. Since the last review conducted in March 2002, the reference pools have experienced more defaults and the credit quality of the remaining loan pools has experienced further deterioration. After reviewing the portfolios' current default levels, evaluating the credit quality of the remaining loan pools, conducting extensive discussions with the sponsor/swap counterparty, and performing cash flow stress runs based on the remaining lives and quality of the reference assets, Fitch has determined that the 'B' ratings assigned to the above-mentioned leveraged asset notes no longer reflect the current risk to the noteholders. Fitch's rating action reflects higher than expected level of defaults amongst originally high grade bank loans in the portfolio of both transactions. Fitch will continue to monitor and review these transactions for future rating adjustments. LEAP WIRELESS: Cricket Wants Edge Designated as 'Stalking Horse' ---------------------------------------------------------------- Leap Wireless Debtor Cricket Licensee, Inc. asks the Court to approve its designation of Edge Acquisitions LLC as the "stalking horse bidder" in connection with proposed sale of two personal communications services licenses. As part of their wireless telecommunications network, the Debtors own hundreds of personal communications services licenses for markets across the county, including Cricket Licensee's ownership of the Twin Falls and Idaho Falls licenses. Both licenses will expire on July 22, 2009. Unfortunately, the Twin Falls and Idaho Falls markets are not productive. Accordingly, Cricket Licensee decided to sell the Licenses. Currently, Edge Acquisitions, LLC expressed an interest in purchasing the Licenses. After extensive negotiations, both parties agreed on a purchase price comparable to other sales of PCS licenses and entered into an Agreement. Robert A. Klyman, Esq., at Latham & Watkins, in Washington, D.C., relates that Cricket Licensee seeks to designate Edge's Offer as the "stalking horse" bid for the Licenses because: (i) it contains what is currently the highest purchase price for the Licenses, and (ii) Edge has obtained FCC approval for the Sale. Edge offered $3,250,000 cash at closing for the Licenses. The sale of the Licenses is subject to FCC approval and other customary closing conditions. The FCC granted its approval of the assignment of the Licenses from Cricket Licensee to Edge as the Proposed Purchaser to September 15, 2003. Under the proposed Bidding Procedures for the Licenses, competing bidders must top Edge's offer by $25,000. The Debtors have no liability to Edge in the event that a higher bidder consummates the sale and Leap will pay not break-up or other termination fee. Mr. Klyman asserts that these uniform bidding procedures be approved. (Leap Wireless Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) LORAL SPACE: Successfully Lauches Exchostar IX/Telstar Satellite ---------------------------------------------------------------- EchoStar IX/Telstar 13, a powerful multi-band satellite built for EchoStar Communications Corporation and Loral Skynet by Space Systems/Loral (SS/L), was successfully launched Thursday last week at 11:31 pm EDT. The satellite, to be positioned at 121 degrees West longitude, was sent into space from the Odyssey Launch Platform, positioned on the Equator in the Pacific Ocean, on a Sea Launch Zenit-3SL rocket. In a unique satellite sharing arrangement, EchoStar will operate the Ku- and Ka-band payloads as EchoStar IX; Loral Skynet, a subsidiary of Loral Space & Communications, will initially own and operate the C-band payload as Telstar 13. In July, Loral reached a definitive agreement to sell Telstar 13, along with five other North American telecommunications satellites to Intelsat, Ltd., Hamilton, Bermuda. The spacecraft's Ku-band fixed satellite services (FSS) transponders are designed to enhance EchoStar's current U.S. DISH Network satellite TV service. EchoStar IX will join EchoStar's current fleet of eight satellites that provide DISH Network customers with hundreds of all-digital television channels, including interactive TV services, sports programming, high definition television and international programming. The spacecraft is also equipped with the first U.S. commercial Ka- band spot-beam payloads. The successful launch of EchoStar IX brings EchoStar's fleet to nine satellites, including three satellites previously built by SS/L. Telstar 13's 24 C-band FSS transponders operating at 36 MHz will provide Skynet's cable programming customers with coverage throughout North America, including Alaska, Hawaii and Puerto Rico. Skynet's current satellite serving cable programmers, Telstar 7, is operating nearby at 127 degrees West longitude. Together the satellites form a very attractive platform to cable programmers looking for the benefits of a strong neighborhood and restoration solutions. "Building this satellite has been a tremendous success for all parties involved," said Patrick DeWitt, SS/L's president and chief operating officer. "Our close relationships with EchoStar and Skynet have been an important part of SS/L's success, and our shared commitment to quality remains our top priority." Built at Space Systems/Loral's Palo Alto, Calif., facility, EchoStar IX/Telstar 13 is based on SS/L's space-proven 1300 geostationary satellite platform, which has an excellent record of reliable operation. The 1300 is designed to achieve a long life, in this case 15 years, excellent station-keeping and orbital stability by using bipropellant propulsion and momentum-bias attitude control systems. A system of high-efficiency solar arrays and batteries provide uninterrupted electrical power. In all, SS/L satellites have amassed nearly 1,000 years of on-orbit service. On July 15, 2003, Loral announced that it had reached a definitive agreement to sell its North American telecommunications satellites to Intelsat, Ltd. In conjunction with this sale, Loral and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The transaction with Intelsat is expected to close within four to six months, pending Bankruptcy Court and regulatory approval. After this transaction, Loral Skynet will continue to operate an integrated fixed satellite and network services business using its fleet of five telecommunications satellites and its established VSAT/fiber global network infrastructure. EchoStar Communications Corporation (NASDAQ:DISH), through its DISH Network(TM), is a leading U.S. provider of satellite television entertainment services with 8.53 million customers. DISH Network provides advanced digital satellite television services to the home, including hundreds of video, audio and data channels, personal video recording, HDTV, sports and international programming, professional installation and 24-hour customer service. For more information, visit DISH Network at http://www.dishnetwork.com A pioneer in the satellite industry, Loral Skynet continues to deliver the superior service quality and range of satellite solutions that have made it an industry leader for more than 40 years. With its fleet of satellites and its established hybrid VSAT/fiber global network infrastructure, Skynet offers a unique, single source for all broadcast, data network, Internet access and IP needs. Headquartered in Bedminster, New Jersey, Skynet is dedicated to providing secure, high-quality connectivity and communications. For more information, visit http://www.loralskynet.com Space Systems/Loral, a subsidiary of Loral Space & Communications (OTC BB:LRLSQ), is a premier designer, manufacturer, and integrator of powerful satellites and satellite systems. SS/L also provides a range of related services that include mission control operations and procurement of launch services. Based in Palo Alto, Calif., the company has an international base of commercial and governmental customers whose applications include broadband digital communications, direct-to-home broadcast, defense communications, environmental monitoring, and air traffic control. For more information, visit http://www.ssloral.com Loral Space & Communications is a high technology company that concentrates primarily on satellite manufacturing and satellite- based services. For more information, visit Loral's Web site at http://www.loral.com LYONDELL: Says Financials Unaffected by Millenium's Restatement --------------------------------------------------------------- In response to numerous inquiries, Lyondell Chemical Company (NYSE: LYO) stated that Millennium Chemicals' recently announced financial restatement will have no effect on the financial statements of Lyondell or Equistar. Equistar is a partnership between Lyondell and Millennium and, as such, is not subject to federal income taxes. Each partner is responsible for reporting the tax effects of its share of partnership operations in its own financial statements. Since the inception of Equistar in December 1997, Lyondell has reported the appropriate deferred taxes related to its interest in Equistar, and does not expect any adjustments similar to those described by Millennium. Lyondell Chemical Company -- http://www.lyondell.com-- headquartered in Houston, Texas, is a leading producer of: propylene oxide (PO); PO derivatives, including toluene diisocyanate (TDI), propylene glycol (PG), butanediol (BDO) and propylene glycol ether (PGE); and styrene monomer and MTBE as co- products of PO production. Through its 70.5% interest in Equistar Chemicals, LP, Lyondell also is one of the largest producers of ethylene, propylene and polyethylene in North America and a leading producer of ethylene oxide, ethylene glycol, high value- added specialty polymers and polymeric powder. Through its 58.75% interest in LYONDELL-CITGO Refining LP, Lyondell is one of the largest refiners in the United States processing extra heavy Venezuelan crude oil to produce gasoline, low sulfur diesel and jet fuel. As reported in Troubled Company Reporter's July 29, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit rating on Lyondell Chemical Co. to 'BB-' from 'BB'. Standard & Poor's also lowered its corporate credit rating on Lyondell's 70.5%-owned subsidiary, Equistar Chemicals L.P. to 'BB-' from 'BB' The current outlook on both companies is negative. MANGUM FUNERAL HOME: Case Summary & 13 Largest Unsec. Creditors --------------------------------------------------------------- Debtor: Mangum Funeral Home, Inc. P.O. Box 2043 Center, Texas 75935-2043 Bankruptcy Case No.: 03-90577 Type of Business: The Debtor operates a funeral home Chapter 11 Petition Date: August 4, 2003 Court: Eastern District of Texas (Lufkin) Judge: Bill Parker Debtor's Counsel: Don F. Russell, Esq. Russell & Madan, PC 4265 San Felipe Suite 250 Houston, TX 77027 Tel: 713-355-3333 Fax: 713-355-3303 Total Assets: $679,570 Total Debts: $1,613,228 Debtor's 13 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ PSI Lending, Ltd. Unsecured Portion $762,000 4615 Post Oak Place, Suite 250 Houston, TX 77027 PSI Lending, Ltd. Promissory Note; $1,300,000 4615 Post Oak Place Deed of Trusts; Value of Security Suite 250 Security Agreement $538,000 Houston, TX 77027 Unsecured Balance $762,000 Billy M. Watson Loans to Mangum $133,066 York Group, Inc. $87,081 Janie Graves Taxes for 2001 and 2002 $40,000 Esser Mfg. Caskets $26,252 Batesville Casket Co. Caskets $24,951 National Music Services Music machine $1,514 Champion Embalming Fluid $1,004 Coca Cola Enterprises $506 Mama Goose Co. Burial urns $198 Oreck Vacuum Cleaner $191 Berry Co. Advertisement $168 MIRANT CORP: Court Approves GECF Mastercard Secured Credit Pact --------------------------------------------------------------- On June 15, 2001, the Mirant Debtors and GE Capital Financial, Inc. entered into a Purchasing Card Program Agreement whereby GECF provided credit charge accounts, credit cards and credit card services to the Debtors through MasterCard International, Inc. Under the Agreement, the Debtors obtained credit cards for approximately 400 employees enabling those employees to charge business expenses, which expenses the Debtors repaid to GECF in accordance with its agreement with GECF. To support their repayment obligations under the Agreement, the Debtors issued on May 13, 2003 a $1,500,000 irrevocable letter of credit from Wachovia Bank, National Association. Robin Phelan, Esq., at Haynes and Boone LLP, in Dallas, Texas, relates that prior to the Petition Date, the Debtors have no past due amount owed to GECF. In fact, just prior to the Petition Date, Debtor Mirant Services LLC paid GECF $927,389 to pay down the then current amounts outstanding but yet past due. The Payment was made to GECF prior to the due date with the expectation that GECF would continue to provide the crucial credit card services under the Agreement. GECF expressed its concern that the Payment may be avoidable under the applicable law. However, GECF still immediately terminated the Agreement when the Debtors filed for Chapter 11 protection, which the Agreement permits. Regardless of the enforceability of ipso facto termination provision, GECF is under no obligation to provide the Debtors with postpetition credit under the Agreement. In addition, GECF has also taken the position that the Agreement constitutes a financial accommodation contract under Sections 365(c)(2) and (e)(2)(B) of the Bankruptcy Code, and therefore cannot be assumed or assigned by the Debtors even if the parties otherwise agreed. Mr. Phelan notes that the Agreement's termination has forced the Debtors' employees to charge their regularly occurring business expenses on their own, personal credit accounts. According to Mr. Phelan, this has negatively impacted employee morale, needlessly created additional administrative expense for the Debtors in processing thousands of individual business reimbursement expenses, which the Employees cannot sustain. To resolve this current dilemma, the Debtors negotiated with GECF. GECF is willing to enter into a new Purchasing Card Agreement to enable the Debtors to incur postpetition credit through the use of credit Cards. Mr. Phelan reports that the New Agreement contains terms substantially similar to those contained in the prepetition Agreement with modifications to reflect the fact that the Debtors are now under bankruptcy protection. Among other things, the parties acknowledge that in the New Agreement, any extension of credit will have the priority of an expense of administration under Sections 503(b) and 507(a)(1) of the Bankruptcy Code. Moreover, the parties agreed that, after approval of proposed compromise regarding the Payment is obtained, the Letter of Credit will be terminated and replaced by a $1,500,000 certificate of deposit, which CD will be obtained immediately. The CD will be pledged to, and a security interest granted in favor of, GECF to secure the Debtors' payment obligations under the New Agreement. Additionally, the Debtors also agreed to pay no more than 50% of the reasonable and necessary fees and costs GECF incurred in connection with preparation of the New Agreement; provided, that the Debtors will reimburse GECF in full for reasonable fees and costs incurred by GECF. With respect to the proposed compromise regarding the Payment, the Debtors and GECF agreed that: (a) GECF will deposit an amount equal to the Payment, which is $927,389, into a segregated trust account maintained by the Debtors' proposed counsel, White & Case, LLP; (b) GECF will then draw upon the LC in an amount equal to: (i) the Payment, plus (ii) other amounts owing under the Agreement as of July 14, 2003 amounting to $75,889, for a total draw under the LC equal to $1,003,278; (c) Upon receipt of the $1,003,278 from the Issuing Bank, the $927,389 held in the Trust Account will be returned to the Debtors for the benefit of their estates; and (d) The Debtors will then terminate the LC. Accordingly, by this motion, the Debtors ask the Court to: (i) authorize them to enter into an agreement on substantially similar terms as those contained in the New Agreement and thereby allow them to incur: (a) on an interim basis, secured credit in an amount not to exceed $401,604 through the use of corporate credit cards issued by Mastercard and administered by GECF; and (b) on a final basis, secured credit under and in connection with the New Agreement for in an amount not to exceed $1,500,000; and (ii) on an interim and final basis, allow them to obtain from unencumbered funds a certificate of deposit equal to $1,500,000 and pledge the certificate of deposit -- and grant a security interest -- to GECF to secure the payment obligations under the New Agreement. Mr. Phelan contends that under Section 364(c)(2) of the Bankruptcy Code, the Court should approve the Debtors' request because: (a) The Debtors' ability to preserve their prepetition practice of having employees charge business-related expenses incurred in the ordinary course on corporate credit cards is critical for: -- the Debtors' business operations are performed by employees who undertake the day-to-day tasks that enable the Debtors to run an energy enterprise; and -- without the cards, the employees' morale will be eroded; (b) The terms of the New Agreement are fair under the circumstances; (c) The terms of the New Agreement are reasonable when one considers the alternative of engaging a new credit card vendor to provide the credit services GECF provided prepetition. Obtaining a new vendor would be very cost prohibitive as it would require the issuance of new credit cards and force the Debtors to establish new procedures with a new company to administer a new credit card program. It would also take time to negotiate, draft and finalize new transaction documents; (d) The Debtors currently have over $733,000,000 in unencumbered cash to purchase the CD; (e) The longer the Cards are not reactivated, the more personal reimbursement charges and expenses the Debtors will have to process, exacerbating the administrative problems presented by GECF's termination of the Agreement; (f) The return of the Payment will eliminate GECF's potential avoidance liability with respect to the Payment; and (g) The proposed compromise is fair and equitable as the priority of creditor claims will not be impacted. * * * Judge Lynn authorizes the Debtors to: (a) obtain postpetition secured credit on an interim basis in an amount not to exceed $600,000 by entering into, and performing the terms of, a New Agreement; (b) utilize unencumbered funds to obtain a CD equal to $1,500,000, to be maintained by GECF at its banking facility, and pledge and grant a security interest to GECF to secure the Debtors' payment obligations under the New Agreement; and (c) pay or reimburse GECC for one half of the reasonable and necessary fees and costs GECF incurred relating to the preparation of the New Agreement and obtaining Bankruptcy Court approval; provided, however that Mirant will reimburse GECF for any reasonable and necessary fees and costs GECF incurred in connection with a physical Bankruptcy Court appearance by GECF with respect to the request; further provided, that any fees and costs incurred by GECF in connection with the enforcement of New Agreement will be paid or reimbursed by Mirant as set forth in the New Agreement. Moreover, Judge