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/raid1/www/Hosts/bankrupt/TCR_Public/030828.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, August 28, 2003, Vol. 7, No. 170 Headlines 8X8 INC: Appealing Nasdaq Delisting Determination ADELPHIA BUSINESS: Plan's Claims Classification and Treatment ADELPHIA COMMS: CWA Asks Bankruptcy Court to Appoint Examiner ADELPHIA COMMS: Court Approves Cole Raywid as Special Counsel AES CORP: Appoints Jose Bernini as VP and CEO of Eletropaulo AIR CANADA: Pursuing Another MOU for Lease of 59 More Aircraft ALASKA COMMS: Completes $182MM Senior Notes Private Placement AMERCO: Court Approves Establishment of Trading Ethical Wall AMERICAN PAD: Completes Sale of Assets to Crescent Capital Unit AMERICAN SOUTHWEST: Class B-2 & B-3 Ratings Affirmed at BB/CCC ARVINMERITOR INC: Juan De La Riva to Head Light Vehicle Systems ASCENT ASSURANCE: Forms Committee to Negotiate Debt Extension AURA SYSTEMS: Liquidity Concerns Raise Going Concern Uncertainty BARRINGTON FOODS: Delays Filing of Form 10-K with SEC BAYVIEW FIN'L: Fitch Affirms BB/B Ratings on Four Note Classes BEAR STEARNS: Fitch Affirms BB+/BB- on 2 Series 1998-C1 Classes BOUNDLESS CORP: Jeffrey A. Hilk Appointed as New VP of Sales BOYD GAMING: Fitch Affirms Bank & Bond Ratings at Low-B Levels CEDRIC KUSHNER: June 30 Balance Sheet Upside-Down by $8.4 Mill. CONSECO INC: Wants to Assign 2 Hangar Leases to IndyCar Aviation CONSOLIDATED FREIGHTWAYS: TransForce Acquires CF Canada Group CONSOLIDATED FREIGHTWAYS: Canadian Assets Sold for C$69 Million COX COMMS: Commences Tender Offer for Exch. Discount Debentures CP KELCO: Significant Debt Burden Spurs S&P's Downgrade Action CROMPTON CORP: Zacks.com Says Dump the Stock Now CROWN BOOKS: Asks Court to Enter Final Decree to Close Cases CYBERADS INC: Hires Timothy L. Steers as New External Auditors DELIA*S: Antitrust Condition for Acquisition by Alloy Satisfied DELTAGEN: Auctioning-Off Surplus Equipment Inventory in Calif. EATON VANCE: Fitch Hatchets Class D Note Ratings Down to BB- ELAN CORP: Receives C$1.2MM Payment for JV Termination Agreement ELWOOD ENERGY: S&P Affirms & Removes BB Rating from Neg. Watch ENERGY VISIONS: Brethren Fails to Provide C$2MM Loan to Company ENRON CORP: Court Allows Protane to Sell ProCaribe for $5 Mill. EOTT ENERGY: Dist. Court Upholds Plan and Nixes Shell Oil Appeal E.SPIRE: Chapter 11 Trustee Hires Bayard Firm as Special Counsel EUROGAS INC: Capital Deficits Raise Going Concern Uncertainty FAIRFAX FINANCIAL: S&P Revises Outlook on BB Rating to Stable FASTNET CORP: Delays Filing of June Quarter Report on Form 10-Q FEDERAL-MOGUL: Seeks $350MM Equity Investment from Citigroup GENERAL DATACOMM: Delaware Court Confirms Joint Reorg. Plan GENEVA STEEL: Sunrise Hired to Provide Engineering Services GENTEK INC: De. Bankruptcy Court Approves Disclosure Statement GENUITY INC: Secures Nod to Limit Disclosure Statement Notice GT DATA CORP: Company's Ability to Continue Operations Uncertain HIGH VOLTAGE ENG'G: Ratings Drop to D After Interest NonPayment HORIZON PCS: Two Units Sue Sprint, et al. for Breach of Contract HUDSON'S BAY: Second Quarter Results Show Slight Improvement IMAGEMAX INC: Senior Lenders Agree to Forbear Until September 30 INDYMAC ABS: S&P Takes Rating Actions on Various Notes INTEGRATED HEALTH: Court OKs Stipulation with American Express KAISER: Bar Date for La. PI Claimants Extended to September 30 KMART CORP: Settles Claims Dispute with General Electric Capital LEAP WIRELESS: Wants Plan-Filing Exclusivity Extended to Dec. 9 LEVCO FOOTWEAR GROUP: Voluntary Chapter 11 Case Summary LOEWEN GROUP: Four Directors Disclose Common Stock Purchases MASSEY ENERGY: Revises Projections for 3rd Quarter 2003 Results MEDISOLUTION LTD: June 30 Balance Sheet Upside-Down by $6.5 Mil. META HEALTH: Issuing 650K Common Shares Under Reorg. Agreement MET-COIL SYSTEMS: Case Summary & 20 Largest Unsecured Creditors MIRANT CORP: Bringing-In AP Services LLC for Crisis Management MORGAN STANLEY: Fitch Affirms 3 Class Ratings at Lower-B Level NAT'L STEEL: Gets Nod to Implement Liquidation Retention Program NATIONSRENT INC: IBJ Whitehall Demands Admin. Expense Payment NEENAH FOUNDRY: Mails Subscription Materials re Rights Offering NEPTUNE SOCIETY: Selling All Operating Assets to The Apogee Cos. NORTHWESTERN CORP: Shareholders Meeting Adjourned Until Sept. 15 NRG ENERGY: Court Modifies Stay Allowing Sr. Debentures Transfer ON COMMAND: June 30 Net Capital Deficit Doubles to $34 Million ORBITAL SCIENCES: Names Leo Millstein SVP and General Counsel OTTAWA SENATORS: Closes Asset Sale to Capital Sports OUTSOURCING SOLUTIONS: Plan Confirmation Objections Due Monday PARADIGM MEDICAL: Cash Resources Insufficient to Continue Ops. PILLOWTEX: Wins Nod to Pay $2.3MM in Prepetition Employee Wages POLAROID CORP: Has Until Nov. 30 to Move Pending Actions to Del. PROTARGA: Wants Court OK to Retain Wolf Greenfield as IP Counsel QUANTUM CORP: Holding Annual Shareholders' Meeting on Wednesday QUANTUM CORPORATION: Zacks.com Says Dump the Stock Now RAPTOR INVESTMENTS: Shoos-Away Weinberg and Hires Webb & Company ROBOTIC VISION: Fails to Meet Nasdaq Filing Requirements SAMSONITE CORP: Completes Private Recapitalization Transactions SR TELECOM: Will Hold Q2 Results Conference Call on Friday TDZ HOLDINGS: Half-Year 2003 Results Enter Positive Territory TECO ENERGY: Selling Hardee Power Station for $115 Mill. + Debts TELESOURCE INT'L: Deficits Raise Going Concern Doubts TESORO PETROLEUM: CEO to Present at Lehman '03 Energy Conference TRENWICK: Wants Schedule Filing Deadline Moved to October 20 U.S. STEEL: Appoints Michael L. Chapman GM of Facility Marketing VALCOM INC: Enters into Partnership Agreement with New Zoo Revue WASHINGTON MUTUAL: Fitch Rates Class I-B-4 & II-B-4 Notes at BB WASHINGTON MUTUAL: Fitch Rates Class B-4 and B-5 Notes at BB/B WEIGHT LOSS FOREVER: Needs New Funds to Meet Cash Requirements WORLDCOM INC: Ad Hoc Committee Asks Court to Nix Consolidation YOUTHSTREAM MEDIA: June Quarter Net Loss Narrows to $1 Million * Spaulding Finalizes Alliance With Business Evaluation Systems * Dewey Ballantine Hires Philipp von Ilberg as Frankfurt Partner * DebtTraders' Real-Time Bond Pricing ********* 8X8 INC: Appealing Nasdaq Delisting Determination ------------------------------------------------- 8x8, Inc. (Nasdaq: EGHT) received notification from the NASDAQ Staff on August 19, 2003, that it was not in compliance with the independent director and audit committee composition requirements, as set forth in Marketplace Rule 4350(d)(2) and 4450(c), due to one of its independent directors not standing for reelection on August 12, 2003. 8x8 had previously received a NASDAQ Staff Determination notification on July 11, 2003 that its securities would be subject to delisting from the NASDAQ SmallCap Market at the opening of business on July 21, 2003, unless the Company filed an appeal with a NASDAQ Listing Qualifications Panel, pursuant to the procedures set forth in the NASDAQ Marketplace Rule 4800 Series. 8x8 has filed its appeal, which operates to stay the delisting of the Company's stock until the Listing Qualifications Panel renders a decision. The Company appeared before the panel on August 21, 2003 and requested a limited exception to the listing requirements in order to implement a plan to regain compliance with all listing requirements. As part of its appeal, 8x8 addressed the Staff's August 19 letter regarding the independent director and audit committee composition requirements. There can be no assurance that the Company's appeal will be successful. 8x8, Inc. offers the Packet8 broadband telephone service -- http://www.packet8.net-- consumer videophones, hosted iPBX solutions (through its subsidiary Centile, Inc.), and voice and video semiconductors and related software (through its subsidiary Netergy Microelectronics, Inc.). For more information, visit 8x8's Web site at http://www.8x8.com Launched in November 2002, Packet8 enables anyone with high-speed internet access to sign up for telephone service at http://www.packet8.net Customers can choose a direct-dial phone number from any of the rate centers offered by the service, and then use an 8x8-supplied terminal adapter to connect any telephone to a broadband internet connection and make or receive calls from a regular telephone number. All Packet8 telephone accounts come with voice mail, caller ID, call forwarding, web access to account controls, and real- time online billing. High speed, instant-on broadband videophone accounts, which use the 8x8 DV325 SIP videophone, are also available. The DV325 videophone functions as a Packet8 voice line when making or receiving voice telephone calls from regular telephone numbers. * * * Liquidity and Capital Resources In its Form 10-Q for the period ended March 31, 2003, the Company reported: The possibility that the Company will not be able to meet its obligations as and when they become due over the next twelve months raises substantial doubt about the Company's ability to continue as a going concern. Accordingly, the Company has been pursuing, and will continue to pursue, among other things, the implementation of certain cost reduction strategies and the licensing or sale of its technologies or projects. Additionally, the Company plans to seek additional financing and evaluate financing alternatives during the next twelve months in order to meet its cash requirements for the remainder of fiscal 2004. The Company has sustained net losses and negative cash flows from operations since fiscal 1999 that have been funded primarily through the issuance of equity securities and borrowings. Management expects to experience negative cash flows for the foreseeable future and such losses may be substantial. There is no assurance that the Company will be able to obtain financing on terms favorable to the Company, or at all. If the Company issues additional equity or convertible debt securities to raise funds, the ownership percentage of the Company's existing stockholders would be reduced and they may experience significant dilution. Failure to increase revenues, to manage net operating expenses and to raise additional financing through public or private equity financing or other sources of financing may result in the Company not achieving its longer term business objectives. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. In connection with efforts to improve its liquidity, in June 2003 Netergy entered into an agreement whereby it would sell certain assets and license/sell certain technology related to its next- generation video compression semiconductor product for cash. The closing of this transaction is subject to certain conditions beyond the Company's control and there can be no assurance that the transaction will close. Even if the transaction closes, additional cash resources may be necessary for the Company to sustain its operations. The Company does not expect to incur a loss on this transaction. In July 2003, the Company announced that Netergy had licensed its voice over IP Audacity-T2 and T2U semiconductor products and Veracity software. The customer obtained rights to sell T2 and T2U based semiconductor products bundled with the Veracity software, and, in return, will pay Netergy a license fee and royalties for each T2 and T2U semiconductor it sells. ADELPHIA BUSINESS: Plan's Claims Classification and Treatment ------------------------------------------------------------- Consistent with the requirements of the Bankruptcy Code, the Plan generally provides for holders of Allowed Administrative Expense Claims to receive, on the Effective Date, cash in an amount equal to those Claims, except for Administrative Expense Claims relating to ordinary course of business transactions, which will be paid by the Debtors or Reorganized Adelphia Business Solutions, Inc. in accordance with its past practice and the terms of the agreements governing, instruments evidencing, or other documents relating to such transactions. Allowed Priority Tax Claims entitled to priority under the Bankruptcy Code will be paid either in full on the Effective Date or with interest at a fixed annual rate equal to the rate applicable to underpayments of federal income tax on the Effective Date over a period not exceeding six years from the date of assessment of the tax with payments beginning on the first anniversary date of the Effective Date. Valid liens of the holders of Allowed Priority Tax Claims are not affected by the Plan. This table summarizes the classification and treatment of claims: Class Description Recovery Claim Treatment ----- ----------- -------- --------------- n/a Administrative 100% Paid in cash, in full. Claims n/a Priority Tax 100% Paid in cash, in full. Claims 1 Secured 100% Each holder of an Allowed Claim Claims will receive either: (a) collateral securing the Claim, (b) Cash or a note equal to the value of the collateral, (c) the net proceeds from the sale of collateral, or (d) treatment under Section 1124(2) of the Bankruptcy Code. Unimpaired; not entitled to vote. 2 Secured 100% Each Allowed Claim holder will Tax receive collateral securing Claim Claims or payment in full of the allowed amount of the Claim or equal annual payments over six years from the date of assessment of the tax, with interest at a fixed annual rate of 5%. Unimpaired; not entitled to vote. 3 Priority 100% Each allowed Claim holder will Non-Tax receive payment in full of the Claims allowed amount. Unimpaired; not entitled to vote. 4 Beal DIP 100% The allowed Claim holder will Claims be paid in Cash in full. Unimpaired; not entitled to vote. 5 ACC DIP [REDACTED] [REDACTED] Claims 6 12 1/4% 50% Secured Claims: Secured to 100% Notes Each holder of a 12 1/4% Claims Secured Note will elect to receive either: (a) a proportionate share of the New Common Stock, or (b) a Cash Recovery distribution equal to $8.94 per share of the New Common Stock. To the extent there is insufficient cash to satisfy all holders of Class 6 and 7C Claims who elect the Cash Recovery option, each Claim holder will receive its Cash distribution on a ratable basis with the holders of Allowed Claims in Class 7C who elect a Cash Recovery. The aggregate amount of Cash available under Plan to satisfy holders of Class 6 and 7C that elect a Cash Recovery will equal $4,000,000, plus Excess Cash, less the amount of Cash used to satisfy Class 7A, 7B and 7D Claims. The holders of Allowed Claims in Class 6 that elect the Cash Recovery will be entitled to Cash on a ratable basis with the Class 7C Claims holders. In the event that the Cash available to holders of Classes 6 and 7C Claims that elect a Cash Recovery is insufficient to satisfy the Claims in full, each each holder will receive its proportionate share of the Cash available for Classes 6, and 7C, if any. The holder will receive a distribution equal to the proportionate share of the shares of New Common Stock otherwise distributable to that holder less the number of shares of New Common Stock equal to the quotient obtained by dividing the amount of Cash received by that holder by $8.94 with respect to the remainder of that holder's Claim. Unsecured Claims: Each holder of a 12 1/4% Secured Notes Claim will also receive its Ratable Proportion of the 12 1/4% Deficiency Claim and its Ratable Proportion of the 12 1/4% Buffalo Claim. These Claims are Funded Debt Claims and are Treated in Class 7C. Impaired; entitled to vote. 7 General Unsecured Claims 7A Convenience 3.5% Each holder of a Class 7A Claim Claims to 7.1% will elect on its Ballot to receive either: (a) a Stock or Warrant Recovery, or (b) a Cash Recovery, in full satisfaction of the Claim. On the Effective Date, a Class 7A Claim that elects a Stock or Warrant Recovery will receive its Ratable Proportion of: (a) the General Unsecured Percentage, and (b) the New Warrants. On the Effective Date, a Claim holder elects a Cash Recovery will receive a distribution of Cash equal to $8.94 per share of the New Common Stock otherwise distributable to a Claim holder that elects to receive New Common Stock. The aggregate amount of Cash available under the Plan to satisfy Convenience Claim holders that elect a Cash Recovery will equal $4,000,000, plus Excess Cash. Any Cash not necessary to satisfy Cash Recovery elections in Class 7A will be used for funding Cash Recovery elections first by holders of Claims in Class 7B, second by holders of Class 7D Claims and third by Claim holders in Classes 6 and 7C. If a holder of a Class 7A Claim does not specify on the Ballot the treatment he/she elects to receive, that holder will receive the Cash Recovery as the treatment for their Claim. Impaired; entitled to vote. 7B Trade 3.5% Each holder of a Class 7B Claim Claims to 7.1% will elect on its Ballot (a) a Stock or Warrant Recovery, or (b) a Cash Recovery, in full satisfaction of the Claim. On the Effective Date, a Class 7B Claim that elects a Stock or Warrant Recovery will receive its Ratable Proportion of: (a) the General Unsecured Percentage, and (b) the New Warrants. On the Effective Date, a Claim holder elects a Cash Recovery will receive a distribution of Cash equal to $8.94 per share of the New Common Stock otherwise distributable to a Claim holder that elects to receive New Common Stock. If a holder of a Class 7B Claim does not specify on the Ballot the treatment he/she elects to receive, that holder will receive the Cash Recovery as the treatment for the Claim. Impaired; entitled to vote. 7C Funded 5.5% Each holder of a Funded Debt Debt to 11.0% consisting of the: Claims -- 12 1/4% Deficiency Claim, -- 12 1/4% Buffalo Claim, and -- 13% Notes Claims, will elect on its Ballot to receive either: (a) a Stock or Warrant Recovery, or (b) a Cash Recovery, in full satisfaction of the Claim. On the Effective Date, a Class 7B Claim that elects a Stock or Warrant Recovery will receive its Ratable Proportion of: (a) the General Unsecured Percentage, and (b) the New Warrants. On the Effective Date, a Claim holder elects a Cash Recovery will receive a distribution of Cash equal to $8.94 per share of the New Common Stock otherwise distributable to a Claim holder that elects to receive New Common Stock. If a holder of a Class 7C Claim does not specify on the Ballot the treatment he/she elects to receive, that holder will receive the Cash Recovery as the treatment for the Claim. Impaired; entitled to vote. 7D 12% Notes 0.1% Each holder of a 12% Notes Claims Claims shall on its Ballot to receive either: (a) a Stock or Warrant Recovery, or (b) a Cash Recovery, in full satisfaction of the Claim. The 12% Notes are contractually Subordinated to the 12 1/4% Secured Notes and the 13% Notes. Thus, holders of the 12% Notes will not be entitled to receive any distribution under the Plan. However, the holders of the 12 1/4% Secured Notes and the 13% Notes agreed to contribute to the non-Rigas Family holders of the 12% Notes Claims from their Stock or Warrant Recovery a number of shares of New Common