Lynn rules that upon execution of the New Agreement and confirmation of the creation of the CD, GECF will cause all Cards issued to the Debtors to be reinstated for immediate use in accordance with the terms of the New Agreement. (Mirant Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) MOBILE COMPUTING: Convertible Debentures to Mature Today -------------------------------------------------------- Mobile Computing Corporation announced that the holders of its convertible debentures have agreed to extend the maturity date until today for that portion of the debentures that were originally due August 8, 2003. The Company continues to negotiate definitive agreements relating to the previously announced significant restructuring of the Company. The transactions contemplated by the restructuring are subject to shareholder approval and the receipt of all necessary regulatory approvals, including the approval of the Toronto Stock Exchange. The Company intends to seek shareholder approval at an annual and special meeting of shareholders, currently expected to be scheduled for mid September, 2003. Accordingly, there can be no assurance that the proposed restructuring will be completed as proposed or at all. Mobile Computing Corporation -- http://www.mobilecom.com-- is a supplier of wireless information solutions for mobile workers. These systems enable companies to communicate with, monitor and manage the activities of their vehicles and field personnel. MCC solutions enable improved management of the movement and delivery of goods and services, improving productivity and profitability. MCC specializes in delivering fully integrated solutions that link mobile workers with corporate information systems utilizing wireless data communications services. Mobile Computing Corporation trades on the Toronto Stock Exchange under the symbol "MBL" and has approximately 45 million shares outstanding. At December 31, 2002, Mobile Computing's balance sheet shows a total shareholders' equity deficit of about C$7.7 million. MOTIENT CORP: Unit Inks Pact to Sell Assets to Nextel Comms. ------------------------------------------------------------ On July 29, 2003, Motient Corporation's wholly owned subsidiary, Motient Communications Inc., entered into an Asset Purchase Agreement with Nextel Communications, Inc., under which Motient Communications will sell to Nextel certain of its Specialized Mobile Radio licenses issued by the Federal Communications Commission. These licenses are not necessary for Motient's future network requirements. Under the Asset Purchase Agreement, Nextel will pay $3,366,100 for the licenses. The closing of this transaction, which is subject to customary conditions including obtaining the FCC's approval of the transfer of the licenses, is expected to occur in several months. Motient expects to use the proceeds of the sale of these licenses to fund its working capital requirements and for general corporate purposes. The lenders under Motient Communications' term credit agreement have consented to the sale of these licenses. Motient owns and operates an integrated terrestrial/satellite network and provides a wide range of two-way mobile and Internet communications services principally to business-to-business customers and enterprises. Motient serves a variety of markets including mobile professionals, telemetry, transportation, field service, and nationwide voice dispatch offering coverage to all 50 states, Puerto Rico, the U.S. Virgin Islands, and thousands of miles of U. S. coastal waters. * * * As disclosed in previous reports, Motient Corporation has focused its efforts in recent periods on reducing operating expenses in order to preserve cash. As of September 30, 2002, the Company had approximately $3.6 million of cash on hand and short-term investments. The Company has taken a number of steps to reduce operating expenses, and is continuing to pursue a variety of measures to further reduce and/or defer or restructure operating expenses. It has also been pursuing funding alternatives. MOUNTAIN RIDGE ESTATES: Case Summary & 3 Largest Unsec. Creditors ----------------------------------------------------------------- Debtor: Mountain Ridge Estates, Inc. 21 East Park Place Rutherford, NJ 07070 Bankruptcy Case No.: 03-36239 Type of Business: Estates tucked amidst the mountains, some with views of the Connecticut River valley Chapter 11 Petition Date: August 7, 2003 Court: District of New Jersey (Newark) Judge: Rosemary Gambardella Debtor's Counsel: Bruce J. Wisotsky, Esq. Ravin Greenberg PC 101 Eisenhower Parkway Roseland, NJ 07068-1028 Tel: 973-226-1500 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million Debtor's 3 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Signature Properties of $25,000 NJ LLC Ira Fleck CPA $8,000 William J. Policastro, Esq. $5,000 MSX: Reports Improved Ops. Results Due to Cost Cutting Efforts -------------------------------------------------------------- MSX International, a global provider of technical business services, announced sales totaling $185.7 million for the second fiscal quarter of 2003, which ended June 29, 2003. This compares to $183.4 million in the first fiscal quarter ended March 30, 2003, and $212.1 million in the same quarter one year ago. The company's second quarter operating income of $6.8 million, an 18.1% improvement over the second quarter of 2002, reflects the net impact of cost reduction actions. Included in operating results for the second quarter are $0.6 million of additional severance and related charges that are expected to generate future savings. The company recorded modest net income of $110 thousand in the second quarter. Thomas T. Stallkamp, vice chairman and chief executive officer, commented, "We continue to achieve the financial milestones in our 2003 business plan. We remain vigilant in our continuing focus on lean operations and disciplined cash flow management." Gross profit in the second quarter of 2003 was $23.1 million, or 12.4% of net sales. This compares to $26.6 million, or 12.5% of net sales one year earlier. Total gross profit declined 13.2% due to reduced volumes and pricing pressure. Cost reduction actions have substantially mitigated the impact of these changes on gross margin expressed as a percentage of net sales. Selling, general and administrative expenses decreased $5.0 million to $15.7 million in the second quarter of 2003, reflecting overhead cost savings achieved in the past year. On August 1, 2003, MSX International completed its previously- announced private offering of senior secured notes due October 15, 2007. Net proceeds from the transaction were used to repay existing bank indebtedness that was scheduled to mature from December 2004 through 2006. MSX International, headquartered in Southfield, Mich., is a global provider of technical business services. The company combines innovative people, standardized processes and today's technologies to deliver a collaborative, competitive advantage. MSX International has over 7,000 employees in 25 countries. Visit their Web site at http://www.msxi.com As reported in Troubled Company Reporter's July 9, 2003 edition, Standard & Poor's Ratings Services assigned its 'B' rating to MSX's proposed offering of $100 million senior secured notes, with a second lien, due in 2007 (144A with registration rights). The proceeds from the notes offering will be used to significantly reduce commitment levels under MSX's senior credit facilities. In addition, Standard & Poor's affirmed its 'B+' corporate credit rating on MSX and its 'B-' rating on the subordinate debt. The 'B+' rating on MSX's senior secured credit facility was withdrawn. NATIONSRENT INC: Court Approves Caterpillar Financing Agreement --------------------------------------------------------------- U.S> Bankruptcy Court Judge Walsh approved a Master Inventory Financing, Security and Settlement Agreement between the NationsRent Debtors and Caterpillar Financial Services Corporation. The Financing Agreement settles a long-standing dispute between the parties with respect to various prepetition equipment agreements. Before the Petition Date, the Debtors regularly obtained equipment from various vendors, including Caterpillar, by entering into leases, purchase and financing agreements and secured financing agreements characterized as leases. The Financing Agreement calls for Caterpillar to sell to the Debtors its remaining equipment inventory being leased to the Debtors. The Debtors will purchase the equipment by borrowing $946,164 from Caterpillar. The Debtors will issue to Caterpillar a promissory note indicating the items of Inventory subject to the Loan. Beginning on April 1, 2003, the unpaid principal amount of the Loan started to accrue interest at 7% per annum. The Debtors commenced paying the Loan interest quarterly in arrears on July 1, 2003. The Loan will mature on October 1, 2004. To secure the Debtors' outstanding obligations under the Financing Agreement and with respect to the Loan, Caterpillar will have a security interest in the Inventory and its proceeds. In addition, the Financing Agreement contemplates a modification of the automatic stay in accordance with Section 362 of the Bankruptcy Code to permit Caterpillar to: (i) file necessary or appropriate documents to perfect its security interests and liens; and (ii) upon the occurrence of an event of default: -- terminate the Financing Agreement, the Note and any other documents, agreements or instruments executed or delivered in connection with the Loan; -- declare the Debtors' outstanding obligations under the Financing Agreement and the Note immediately due and payable; -- exercise the rights of a secured party under the Uniform Commercial Code to take possession and dispose of the collateral under the Financing Agreement and the Loan; and -- exercise any other rights or remedies permitted to Caterpillar under applicable law. The parties have also determined to terminate their Prepetition Agreements. Caterpillar will be allowed under the Plan unsecured non-priority claims for the deficiency claims and other general unsecured claims arising from the Prepetition Agreements, including certain rejection claims. However, Caterpillar will have no further claims against the Debtors with respect to the Prepetition Agreements. At the same time, both parties will fully release the other and their affiliates from any and all claims, causes of action, liabilities and obligations arising under the Prepetition Agreements. Concurrent with the Equipment Lease Review Program, the Debtors rejected a Master Tax Lease dated August 24, 1998 with Caterpillar. Caterpillar has a general unsecured claim with respect to the rejected Lease. "Entry into the [Financing Agreement] represents a reasonable exercise of the Debtors' business judgment. The [Financing Agreement] provides for the purchase of the Inventory at a reasonable price and on reasonable terms. Moreover, at the end of the term of the [Financing Agreement], the Debtors will continue to own, and will be able to utilize, the purchased Inventory for its remaining useful life," Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, says. (NationsRent Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 609/392-0900) NEUCOM INC: Case Summary & 10 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Neucom, Inc. 412 West Madison Street Suite 1000 Tampa, Florida 33602 Bankruptcy Case No.: 03-15914 Type of Business: Bandwidth provider Chapter 11 Petition Date: August 1, 2003 Court: Middle District of Florida (Tampa) Judge: Paul M. Glenn Debtor's Counsel: Thomas C. Little, Esq. Thomas C. Little, P.A. 2123 N.E. Coachman Road, Suite A Clearwater, FL 34625 Tel: 727-443-5773 Total Assets: $0 Total Debts: $1,743,980 Debtor's 10 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Intermedia Communications $686,303 c/o Carey, O'Malley, et al. 712 South Oregon Avenue Tampa, Florida 33606 AT&T $251,922 PO Box 277019 Atlanta, Georgia 30384-7019 Level 3 Communications $239,727 MCI $221,054 Aleron Broadband Services $121,350 Time Warner Telecom $103,621 Epik Communications $100,000 Bay Area Leasing $12,000 Candid Friends, Inc. $5,000 Entertainment Network, Inc. $3,000 NEXTMEDIA OPERATING: Second Quarter Net Loss Narrows to $3 Mill. ---------------------------------------------------------------- NextMedia Operating, Inc. announced financial results for the three and six months ended June 30, 2003. Carl Hirsch, Executive Chairman, and Steven Dinetz, President and CEO of NextMedia stated, "Despite the lackluster advertising market during the second quarter, we continued to implement our growth strategy. While our radio revenues were flat, we believe our leading market positions will enable us to grow revenue and Broadcast/Billboard Cash Flow, or BCF, when advertising conditions improve. Our outdoor division outperformed our expectations, reflecting improved rates and occupancy levels, a trend that has continued into the current quarter. Even as we continue to invest in our sales and content resources, we are controlling costs, as highlighted by the notable reduction in our second quarter operating expenses. While visibility in the current radio environment remains limited, we believe we are taking the rights steps to build market share, strengthen operating leverage and optimize our returns over the long-term." Results for the Three Months Ended June 30, 2003 GAAP Measures For the three months ended June 30, 2003, net revenue increased 17.4% to $27.7 million compared to $23.6 million for the three months ended June 30, 2002. Operating income increased 20.0% to $6.0 million for the three months ended June 30, 2003 from $5.0 million for the three months ended June 30, 2002. Additionally, net loss decreased from $5.2 million for the three months ended June 30, 2002 to $3.0 million for the three months ended June 30, 2003. The net loss for the three months ended June 30, 2002 contains a $3.3 million loss on discontinued operations related to the sale of radio assets in our Panama City market. Non-GAAP Measures BCF for the three months ended June 30, 2003 increased 30.6% to $11.1 million compared to $8.5 million in the three months ended June 30, 2002. As a result, Adjusted EBITDA for the three months ended June 30, 2003 increased 38.1% to $8.7 million compared to $6.3 million for the three months ended June 30, 2002. Pro Forma Non-GAAP Measures On a pro forma basis, net revenue for the three months ended June 30, 2003 increased 0.7% to $27.7 million compared to $27.5 million for the three months ended June 30, 2002. Pro forma BCF for the three months ended June 30, 2003 increased 7.8% to $11.1 million compared to $10.3 million for the three months ended June 30, 2002. Pro forma Adjusted EBITDA increased 7.4% to $8.7 million from $8.1 million for the same periods. On a pro forma basis, radio division net revenue decreased 0.5% for the three months ended June 30, 2003 to $19.5 million from $19.6 million for the three months ended June 30, 2002. Radio division pro forma BCF was flat at $8.0 million for both the three months ended June 30, 2003 and the three months ended June 30, 2002. On a pro forma basis, outdoor division net revenue increased 3.8% for the three months ended June 30, 2003 to $8.2 million from $7.9 million for the three months ended June 30, 2002. Outdoor division pro forma BCF increased 34.8% to $3.1 million for the three months ended June 30, 2003 from $2.3 million for the three months ended June 30, 2002. Results for the Six Months Ended June 30, 2003 GAAP Measures For the six months ended June 30, 2003, net revenue increased 21.0% to $51.3 million compared to $42.4 million for the six months ended June 30, 2002. Operating income increased 37.5% to $9.9 million for the six months ended June 30, 2003 from $7.2 million for the six months ended June 30, 2002. Additionally, net loss decreased from $25.2 million for the six months ended June 30, 2002 to $8.1 million for the six months ended June 30, 2003. The net loss for the six months ended June 30, 2002 contains a $3.5 million loss on discontinued operations related to the sale of radio assets in our Panama City market and a non-cash tax expense of $11.6 million related to the adoption of SFAS 142. Non-GAAP Measures BCF for the six months ended June 30, 2003 increased 37.6% to $19.4 million compared to $14.1 million in the six months ended June 30, 2002. As a result, Adjusted EBITDA for the six months ended June 30, 2003 increased 53.1% to $15.0 million compared to $9.8 million for the six months ended June 30, 2002. Pro Forma Non-GAAP Measures On a pro forma basis, net revenue for the six months ended June 30, 2003 increased 3.6% to $51.4 million compared to $49.6 million for the six months ended June 30, 2002. Pro forma BCF for the six months ended June 30, 2003 increased 11.5% to $19.4 million compared to $17.4 million for the six months ended June 30, 2002. Pro forma Adjusted EBITDA increased 14.5% to $15.0 million from $13.1 million for the same period. On a pro forma basis, radio division net revenue increased 1.4% for the six months ended June 30, 2003 to $35.5 million from $35.0 million for the six months ended June 30, 2002. Radio division pro forma BCF increased 3.8% for the six months ended June 30, 2003 to $13.7 million from $13.2 million for the six months ended June 30, 2002. On a pro forma basis, outdoor division net revenue increased 8.9% for the six months ended June 30, 2003 to $15.9 million from $14.6 million for the six months ended June 30, 2002. Outdoor division pro forma BCF increased 35.7% to $5.7 million for the six months ended June 30, 2003 from $4.2 million for the six months ended June 30, 2002. Liquidity and Financial Position At June 30, 2003, the Company had long-term debt of $234.0 million and cash on-hand of approximately $11.1 million. Approximately $12.5 million was available for borrowing under the Company's senior credit facility. NextMedia Operating, Inc. (S&P, B+ Corporate Credit Rating, Negative) is a diversified out-of-home media company headquartered in Denver, Colorado. NextMedia, through its subsidiaries and affiliates, owns and operates 60 stations in 15 markets throughout the United States and more than 5,600 bulletin and poster displays. Additionally, NextMedia owns advertising displays in more than 5,300 retail locations across the United States. Investors in NextMedia's ultimate parent entity, NextMedia Investors, LLC, include Thomas Weisel Capital Partners, Alta Communications, Weston Presidio Capital and Goldman Sachs Capital Partners, as well as senior management. NextMedia was founded by veteran media executives Carl E. Hirsch, Executive Chairman, and Steven Dinetz, President and CEO. NLINE CORPORATION: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------------- Debtor: nLine Corporation 4150 Freidrich Lane Suite A Austin, Texas 78744 Tel: 512-440-7720 Bankruptcy Case No.: 03-13779 Type of Business: The Debtor is a custom manufacturer and designer of inspection and test equipment for the semiconductor industry. Chapter 11 Petition Date: August 3, 2003 Court: Western District of Texas (Austin) Judge: Frank R. Monroe Debtor's Counsel: Patricia Baron Tomasco, Esq. Brown McCarroll, L.L.P. 111 Congress Avenue, Suite 1400 