Stock equal to 0.25% of the aggregate number of shares of New Common Stock outstanding on the Effective Date. The New Warrants allocable in respect of the New Common Stock will be extinguished. On the Effective Date, a non-Rigas Family holder of a 12% Note Claim that elects a Stock or Warrant Recovery will receive its Ratable Proportion of 0.25% of the aggregate number of shares of New Common Stock outstanding on the Effective Date contributed by the holders of the 12 1/4% Secured Notes and the 13% Notes, which the holders have agreed will be on a ratable basis based on the outstanding amount of the 12 1/4% Deficiency Claim and the principal amount of the 13% Notes. On the Effective Date, a holder of a 12% Notes Claim that elects a Cash Recovery will receive a distribution of Cash equal to $8.94 per share of New Common Stock. If a holder of a Class 7D Claim does not specify on the Ballot the treatment he/she elects to receive, that holder will receive the Cash Recovery as the treatment for their Claim. Impaired; entitled to vote. 8 Century 0% No distribution. Facility Claims Impaired, but not entitled to vote -- deemed to reject the Plan. 9 Securities 0% No distribution Claims Impaired, but not entitled to vote -- deemed to reject the Plan. 10 Intercompany 0% Extinguished by either offset, Claims contribution or distribution of the Claim. Impaired, but not entitled to vote -- deemed to reject the Plan. 11 Equity 0% No distribution Interests Impaired, but not entitled to vote -- deemed to reject the Plan. 12 Subsidiary 100% Retain rights in Equity Subsidiary Equity Interest. Interests Unimpaired; not entitled to vote. 13 Subordinated 0% No distribution Claims Impaired, but not entitled to vote -- deemed to reject the Plan. (Adelphia Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADELPHIA COMMS: CWA Asks Bankruptcy Court to Appoint Examiner ------------------------------------------------------------- Adelphia Communications' labor relations practices have provoked strikes that not only have wasted company resources but also have damaged community goodwill and employee morale, the Communications Workers of America today charged in a filing with the U.S. Bankruptcy Court of the Southern District of New York. CWA urged the court to appoint an examiner to investigate what it termed a "scorched-earth strategy" toward its unions, charging that, "Adelphia's blatant hostility towards labor undermines confidence in the Debtors' ability to manage its reorganization." The union cited two recent strikes at Adelphia cable operations in Morgantown, W.Va., and Auburn, N.Y., as examples of a destructive pattern of labor policies where the company has wasted tens of thousands of dollars fighting its unions while also tarnishing its reputation with customers and community leaders. In both cases, the costs of hiring replacement workers and security forces have far exceeded the expense of peaceful labor settlements, CWA said. "As a debtor in possession, Adelphia owes a duty to its creditors to exercise the utmost care in expending estate resources," the filing states. "Instead, strike-inducing conduct at two locations has resulted in wasteful expenditures, has soured community relations and damaged employee morale. In a reorganization burdened by the impact of corporate scandal, it is essential that the Debtors effectively regain the confidence of their creditors, employees, customers and other critical constituencies." CWA urged appointment of an examiner "to instill confidence that the reorganization can be managed competently." ADELPHIA COMMS: Court Approves Cole Raywid as Special Counsel ------------------------------------------------------------- The Adelphia Communication Debtors obtained permission from the U.S. Bankruptcy Court for the Southern District of New York to employ Cole, Raywid & Braveman, LLP as their special counsel. Cole will assist Adelphia with, among other things, cable television regulatory matters. Cole will provide legal advice on cable matters to the Debtors, including, but not limited to: (i) local, state and federal issues under Title VI of the Communications Act; (ii) advocacy before local, state and federal agencies and other governmental units; and (iii) regulatory issues, including required regulatory filings as well as regulatory approvals. In consideration for Cole's services, it will seek from the Court compensation on an hourly basis, plus reimbursement of actual and necessary expenses incurred. Cole's hourly rates are: Attorneys $150 - 480 Paralegals 110 - 180 Cole agreed to reduce all fees by 10% from their standard hourly rates for work that will be performed for the Debtors between July 1, 2003 and June 30, 2004. To date, Cole received $177,367 in compensation for services rendered an dexpenses incurred in the Debtors' Chapter 11 cases. (Adelphia Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) AES CORP: Appoints Jose Bernini as VP and CEO of Eletropaulo ------------------------------------------------------------ The AES Corporation (NYSE: AES) announced that Eduardo Jose Bernini has been appointed Vice President of AES and Chief Executive Officer of Eletropaulo, the electric distribution company serving 4.6 million customers in Sao Paulo, Brazil. Mr. Bernini's appointments are effective as of September 1, 2003. Prior to joining AES and Eletropaulo, Mr. Bernini was Chief Executive Officer of EDP Brasil S.A., the Brazilian electricity holding company of Eletricidade de Portugal S.A. He is Vice- President of the Brazilian Association for Infrastructure Development and in 1995-1996 was Deputy Secretary of Energy of the State of Sao Paulo. "I am extremely pleased to welcome Eduardo to AES as Vice President of our Brazilian businesses and as CEO of Eletropaulo," stated Joseph C. Brandt, Chief Operating Officer for Integrated Utilities. "With over twenty years of public and private sector experience in the electricity market, Eduardo is uniquely suited to lead our businesses in Brazil. He brings well-honed regulatory skills, a commitment to operational excellence and a reputation for integrity to these significant and promising investments." AES is a leading global power company comprised of contract generation, competitive supply, large utilities and growth distribution businesses. The company's generating assets include interests in 157 facilities totaling over 52 gigawatts of capacity, in 29 countries. AES's electricity distribution network sells 108,000 gigawatt hours per year to over 16 million end-use customers. For more general information visit http://www.aes.com * * * As reported in Troubled Company Reporter's July 18, 2003 edition, Fitch Ratings affirmed the existing ratings of The AES Corp. as follows: AES -- Senior secured bank debt 'BB'; -- Senior secured notes collateralized by first priority lien 'BB'; -- Senior unsecured debt 'B'; -- Senior and junior subordinated debt 'B-'; AES Trust III -- Trust preferred convertibles 'CCC+'. AES Trust VII -- Trust preferred convertibles 'CCC+'. Fitch has also assigned a 'B+' rating to AES' recently raised $1.8 billion junior secured notes collateralized by a second priority lien. The collateral package pledged to AES' secured debts consists of all of the capital stock of AES' material domestic subsidiaries and 65% of the capital stock of AES' foreign subsidiaries. In addition, Fitch revised AES' Rating Outlook to Stable from Negative. AIR CANADA: Pursuing Another MOU for Lease of 59 More Aircraft -------------------------------------------------------------- Air Canada provides the following update on the airline's restructuring under the Companies' Creditors Arrangement Act: Status of aircraft lease negotiations Air Canada said that it has completed memoranda of understanding covering an additional 14 aircraft with three different aircraft lessors bringing to 135 the total number of aircraft with restructured leases and is in the process of finalizing memoranda of understanding on another 59 aircraft with 12 different lessors. These 194 aircraft represent approximately 60 per cent of Air Canada's fleet. Substantive discussions are currently underway with respect to the balance of the fleet. Air Canada is recommencing lease payments as memoranda of understanding are completed. Announcements on these various agreements will be made during the course of the coming weeks. ALASKA COMMS: Completes $182MM Senior Notes Private Placement ------------------------------------------------------------- Alaska Communications Systems Holdings, Inc. has completed the issuance of $182 million aggregate principal amount of 9-7/8% senior unsecured notes due 2011 at an issue price of approximately 96.7% in a private placement as previously announced. The Notes are guaranteed by the Company's parent, Alaska Communications Systems Group, Inc. (Nasdaq:ALSK), and certain of the Company's subsidiaries. The Company also entered into a new $250 million bank credit facility consisting of a term loan facility in an aggregate principal amount of $200 million and an undrawn revolving credit facility in an aggregate principal amount of $50 million. As previously announced, the purpose of the simultaneous issuance of the Notes and the borrowings under the Company's new bank credit facility was to repay all outstanding amounts under the Company's then existing bank credit facility. The new financings provide additional balance sheet cash for the continued investment in the Company's future growth initiatives