Austin, TX 78701 Tel: 512-479-1141 Fax: 512-236-7320 Estimated Assets: $923,586 Estimated Debts: $1,858,672 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ UT-Battelle LLC Legal Fees $140,034 Baker Botts LLP Legal Fees $84,836 Broadview Intl, LLC Fundraising $25,000 Research Electro-Optics, Trade Debt $13,696 Inc. Aetna Life Ins. Co. Rent $7,955 Edgar Voelkl Employee Benefits $4,867 William Usry Employee Benefits $3,378 Ayman El-Khashab Employee Benefits $3,285 Lou Schaefer Employee Benefits $3,133 Karsten Weber Employee Benefits $2,820 PriceWaterhouseCoopers Taxes $2,468 Joel Hickson Employee Benefits $1,943 Charline Dickson Employee Benefits $1,297 Jani King Trade Debt $1,225 Atlas Copco Trade Debt $1,100 Federal Express Trade Debt $1,039 Mark Schulze Employee Benefits $977 Premier Conferencing Trade Debt $948 Allegiance Telecom, Inc. Trade Debt $879 Prudential Cleanroom Svcs Trade Debt $831 NQL INC: Files Chapter 11 Plan and Disclosure Statement in N.J. --------------------------------------------------------------- NQL INC. (OTC Bulletin Board: NQLQE.ob), which filed for reorganization under Chapter 11 of the Bankruptcy Code on February 15, 2002, announced that on July 31, 2003, has filed with the United States Bankruptcy Court for the District of New Jersey, a proposed Disclosure Statement Pursuant to Section 1125 of Bankruptcy Code, a proposed Chapter 11 Plan of Liquidation and a Proposed Order (i) approving adequacy of disclosure statement, (ii) fixing hearing for confirmation of plan, (iii) providing for limited notice of hearing on confirmation of plan and (iv) approving form of publication notice of hearing on confirmation of plan. The Bankruptcy Court has scheduled a hearing on the adequacy of the Disclosure Statement on September 16, 2003. The proposed Plan is a liquidating Plan since all of NQL's assets have been or will be liquidated to pay claimants under the Plan. Under the Plan, allowed Preferred Stock interests of NQL Inc. are entitled to a distribution preference of $23,407,000 prior to the holders of "Equity Interests" receiving any distribution. An Equity Interest means the interest of any holder of (a) equity securities of NQL represented by any issued and outstanding shares of common stock of NQL or (b) any option, warrant or right to acquire or receive such equity securities. Equity Interest does not include the interest of any holder of Preferred Stock of NQL. The Plan states with regard to Equity Interests that NQL believes that it is highly unlikely if not virtually impossible that the proceeds from the sale of the assets of NQL, or of NQL's wholly- owned subsidiary, NQL Sub-Surviving Corporation, will ever be sufficient to provide for a distribution to Equity Interest holders. Holders of Equity Interests are not entitled to vote on the Plan. If the Disclosure Statement is approved by the Bankruptcy Court, and if the Plan is confirmed by the Bankruptcy Court, on the Effective Date of the Plan, all Equity Interests shall be terminated and their certificates shall be deemed cancelled. NQL has ceased all business operations. NSSC sold all of its operating assets in October, 2002 but the entire purchase price as a result of that asset sale has not yet been received by NSSC or NQL Inc. NRG ENERGY: Secures Court's Nod to Use Lenders' Cash Collateral --------------------------------------------------------------- U.S. Bankruptcy Court Judge Beatty authorizes to use the Cash Collateral pursuant to the terms of the Final Order and Budget; provided, however, that NRG Energy, Inc., and its debtor- affiliates' authorization to use Cash Collateral will expire upon the earlier of: (1) an Event of Default, or (2) the Commitment Termination Date. NRG provides the Court with an updated Budget and Cash Flow Forecast through 2004: NRG Northeast Generating LLC and Subsidiaries Budget/Cash Flow Statement Reforecast July 17, 2003 Jul-Dec 2003 2004 ------------ ---- Beginning Cash Balance $43,112,000 $39,945,000 Net Cash Inflow from Ops 266,157,000 454,948,000 CT Cash of Service 0 0 Other (903,000) 0 ------------- ----------- Receipts from Operations 265,254,000 454,948,000 Disbursements from Operations: Payroll (42,044,000) (75,446,000) SG&A (78,860,000) (165,914,000) Reimbursement of Corp Expenses (21,043,000) (42,963,000) ------------- ----------- Total Disbursements from Ops (141,945,000) (284,324,000) ------------- ----------- Net C/F from Ops $123,307,000 $176,624,000 Cap Ex - Construction & Maintenance (35,629,000) (75,885,000) Debt Principal Payments 0 0 Other (54,903,000) 0 DIP Interest and Fees (8,084,000) (2,018,000) Interest Payments - Project Level (24,786,000) (49,579,000) Working Capital Requirements 0 0 DIP Borrowings 207,565,000 268,639,000 DIP Repayments (207,566,000) (268,639,000) Restructuring Professional Fees (3,701,000) (5,000,000) Cash reimbursed to NRG 0 0 Cash paid by NRG 0 0 ------------- ----------- C/F from Financing and Investing (126,474,000) (133,475,000) Net Cash Flows (3,167,000) 37,148,000 NRG Corporate Funding 0 0 ------------- ----------- Ending Bank Cash Balance $39,946,000 $77,094,000 Beginning Borrowings - DIP Financing Order 0 0 Borrowings under the DIP (207,565,000) (258,639,000) Repayments 207,565,000 258,639,000 ------------- ----------- Net Advances (Repayments) 0 0 Ending Borrowing - DIP Financing Facility 0 0 ------------- ----------- Beginning - DIP Financing Facility 210,000,000 210,000,000 Borrowings under the DIP (207,565,000) (258,639,000) Repayments 207,565,000 258,639,000 ------------- ----------- Net Advances (Repayments) 0 0 Ending - DIP Financing Ability $210,000,000 $210,000,000 ------------- ----------- (NRG Energy Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) NVIDIA CORP: Second Quarter 2004 Results Show Better Performance ---------------------------------------------------------------- NVIDIA(R) Corporation (Nasdaq: NVDA) reported financial results for the second quarter of fiscal 2004 ended July 27, 2003. For the second quarter of fiscal 2004, revenue increased to $459.8 million, compared to $427.3 million for the second quarter of fiscal 2003, an increase of 8 percent. Net income for the second quarter of fiscal 2004 was $24.2 million, or $0.14 per diluted share, compared to net income of $5.3 million, or $0.03 per diluted share, for the second quarter of fiscal 2003. Revenue for the six months ended July 27, 2003 was $864.8 million, compared to revenue of $1.01 billion for the six months ended July 28, 2002. Net income for the six months ended July 27, 2003 was $43.9 million, or $0.26 per diluted share, compared to net income of $88.5 million, or $0.51 per diluted share, for the six months ended July 28, 2002. "The broad adoption of our new FX family of GPUs in the desktop, notebook, workstation, and media center segments is driving our revenue growth," stated Jen-Hsun Huang, president and CEO of NVIDIA. "The FX GPUs were designed to bring Cinematic Computing to every platform and segment we serve, and as a result, NVIDIA has the strongest GPU offering available in the market today." "Earlier this week, we announced our acquisition of MediaQ, the leading provider of graphics and multimedia technology for wireless mobile devices," added Huang. "With our combined strengths, we are in a terrific position to deliver rich media experiences in the three most important visual computing platforms -- personal computers, digital consumer electronics and handhelds." NVIDIA Corporation, whose corporate credit rating is rated at B+ by Standard & Poor's, is a visual computing technology and market leader dedicated to creating products that enhance the interactive experience on consumer and professional computing platforms. Its graphics and communications processors have broad market reach and are incorporated into a wide variety of computing platforms, including consumer digital-media PCs, enterprise PCs, professional workstations, digital content creation systems, notebook PCs, military navigation systems and video game consoles. NVIDIA is headquartered in Santa Clara, California and employs more than 1,500 people worldwide. For more information, visit the company's Web site at http://www.nvidia.com ONE PRICE CLOTHING: Reports Weaker Second Quarter Sales Results --------------------------------------------------------------- One Price Clothing Stores, Inc. (OTC Bulletin Board: ONPR) reported net sales of $76.9 million for the thirteen-week period ended August 2, 2003. Net sales decreased 14.7 percent compared with the corresponding thirteen-week period last year, as the Company operated 49 fewer stores on a year-over-year basis. Comparable store sales for the thirteen-week period decreased 10.5 percent compared with the same thirteen-week period last year. For the twenty-six week period ended August 2, 2003, the Company reported net sales of $154.0 million. Net sales decreased 13.2 percent compared with the corresponding twenty-six week period last year. Comparable store sales for the twenty-six week period decreased 10.3 percent compared with the same twenty-six week period last year. Leonard M. Snyder, Chairman & Chief Executive Officer, commented: "Second quarter sales suffered due to lackluster consumer demand and continuing economic uncertainty. More importantly, the Company's inventory was not in position to maximize revenue during the last three weeks of June and most of July due to a reduced flow of new merchandise receipts. This reduced flow was a result of negotiations with key merchandise vendors preceding the completion of the $7 million investment of new equity in One Price by affiliates of Sun Capital Partners, Inc. on June 27. In fact, merchandise receipts during fiscal June were well below last year's levels. Importantly, with the completion of Sun Capital's equity investment and normalization of terms with our merchandise vendors, the Company's receipt flow has recovered with fiscal July merchandise receipts which were well above the same period last year. We believe that the Company is now in good position in key merchandise categories, solidly transitioned to fall content and realizing improved sales." One Price Clothing Stores, Inc. -- whose May 3, 2003 balance sheet shows a total shareholders' equity deficit of about $1.2 million -- currently operates 568 stores in 30 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands under the One Price & More!, BestPrice! Fashions and BestPrice! Kids brands. For more information about One Price, visit http://www.oneprice.com OREGON STEEL: S&P Withdraws Ratings at Company's Request -------------------------------------------------------- Standard & Poor's Ratings Services has withdrawn its ratings, including its 'B+' corporate credit rating, on Oregon Steel Mills Inc. at the company request. OWENS CORNING: Wants Nod to Assume Amended BOC Supply Agreement --------------------------------------------------------------- Owens Corning and the BOC Group, Inc. are parties to a September 15, 1999 Master Oxygen Supply Agreement. Under the terms of the Supply Agreement, BOC has agreed to supply liquid and gaseous oxygen to Owens Corning at certain of its and its affiliates' manufacturing sites, subject to certain terms and conditions and in accordance with specified pricing schedules. J. Kate Stickles, Esq., at Saul Ewing LLP, in Wilmington, Delaware, informs the Court that the Supply Agreement contemplates the execution of Site Addenda for designated manufacturing sites, which may include Amarillo, Texas; Anderson, South Carolina; Jackson, Tennessee; Guelph, Canada; Wrexham, United Kingdom; and Rio Claro, Brazil. Each Site Addendum is to contain specific pricing terms and is to have a 15-year term, subject to extension. As of July 16, 2003, the parties had entered into one Site Addendum for the facility located in Guelph, Canada. As of November 25, 2002, the parties were also operating under an additional, but not fully signed, Site Addendum for a facility in Wrexham, UK, owned by Owens-Corning Fiberglas G.B. Ltd. Under the Supply Agreement, BOC is required to construct a "BOC Facility" at each manufacturing facility subject to a Site Addendum. Each BOC Facility consists of production, metering, storage and vaporizing facilities, as required by BOC to comply with its obligations under the Supply Agreement and applicable Site Addendum. One of the Site Addenda covers the facility in the United Kingdom owned by Owens-Corning Fiberglas G.B. Ltd. This facility was closed pursuant to a November 27, 2002 Court Order. Under the terms of the Order, Owens Corning and its affiliates were authorized to, among other things, satisfy the third party obligations of Owens-Corning Fiberglas G.B. Ltd., including a "contract termination liability" amounting to $4,500,000. This "contract termination liability" represents amounts allegedly due to BOC due to the closure of the Wrexham Facility and the related termination of the Wrexham Addendum. According to BOC, the termination of the agreement requires 12 months' written notice and the payment to BOC of a termination fee. The Debtors had calculated that the termination fee could be as high as $4,500,000, including 12 months of payments at $50,000 per month and a termination payment of GBP2,300,000. Because the Wrexham Addendum was never signed, the Debtors have disputed BOC's asserted entitlement to the Wrexham Termination Fee. The Debtors and BOC have discussed this matter at some length, have engaged in extensive, arm's-length negotiations, and have agreed on a resolution, which provides for: 1. the execution by the parties of a new Site Addendum, for Owens Corning's facility in Jackson, Tennessee; 2. the payment by Owens Corning to BOC of a termination fee, not to exceed $1,700,000, equal to the cost of relocating the BOC Facility currently at the Wrexham Facility to Jackson, Tennessee; 3. Owens Corning's payment of 12 monthly fees equal to $50,000 each to BOC with respect to the Wrexham Addendum; 4. Owens Corning's assumption of the Supply Agreement and the Existing Site Addendum; and 5. certain other modifications to the parties' agreements pursuant to the Supply Agreement Amendment. Ms. Stickles asserts that the resolution reduces the cost to Owens Corning with respect to the Wrexham Termination Fee from as much as $4,500,000 to $2,000,000, representing a significant savings to the estate. The principal terms of the parties' agreement are: 1. The parties will execute the Jackson Addendum, for Owens Corning's facility in Jackson, Tennessee; 2. As an agreed-upon termination fee regarding the Wrexham Addendum, Owens Corning will fund BOC's costs relating to the relocation of the BOC Facility at the Wrexham Facility to Jackson, Tennessee, not to exceed $1,700,000. These costs are estimated to be $1,400,000, $429,760 of which is to be paid upon execution of the Supply Agreement Amendment and the Jackson Addendum; 3. Owens Corning will continue to make $50,000 monthly payments to BOC under the Wrexham Addendum until the BOC Facility is producing oxygen at the Jackson, Tennessee facility, for a total expected cost of $750,000; and 4. Other than the payments contemplated, no "cure" payment is required with respect to the assumption of the Supply Agreement or the Existing Site Addendum. The total savings to be realized from these agreements is $2,300,000, as compared to the Wrexham Termination Fee that BOC alleges is due and payable. By this motion, the Debtors seek, pursuant to Sections 363 and 365 of the Bankruptcy Code and Rules 6006 and 9019 of the Federal Rules of Bankruptcy Procedure: 1. authority to assume the Supply Agreement and the Existing Site Addendum; 2. approval of the Supply Agreement Amendment and the Jackson Addendum; and 3. approval of the settlements. Ms. Stickles relates that assumption of the Supply Agreement and the Existing Site Addendum will provide significant benefit to the Company. Owens Corning requires access to a supply of liquid and gaseous oxygen for certain of its and its affiliates' manufacturing facilities, and will safeguard the supply, at favorable rates, through the assumed agreements. Separately, Owens Corning will obtain significant benefits under the Supply Agreement Amendment and Jackson Addendum, through which Owens Corning will save $2,200,000, as compared to the amount asserted to be due on account of the Wrexham Termination Fee; Owens Corning will secure the oxygen supply for the Guelph facility, and will obtain an oxygen supply for the Jackson Facility, at favorable terms and conditions; and certain business and technical revisions will be made to the Supply Agreement for the benefit of Owens Corning. BOC has agreed that no cure claim will be payable in connection with the assumption of the Supply Agreement and the Existing Site Addendum. (Owens Corning Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 609/392-0900) OXFORD AUTOMOTIVE: S&P Assigns Various Lower-B Level Ratings ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its 'B+' corporate credit rating to Troy, Michigan-based Oxford Automotive Inc. At the same time, Standard & Poor's assigned its 'B+' rating to the company's new $75 million senior secured bank credit facility. In addition, Standard & Poor's assigned its 'B-' rating to the company's proposed $240 million senior secured second lien notes due 2011, which are being issued under SEC Rule 144A with registration rights. Proceeds from the transaction the will be used to refinance existing debt of the company. Oxford had about $284 million of debt as of June 30, 2003. The outlook is stable. "The ratings reflect Oxford's below-average business position as a large supplier of metal-formed structural components in the highly competitive and fragmented auto supplier industry, its aggressive financial profile, and adequate liquidity," said Standard & Poor's credit analyst Eric Ballantine. Oxford is a tier-one supplier of specialized metal-formed systems, modules, and assemblies. The company has three main product areas: structural assemblies, mechanisms, and springs. Oxford's core products are assemblies that contain multiple stamped parts, forgings, and various welded, or fastened components that are incorporated into the body or undercarriage of the vehicle. Oxford emerged from bankruptcy protection in July 2002 and since has been focusing on improving its operations and winning new business awards. "We expect Oxford to continue to focus on improving its operations through increased plant utilization and outsourcing of noncore components," Mr. Ballantine said. "Although Oxford's growth in the past was mainly through acquisitions, we expect it will focus on internal growth in the near-term." Following the transaction the company is expected to have full availability of the company's $75 million revolving credit facility and minimal cash on hand. Providing modest flexibility is the company's ability to sell discrete business segments. The $75 million, five-year revolving credit facility, rated the same as the corporate credit rating, is secured by a first- priority perfected lien on all material tangible and intangible domestic assets of Oxford and 65% of the voting capital stock of the company's foreign subsidiaries, which hold a majority of the company's assets. PAYLESS SHOESOURCE: July Same-Store Sales Increased 2.8 Percent --------------------------------------------------------------- Payless ShoeSource, Inc., (NYSE: PSS) reported that same-store sales increased 2.8 percent during the July reporting period, the four weeks ended August 2, 2003. Company sales totaled $203.6 million, a 3.0 percent increase from $197.6 million during fiscal July of last year. Sales for the second quarter were $731.5 million, a 5.8 percent decrease from $776.2 million in the second quarter 2002. Same- store sales decreased 6.4 percent during the second quarter. Total sales for the first six months of fiscal 2003 were $1.43 billion, a 5.6 percent decrease from $1.51 billion during the similar period in fiscal 2002. Same-store sales decreased 6.3 percent during the first six months of the fiscal year. July sales reflected more seasonable weather and favorable customer response to the company's stepped-up promotional events. Consistent with previous statements by the company, the aggressive promotional environment put pressure on margins and earnings throughout the second quarter. The company expects to achieve a small profit for the second quarter, ended August 2, 2003. The company intends to report results for the second quarter on Wednesday, August 13, 2003. Payless ShoeSource, Inc. is the largest family footwear retailer in the Western Hemisphere. The company operates a total of 5,020 stores offering quality family footwear and accessories at affordable prices. In addition, customers can buy shoes over the Internet through Payless.com(SM), at http://www.payless.com As reported in Troubled Company Reporter's July 21, 2003 edition, Standard & Poor's Ratings Services affirmed its 'BB' corporate credit rating on Payless ShoeSource Inc. and its 'BB' senior unsecured bank loan rating on its wholly owned subsidiary, Payless ShoeSource Finance Inc. At the same time, Standard & Poor's assigned its 'B+' subordinated debt rating to Payless' proposed $200 million senior subordinated notes due 2013. The outlook is stable. As of May 3, 2003, Payless had about $240 million of debt outstanding. PG&E NATIONAL: US Trustee Appoints Senior Noteholders' Committee ---------------------------------------------------------------- An Ad Hoc Group of holders of 10% PG&E National Energy Group Senior Notes due 2011 represents $495,320,999 of senior notes and collectively holds the largest bloc of claims against the NEG Debtors. The Ad Hoc Group's Claims are non-contingent and undisputed and in the form of publicly tradable securities. The Senior Notes constitute claims solely against NEG. The Noteholders do not have claims against any other NEG affiliate. The Ad Hoc Group demands separate representation from other unsecured trade creditors and bank lenders to ensure that the interests of Senior Noteholders are prosecuted. During a 10-month pre-bankruptcy workout period, the Debtors, the Bank Lender Group and the Noteholder Group acknowledged in the course of their discussions that a comprehensive restructuring of NEG would require the restructuring of NEG's principal bank debt and the Senior Notes, which collectively total approximately $2,900,000,000 and constitute approximately 90% of the total estimated unsecured claims expected to be asserted against NEG. The value of Reorganized NEG stock and notes will be in significant part attributable to value tax benefits that are expected to flow to NEG on the realization of some $3,000,000,000 in tax losses. The banks, in contrast to the Noteholders, are motivated to maximize NEG's value insofar as that process does not interfere with their ability to collect their secured claims and obtain control of their collateral at the project level. Prompt disposition of assets at the project level, however, may have serious adverse effects on NEG's tax attributes, including the more than $3,000,000,000 in unrealized tax losses. The Senior Noteholders are critically interested in ensuring that the timing and manner of asset disposition occurs so as to maximize the present value of NEG's tax attributes and NEG's claims under its tax sharing agreement with PG&E Corporation. Throughout the course of the parties' discussions, it was evident that the Ad Hoc Group and the Banks are in a collision course as to their individual interests in NEG. To address concerns on Committee representation, the Court directed the United States Trustee for Region 4, W. Clarkson McDow, Jr. to appoint a committee consisting of Senior Noteholders. Accordingly, the U.S. Trustee appoints five entities as members of the Official Noteholders' Committee: A. AEGON USA Investment Management, LLC Attn: Clint Woods 4333 Edgewood Road, N.E., Cedar Rapids, IA 52499 Phone: (319) 896-6540 Fax: (319) 398-8931; B. California Public Employees Retirement System (CALPERS) Attn: Tom Baker 400 P. Street, Sacramento, CA 95814 Phone: (916)341-2162 Fax: (916)326-3330; C. John Hancock Financial Services, Inc. Attn: Marlene J. DeLeon 200 Clarendon Street, T.57, Boston, MA 02117 Phone: (617)572-9627 Fax: (617)572-0073; D. Wilmington Trust Company Attn: Steven Cimalore 1100 North Market Street, Wilmington, DE 19890 Phone: (302)636-6058 Fax: (302)636-4143; and E. Wind River Corporation c/o Principal Global Investors, LLC Attn: Michael Zorich 801 Grand Ave., Des Moines, IA 50392-0800 Phone: 515-246-4053 Fax: 515-248-2490 (PG&E National Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) PILLOWTEX CORP: Hires Logan & Company as Claims & Noticing Agent ---------------------------------------------------------------- In the course of the Chapter 11 proceedings, thousands of notices will have to be distributed to creditors, equity security holders and other parties-in-interest. Due to the sheer volume of these notices, Local Bankruptcy Rule 2002-1(f) requires Pillowtex Corporation and its debtor-affiliates to hire a noticing agent. Logan & Company, Inc. is one of the country's leading Chapter 11 administrators with experience in noticing and claims processing. In addition, Logan acted as Claims Agent for the Debtors' prior bankruptcy cases. Therefore, it possesses substantial knowledge of the Debtors' business. Moreover, based on the declaration of Kathleen M. Logan, Logan is a disinterested person, within the meaning of Section 101(14) and 1107(b), and as required by Section 327 of the Bankruptcy Code, in the present Chapter 11 cases. Thus, Debtors ask the Court to appoint Logan & Company, Inc. as Notice and Claims Agent who will: -- assume responsibility for the distribution of notices; -- handle and administer claims in the Debtors' Chapter 11 cases; and -- assist the Debtors with the preparation of their statements and schedules. (Pillowtex Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-0900) PRINCETON VENTURES: Hires Epstein Weber as New External Auditors ---------------------------------------------------------------- Effective August 5, 2003, the client-auditor relationship between Aero Marine Engine, Inc., formerly Princeton Ventures, Inc., and Morgan & Company, Chartered Accountants, a Professional Accountancy Corporation ceased as the former accountant was dismissed. On August 6, 2003, the Company engaged Epstein, Weber & Conover, PLC as its principal independent public accountant. Morgan & Company issued a going concern opinion on the financial statements of Princeton Ventures for the year ended June 30, 2002. The Company has been in the exploration stage since its formation and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Upon location of a commercial mineable reserve, the Company expects to actively prepare the site for its extraction and enter a development stage. PUBLICARD INC: June 30 Net Capital Deficit Narrows to $920,000 -------------------------------------------------------------- PubliCARD, Inc. (OTC Bulletin Board: CARD.OB) reported its financial results for the three and six months ended June 30, 2003. Sales for the second quarter of 2003 were $1,193,000, compared to $1,016,000 a year ago. The increase in sales resulted primarily from an improvement in shipments to distributors in the United States. The Company reported a net loss for the quarter ended June 30, 2003 of $929,000, or $0.04 per share, compared with a net loss of $1,227,000, or $0.05 per share, a year ago. As of June 30, 2003, cash and short-term investments totaled $1,841,000. For the six months ended June 30, 2003, sales were $2,606,000 compared to $2,215,000 a year ago. The improvement in sales resulted primarily from an increase in sales outside of the United Kingdom and revenues realized on several one-time custom development projects. The Company reported net income of $71,000 for the six months ended June 30, 2003 versus a net loss of $2,496,000, or $.10 per share, in 2002. The 2003 results include a gain of $1,707,000 relating to two separate settlements with various historical insurers that resolve certain claims (including certain future claims) under policies of insurance issued to the Company by those insurers. Headquartered in New York, NY, PubliCARD, through its Infineer Ltd. subsidiary, designs smart card solutions for educational and corporate sites. The Company's future plans revolve around a potential acquisition strategy that would focus on businesses in areas outside the high technology sector while continuing to support the expansion of the Infineer business. However, the Company will not be able to implement such plans unless it is successful in obtaining additional funding, as to which no assurance can be given. More information about PubliCARD can be found on its Web site http://www.publicard.com At June 30, 2003, PubliCARD's balance sheet shows a working capital deficit of about $100,000 and a total shareholders' equity deficit of about $920,000. Liquidity and Going Concern Considerations The Company's consolidated statements of operations and balance sheets contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred operating losses, a substantial decline in working capital and negative cash flow from operations for the years 2002, 2001 and 2000. The Company has also experienced a substantial reduction in its cash and short term investments, which declined from $17.0 million at December 31, 2000 to $1.8 million at June 30, 2003. The Company also had a working capital deficit of $89,000 and an accumulated deficit of $112.0 million at June 30, 2003. If the distress termination of the Company's defined benefit pension plan for which the Company has applied is completed, for which no assurance can be given, the Company's 2003 funding requirements for the plan could be eliminated, in which case management believes that existing cash and short term investments may be sufficient to meet the Company's operating and capital requirements at the currently anticipated levels through December 31, 2003. However, additional capital will be necessary in order to operate beyond December 2003 and to fund the current business plan and other obligations. While the Company is actively considering various funding alternatives, the Company has not secured or entered into any arrangements to obtain additional funds. There can be no assurance that the Company will eliminate the 2003 funding requirements for the defined benefit pension plan or be able to obtain additional funding on acceptable terms or at all. If the Company cannot raise additional capital to continue its present level of operations it may not be able to meet its obligations, take advantage of future acquisition opportunities or further develop or enhance its product offering, any of which could have a material adverse effect on its business and results of operations and could lead the Company to seek bankruptcy protection. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The independent auditors' report on the Company's Consolidated Financial Statements for the year ended December 31, 2002 contained an emphasis paragraph concerning substantial doubt about the Company's ability to continue as a going concern. RELIANCE GROUP: Friede Goldman Wants to Commence Rule 2004 Exams ---------------------------------------------------------------- Friede Goldman Halter, Inc., Halter Marine, Inc., and their debtor-affiliates ask the Bankruptcy Court for the Southern District of Mississippi for permission to examine Reliance Insurance Company pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure. The FGH Debtors filed for bankruptcy protection on April 19, 2001 in the United States Bankruptcy Court for the Southern District of Mississippi. Judge Edward R. Gaines presides over FGH's bankruptcy cases. FGH is a multi-national, worldwide leader in the design, manufacture, conversion and modification of equipment for the offshore energy and maritime industries. Since 1982, FGH has converted, retrofitted and repaired offshore drilling rigs. FGH is the product of the merger of Friede Goldman International, Inc. and Halter Marine Group, Inc. in November 1999. Hugh Ray, Esq., at Andrews & Kurth, in Houston, tells Judge Gaines that Reliance National Indemnity Company, a former RIC subsidiary, issued Policy No. NWA 0135251 to Halter Marine Group, Inc., providing workers' compensation and Longshore and Harbor Workers' Compensation Act coverage for the policy periods beginning March 1, 1998 and ending March 1, 2000. The Policy was subject to a Captive Reinsurance Plan, which provided that Offshore Marine Indemnity Co., a wholly owned FGH subsidiary, would reinsure RIC for the first $250,000 of incurred losses for a covered claim. This obligation was secured by a Captive Reinsurance Agreement dated July 1, 1996 and supported by Letter of Credit No. NZS337201, issued by Wells Fargo Bank (Texas), for $10,000,000. Under the Captive Reinsurance Agreement, RIC had no interest in the funds under the Letter of Credit unless it had made a payment of an insured workers' compensation or Longshore Act claim within that first $250,000 layer insured by OMIC. According to Mr. Ray, RIC has drawn down the entire $10,000,000 balance on the Letter of Credit, but has offered no proof that the funds have been used in accordance with the Captive Reinsurance Agreement. Therefore, FGH seeks to examine RIC. Judge Gaines grants the FGH Debtors' request. An oral examination of an authorized representative of RIC will take place at the offices of King, LeBlanc & Bland, at Bank One Center in New Orleans. RIC is directed to produce documents related to the disputed insurance policy, the Captive Reinsurance Agreement and the Wells Fargo Letter of Credit. (Reliance Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) REUNION INDUSTRIES: Has Until Nov. 23 to Meet Nasdaq Guidelines --------------------------------------------------------------- Reunion Industries, Inc. (Amex - RUN) announced that on August 1, 2003, the Company received notice from the staff of the American Stock Exchange that the AMEX has accepted the Company's plan to regain compliance with AMEX listing standards and has granted the Company an extension until November 23, 2004 to regain compliance with those standards. Currently, the Company does not meet the continued listing standards due to its shareholders' equity being less than the required amount in conjunction with operating losses in two of its three most recent fiscal years. The Company will be subject to periodic review by the AMEX staff during the extension period. Failure to make progress consistent with the terms of the plan or to regain compliance with the continued listing standards by the end of the extension period could result in the Company being delisted from the AMEX. Reunion manufactures and markets a broad range of metal and plastic products and parts, including seamless steel pressure vessels, fluid power cylinders, leaf springs, precision plastics products and thermoset compounds and provides engineered plastics services. Reunion Industries is headquartered at 11 Stanwix Street, Suite 1400, Pittsburgh, Pennsylvania, 15222. * * * As reported in Troubled Company Reporter's July 29, 2003 edition, Reunion Industries hired Wiss & Company LLP as its new independent accountants, to replace Ernst & Young LLP. The reports of Ernst & Young LLP on the financial statements for the past two fiscal years were modified as to uncertainty surrounding the Company's ability to continue as a going concern. SAFETY-KLEEN CORP: Post-Confirmation Directors for New Holdco ------------------------------------------------------------- The new Board of Directors includes only one member of the Reorganized Safety-Kleen's senior management. Most of the directors are veterans of other Chapter 11 reorganizations. 1) Ronald A. Rittenmeyer, Chairman Mr. Rittenmeyer joined Safety-Kleen's board as an outside director in April 2001. In September of 2001, he was named Chairman of the Board, CEO and President of Safety-Kleen. Mr. Rittenmeyer spent over 20 years with PepsiCo's Frito-Lay division in various executive roles. Upon leaving Frito-Lay, Mr. Rittenmeyer began a series of assignments reorganizing or reengineering a number of companies. He has worked in the capacity of Chairman, CEO, President and/or COO in companies ranging in size from $200MM in annual revenues (RailTex, Inc.) to $10 billion in annual revenues (Ameriserve, Inc.). Other companies that he has worked at include Ryder Truck, Merisel and Burlington Northern Railroad. 2) Ronald W. Haddock Mr. Haddock was President and CEO of FINA, Inc. from 1989 until 2000. He joined FINA, headquartered in Dallas, in June 1986 as Executive Vice President and Chief Operating Officer, and was elected to the company's Board of Directors in 1987. Prior to that, he was with Exxon for over 20 years as a VP and Director of Esso Eastern, Executive Assistant to the Chairman, and Vice President of Refining. Mr. Haddock has over 35 years of corporate management experience, including general management, finance planning and operations. Mr. Haddock currently serves on the Boards of Enron (restructured); Elektro, a Brazilian-based power generation and distribution company; Alon Energy USA, a petroleum refining and marketing company; Southwest Securities, Inc., a financial services company; Adea Solutions, Inc., a high tech personnel and consulting firm in Dallas; and SepraDyne, a Dallas-based environmental technology company. Mr. Haddock is chairman of the SepraDyne Board, the Southwest Securities Governance Committee, and the Adea Compensation Committee. In addition, Mr. Haddock is on the Dean's Visiting Committee of the School of Engineering at Purdue University where he obtained an engineering degree. 3) David Samuel Coats Mr. Coats has over 30 years of diverse corporate leadership experience, primarily focused on service and customer satisfaction in the airline industry. He has held senior-level management positions at Texas International Airlines, Southwest Airlines, and Continental Airlines, and COO/CEO positions at Muse Air and Southern Cross Airlines. Most recently, Mr. Coats was President and CEO of The Sammons Travel Group (2000-2001) and prior to that he served as President and CEO of PROS Revenue Management, Inc. (1996-1999). Mr. Coats holds B.A. and law degrees from the University of Texas. 