and solidifies the Company's capital structure by extending the first significant debt maturities from 2006 to 2009. The Notes are not registered under the Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and any applicable state securities laws. ACS (S&P, B+ Corporate Credit Rating, Stable) is the leading integrated, facilities-based telecommunications services provider in Alaska, offering local telephone, wireless, Internet and interexchange services to business and residential customers throughout Alaska. ACS currently services approximately 339,000 lines, 83,000 wireless customers, 45,000 Internet customers, and 44,000 long distance customers. More information can be found on the Company's Web site at http://www.alsk.com AMERCO: Court Approves Establishment of Trading Ethical Wall ------------------------------------------------------------ The Official Committee of Unsecured Creditors in the Chapter 11 cases of AMERCO and its debtor-affiliates obtained permission from the U.S. Bankruptcy Court for the District of Nevada for certain Committee members to trade in Amerco's securities upon the establishment and implementation of an "Ethical Wall". As previously reported, the term "Ethical Wall" refers to a procedure established by an institution to isolate its trading activities from its activities as a member of an official creditors' committee. An Ethical Wall requires, among other things, the employment of different personnel to perform committee functions and trading functions, physical separation of the office and file spaces, procedures for securing committee-related files, separate telephone and facsimile lines for trading activities and committee activities, and special procedures for the delivery and posting of telephone messages. Judge Zive declared that a Committee member acting in any capacity will not violate its duties as a Committee member -- and, therefore, will not subject its claims to possible disallowance, subordination or other adverse treatment -- by trading in Amerco's stock, notes, bonds debentures, buying or selling participations in any of Amerco's debt obligations, or other claims not covered by Rule 3001(e) of the Federal Rules of Bankruptcy Procedure during the pendency of Amerco's case, provided that the Committee member implements an Ethical Wall to insulate its trading activities from the activities related to its Committee service. The Court established these procedures: (1) Each Securities Firm will cause a duly authorized representative of that Securities Firm to execute a memorandum acknowledging that Committee Personnel may receive non-public information regarding the Debtor and that they are aware of the Screening Wall Procedures; (2) The memorandum will state that the Securities Firm is in compliance with the provisions of the Court Order and a copy of each memorandum will be forwarded to the Committee's counsel; (3) Committee Personnel of each Securities Firm will be different from that Securities Firm's trading personnel and will use physically separate office space, file space, phone lines and facsimile lines for the performance of their responsibilities; (4) Committee Personnel will not directly or indirectly share any non-public information concerning the Debtor or this Chapter 11 case with any other employees of their Securities Firm, except: (a) senior management of the Securities Firm who, due to its duties and responsibilities, has a legitimate need to know the information, provided that these individuals otherwise comply with the Screening Wall Procedures and use the information only in connection with their senior managerial responsibilities; (b) regulators, auditors and designated legal personnel for the purpose of rendering legal and compliance advice to Committee Personnel who will not share the non-public information with any other employees; and (c) to the extent that the information may be accessible by internal computer systems, the Securities Firm's administrative personnel who service and maintain the systems each of whom will agree not to share the non-public information with other employees and will keep the information in files inaccessible to other employees; and (5) Committee Personnel will establish procedures for the maintenance of all documents containing non-public information received in connection with, or generated from, Committee activities in secured files, which are physically separated from, and inaccessible to, other employees of their Securities Firm. (AMERCO Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMERICAN PAD: Completes Sale of Assets to Crescent Capital Unit --------------------------------------------------------------- Crescent Capital Investments, Inc. announced that an affiliate company (Ampad Holdings Corporation) has completed acquisition of American Pad & Paper LLC, marking Ampad's successful emergence from bankruptcy after only eight months. Ampad is credited with inventing the legal pad in 1888 and is one of North America's leading manufacturers and distributors of writing pads, filing supplies, retail envelopes and specialty papers. David Crosland, Executive Director at Crescent Capital, stated, "Our goal is to invest in good companies with capable management teams and a significant market presence with the potential for long-term growth. Ampad's brand has been a respected name in the office products industry for over 100 years. Now combined with Crescent Capital's financial strength and backing, we expect Ampad will increase its market leadership in the future." Mark Lipscomb, Ampad's President and CEO, stated, "This outcome has far reaching benefits for Ampad. Even during bankruptcy, with the continued support of our vendors, customers and employees, we were able to grow our sales and received prestigious awards for service from two of our largest customers -- Staples and Wal*Mart. Now Ampad is emerging from Chapter 11 an even stronger, more viable competitor; our customers will continue to have a leading source of high-quality office products; and Crescent Capital's equity contribution will help assure a solid financial foundation so Ampad can expand its market position." A major factor in Ampad's successful exit from Chapter 11 was the timely and focused cooperation the key parties and their advisors exhibited to reach a consensual solution. Those parties include: Bank of America which provided the DIP financing; Ampad along with its advisors, Gardere Wynne Sewell LLP and Blackhill Partners, LLC; the Official Unsecured Creditors Committee, represented by Jenkins & Gilchrist Parker Chapin LLP and Ernst & Young LLP; and Crescent Capital, which was advised by King & Spalding LLP and Casas, Benjamin & White, LLC. Under the terms of the acquisition, Crescent Capital has invested $27 million of capital into Ampad. Ampad has also been provided with a $34.5 million revolving credit facility by PNC Bank to support its future business operations. Crescent Capital Investments, Inc. is an Atlanta-based private equity firm founded in 1997. It has over $500 million in capital resources with over $100 million in equity available for each transaction. Since 1998, Crescent has completed eleven transactions with an aggregate enterprise value of nearly $1 billion. The other companies in Crescent Capital's current portfolio also represent unique positions in their diverse industries. Cirrus Industries, Inc. is the second largest manufacturer of single- engine, piston-powered, general aviation aircraft in the world; MediFAX-EDI is a leading provider of health care information services; Caribou Coffee Company, Inc. is a specialty retailer of premium brewed and roasted whole bean coffee as well as teas, bakery goods and related products; Lee Industries is the number- one manufacturer of commercial paving equipment; DVT Corporation is a provider of technology-based machine vision systems; Smart Document Solutions, LLC is the leading provider of medical records release of information services in the United States; Transportation Safety Technologies, Inc. is a technological leader in the manufacture of specialty electrical components and safety products for the truck, utility and emergency vehicles in the United States; and WaterMark Paddlesports, Inc. is one of the premier outdoor sporting goods companies in the nation. Further information on Crescent can be found at http://www.crescentcapital.com Ampad is a leading manufacturer and distributor of writing pads, filing supplies, retail envelopes and specialty papers and serves many of the largest and fastest growing office products retailers and distributors in North America. Additional information on Ampad can be found at http://www.ampad.com AMERICAN SOUTHWEST: Class B-2 & B-3 Ratings Affirmed at BB/CCC -------------------------------------------------------------- Fitch Ratings upgrades the following classes of American Southwest Financial Securities Corp., commercial mortgage pass-through certificates, Series 1993-2: -- $7.7 million class A-2 to 'AA+' from 'AA'; -- $6.4 million class B-1 to 'A' from 'BBB+'. Fitch also affirms the following classes: -- $37 million class A-1 'AAA'; -- Interest-only classes S-1 and S-2 'AAA'; -- $6.4 million class B-2 'BB'; -- $6.4 million class B-3 'CCC'. Fitch does not rate the class C certificates. The rating upgrades and affirmations follow Fitch's annual review of this transaction, which closed in December 1993. The rating upgrades are a result of continued overall pool performance and