4) R. Randolph Devening Mr. Devening was CEO, President and Chairman of Foodbrands America from 1994 until it was acquired by IBP in 1997 and then with IBP, which was in turn acquired by Tyson Foods, Inc. in 2001. Mr. Devening has over 30 years of experience in corporate leadership, including roles as Chief Financial Officer and Chief Executive Officer. Mr. Devening has been a board member for Autocraft Industries, Inc., Del Monte Foods, Entex Information Services, Fleming Companies (ending in 1994), Hancock Fabrics and Hussman Corporation. Mr. Devening has an International Relations degree from Stanford University and an MBA from the Harvard Business School. 5) Joshua Gotbaum For 13 years, Mr. Gotbaum was an investment banker with Lazard Freres, primarily in mergers and restructuring. He also held senior financial and management positions in the federal government -- Controller and Executive Associate Director of the Office of Management & Budget, Assistant Secretary of Treasury for Economic Policy, Assistant Secretary of Defense, and Associate Director/Economics of the White House Domestic Policy Office. Most recently, Mr. Gotbaum was the startup CEO of the September 11th Fund, a $500+ million charity. Mr. Gotbaum holds a bachelor's degree from Stanford University, a Master's degree in Public Policy from Harvard University and a JD from the Harvard Law School. 6) Michael P. Fountain Mr. Fountain is currently CEO, Technology & Global Freight Management, Americas & Europe for Exel Logistics, Inc. He has over 30 years experience primarily based in logistics in the air cargo and freight management industry. Mr. Fountain has held various lead positions with Exel since 1993, including President and CEO of four progressively larger regions -- USA, North America, North & South America, and Americas & Pacific. Exel is a global leader, which provides clients with a comprehensive solution to supply chain management and logistics. Mr. Fountain is a director of the Exel Executive Board and an Executive Director of the Exel PLC Board. He also serves on the Sprint Global Advisory Board and is Vice Chairman of Cargo 2000, a leading industry body in Global Freight Management. 7) William A. Holl Mr. Holl has over 20 years of corporate experience primarily with Coca-Cola Enterprises and has served in roles as Eastern Group Vice President, Eastern Group President, and as Corporate Senior Vice President. He is currently President and Chief Executive Officer of Coca-Cola Bottlers Sales and Services, LLC. Mr. Holl has significant logistics, operations turnaround, and sales experience. He holds a B.S. degree from University of Southern California and an MBA from the Harvard Business School. 8) Richard B. Neff Mr. Neff has over 30 years of experience in building and acquiring corporations. He has held progressively senior executive positions in various industries, primarily food distribution and including investment, leasing, building and land development and was instrumental in building one of the largest independent wholesale food distributors and warehouse operators in the New York City metropolitan area. Mr. Neff was formerly CFO and COO and is currently Chief Executive Officer and Co-Chairman of DI Giorgio Corporation. Mr. Neff has been a board member for Ryan Beck & Co. (Chairman in 1998), Bruno's Supermarkets and Transco Group. He is a graduate of Farleigh Dickinson University and is a CPA. 9) Glenn R. August Mr. August is President of Oak Hill Advisors, an investment management firm specializing in leveraged loans, high yield bonds and distressed investments. In this capacity, he is currently responsible for more than $4 billion of capital committed to the leveraged capital markets through various Oak Hill funds and separate accounts. He also serves as a Managing Partner of Oak Hill Special Opportunities Fund, a $500 million distressed private equity fund currently in formation. He joined the predecessor entity of Oak Hill, Acadia Partners, in 1987 and since then has invested more than $20 billion. Throughout his career at Oak Hill, Mr. August has served as a leading member of numerous creditors' committees and helped structure more than $10 billion of securities on behalf of Oak Hill and related entities. Prior to joining Oak Hill, he worked in the mergers and acquisitions department at Morgan Stanley. He serves as a director of Stage Stores, a public company that emerged from bankruptcy in 2001, and two non-profit institutions, the 92nd St. Y and the Mt. Sinai Children's Center Foundation. He previously served as a director of Ivex Packaging Corp. -- a packaging company that was acquired by Alcoa for approximately $800 million in 2002 -- and SPI Holdings, the parent of Spectradyne, and was Board Observer at Vons Companies, Inc. Mr. August received his BS degree from Cornell University and his MBA from Harvard Business School, where he was a Baker Scholar. 10) Matthew Kaufman Mr. Kaufman joined GSC Partners in 1997, and became a partner in January 2000. GSC Partners is an investment firm with $6 billion of capital under management, and invests in distressed debt, mezzanine loans, structured debt and private equity. He was previously Director of Corporate Finance with NextWave Telecom, Inc. Prior to that, he was with The Blackstone Group, in the Merchant Banking and Mergers & Acquisitions departments, and with Bear Stearns working primarily in the Mergers & Acquisitions department. He is a director of Burke Industries, Inc., Day International Group, Inc., Worldtex, Inc., and is Chairman of the Board of Pacific Aerospace & Electronics, Inc. Mr. Kaufman graduated with a B.B.A. degree and M.A.C.C. from the University of Michigan. (Safety-Kleen Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., 609/392-0900) SATCON TECHNOLOGY: Ability to Continue Operations Uncertain ----------------------------------------------------------- SatCon Technology Corporation designs, develops and manufactures high power electronics and standard and custom machines that convert, store and manage electricity for customers that require reliable, "always-on", electric power. SatCon also designs, develops and manufactures highly reliable electronics and controls for government and military applications. Its specialty motors are typically designed and manufactured for customers that purchase small efficient motors requiring high power relative to the size of the motor. As of March 29, 2003, the Company is in default under its Loan and Security Agreement, dated September 13, 2002, with Silicon Valley Bank due to its failure to obtain additional capital and to maintain adjusted tangible net worth, as defined. On April 4, 2003, the Company entered into an Amended and Restated Accounts Receivable Financing Agreement with the Bank. In the Agreement, the Bank has agreed to provide the Company with a line of credit of up to $5 million. Advances under the line of credit are limited to 80% of eligible accounts receivables. Based on current business levels, the Company believes that it will be able to borrow approximately $1.5 million from the Bank during the current quarter, of which over $1 million is already outstanding. Loans under this line of credit bear interest at the prime rate plus 3.0% per annum. Other customary banking fees are also charged. In connection with this financing, the Company issued to an affiliate of Silicon Valley Bank a warrant to purchase 210,000 shares of its common stock at an exercise price of $1.05 per share. The terms of the line of credit provide that the Company will be in default under the line of credit if it is unable to consummate the debenture offering on or before July 31, 2003. The Company is also required to maintain a tangible net worth in excess of $9 million at all times. Unless the Company is able to stem its current operating losses or sell assets at values higher than reflected on its books of account, the Company anticipates that its tangible net worth will drop below the required threshold as of June 28, 2003, the end of the Company's fiscal third quarter. Unless the Company can obtain a waiver from the Bank, dropping below this tangible net worth threshold would constitute a default under the line of credit documents. This credit expires on April 3, 2004 and carries a $0.1 million early termination fee. In order to sustain current business operations, the Company believes that it will require approximately $6 million of cash liquidity during the quarter ending June 28, 2003. In addition, its current forecast will require an additional $1.5 million in its fiscal fourth quarter before it stems the cash outflow. Of these amounts, approximately $1.5 million is expected to be provided by the Silicon Valley Bank line, $3 million from a third party guarantee acceptable to the bank, and $0.8 million by the debenture offering. Other than the bank line of credit, which is already in place, there can be no assurance that these transactions will take place. The Company has incurred significant costs to develop its technologies and products. These costs have exceeded total revenue. As a result, the Company has incurred losses in each of the past five years and for the six months ended March 29, 2003. As of March 29, 2003, it had an accumulated deficit of $102.7 million. Management of the Company is addressing additional cash needs through a combination of seeking equity infusions, sales of assets, selective workforce reductions, outsourcing some manufacturing and seeking to form joint ventures. The Company has embarked on a major restructuring of the Power Systems Division is order to address its cost structure. This initiative has already resulted in significant reductions in its work force from 167 employees at December 2002 to 74 employees at May 2003, which will be reflected as lower operating expenses in the near future. The Company is working aggressively on its goal to reduce its future cash flow burn rate to zero by fiscal year end. However, the Company does not expect to be profitable for its fourth quarter of fiscal year 2003. The Company has also engaged a financial advisor, Alliant Capital Partners (an affiliate of Silicon Valley Bank), to assist it in disposing of assets unrelated to its engineering and manufacturing expertise in electromechanical systems. The assets and businesses the Company would consider selling include its Ling test and measurement vibration system business, its patented smart predictive line control technology utilized by the electric arc steel manufacturing industry and patents acquired from Northrop Grumman related to hybrid electric vehicles. For larger systems, such as its UPS system, the Company intends to enter into strategic alliances for the manufacture, sale, service and distribution of its products. In view of the matters described in the preceding paragraphs, there is substantial doubt about the Company's ability to continue as a going concern. SEA CONTAINERS: Completes Asset Sale Transaction with Windwood -------------------------------------------------------------- On July 18, 2003, Sea Containers Ltd. completed the cash sale of all of the shares of its indirect wholly-owned subsidiary Sea Containers Isle of Man Ltd., which is the holding company of Sea Containers' Isle of Man Steam Packet ferry business, including The Isle of Man Steam Packet Company Ltd. subsidiary. The sale was to Windwood Limited, a company unaffiliated with Sea Containers and controlled by Montagu Private Equity Ltd., formerly the private equity arm of HSBC. Steam Packet operates passenger, vehicle and freight ferry services between the Isle of Man in the Irish Sea and England, Northern Ireland and the Republic of Ireland. Included in the sale was the ferry service of Sea Containers directly between England and the Republic of Ireland previously operated on its behalf by Steam Packet. Sea Containers will charter one of its fast ferries to Steam Packet for a term expiring in 2010 and continue to provide certain administrative services to Steam Packet under contract. Sea Containers will retain its remaining ferry service in the Irish Sea, between Northern Ireland and Scotland, which Steam Packet will oversee on Sea Containers' behalf under contract. The transaction was completed under sale and purchase documentation dated July 14, 2003. The sale price of pound 146,685,000 (approximately $240,000,000, including pound 4,685,000 of Steam Packet cash retained by Sea Containers), was agreed on an arm's-length basis and is subject to a post-closing working capital adjustment as of July 1, 2003. Part of the sale proceeds was used to redeem pound 61,490,000 of outstanding secured notes of a Steam Packet affiliate issued pursuant to a whole-business securitization of Steam Packet in April 2002, and the balance was used to repay part of a short-term bank loan borrowed by Sea Containers on July 1, 2003 to repay its publicly-held 9-1/2% and 10-1/2% senior notes that matured on that date. * * * As reported in Troubled Company Reporter's July 17, 2003 edition, Moody's Investors Service downgraded the ratings of Sea Containers Ltd. Ratings outlook is negative. Downgraded Ratings To From * $115 million 10.75% Sr. Notes due 2006 B3 B1 * $150 million 7.875% Sr. Notes due 2008 B3 B1 * $98 million 12.5% Sr. Sub. Notes due 2004 Caa1 B2 * Senior implied B2 B1 * Issuer rating B3 B1 The downgrades conclude the ratings review Moody's started on December 2002. The actions reflect the company's high debt levels, weak cash flow and weak operating performance. These are however offset by the company's fixed asset base, its position in certain markets and improving financial performance. Moody's is also concerned that "near-term debt maturities will not be covered by the company's current level of operating cash flows, and that additional asset sales or refinancing may be required to meet debt obligations." SK GLOBAL: Final Hearing on Togut Segal Engagement on August 20 --------------------------------------------------------------- On an interim basis, pending a final hearing at 2:00 p.m. on August 20, 2003, U.S. Bankruptcy Court Judge Blackshear authorizes SK Global America Inc., to employ Togut, Segal & Segal as its U.S. bankruptcy counsel. Albert Togut, Esq., and Scott E. Ratner, Esq., lead the team of TS&S lawyers charged with: * advising the Debtor of its powers and duties as a debtor- in-possession; * assisting in the preparation of financial statements, the schedules of assets and liabilities, the statement of financial affairs, and other reports and documentation required by the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure; * representing the Debtor at all hearings on matters pertaining to its affairs as a debtor-in-possession; * prosecuting and defending litigated matters that may arise during this Chapter 11 case; * negotiating, formulating, and confirming a plan of reorganization for the Debtor; * counseling and representing the Debtor concerning the assumption or rejection of executory contracts and leases, administration of claims, and numerous other bankruptcy related matters arising from this case; * counseling the Debtor about various litigation and reorganization matters relating to this Chapter 11 case; and * performing such other bankruptcy services that are desirable and necessary for the efficient and economic administration of this Chapter 11 case. TS&S charges $550 to $675 per hour for work performed by partners, and $115 to $470 per hour for hours logged by paralegals and associates. (SK Global Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) SPEIZMAN IND.: Listing on Nasdaq SmallCap Extended to Sept. 29 -------------------------------------------------------------- Speizman Industries, Inc. (Nasdaq: SPZN) reported that, pursuant to a hearing request before a Nasdaq Listing Qualification Panel, the Company received an extension to continue the listing of the Company's securities on The Nasdaq SmallCap Market until September 29, 2003, by which time the Company must evidence a closing bid price in its stock of at least $1.00 per share and, immediately thereafter, a closing bid price of at least $1.00 per share for a minimum of ten consecutive days. Speizman Industries is a leader in the sale and distribution of specialized industrial machinery, parts and equipment. The Company acts as exclusive distributor in the United States, Canada, and Mexico for leading Italian manufacturers of textile equipment and is a leading distributor in the United States of industrial laundry equipment representing several United States manufacturers. For additional information on Speizman Industries, please visit the Company's web site at http://www.speizman.com As reported in Troubled Company Reporter's April 7, 2003 edition, Speizman Industries, effective March 31, 2003, entered into a Sixth Amendment and Forbearance Agreement relating to its credit facility with SouthTrust Bank, extending the maturity date until December 31, 2003. The credit facility as amended provides a revolving credit facility up to $10.0 million and an additional line of credit for issuance of documentary letters of credit up to $7.5 million. The availability under the combined facility is limited to a borrowing base as defined by the bank. The Company, as of March 31, 2003, had borrowings with SouthTrust Bank of $4.8 million under the revolving credit facility and had unused availability of $2.5 million. STORAGENETWORKS: Nasdaq to Delist Shares Effective August 18 ------------------------------------------------------------ StorageNetworks, Inc. (Nasdaq: STOR) has been notified by Nasdaq that its common stock will be delisted from The Nasdaq National Market as of the opening of business on August 18, 2003. StorageNetworks' common stock is expected to begin trading on the OTC Bulletin Board (OTCBB) effective as of the opening of business on August 18, 2003. The delisting is a result of StorageNetworks' previously announced inability to meet Nasdaq's independent board and audit committee requirements for continued listing (Marketplace Rules 4350c and 4350(d)(2)), due to the resignation of certain of StorageNetworks' directors in February 2003. StorageNetworks has previously announced that its board of directors has adopted a Plan of Complete Liquidation and Dissolution. The ticker symbol of StorageNetworks' common stock on the OTCBB will be STOR. * * * As reported in Troubled Company Reporter's August 6, 2003 edition, StorageNetworks Inc. said it will liquidate after it was unable to sell the company at a high enough price, Bloomberg News reported. Investors will get about $1.60 to $1.70 a share, the company said in a statement on its web site, pushing the stock up as much as 19 percent. The Waltham, Massachusetts-based company had been turning itself into a software maker after its computer data-storage management business failed to make a profit. In March, it hired investment bankers to evaluate options, including a sale. The only offers to buy the company were too low, StorageNetworks said, reported the newswire. SUN HEALTHCARE: June 30 Balance Sheet Upside-Down by $196 Mill. --------------------------------------------------------------- Sun Healthcare Group, Inc., (OTC BB: SUHG) announced its operating results for its second quarter ended June 30, 2003. For the quarter ended June 30, 2003, Sun reported total net revenues of $282.6 million and a net loss, before income taxes and discontinued operations, of $9.6 million, compared with total net revenues of $283.1 million and a net loss, before income taxes and discontinued operations of $9.5 million for the three-month period ended June 30, 2002. The Company operated 157 long-term and other inpatient care facilities with 16,897 licensed beds on June 30, 2003, as compared with 243 facilities with 27,571 licensed beds on June 30, 2002. Sun Healthcare's June 30, 2003 balance sheet shows a working capital deficit of about $69 million, and a total shareholders' equity deficit of about $196 million. As previously announced, the Company completed the sale of the assets of SunScript Pharmacy Corporation and other pharmacy- related operations on July 15, 2003. Accordingly, results of those businesses have been reclassified as results from discontinued operations. For the quarter ended June 30, 2003, Sun's net revenues net of intersegment eliminations from its ancillary operations, which, as of August 8, 2003 primarily include SunDance Rehabilitation Corporation, CareerStaff Unlimited, SunPlus Home Health Services, Inc. and Shared Healthcare Systems, Inc., increased $1.6 million, from $64.5 million for the three months ended June 30, 2002, to $66.1 million for the same period in 2003. The net segment income, before restructuring costs, gain on sale of assets, income taxes and discontinued operations for those operations, decreased $4.5 million over the same period, from net income of $10.3 million to net income of $5.8 million. This decrease was the result of multiple factors including reimbursement cuts, labor increases and start-up costs associated with new CareerStaff offices. The net revenues and net income for the pharmacy operations, which were not included in the ancillary operations because they were reclassified into discontinued operations, were $65.2 million and $2.5 million, respectively, for the three months ended June 30, 2003. Net revenues from the long-term and inpatient care operations, which comprised 76.6 percent of Sun's total revenue in the second quarter of 2003, decreased $2.1 million to $216.5 million for the three months ended June 30, 2003, from $218.6 million for the same period in 2002. The net segment loss, before restructuring costs, gain on sale of assets, income taxes and discontinued operations from the long-term and inpatient care operations increased $0.7 million from $0.5 million for the three months ended June 30, 2002, to $1.2 million for the same period in 2003. Sun's inpatient care results of operations were negatively impacted by reductions in Medicare reimbursements of $6.8 million, which were partially offset by a market basket increase of $1.8 million. Without the reimbursement cuts Sun's inpatient care net revenues and net income, before restructuring costs, gain on sale of assets, income taxes and discontinued operations, would have been $221.5 million and $3.8 million, respectively. Sun's corporate overhead costs for the second quarter of 2003 decreased $6.2 million to $14.0 million from $20.2 million for the same period in 2002. This decrease is due to the Company's efforts to match its corporate infrastructure to the decreasing size of the enterprise as the restructuring of the Company continues. "Our restructuring of the Company is progressing well, as evidenced by the recent sale of SunScript and the divestiture of ninety-five nursing homes and hospital operations which collectively represent approximately seventy percent of our intended divestitures," said Richard K. Matros, Sun's chairman and chief executive officer. Matros continued, "Many challenges remain, but we are pleased by our progress to this point." As noted above, on July 15, 2003, Sun sold its pharmacy services business to Omnicare, Inc. for total consideration of up to $90 million in cash, of which $75 million was paid at closing and up to $15 million is payable post-closing, subject to reduction. Proceeds received at the closing of that sale were used to retire the Company's Term Debt as well as to reduce a significant portion of the balance owed by the Company under its Revolving Loan Agreement. Sun continues to restructure its long-term care facility portfolio to transition certain under-performing facilities to other operators. Pursuant to this initiative, Sun divested 60 facilities between March 31, 2003 and June 30, 2003. Those 60 facilities accounted for $4.0 million in losses during the second quarter of 2003. Sun divested an additional 14 facilities in July 2003 and anticipates that operations of 29 percent of the 143 long-term care facilities currently operated by the Company's subsidiaries may be divested as part of the current restructuring. "Despite the distractions of the restructuring, our long term care continuing operations improved to where we have been able to offset most of the reimbursements cuts that have hit the industry," said Mr. Matros. Sun and its subsidiaries have continued to receive funding under their Revolving Loan Agreement, even though the Company continues to be in covenant default of that loan agreement and has not obtained a waiver of those defaults. Sun's senior management will hold a conference call to discuss the Company's second quarter operating results today at 12 p.m. EDT / 9 a.m. PDT. To listen to the conference call, dial (877) 516-8526 and refer to Sun Healthcare Group. A recording of the conference call will be available from 1 p.m. EDT on August 12 until midnight EDT on August 19 by dialing (800) 642-1687 and using access code 1809707. Headquartered in Irvine, California, Sun Healthcare Group, Inc. owns many of the country's leading healthcare providers. Through its wholly owned SunBridge Healthcare Corporation subsidiary and its affiliated companies, Sun's affiliates together operate long- term and postacute care facilities in many states. In addition, the Sun Healthcare Group family of companies provides high-quality therapy, home care and other ancillary services for the healthcare industry. For further information regarding the Company and the matters reported herein, see the Company's Report on Form 10-K for the year ended December 31, 2002, a copy of which is available at the Company's Web site at http://www.sunh.com TECSTAR INC: Files Liquidating Plan and Disclosure Statement ------------------------------------------------------------ Don Julian, Inc., formerly known as Tecstar, Inc., and its debtor- affiliate filed their Chapter 11 Liquidating Plan and an accompanying Disclosure Statement with the U.S. Bankruptcy Court for the District of Delaware. A full-text copy of the Debtors' Plan is available for a fee at: http://www.researcharchives.com/bin/download?id=030804222528 The Debtors' Plan describes how Claims against, and Equity Interests in, the Debtor will be treated under a substantive consolidation of the Estates. The Plan provides for the distribution and treatment of 9 classes of claims and equity interests: Class Description Treatment ----- ----------- --------- 1 Priority Claims Unimpaired, deemed to accept the Plan; Will receive cash equal to the Claim on the Effective Date or as soon as practicable 2 Bank Group Secured Impaired, entitled to vote; When Claim made available, are entitled to receive: i) $16,914 or 50% of amounts remaining in escrow on account of Met-Pro's claim; and ii) $250,000 held in escrow in connection with the Firstmark Sale 3 Westar Secured Claim Impaired, entitled to vote; Will be paid from the Liquidation Proceeds and, if unliquidated at the time of distribution, will receive the Demo Systemes Note 4 Mechanics' Lien Impaired, deemed to accept the Secured Claims Plan; Will be paid in dull in accordance with the Amrofell Stipulation and the Met-Pro Stipulation 5 Irwin Business Impaired, entitled to vote; Leasing Secured Entitled to payment of the fair Claim market value of such creditor's interest in the Collateral securing its Claim. 6 S&C Electric Secured Impaired, entitled to vote; Claim Entitled to payment of the fair market value of such creditor's interest in the Collateral securing its Claim. 7 Other Secured Claims Impaired, entitled to vote; Entitled to payment of the fair market value of such creditor's interest in the Collateral securing its Claim. 8 General Unsecured Impaired, entitled to vote; Claim Consistent with the Global Stipulation, distribution will be made in a Pro Rate basis, from the Unsecured Creditor Fund and from the Supplemental Unsecured Creditor Payments 9 Equity Interests Impaired, deemed to reject the Plan; Holders will not receive or retain any property under the Plan. Tecstar, Inc., n/k/a Don Julian, Inc., manufactures high- efficiency solar cells that are primarily used in the construction of spacecraft and satellite. The Company filed for chapter 11 protection on February 07, 2002 (Bankr. Del. Case No. 02-10378). Tobey M. Daluz, Esq., at Ballard Spahr Andrews & Ingersoll LLP and Jeffrey M. Reisner, Esq., at Irell & Manella LLP represent the Debtors in their restructuring efforts. When the company filed for protection from its creditors, it listed assets of over $10 million and debts of over $50 million. TELESYSTEM INT'L: S&P Upgrades Junk Corp. Credit Rating to B- ------------------------------------------------------------- Standard & Poor's Ratings Services raised its long-term corporate credit rating on Montreal, Quebec-based Telesystem International Wireless Inc. to 'B-' from 'CCC+'. The rating has been removed from CreditWatch, where it was placed June 18, 2003. The outlook is stable. "The revised rating follows repayment on Aug. 8, 2003, of the remaining principal amount on TIW's senior guaranteed notes due December 2003. As such the refinancing risk on the notes is no longer a concern," said Standard & Poor's credit analyst Joe Morin. TIW has no material amount of debt remaining at the corporate level. The analytical approach used in assigning TIW's rating is based on Standard & Poor's methodology with respect to parent and subsidiary relationships. The rating on TIW reflects the combined credit risk profiles of principal operating subsidiaries, Mobifon S.A. (Mobifon) and Cesky Mobil A.S. (Cesky Mobil). The rating on TIW is further supported by a relatively stronger credit risk profile at Mobifon, though offset by a relatively weaker credit risk profile at Cesky Mobil. Mobifon's financial risk profile is deemed to be high given its relatively high overall leverage for an emerging market operator, the debt structure that is in place at Mobifon Holdings B.V., and its substantial foreign currency exposure to Romania. These factors are somewhat mitigated by Mobifon's dominant market position in the Romanian wireless industry, high EBITDA margins, and improving free cash flows. Cesky Mobil is still in the early stages of development, having entered the highly competitive Czech Republic market just over three years ago. It too has relatively high leverage, an aggressive five-year amortization schedule on its senior secured bank facility, as well as limited liquidity and financial flexibility. Cesky Mobil has performed well recently and may turn free cash flow positive in the second half of 2003; however, continued revenue and cash flow growth could prove difficult in the saturated Czech market. The stable outlook reflects Standard & Poor's view that TIW will continue to receive sufficient funds from Mobifon, through Mobifon Holdings and Clearwave, to ensure that corporate overhead and other corporate obligations are met. The outlook also assumes that TIW would not incur any additional debt to make new investments or to fund operations at its current subsidiaries. TELETECH HOLDINGS: Will Publish Second Quarter Results Thursday --------------------------------------------------------------- TeleTech Holdings, Inc. (Nasdaq: TTEC), a global provider of customer management solutions, announced details relating to the release of its second quarter 2003 financial results and related conference call and webcast. TeleTech will release second quarter 2003 results on Thursday, August 14, 2003, when a summary press release will be issued and its Report on Form 10-Q will be filed with the Securities and Exchange Commission. A conference call and webcast with management will be held the following morning on Friday, August 15, 2003 at 11:00 a.m. Eastern time. You are invited to join a live webcast of the conference call by visiting the "Investors" section of the TeleTech website at http://www.teletech.com If you are unable to participate during the live webcast, a replay of the call will be available on the TeleTech Web site through Friday, August 29, 2003. For twenty years, TeleTech has managed the customer experience for some of the world's largest enterprises. TeleTech's customer care services help companies acquire, serve, grow and retain customers throughout the entire relationship lifecycle. TeleTech offers solutions to a variety of industries including financial services, transportation, communications, government, healthcare and travel. With a presence that spans North America, Asia-Pacific, Europe and Latin America, TeleTech provides comprehensive customer care services to global organizations. Additional information on TeleTech can be found at http://www.teletech.com * * * As reported in Troubled Company Reporter's July 14, 2003 edition, TeleTech Holdings said the due to charges to be incurred in its profit improvement and cost reduction initiatives, the Company will not be in compliance with certain financial covenants in its revolving credit and senior note agreements. TeleTech is working with the lender groups to obtain the necessary waivers and amendments, and believes it will be successful in these efforts prior to filing its second quarter Form 10-Q in August 2003. As of June 30, 2003 TeleTech had total debt of approximately $120 million and cash and cash equivalents of approximately $115 million. UNICCO SERVICE: Arranges Credit Facility Refinancing with CIT ------------------------------------------------------------- UNICCO(R) Service Company, one of North America's largest integrated facilities services outsourcing companies, announced the refinancing of its revolving credit facility with The CIT Group/Business Credit Inc., a unit of CIT Group (NYSE:CIT). The refinancing, which replaces a similar facility with other lenders, consists of a three-year, secured revolving credit facility for $60 million. Additionally, the company entered into an agreement with noteholders of $47 million of outstanding subordinated notes. This agreement, which includes both economic and non-economic changes, was unanimously approved by the company's noteholders. George A. Keches, president and COO, stated, "The refinancing of our senior revolving credit facility, as well as the restructuring of certain terms of our subordinated notes, fully resolves the covenant compliance matters resulting from the company's financial support of an affiliated insurance company." UNICCO Service Company (S&P, B Corporate Credit Rating, Negative) is one of North America's largest and most successful Integrated Facilities Services companies with over $600 million in sales, 20,000 employees and a 95 percent customer retention rate. The company has over 50 years of facilities outsourcing experience, including maintenance, operations, engineering, cleaning, lighting and administrative/office services for 1,000 educational, commercial, corporate, and industrial, government, and retail customers. UNICCO's advanced facilities technologies include its proprietary myUNICCO.com customer portal and the UNI-Q(sm) palmtop inspection system, best-of-breed computerized maintenance management systems (CMMS), eProcurement, and 24x7x365 call centers. For further information, visit http://www.unicco.com UNIFORET INC: Satisfies All Conditions to Implement CCAA Plan ------------------------------------------------------------- UNIFORET INC. and its subsidiaries, Uniforet Scierie-Pate Inc. and Foresterie Port-Cartier Inc., announced that all the conditions precedent to the implementation of their plan of arrangement pursuant to the Companies' Creditors Arrangement Act (Canada) have been satisfied. In the context of the implementation of its plan of arrangement, the Company has signed two trust deeds governing the new notes issued in replacement of the notes previously issued pursuant to the indenture dated October 15, 1996, the whole in accordance with the terms of the Company's plan of arrangement and the decision rendered by the Quebec Superior Court on May 16, 2003. As of today, no transaction on these previously issued notes will be recognized by the Company. Also, the Canadian convertible debentures issued pursuant to the indenture dated May 9, 1996 will cease trading as of today on the Toronto Stock Exchange and transactions on these debentures will no longer be recognized by the Company. In replacement of these Canadian debentures, the debentureholders will receive a cash payment or shares of the Company, the whole in accordance with the terms of the Company's plan of arrangement and the decision rendered by the Quebec Superior Court on May 16, 2003. The Company undertakes all necessary steps so that the different payments provided by its plan of arrangement, including the issuance of new notes and shares, be made before the end of September 2003. The Company manufactures softwood lumber. It carries on business through mills located in Port-Cartier and in the Peribonka area. Uniforet Inc.'s securities are listed on The Toronto Stock Exchange under the trading symbol UNF.A, for the Class A Subordinate Voting Shares. UNITED AIRLINES: Wants Approval to Continue Mercer's Engagement --------------------------------------------------------------- United Airlines Inc., asks U.S. Bankruptcy Court Judge Wedoff to extend the employment of Mercer Management Consulting as Executory Contract Consultants until September 12, 2003. United also seeks to expand the scope of Mercer's services to include "vendor executory contracts in Catering, Information Technology, Telecom, Maintenance, United Loyalty Services, Marketing, Advertising, Hotels and other areas which have agreements that qualify as executory contracts as directed by United." James H.M. Sprayregen, Esq., reports that Mercer has completed its analysis of executory contracts and has identified preliminary disposition strategies. Mercer continues to monitor and support United's negotiations with its contract counterparties. Additionally, Mercer has been asked to identify where similar strategies can be used to assist United in making decisions on a greater universe of contracts. (United Airlines Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) UNITED INDUSTRIES: June 30 Net Capital Deficit Narrows to $63MM --------------------------------------------------------------- Conducting business as Spectrum Brands, United Industries Corporation, the leading manufacturer and marketer of value- oriented products for the consumer lawn and garden care and insect control markets in the United States, announced record results for the second quarter and six months ended June 30, 2003. Comparing actual results for the three months ended June 30, 2003 with actual results for the three months