additional credit enhancement provided by loan payoff and amortization. As of the August 2003 distribution date, the pool's aggregate balance has been reduced by 48.9%, to $65.8 million from $128.7 million at issuance. GMAC Commercial Mortgage Corp., the master servicer, collected year-end 2002 financials for 100% of the outstanding pool balance. The weighted average debt service coverage ratio for comparable loans was 1.51 times for YE 2002, compared to 1.49x at YE 2001 and 1.42x at issuance. Eleven of the original 30 loans remain in the pool. Currently, there are no delinquent or specially serviced loans. Fitch is concerned that the pool has become more concentrated, with the top five loans representing 67% of the pool. However, the top five loans have a strong DSCR of 1.54x for YE 2002, compared to 1.45x at issuance. Fitch considered one loan (3.9%) to be of concern. The loan is secured by an industrial property located in Tucson, AZ having a vacancy problem. Although the property is only 60% occupied, the DSCR is 1.06x. Fitch applied various hypothetical stress scenarios taking into consideration all of the above concerns. Even under these stress scenarios, the resulting subordination levels remain sufficient for the upgrades. Fitch will continue to monitor this transaction, as surveillance is ongoing. ARVINMERITOR INC: Juan De La Riva to Head Light Vehicle Systems --------------------------------------------------------------- ArvinMeritor, Inc. (NYSE: ARM) announced the appointment of Juan De La Riva to the position of senior vice president and president, Light Vehicle Systems, effective immediately. He will report to ArvinMeritor's President and Chief Operating Officer Terry O'Rourke. As president of LVS, De La Riva will be responsible for overall strategic management of the company's $4.5 billion passenger vehicle components and modules and systems business, including air and emissions technologies, aperture and undercarriage businesses. His focus is on growth strategies, global expansion and enhanced product quality. "Juan's extensive knowledge of our industry and our global customers, as well as his strong leadership skills, lean manufacturing experience and financial insight will ensure the success of this organization," said O'Rourke. "He more than proved his ability to drive results when he helped lead the highly successful ArvinMeritor integration process in July 2000, which exceeded the synergy goals." In his previous position at ArvinMeritor, De La Riva was responsible for Corporate Development & Strategy, Engineering and Procurement. Before the July 2000 merger of Arvin Inc. and Meritor Automotive Inc., De La Riva held the positions of senior vice president, Business Development and Strategy, senior vice president of Communications until August 1999, and was named a corporate officer of Meritor in February 1999. In early 1994, De La Riva joined the company as a director of Rockwell do Brasil S.A., and served as chairman of Rockwell's South American council. He was named managing director of Rockwell Automotive's Light Vehicle Systems' wheels business in Limeira, Brazil, later that year. Before coming to ArvinMeritor, De La Riva was director and partner in Amtech Com e Ind. De La Riva began his professional career in the New York marketing and sales department of Bendix Corporation's international division. In 1978, following a series of promotions and appointments, he was transferred to Allied-Signal in Brazil, where he was promoted to vice president of Engineering, Marketing and Sales. In 1981, De La Riva was appointed vice president and general manager of Allied-Signal's friction materials business for the South American region. De La Riva holds a bachelor of science degree in business from City University of New York and a master's of business administration in finance from the University of Detroit. De La Riva will replace Craig Stinson who has decided to pursue other endeavors outside the company. "We are indebted to Craig's commitment and dedication to the company as well as to the numerous contributions he has made throughout his career at ArvinMeritor," said O'Rourke. ArvinMeritor, Inc. (S&P, BB+ Corporate Credit & Senior Unsecured Debt Ratings, Negative) is a premier $7-billion global supplier of a broad range of integrated systems, modules and components to the motor vehicle industry. The company serves light vehicle, commercial truck, trailer and specialty original equipment manufacturers and related aftermarkets. In addition, ArvinMeritor is a leader in coil coating applications. The company is headquartered in Troy, Mich., and employs 32,000 people at more than 150 manufacturing facilities in 27 countries. ArvinMeritor common stock is traded on the New York Stock Exchange under the ticker symbol ARM. For more information, visit the company's Web site at: http://www.arvinmeritor.com ASCENT ASSURANCE: Forms Committee to Negotiate Debt Extension ------------------------------------------------------------- Ascent Assurance, Inc. (OTC Bulletin Board: AASR) has received a letter from its largest shareholder and creditor, Credit Suisse First Boston, indicating that CSFB is prepared to begin discussions concerning the terms on which CSFB would be willing to extend the April 17, 2004 maturity date of the Company's 12% Note and the March 24, 2004 mandatory redemption date of the Company's Series A Convertible Preferred Stock. Both the note and the preferred stock are held by entities affiliated with CSFB. Ascent also announced that its Board of Directors has formed a special committee consisting of the Board's four independent directors to evaluate and negotiate the terms of any such extension with CSFB. The special committee expects to retain legal counsel and an independent financial advisor to assist it in evaluating the fairness of the terms of any transaction to be entered into with CSFB. There can be no assurance that the negotiations with CSFB will result in a successful extension of the maturity dates of either the note or the preferred stock. Ascent Assurance, Inc. is an insurance holding company primarily engaged in the development, marketing, underwriting and administration of medical-surgical expense, supplemental health, life and disability insurance products to self-employed individuals and small business owners. Marketing is achieved primarily through the career agency force of its marketing subsidiary. The Company's goal is to combine the talents of its employees and agents to market competitive and profitable insurance products and provide superior customer service in every aspect of operations. For more information about the company, visit http://www.ascentassurance.com * * * CSFB Financing In its Form 10-Q filed with Securities and Exchange Commission, the Company reported: "Ascent received debt financing to fund an $11 million capital contribution to FLICA in April 2001 from Credit Suisse First Boston Management Corporation, which is an affiliate of Special Situations Holdings, Inc. - Westbridge (Ascent's largest stockholder). The credit agreement relating to that loan provided Ascent with total loan commitments of $11 million, all of which were drawn in April 2001. The loan bears interest at a rate of 12% per annum and matures in April 2004. Absent any acceleration following an event of default, Ascent may elect to pay interest in kind by issuance of additional notes. During the three months ended June 30, 2003, Ascent issued $427,000 in additional notes for payment of interest in kind which increased the notes payable balance to CSFB at June 30, 2003 to approximately $14.4 million. Terms of the CSFB Credit Agreement are equivalent to terms that exist in arm's-length credit transactions. Ascent must obtain additional financing to retire the note payable when it matures in April 2004 or restructure the terms of the note. Failure of Ascent to successfully refinance the note payable would have a material adverse impact on Ascent's liquidity, capital resources and results of operations. "The Company has authorized 40,000 shares of non-voting preferred stock. At June 30, 2003, 35,654 shares of preferred stock were outstanding, all of which are owned by Special Situations Holdings, Inc. - Westbridge, which is Ascent's largest common stockholder and is also an affiliate of CSFB. Dividends on Ascent's preferred stock are payable in cash or through issuance of additional shares of preferred stock at the option of Ascent. On June 30, 2003, preferred stock dividends accrued in the second quarter of 2003 were paid through the issuance of 890 shares of preferred stock. "The preferred stock is mandatorily redeemable in cash on March 24, 2004 in an amount equal to the stated value per share plus all accrued and unpaid dividends thereon to the date of redemption. Ascent must obtain additional financing to retire the preferred stock when due or restructure the terms of the preferred stock. Failure of Ascent to successfully refinance the preferred stock would have a material adverse impact on Ascent's liquidity, capital resources and results of operations." AURA SYSTEMS: Liquidity Concerns Raise Going Concern Uncertainty ---------------------------------------------------------------- In connection with the audit of Aura Systems Inc.'s consolidated financial statements or the year ended February 28, 2003, the Company received a report from its independent auditors that includes an explanatory paragraph describing uncertainty as to