ended June 30, 2002, United's results were as follows: net sales before promotion expense increased 5.4% to $222.2 million from $210.8 million, net sales increased 5.6% to $206.0 million from $195.1 million, operating income increased 9.4% to $44.3 million from $40.5 million and net income decreased 18.9% to $21.4 million from $26.4 million, respectively. Comparing actual results for the six months ended June 30, 2003 with actual results for the six months ended June 30, 2002, United's results were as follows: net sales before promotion expense increased 15.6% to $416.0 million from $360.0 million, net sales increased 16.1% to $384.8 million from $331.5 million, operating income increased 20.6% to $75.4 million from $62.5 million and net income decreased 4.9% to $34.8 million from $36.6 million, respectively. Comparing actual results for the three months ended June 30, 2003 with pro forma results for the three months ended June 30, 2002, which reflect the May 2002 merger with Schultz Company and the December 2002 acquisition of WPC Brands, Inc., United's results were as follows: net sales before promotion expense decreased 7.1% to $222.2 million from $239.1 million, net sales decreased 7.6% to $206.0 million from $222.9 million, operating income decreased less than 1% to $44.3 million from $44.6 million and net income decreased 23.8% to $21.4 million from $28.1 million, respectively. Comparing actual results for the six months ended June 30, 2003 with pro forma results for the six months ended June 30, 2002, which reflect the transactions described above, United's results were as follows: net sales before promotion expense decreased 3.1% to $416.0 million from $429.2 million, net sales decreased 3.7% to $384.8 million from $399.6 million, operating income increased 5.2% to $75.4 million from $71.7 million and net income decreased 14.5% to $34.8 million from $40.7 million, respectively. The decrease in net income on both an actual and pro forma basis reflects an increase in United's effective tax rate from 19% in 2002 to 38% in 2003, which is reflective of the Company's increased profitability. From a liquidity perspective, second quarter 2003 earnings before interest, income taxes, depreciation and amortization, or EBITDA, increased 11.4% to $48.0 million from $43.1 million for the second quarter of 2002. For the six months ended June 30, 2003, EBITDA increased 20.3% to $81.3 million from $67.6 million for the six months ended June 30, 2002. On a pro forma comparative basis, second quarter 2003 actual EBITDA increased less than 1% to $48.0 million compared to pro forma EBITDA of $47.9 million for the second quarter of 2002. On a pro forma comparative basis, for the six months ended June 30, 2003, EBITDA increased 4.2% to $81.3 million from $78.0 million for the six months ended June 30, 2002. EBITDA information presented herein cannot be directly compared to that presented in the Company's press releases issued during 2002, as new financial reporting rules prohibit the inclusion of certain non-cash expenses in the calculation of EBITDA. Furthermore, EBITDA is not defined by generally accepted accounting principles (GAAP) and may not be comparable to other similarly titled measures prepared by other companies. United Industries Corporation's June 30, 2003 balance sheet shows a total shareholders' equity deficit of about $63 million. Bob Caulk, United's Chairman and CEO, stated, "Despite the weather challenges our industry has faced this year, combined with our retail customers' continued focus on reducing inventories, we are pleased to report record financial results for the second quarter and six months ended June 30, 2003. In the second quarter, we experienced a slow start and strong finish, as cool temperatures and wet weather persisted in April and May, followed by conditions more conducive to gardening and outdoor activities in June. We are particularly satisfied that, despite these adverse conditions, we were effective in achieving our acquisition related synergy targets to obtain a good bottom line result. We continue to be particularly pleased with the results of our Spectracide(R), Cutter(R) and Garden Safe(TM) brands." Caulk continued, "With regard to our full year guidance, we now believe that too much volume related to early season categories was lost to the poor weather. As such, our previously issued full year guidance of low double-digit percentage EBITDA growth is unattainable. With regard to where we will finish up the year, there are several factors which could have an impact on our 2003 full year EBITDA, including our consumer and trade promotions, weather and our retailer line reviews. To date, in the ongoing line review process, we have received both negative and positive news from individual retailers on elements of our programs. The results of these line reviews may have an impact on 2003 full year volumes and costs, as transitional expenses such as inventory write-offs and packaging development costs may or may not occur." United is the leading manufacturer and marketer of value-oriented products for the consumer lawn and garden care and insect control markets in the United States and offers one of the broadest lines in the industry under a variety of brand names. The Company's household brands include Hot Shot(R) and Cutter(R). The Company's lawn and garden brands include Spectracide(R), Garden Safe(TM), Real-Kill(R) and No-Pest(R) in the controls category and Vigoro(R), Sta-Green(R), and Schultz(TM) in the lawn and garden fertilizer and organic growing media categories. More information about United can be found at http://www.spectrumbrands.com U.S. ENERGY: Subsidiary to Sell Certain Assets to Cactus Group -------------------------------------------------------------- U.S. Energy Corp. (Nasdaq: USEG) and Crested Corp. (OTC Bulletin Board: CBAG), d/b/a USECC, announced that U.S. Energy Corp's. wholly owned indirect subsidiary, Canyon Homesteads, Inc. has entered into a Stock Purchase Agreement with The Cactus Group, a private company of Denver, CO, for CG to purchase various commercial and real estate holdings at the Ticaboo Townsite for $3.68 million of which, $466,800 will be paid by CG at closing, $210,000 will be paid to USE from the sale of lots at the Ticaboo Townsite and $3,003,200 in the form of a Promissory Note payable to USE. The Ticaboo Townsite is located in southern Utah near Lake Powell. The sale is subject to preparation of the necessary closing documents and approval by the various Boards of Directors of the Companies involved. It is currently projected that the contract will close on or before August 12, 2003. "I look forward to concluding this agreement with The Cactus Group," stated Keith Larsen, President of U.S. Energy Corp. "This sale is consistent with our previously stated goals to sell off the non-core assets of U.S. Energy Corp. and Crested Corp. and increase our efforts in the development of the Companies' coalbed methane assets," concluded Larsen. U.S. Energy Corp. and its majority owned subsidiary, Crested Corp., are engaged in joint business operations as USECC, and through their subsidiary Rocky Mountain Gas, Inc., own interests in over 320,000 gross acres prospective for coalbed methane in the Powder River Basin of Wyoming and Montana and acreage adjacent to the Greater Green River Basin in southwest Wyoming. Certain properties are subject to a definitive agreement with a division of Carrizo Oil & Gas, Inc. of Houston, TX to develop and expand RMG's CBM properties dated July 10, 2001. Other properties are held by another CBM company (Pinnacle Gas Resources, Inc.) to develop and expand CBM properties. U.S. Energy's and Crested's subsidiary, Rocky Mountain Gas, Inc. owns an equity interest in Pinnacle. USECC owns control of Sutter Gold Mining Company, which owns gold properties in California. USECC also owns various interests in uranium properties in Wyoming and Utah. * * * In its Form 10-Q for the quarter ended March 31, 2003, U.S. Energy Corp., reported: "The [Company's] condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. We have sustained substantial losses from operations in recent years, and such losses have continued through March 31, 2003. In addition, we have used, rather than provided, cash in our operations. "...[R]ecoverability of a major portion of the recorded asset amounts shown in the condensed consolidated accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon our ability to meet our financing requirements on a continuing basis, to maintain present financing, and to succeed in our future operations. "We continue to pursue several items that will help us meet our future cash needs. We are aggressively pursuing claims against Nukem. We are also currently working with several different sources, including both strategic and financial investors, in order to raise sufficient capital to finance our continuing operations. Although there is no assurance that funding will be available or that the outcome in the Nukem litigation will be positive, we believe that our current business plan, if successfully funded, will significantly improve our operating results and cash flow in the future." WACKENHUT CORRECTIONS: Reports Improved Second Quarter Results -------------------------------------------------------------- Wackenhut Corrections Corporation (NYSE: WHC) reported second quarter 2003 earnings per share of $0.29 or $6.3 million compared with $0.25 or $5.4 million in the second quarter of 2002, a 17 percent increase. For the first half of the year, earnings per share were $0.54 or $11.5 million compared with $0.50 or $10.6 million for the first six months of 2002. Revenue for the second quarter increased to $153 million compared with $141 million in the second quarter of 2002. Revenue for the first six months of 2003 increased to $298 million compared with $281 million during the first six months of last year. Increases in revenues for the first and second quarters of 2003 are attributable to the opening of the Lawrenceville Correctional Facility in Virginia in March of this year, a strengthening of the Australian dollar, improved occupancy rates and contractual adjustments for inflation. Contribution from operations for the second quarter in 2003 increased by 27 percent to $20.1 million compared with $15.8 million in the second quarter of 2002. Contribution from operations for the first six months of the year increased by 30 percent to $38.7 million from $29.8 million in the comparable period a year ago. Increases in contribution from operations in the first and second quarters of 2003 reflect cost reductions in workers' compensation and general liability insurance and a reduction of lease expense due to the purchase of four previously leased facilities. George C. Zoley, Chairman and Chief Executive Officer of WCC, said, "We are very pleased with our financial performance in the second quarter of 2003. We have met our goals and continue to focus on enhancing shareholder value. The month of July marked several significant milestones for WCC. We successfully refinanced our senior secured credit facility and issued $150 million in senior unsecured notes at favorable interest rates. We also completed the sale of our interest in our UK Joint Venture, generating approximately $80 million in pre-tax proceeds. Additionally, we repurchased all 12 million shares of our common stock previously owned by Group 4 Falck." Zoley further stated, "The repurchase of the shares has transformed our company from a corporate subsidiary into a truly independent company with full access to the capital markets and the ability to grow at our own pace. We are very excited about our future." WCC is a world leader in the delivery of correctional and detention management, health and mental health services to federal, state and local government agencies around the globe. WCC offers a turnkey approach that includes design, construction, financing and operations. The Company represents 31 government clients servicing 48 facilities in the United States, Australia, South Africa, New Zealand, and Canada with a total design capacity of approximately 36,000 beds. As reported in Troubled Company Reporter's May 5, 2003 edition, Standard & Poor's Ratings Services placed its 'BB-' corporate credit and 'BB' senior secured debt ratings on Wackenhut Corrections Corp., on CreditWatch with negative implications. Negative implications mean that the ratings could be lowered or affirmed, following Standard & Poor's review. Boca Raton, Florida-based WCC, a provider of a comprehensive range of prison and correctional services, had about $125 million of debt outstanding at Dec. 29, 2002. WESTAR ENERGY: Second Quarter Results Show Marked Improvement ------------------------------------------------------------- Westar Energy, Inc. (NYSE:WR) announced earnings of $27.9 million, or $0.39 per share, for the second quarter 2003. This compares to $9.2 million, or $0.13 per share, for the second quarter 2002. For the first six months ended June 30, 2003, the Company reported earnings of $151.6 million, or $2.10 per share, compared to a loss of $737.1 million, or $10.31 per share, for the first six months of 2002. Earnings from continuing operations for the second quarter 2003 were $21.8 million, or $0.30 per share, compared to $8.3 million, or $0.11 per share, for the same period in 2002. Earnings from continuing operations for the six months ended June 30, 2003, were $41.9 million, or $0.57 per share, compared to $14.0 million, or $0.20 per share, for the same period in 2002. Earnings from continuing operations exclude the results of the Company's monitored security businesses which are classified as discontinued operations. Utility Operations Westar Energy's utility operations reported revenues of $345.9 million for the second quarter of 2003, compared to revenues of $332.7 million for the same period last year, an increase of 4.0 percent. Retail revenues from residential, commercial and industrial customers decreased $8.0 million or 3.1 percent, reflecting milder weather than for the same period last year. Higher wholesale revenues offset the reduction in retail revenues. Revenues in the first six months of 2003 were $691.3 million compared to $649.7 million in the same period a year ago, an increase of 6.4 percent. This increase in revenues is largely the result of greater wholesale revenues. Utility operations contributed earnings of approximately $23.8 million, or $0.33 per share, for the second quarter 2003 compared to a loss of $2.6 million, or $0.04 per share, for the second quarter 2002. The change in earnings for the quarter was attributable to more favorable wholesale market conditions, reduced selling, general and administrative expenses and reduced interest expense from the previous year. Selling, general and administrative expenses in 2002 included a charge of approximately $9.0 million related to the exchange of restricted share units. Pursuant to a regulatory order, 2003 second quarter utility operations includes interest income of $12.9 million from an affiliate. The utility earnings for the same period in 2002 did not include this interest income. This interest income (and corresponding interest expense for the Company's affiliate) is eliminated in the Company's consolidated results. Utility operations for the six months ending June 2003 contributed earnings of approximately $44.5 million, or $0.62 per share, compared to a loss of $17.5 million, or $0.24 per share, for the same period in 2002. The change in utility earnings for this period was attributable to more favorable wholesale market conditions and reduced operating and interest expense. The reduction in operating expenses as compared to 2002 resulted from a reduction in depreciation expense primarily due to the adoption of new depreciation rates, a charge of approximately $36 million in 2002 related to employee severance, and a charge of approximately $9.0 million in 2002 related to the exchange of restricted share units. These reductions were offset by $6.7 million of expenses in 2003 related to the special committee investigation. Utility operations for the first six months of 2003 includes $26.8 million in interest income received from an affiliated company. The utility earnings for the same period in 2002 did not include this interest income. Other Operations Westar Energy's other operations include its ownership interest in ONEOK, discontinued operations and other miscellaneous investments. Effective the first quarter of 2003, the Company classified its monitored security businesses as discontinued operations. Other operations recorded a loss of $2.2 million, or $0.03 per share, for the second quarter 2003, compared to earnings of $10.7 million, or $0.15 per share, for the same period last year. The decrease results primarily from lower investment earnings from our holdings in ONEOK due to the sale of a portion of these ONEOK shares and increased interest expenses associated with the payment of interest to Westar Energy's utility segment. Other operations recorded a loss of $3.1 million, or $0.04 per share, for the six months ended June 2003 compared to earnings of $31.6 million, or $0.44 per share, for the same period last year. The decrease is primarily due to higher operating and interest expenses in 2003 and lower investment earnings received from ONEOK in 2003. On August 5, the Company priced an offering of 9.5 million shares of ONEOK common stock at a public offering price of $19.00 per share. In addition, the Company sold 2.6 million shares of ONEOK common stock to ONEOK at the public offering price of $19.00 per share. Upon closing, the Company will receive $230.5 million in gross proceeds from these transactions. These transactions reduced our stake in ONEOK from 27.5 percent to approximately 15 percent. Westar Energy will use the proceeds of the sale, net of taxes and expenses, to reduce its debt. The transaction is expected to close on Monday, August 11, 2003. Westar Energy, Inc. (NYSE:WR) (S&P/BB+/Developing/--) is the largest electric utility in Kansas and owns interests in monitored security businesses and other investments. Westar Energy provides electric service to about 657,000 customers in the state. Westar Energy has nearly 6,000 megawatts of electric generation capacity and operates and coordinates more than 36,600 miles of electric distribution and transmission lines. The company has total assets of approximately $6.7 billion, including security company holdings through ownership of Protection One, Inc. (NYSE: POI). Through its ownership in ONEOK, Inc. (NYSE: OKE), a Tulsa, Okla.- based natural gas company, Westar Energy has, prior to completion of the ONEOK transaction described herein, a 27.5 percent interest in one of the largest natural gas distribution companies in the nation, serving nearly 2 million customers. For more information about Westar Energy, visit http://www.wr.com WILLIAMS SCOTSMAN: Proposed $150MM Senior Notes Get B+ Rating ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' rating to Williams Scotsman Inc.'s proposed $150 million senior second secured notes. Standard & Poor's also affirmed its 'B+' corporate credit rating on the mobile office lessor. However, the outlook was revised to negative from stable. The Baltimore, Maryland-based company has approximately $1.0 billion in lease-adjusted debt. Ratings on Williams Scotsman Inc. reflect its weak earnings, substantial debt burden, and potential issues with meeting bank covenants. Positive credit factors include the company's 25% market share of the mobile office leasing market and stable cash flow. "The outlook revision reflects Standard & Poor's concern that Williams Scotsman's financial performance, which has been weaker than expected, will continue to be pressured by reduced demand, resulting in lease and utilization rates below historical levels," said Standard & Poor's credit analyst Kenneth L. Farer. The new senior secured notes will have a second lien on substantially all assets of the company. The company's credit facility has a priority lien on substantially all assets of the company, with availability subject to a borrowing base. Standard & Poor's believes that collateral coverage for the second secured notes should provide for a strong likelihood of full recovery of principal in the event of default or bankruptcy. The company is amending covenants in its credit facility to relax the leverage, utilization, and interest coverage ratios. The completion of the amendments is a condition precedent to the completion of the new debt offering. The company's fleet consists of 94,000 units leased through a North American network of over 80 locations. The company's market share is approximately 25%, second to GE Capital Modular Space, with the third-largest competitor's market share less than one- third the size of Williams Scotsman's and the balance of the industry highly fragmented. The primary industry sectors that lease mobile units are construction, commercial/industrial, education, and government. Leasing mobile office units offers customers more flexibility and lower costs than the construction of permanent facilities for certain purposes. Although the industry is typically thought to be somewhat recession resistant, with historic utilization rates around 85%, utilization rates have declined during the current economic slowdown, averaging 76% for the first half of 2003 and 78% in 2002. Williams Scotsman's credit ratios remain relatively weak, reflecting increased debt levels incurred to expand its fleet in the late 1990s. Pretax interest coverage has averaged in the mid- 1x area, EBITDA coverage at around 2x, and funds from operations to debt around 10%. The company's debt to capital continues at the high level of 98.3% at March 31, 2003, although this was an improvement from 125.8% in 1997, when the company recapitalized. The company's financial flexibility, adequate for the rating, is significantly weaker than that of its major competitor, GE Capital Modular Space, reflecting a weak balance sheet, private ownership, and limited access to the capital markets. Its liquidity is also substantially weaker, with minimal cash and most assets pledged against its credit facilities. At March 31, 2003, the company had $169 million of goodwill on its balance sheet, equal to 14% of assets. Ratings could be lowered if covenants are breached, anticipated earnings improvements are not realized, or the financial profile weakens further. WINSTAR: Ch. 7 Trustee Asks Court to Clear P&T Supply Settlement ---------------------------------------------------------------- Winstar Communications' Chapter 7 Trustee Christine C. Shubert asks the Court to approve its June 30, 2003 Settlement Agreement with Power and Telephone Supply. The Trustee sought to recover a $1,747,962 preferential transfer from Power and Telephone Supply pursuant to Sections 547 and 550 of the Bankruptcy Code. Sheldon K. Rennie, Esq., at Fox Rothschild LLP, in Wilmington, Delaware, recounts that P&T provided evidence that payments were made in the ordinary course of business. This, in turn, reduced the gross preference amount to $1,100,000. In light of the high costs of litigation, the Trustee agreed to accept $774,900 in full and final settlement of all claims and the parties will exchange mutual releases. (Winstar Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM INC: Wants Nod to Rationalize International Operations --------------------------------------------------------------- Worldcom Inc., and its debtor-affiliates want to implement a realignment and consolidation of their European, Middle Eastern and African subsidiaries -- the EMEA Group -- pursuant to which the ownership of the EMEA Group would be consolidated under a newly organized holding company. Under the EMEA Rationalization, the Debtors plan to consolidate multiple subsidiaries existing in a single country into a single entity with the goal being that, where feasible, there will be only one WorldCom company per country. Because of license requirements and mergers, as well as other factors, there are often multiple EMEA Subsidiaries within one country. The EMEA Rationalization is intended to rationalize the ownership and operation of EMEA and foster more efficient management. Redundancies and duplication will be eliminated through the combination of entities and consolidation of functions. Costs will be reduced as the need to maintain multiple entities within a single country will be eliminated. In addition, cash management will be greatly enhanced and the amount of funding required to be provided from the Debtors will be reduced. The assets and liabilities of the EMEA Group are spread unevenly among the different entities. The EMEA Rationalization will facilitate the consolidation of these assets and liabilities and reduce or eliminate the net liabilities showing currently on the balance sheets of certain of these companies. By effecting the EMEA Rationalization, many of inter-company payables and receivables will be eliminated. Currently, nine WorldCom entities directly own shares in the EMEA Subsidiaries: * UUNET Technologies, Inc., * MCI International, Inc., * UUNET Holdings Corp., * UUNET International, Ltd., * MCI International Services, LLC, * WorldCom International, Inc., * WorldCom International Data Services, Inc., * Marconi Telegraph-Cable Company, Inc., and * MFS Globenet, Inc., a non-debtor. There are approximately 73 EMEA Subsidiaries involved in the Rationalization, the majority of which are located in Europe. Most European countries contain more than one EMEA Subsidiary. WorldCom is the parent corporation of MCI Communications Corp, which, in turn is the parent corporation of UUNET Technologies and MCI International. Each of the EMEA Subsidiaries -- except WorldCom Wireless (UK) Limited, a subsidiary of WorldCom International Mobile Services, Inc. -- is a direct or indirect subsidiary of UUNET Technologies or MCI International. The proposed reorganization will integrate the international operations of UUNET Technologies and its subsidiaries and MCI International and its subsidiaries into one business unit organized along business lines. An Agreement and Plan of Corporate Reorganization between WorldCom and the EMEA Group will formalize and continue this ongoing restructuring and rationalization initiative. Under the EMEA Rationalization, each of the WorldCom entities -- except WorldCom International -- will transfer the shares it owns in the EMEA Subsidiaries to Newco in exchange for shares of voting common stock in Newco -- or shares in and indebtedness of Newco, as appropriate. The relative ownership interests in Newco will approximate fair market value of the shareholders' equity interests of the companies whose shares are being transferred. To the extent that the adjustments are requested as a result of the audit of WorldCom's financial statements, there will be a true-up as at December 31, 2002. None of the Transferors has any material third party debt for borrowed money. Subsequent to the transfers, WorldCom and its subsidiaries will merge or liquidate the EMEA Subsidiaries where more than one currently exist in a particular jurisdiction. These various transactions are based on advice regarding the most tax efficient and expeditious manner to effect the consolidations. Approximately 36 entities will remain after the rationalization plan is completed. Accordingly, the Court authorizes the Debtors to (a) execute delivery and performance of the Agreement and Plan of Corporate Reorganization and related transactions, (b) consummate the contemplated transactions, free and clear of liens, claims and encumbrances, and (c) execute all documents and take all necessary or appropriate actions. (Worldcom Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 609/392-0900) XM SATELLITE RADIO: Second Quarter Net Loss Balloons to $164MM -------------------------------------------------------------- XM Satellite Radio Holdings Inc. (Nasdaq: XMSR) reported financial and operating results for the second quarter ended June 30, 2003. As of June 30, 2003, XM Radio reported 692,253 subscribers. This represented a net subscriber addition of 209,178 for the second quarter; a 43% increase from the first quarter 2003 and five times the ending subscribers from the second quarter of 2002. Including a $19.4 million non-cash accounting charge for de- leveraging activities and a $6.0 million non-cash stock-based compensation charge, XM's EBITDA loss was $95.8 million for the second quarter of 2003, compared to the EBITDA loss of $78.7 million in the second quarter of 2002. The major contributor to the $8.3 million improvement in the EBITDA loss (after adjusting for the non-cash expense items) is the significant increase in revenue associated with the growth in subscribers and declining CPGA costs. EBITDA is tracking to expectations for the full year if these non-cash charges are excluded. The consolidated net loss available to common shareholders was $164.3 million, or $1.38 per share (on weighted average shares of 119.4 million), as compared to $122.4 million, or $1.38 per share (on weighted average shares of 88.7 million), for the second quarter of 2002. The majority of this increase is due to higher depreciation on long-lived assets and non-cash charges. XM President and CEO Hugh Panero noted that XM's second-quarter performance was highlighted by strong subscriber growth, reflected in the five-fold increase in revenue during the quarter versus last year. XM remains on track to reach cash flow breakeven in late 2004 and the quarterly losses being reported today are to be expected from a rapidly ramping growth business. "XM continues to show significant progress in adding subscribers, controlling costs and achieving key operational milestones," Panero said. "By the end of the third quarter, XM Radio will be rapidly approaching one million subscribers, a major milestone for satellite radio." XM's Cost Per Gross Addition, the per unit measurement of the fully loaded acquisition costs, including advertising and marketing costs, for the second quarter was $160 per subscriber as compared to $591 per subscriber in the second quarter of 2002. Subscriber Acquisition Costs are a subset of CPGA expenses and reflect the direct subsidy and distribution expenses per unit. XM's SAC for the second quarter of 2003 was $80 per subscriber as compared to $132 per subscriber for the same period last year. Both CPGA and SAC are expected to follow a general downward trend into 2004. As of June 30, 2003, XM had total cash and cash equivalents of $345.9 million and undrawn credit and equity facilities from GM of $114.4 million. In July, the Company raised an additional $10 million -- related to the exercise of an over-allotment option on XM's recently issued Senior Secured Notes -- resulting in a pro- forma total liquidity position of $470 million. General Motors Hits 500,000 Production Milestone GM announced last week the production of the 500,000th GM car featuring XM factory-installed. This milestone was accomplished in 21 months of production for the 2002, 2003 and early 2004 model year vehicles. GM also announced that, with the availability of XM in more than 40 models beginning next month, it expects to surpass the one million factory-installation mark by March 31, 2004. This fall, XM and Delphi will unveil the newest product for the car, the Delphi XM Roady. With an MSRP below $120, the device will be the lowest-cost satellite radio product in the industry. Roady is designed to appeal to a younger market segment (18-26 year olds) and features a compact design, ease of installation without professional help, ability to customize the receiver with seven different back-lit color displays and three interchangeable faceplates. Roady also includes "Tune Select" -- built in software that alerts the listener to favorite songs playing on any XM channel. The new XM Micro Antenna, the smallest satellite radio antenna on the market today, will be included with all new XM products (including Roady) in the third quarter. The fully integrated, low cost antenna with its low profile will make car installations easier and appeal to both retailers and consumers. Retail Distribution Continues to Ramp During the quarter, and into the summer, Wal-Mart has continued to ramp up distribution and merchandising of XM product in its 2,800 store locations nationwide. Announced just last week by Delphi Product and Service Solutions, Sears will now be joining XM's current retail distribution channels, which include the nation's top consumer electronic retailers Best Buy and Circuit City. Sears will sell the complete line of Delphi XM SKYFi products in full-line stores across the United States beginning in August 2003. XM Raises $231 Million In Additional Financing In June and July, XM raised approximately $185 million in gross proceeds as the result of a high yield offering of 12% Senior Secured Notes due 2010. During the quarter, XM also raised approximately $46.0 million in cash proceeds under its Direct Stock Purchase Plan. XM expects the net proceeds of these transactions to be used for working capital and general corporate purposes, which would potentially include funding for the completion and launch of XM's ground spare satellite if insurance proceeds are not received in a timely manner. Satellite Infrastructure Status Update XM's satellites currently provide excellent performance but continue to experience progressive solar array power degradation consistent with that experienced by other Boeing 702 satellites in-orbit. There has been no meaningful change in the previously predicted rate of degradation. XM has now put in place firm contractual arrangements to launch the spare satellite (XM-3) during the fourth quarter of 2004, and for Boeing to construct a new ground spare (XM-4) to be completed by the fourth quarter of 2005. XM has also entered into a contract with Sea Launch to provide an XM-4 launch, as needed in the future. Under these contract arrangements, XM's major cash outlays to launch XM-3 will not arise until the fourth quarter of 2004 and those to construct XM-4 will not occur until the first quarter of 2005. The Company has recently raised sufficient funds to launch XM-3, but will need to obtain insurance reimbursement or other funds to complete construction of XM-4. Currently, XM has insurance claims in process relating to the power degradation trends experienced by the satellites. A group of XM's insurers recently denied these claims, asserting that the satellites are still performing above the insured levels and the power trend lines are not definitive; these insurers also allege XM failed to comply with certain policy provisions regarding material change and other matters. The Company will be responding to the insurers' position and will proceed to settlement discussions, arbitration or litigation (as needed) to recover the insured losses. XM is transforming radio with a programming lineup featuring 101 coast-to-coast digital channels: 70 music channels, more than 35 of them commercial-free, from hip hop to opera, classical to country, bluegrass to blues; and 31 channels of sports, talk, children's and other entertainment programming. XM's strategic investors include America's leading car, radio and satellite TV companies -- General Motors, American Honda Motor Co. Inc., Clear Channel Communications and DIRECTV. For more information, and to view this press release, please visit XM's web site: http://www.xmradio.com As reported in Troubled Company Reporter's February 3, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit ratings on satellite radio provider XM Satellite Radio Inc., and its parent company XM Satellite Radio Holdings Inc. (which are analyzed on a consolidated basis) to 'SD' from 'CCC-'. At the same time, Standard & Poor's lowered its rating on the company's $325 million 14% senior secured notes due 2010 to 'D' from 'CCC-'. These actions follow XM's completion of its exchange offer on the senior secured notes, at par, for new 14% senior secured notes due 2009. All ratings were removed from CreditWatch with negative implications where they were placed on Nov. 18, 2002. * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Alliance Imaging AIQ (39) 683 43 Akamai Technologies AKAM (168) 230 60 Alaris Medical AMI (32) 586 173 Amazon.com AMZN (1,353) 1,990 550 Aphton Corp APHT (11) 16 (5) Arbitron Inc. ARB (100) 156 (2) Alliance Resource ARLP (46) 288 (16) Atari Inc. ATAR (97) 232 (92) Actuant Corp ATU (44) 295 18 Avon Products AVP (91) 3,327 73 Saul Centers Inc. BFS (13) 389 N.A. Caraco Pharm Lab CARA (20) 20 (2) Cincinnati Bell CBB (2,104) 1,467 (327) Cubist Pharmaceuticals CBST (7) 221 131 Choice Hotels CHH (114) 314 (37) Columbia Laboratories COB (8) 13 5 Campbell Soup Co. CPB (114) 5,721 (1,479) Centennial Comm CYCL (470) 1,607 (95) Echostar Comm DISH (1,206) 6,260 1,674 D&B Corp DNB (19) 1,528 (104) Graftech International GTI (351) 859 108 Hollywood Casino HWD (92) 553 89 Hexcel Corp HXL (127) 708 (531) Integrated Alarm IASG (11) 46 (8) Imax Corporation IMAX (104) 243 31 Imclone Systems IMCL (186) 484 139 Gartner Inc. IT (29) 827 1 Jostens JOSEA (512) 327 (71) Journal Register JRC (4) 702 (20) KCS Energy KCS (30) 268 (16) Kos Pharmaceuticals KOSP (75) 69 (55) Level 3 Comm Inc. LVLT (240) 8,963 581 Memberworks Inc. MBRS (21) 281 (100) Moody's Corp. MCO (327) 631 (190) McDermott International MDR (417) 1,278 154 McMoRan Exploration MMR (31) 72 5 Maguire Properti MPG (159) 622 N.A. MicroStrategy MSTR (34) 80 7 Northwest Airlines NWAC (1,483) 13,289 (762) ON Semiconductor ONNN (548) 1,203 195 Petco Animal PETC (11) 555 113 Primus Telecomm PRTL (168) 724 65 Per-Se Tech Inc. PSTI (39) 209 32 Qwest Communications Q (1,094) 31,228 (1,167) Rite Aid Corp RAD (93) 6,133 1,676 Ribapharm Inc RNA (363) 199 92 Sepracor Inc SEPR (392) 727 413 St. John Knits Int'l SJKI (76) 236 86 I-Stat Corporation STAT 0 64 33 Town and Country Trust TCT (2) 504 N.A. Tenneco Automotive TEN (75) 2,504 (50) Thermadyne Holding THMD (665) 297 139 TiVo Inc. TIVO (25) 82 1 Triton PCS Holdings TPC (36) 1,617 172 UnitedGlobalCom UCOMA (3,040) 5,931 (6,287) United Defense I UDI (30) 1,454 (27) UST Inc. UST (47) 2,765 829 Valassis Comm. VCI (33) 386 80 Valence Tech VLNC (17) 36 4 Ventas Inc. VTR (54) 895 N.A. Warnaco Group WRNC (1,856) 948 471 Western Wireless WWCA (464) 2,399 (120) Xoma Ltd. XOMA (11) 72 30 ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***