the Company's ability to continue as a going concern. The Company continues to experience acute liquidity challenges. The Company had cash of approximately $100,000 and $200,000 at May 31 and February 28, 2003, respectively. For the three months ended May 31, 2003 and the year ended February 28, 2003, the Company incurred a net loss of approximately $2,200,000 and $16,100,000, respectively, on net revenues of approximately $100,000 and $1,100,000, respectively. The Company had working capital deficiencies at May 31 and February 28, 2003 of approximately $12,700,000 and $15,600,000, respectively. These conditions, combined with the Company's historical operating losses, raise substantial doubt as to the Company's ability to continue as a going concern. At July 31, 2003, the Company had less than $100,000 of cash. The Company requires additional debt or equity financing to fund ongoing operations. The Company is seeking to raise additional capital; however, there can be no assurance that the Company will raise sufficient capital to fund ongoing operations. The issuance of additional shares of equity in connection with such financing could dilute the interests of existing stockholders of the Company and such dilution could be substantial. The Company must increase its authorized shares in order to be able to sell common equity and intends to propose to stockholders such action as well as a reverse stock split of its common shares; there can be no assurance that either such action will be approved. The inability to secure additional funding could result in the Company having to cease operations. The cash flow generated from the Company's operations to date has not been sufficient to fund its working capital needs, and the Company does not expect that operating cash flow will be sufficient to fund its working capital needs in its fiscal year ending February 28, 2004. In the past, in order to maintain liquidity, the Company has relied upon external sources of financing, principally equity financing and private and bank indebtedness. The Company expects to fund any operating shortfall in the current fiscal year from cash on hand, sales of non-core assets and external financings. Currently, the Company has no firm commitments from third parties to provide additional financing and there can be no assurance that financing will be available at the times or in the amounts required. If financing cannot be arranged in the amounts and at the times required, the Company will cease operations. The Company has no bank line of credit. BARRINGTON FOODS: Delays Filing of Form 10-K with SEC ----------------------------------------------------- Barrington Foods International Inc. (OTC BB: BFII) announced that due to scheduling issues with its accountant the filing of the second quarter 10-K report has been delayed. A five-day extension has been requested from the Securities and Exchange Commission; however, in the event that the report is not filed on time, the company may experience an "E" affixed to its symbol (BFIIE). The company is current in all of its required filings to date. Barrington also announced that it is currently evaluating opportunities for capital infusion and expanding markets. There will be additional announcements in the near future when plans are finalized. Further, information about Barrington Foods can be found at its Web site http://www.barringtonfoods.com Barrington Foods' March 31, 2003 balance sheet shows a working capital deficit of about $1 million, and a total shareholders' equity deficit of about $1 million. BAYVIEW FIN'L: Fitch Affirms BB/B Ratings on Four Note Classes -------------------------------------------------------------- Fitch Ratings has affirmed the following Bayview Financial Acquisition Trust Issue: Series 1998-1 GROUP 1: -- Class IA 'AAA'; -- Class IO-I 'AAA'; -- Class IM1 'AA'; -- Class IM2 'A'; -- Class IM3 'BBB; -- Class IM4 'BBB; -- Class IB1 'BB'; -- Class IB2 'B'. Series 1998-1 GROUP 2: -- Class II-A 'AAA'; -- Class IO-II 'AAA'; -- Class IIM1 'AA'; -- Class IIM2 'A'; -- Class IIM3 'BBB; -- Class IIM4 'BBB; -- Class IIB1 'BB'; -- Class IIB2 'B'. The affirmations on these classes reflect levels of credit enhancement consistent with future loss expectations. BEAR STEARNS: Fitch Affirms BB+/BB- on 2 Series 1998-C1 Classes --------------------------------------------------------------- Fitch Ratings affirms Bear Stearns Commercial Mortgage Securities Inc.'s commercial mortgage pass-through certificates, series 1998- C1, as follows: -- $74 million class A-1 'AAA'; -- $417.2 million class A-2 'AAA'; -- Interest only class X 'AAA'; -- $35.7 million class B 'AA'; -- $32.2 million class C 'A'; -- $32.2 million class D 'BBB'; -- $8.9 million class E 'BBB-'; -- $12.5 million class F 'BB+'; -- $5.4 million class H 'BB-'. Fitch does not rate the $12.5 million class G, $17.9 million class I, $4.6 million class J or $5.9 million class K certificates. These ratings affirmations follow Fitch's annual review of the transaction, which closed in June 1998. The rating affirmations reflect the consistent loan performance and minimal reduction of the pool collateral balance since closing. ORIX Capital Markets, the master servicer, collected year-end 2002 financials for 97% of the pool balance. Based on the information provided the resulting YE 2002 weighted average debt service coverage ratio is 1.89 times, compared to 1.58x at issuance for the same loans. Currently, four loans (3%) are in special servicing. The largest loan is secured by four industrial properties in Rochester, New York, and is currently real estate-owned. GMACCM Investment Committee approved to list the four properties for sale. The next largest specially serviced loan is secured by a 179,619 square foot retail property in St. Johnsbury, Vermont and is current. Ames, which was the largest tenant, filed for bankruptcy and rejected the lease. The loan has remained current while the vacant space has been marketed. Five loans (2.51%) reported YE 2002 DSCRs below 1.00x. Expected losses and other stress scenarios were factored into Fitch's analysis of the pool. The resulting credit enhancement remained sufficient to affirm the transaction. Fitch will continue to monitor this transaction, as surveillance is ongoing. BOUNDLESS CORP: Jeffrey A. Hilk Appointed as New VP of Sales ------------------------------------------------------------ Boundless Corporation (OTC Bulletin Board: BDLS) has appointed desktop display veteran, Jeffrey A. Hilk, as Vice President, Sales. Mr. Hilk will lead the worldwide sales team and report directly to Mr. Joseph Joy, president and CEO. Mr. Joy commented, "Jeff has broad experience in this business. Not only does he have a proven track record in sales, he has a diverse background in business development, engineering and operations management as well. Jeff is poised to help our company apply resources and capabilities to the specific needs of our customers. As our emergence from bankruptcy draws near and our order rate steadily grows, Jeff's goal will be to hasten the pace of regaining our full market share and former revenue levels. The management team is very pleased to have Jeff accept this new position and these responsibilities." "Formerly, the company had a combined sales, business development, and product marketing/planning function," said Tony Giovaniello, VP, Business Development. "The new organization offers additional focus on sales, and the other supporting business development functions. Not only we will be able to touch more current and prospective customers with our expanded sales team, we'll be able to provide a higher quality exchange through an increased focus on marketing, alliances, and new products." Added Mr. Joy, "This change allows Tony to focus on our next generation of desktop products, our services business development and expanding our footprint in the Point-of-Sales and Services markets. This is an investment by the Company in shifting from short-term survival-only mode to longer-term value creation for all of our stakeholders." In accepting his new position, Mr. Hilk stated, "I am pleased to have this opportunity to work closely with Boundless' customers and channel partners. I also am excited about working with the excellent and very experienced sales team at Boundless. There are many opportunities today for our current terminal products as well as the new products to be offered during the rest of the year." Boundless Corporation is a global technology company with two subsidiaries: Boundless Technologies, Inc. -- http://www.boundless.com-- a desktop display products company, and Boundless Manufacturing Services, Inc. -- http://www.boundless.com/manufacturing-- an emerging EMS company providing build-to-order systems manufacturing, as well as complete end-to-end solutions from design through product end-of- life to its customers. Boundless Corporation filed for Chapter 11 protection on March 12, 2003, in the U.S. Bankruptcy Court for the Eastern District of New York (Central Islip) (Lead Bankr. Case No. 03-81558). BOYD GAMING: Fitch Affirms Bank & Bond Ratings at Low-B Levels -------------------------------------------------------------- Fitch Ratings has affirmed the ratings for Boyd Gaming Corporation's senior secured bank credit facility at 'BB+', senior unsecured at 'BB-' and senior subordinated notes at 'B+'. The ratings reflect the company's geographically diverse asset base, strong free cash flow generation, focused balance sheet management and visible growth prospects (namely, The Borgata). Offsetting factors include the material tax increases enacted in Illinois, Nevada and New Jersey in 2003 which are expected to result in a $15 million - $20 million hit to run-rate EBITDA. Longer term, risk factors include new competition for Boyd's Delta Downs facility, where Pinnacle Entertainment plans to open its new casino facility in early 2005, and the potential for a Native American casino within 15 miles of Boyd's Blue Chip Casino in Michigan City. Recently announced capital spending plans at these two properties could minimize the impact; however, Fitch believes that the combined hit to EBITDA in 2005 could be in the $35 million - $50 million range. The Rating Outlook is Stable. Boyd's primary growth opportunity, The Borgata, a $1.1 billion 50/50 Atlantic City joint venture project with MGM MIRAGE, opened July 3, 2003. As the first must-see 'Las Vegas-style' casino- resort in the market and the first major opening in over 13 years, Fitch expects the property to ramp up relatively quickly to a leading market position, with annual EBITDA in the $160 million - $180 million range. Funding for the Borgata includes equity contributions from both sponsors of $226 million each, $188.4 million of which is funded to date. In addition, $621 million of Borgata project costs are being drawn under a $630 million bank agreement, which is non-recourse to both BYD and MGG. Under the terms of the bank agreement, no funds may be advanced to Boyd or MGM MIRAGE for a full seven quarters after opening, and only then, provided certain performance milestones are met. However, Boyd's equity stake in the property provides further asset support to the company's risk profile. For the first half of 2003, Boyd faced challenging operating conditions throughout its portfolio. For the six-month period, EBITDA fell 4.7% year-over-year to $135.0 million, while same- store property EBITDA (excluding Delta Downs, which opened Feb 2002) fell 7.6%. EBITDA margin for the period was down 200 basis points (bps), to 21.3%. Bright spots during the period included Sam's Town Las Vegas which posted solid EBITDA gains (+20.0% to $19.1 million), and Delta Downs (+61.7% to $15.5 million) due in part to the partial quarter comparison in first quarter 2003. For the property's first full quarter comparison, EBITDA increased 39.2% due to margin improvement. Aside from these properties, Boyd faced declines at the balance of its portfolio. Gaming tax increases negatively affected operating results at Blue Chip in Indiana and Par-A-Dice in Illinois, while higher costs hurt the Downtown Properties' niche Hawaiian charter business. Over the past six quarters, Boyd's credit profile has improved dramatically thanks to improved operating results, incremental EBITDA from Delta Downs and focused debt reduction. At June 30, 2003, last twelve month leverage and coverage stood at 4.1 times and 3.0x, respectively, versus 4.4x and 2.7x in the prior year period and 5.1x and 2.4x at year-end 2001. During the first half of 2003, Boyd reduced debt by $35.5 million, bringing debt to $1.1 billion. Free cash flow was also used for stock repurchases for the first time in company history. Management repurchased 991,100 for $12.2 million leaving an additional 1.0 million shares under its current authorization. For the remainder of 2003, the majority of free cash flow will be allocated to two new capital projects (Delta Downs and Blue Chip) and common dividend payments of approximately $19.0 million annually. In addition, Boyd's share repurchase program (which has 1.0 million shares remaining) remains in effect. Fitch believes Boyd management is comfortable with current leverage and debt levels, thus debt repayment will likely be less of a priority going forward. Credit ratios at fiscal year-end 2003 are expected to remain flat or improve modestly from current levels, despite new capital spending plans, planned dividend payments, and projected share repurchases. For 2003, this assumes flat to a slight decrease in EBITDA over the prior year (excluding Borgata). Even at the low end of this scenario, Fitch estimates that Boyd would finish 2003 with 4.0x leverage and 3.0x interest coverage (unadjusted for Borgata debt). For 2004, Fitch expects capital spending and dividends to usurp free cash flow, but with equity funding requirements for the Borgata complete, leverage should improve slightly due to projected EBITDA growth of 5% and stable debt levels. Beyond 2004, Boyd has a number of internal development projects under consideration. While no definite plans have been decided on, a key opportunity for Boyd is redevelopment of the historical Stardust casino/hotel. Located at the northern end of the Las Vegas Strip, the value of the Stardust should increase significantly with the opening of Steve 'Wynn Las Vegas' megaresort across the street in Spring 2005. At Par-A-Dice in Illinois, potential casino expansions and/or hotel additions are also under consideration; however, the recent enactment of a steep gaming tax increase in Illinois (effective July 1, 2003) may shelve expansion plans there indefinitely. Liquidity remains adequate. At June 30 2003, the company had $77 million in cash and an estimated $273 million in availability under the revolving credit facility. However, availability will be reduced later in October 2003 when $122.2 million in 9.25% senior notes are redeemed. Thereafter, Boyd's nearest maturity is not until 2007 and 2008 when outstandings under the $400 million revolving bank facility and $100 million term loan, respectively, come due. At June 30, 2003, Boyd had $1.1 billion in debt, split 50/50 between senior and subordinated, 80% of which was fixed. CEDRIC KUSHNER: June 30 Balance Sheet Upside-Down by $8.4 Mill. --------------------------------------------------------------- Cedric Kushner Promotions Inc.'s revenues decreased by approximately $9,860,500, or 84%, from approximately $11,735,000 for the six months ended June 30, 2002 to approximately $1,874,200 for the six months ended June 30, 2003. Contributing significantly to the revenue decline is the number of televised events promoted during the six months ended June 30, 2003 compared to the same period during the prior year. The Company had relatively fewer premium cable licensing fees due to the expiration of contracts with premium level boxers. In addition, the Company experienced a decrease in activity from its talent command premium cable- licensing fees. At June 30, 2003, CKB's cash's balance indicated an overdraft of $15,475 (reflected as a current liability on its balance sheet), compared to a balance of approximately $782,000 at June 30, 2002. The Company incurred a net loss of approximately $3,756,200 during the six months ended June 30, 2003. In addition, the Company had a working capital deficiency of approximately $9,233,500, and a stockholders' deficiency of approximately $8,393,800 at June 30, 2003, and operating cash constraints that raise substantial doubt about the Company's ability to continue as a going concern. There can be no assurance that sufficient funds required during the next twelve months or thereafter will be generated from operations or that funds will be available from external sources such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Further, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company's existing shareholders. CONSECO INC: Wants to Assign 2 Hangar Leases to IndyCar Aviation ---------------------------------------------------------------- Conseco entered into a Hangar 75 Lease on April 14, 1989 with the Indianapolis Airport Authority. With the Airport Authority's consent, Conseco assigned its rights, title and interest in the Hangar 75 Lease to Lincoln Income Life Insurance Company. Lincoln subleased the Hangar 75 premises back to Conseco. Lincoln constructed an airplane hangar and related improvements at the Hangar 75 premises. Bankers National Life Insurance Company, as successor by merger to Lincoln, and the Authority, amended the Hangar 75 Lease to include BNLIC. On April 4, 1994, Conseco and the Airport Authority entered into the Hangar 76 Lease. Pursuant to the Lease, Bankers National constructed an airplane hangar and related improvements at Hangar 76 Premises. Now, Conseco and Bankers National propose to assign to IndyCar Aviation LLC, all of their rights, title and interest in the Hangar 75 and the Hangar 76 Leases. IndyCar will buy all personal property and equipment located on the Hangar premises from BNLIC for $1,900,000. The Debtors will transfer these properties that are located at the Hangars to IndyCar: -- office furniture and furnishings, -- two fax machines, -- telephone system, -- data network, and -- two tugs. (Conseco Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONSOLIDATED FREIGHTWAYS: TransForce Acquires CF Canada Group ------------------------------------------------------------- Canadian Freightways announced TransForce Income Fund's successful bid to acquire the CF Canada Group of Companies, including Calgary-based Canadian Freightways. The Montreal-based TransForce is a known leader in the Canadian transportation and logistics industry. CF Canada was sold as its parent company, Consolidated Freightways Corporation headquartered in Vancouver Washington, continues to sell its assets since announcing bankruptcy in September 2002. Speaking for CF Canada, President and Chief Executive Officer Darshan Kailly says the new ownership will provide growth opportunities for the company and its customers. "We are pleased to be joining an organization with high standards of performance. We will continue to provide CF Canada customers with the very best in service and our team with a rewarding place to work," he says. As part of the TransForce group, Canadian Freightways' 68 years of experience is now reinforced by a parent company that has proven capabilities and resources in the North American transportation industry. As a wholly-owned independent subsidiary, the company will continue to leverage the expertise of its senior management team and the commitment of its entire staff to provide customers with the service excellence they depend on. The CF Canada Group of Companies consists of: Canadian Freightways, Epic Express and Click Express (specializing in time definite, less-than-truckload service across North America); CF Parcel Express and Epic Parcel Express (Canadian parcel services); UTL Transportation Services, (North American truckload services); Universal Contract Logistics (dedicated fleet services); M&C, (customs brokerage and international freight forwarding); the Sufferance Warehouse Group and Stream Inventory Logistics (warehousing), Tractive Express (equipment for hire), and; FIT Solutions (logistics). Over the past year, while the ownership outcome was pending, Canadian Freightways continued to offer industry-leading performance. Between Canada and the United States, 98 per cent of its shipments were delivered on time, and in Canada this figure rose to an almost perfect 99 per cent. This year Canadian Freightways is forecasting another profitable year despite what has been and will continue to be a challenging economic environment. "Now that the ownership issue has been resolved with an outcome that is positive for our customers, team, and business partners, we can get down to the business of expanding our capabilities, enhancing our customer service and growing our business," says Kailly. Canadian Freightways has been operating in Canada since 1935 and today employs 1500 people. Specializing in guaranteed time- definite and expedited transportation, customs brokerage and supply chain services across Canada and the United States, the company provides service to businesses who expect to create competitive advantage with their supply chain. The company can be found on the Web at http://www.canadianfreightways.com CONSOLIDATED FREIGHTWAYS: Canadian Assets Sold for C$69 Million --------------------------------------------------------------- TransForce Income Fund (TSX : TIF.UN), a leader in the Canadian transportation and logistics industry, was successful in its bid to purchase substantially all the assets of Canadian Freightways Limited and certain of its subsidiaries. The purchase price is CDN$69.6 million plus assumption of loans and credit facilities of approximately CDN$15.0 million. The acquisition is expected to close before the end of this year. The bid was accepted by Canadian Freightways' parent company, Consolidated Freightways Corporation, and was approved by the United States Bankruptcy Court in California on August 25, 2003. Court approval was necessary due to Consolidated Freightways Corporation being under Chapter 11 proceedings in the United States. Canadian Freightways itself is not under bankruptcy protection in the U.S. or in Canada. Canadian Freightways is headquartered in Calgary, Alberta and its operations in Canada and the United States include less-than- truckload, truckload, sufferance warehouses, customs brokerage, international freight forwarding, fleet management and logistics management. The combined revenues of Canadian Freightways for its last fiscal year were approximately CDN$236 million. "Canadian Freightways is a profitable, well-managed enterprise and adding this company to the TransForce group will provide unparalleled coverage to our customers across Canada and beyond. Moreover, the addition of Canadian Freightways will increase our range of services and significantly augment our business," said Alain B,dard, President and CEO of TransForce. TransForce intends to operate Canadian Freightways as an independent division and will retain its current management and staff of approximately 1,500 people under the direction of Mr. Darshan Kailly, President of Canadian Freightways. TransForce Income Fund -- http://www.transforce.ca-- headquartered in Montreal, Quebec, is one of Canada's leading transport and logistics companies. TransForce, through its businesses, operates in four well-defined business segments: Less Than Truckload and Parcel Delivery, Truckload, Specialized Truckload and Logistics and Warehousing Services. TransForce offers its services across North America with a focus on Eastern Canada. TransForce's trust units (TIF.UN) are listed on the Toronto Stock Exchange. COX COMMS: Commences Tender Offer for Exch. Discount Debentures --------------------------------------------------------------- Cox Communications, Inc. (NYSE: COX) is commencing a cash tender offer to purchase any and all of its outstanding Exchangeable Subordinated Discount Debentures due 2020. The offer is being made upon the terms and is subject to the conditions set forth in an Offer to Purchase dated August 26, 2003. Total consideration for the Discount Debentures validly tendered and not validly withdrawn prior to 5 p.m., New York City time, on September 9, 2003 will be a price of $510.00 for each $1,000 principal amount at maturity of the Discount Debentures. The tender offer consideration for the Discount Debentures validly tendered after 5 p.m., New York City time, on September 9, 2003, but before the expiration of the offer at midnight, New York City time, on September 23, 2003, unless extended by Cox, will be a price of $495.00 per Discount Debenture. In either case, holders of the Discount Debentures that validly tender their Discount Debentures will receive accrued and unpaid cash interest from the last interest payment date to, but not including, the settlement date. A more complete description of the tender offer can be found in the Offer to Purchase. Merrill Lynch & Co. and Citigroup Global Markets Inc. are acting as dealer managers and Global Bondholder Services Corporation is acting as information agent in connection with the tender offer. Any questions or requests for assistance should be directed to Merrill Lynch's Liability Management Group at (888) 654-8637 or Citigroup's Liability Management Group at (800) 558-3745. For additional information regarding the tender offer, reference should be made to the Offer to Purchase and related Letter of Transmittal, copies of which can be obtained from the information agent at (866) 470-3900. Credit Suisse First Boston, Lehman Brothers, UBS Investment Bank and Wachovia Securities are serving as co-managers for the tender offer. None of Cox, its board of directors, the dealer managers, the co-managers, the information agent, the depositary or the trustee make any recommendation as to whether or not holders should tender their Discount Debentures pursuant to the tender offer. Cox Communications, Inc., a Fortune 500 company, is a multi- service broadband communications company with approximately 6.5 million total customers, including 6.3 million basic cable subscribers. The nation's fourth-largest cable television provider, Cox offers both analog cable television under the Cox Cable brand as well as advanced digital video service under the Cox Digital Cable brand. Cox provides an array of other communications and entertainment services, including local and long distance telephone under the Cox Digital Telephone brand; high-speed Internet access under the Cox High Speed Internet brand; and commercial voice and data services via Cox Business Services. Local cable advertising, promotional opportunities and production services are sold under the Cox Media(SM) brand. Cox is an investor in programming networks including Discovery Channel. More information about Cox Communications can be accessed on the Internet at http://www.cox.com At June 30, 2003, Cox's balance sheet shows that its total current liabilities exceeded its total current assets by about $500 million. CP KELCO: Significant Debt Burden Spurs S&P's Downgrade Action -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on hydrocolloid producer CP Kelco ApS to 'B' from 'B+'. Wilmington, Delaware-based CP Kelco had approximately $675 million of debt outstanding as of June 30, 2003. The current outlook is negative. "The downgrade reflects heightened concerns regarding CP Kelco's sizable debt burden following the recent settlement of its lawsuit against Pharmacia," said Standard & Poor's credit analyst Franco DiMartino. Proceeds from the settlement agreement, while a positive step in regard to near-term liquidity, were much lower than anticipated and have substantially diminished CP Kelco's prospects for reducing its sizable debt burden for the foreseeable future. Standard & Poor's said that its ratings on CP Kelco reflect a below-average business position and a very aggressive financial profile. CP Kelco is a leading producer of hydrocolloids, which are used as thickeners, suspension agents, texturizers, binders, and stabilizers in an array of industrial applications. CROMPTON CORP: Zacks.com Says Dump the Stock Now ------------------------------------------------ Zacks.com says shareholders should dump their equity positions in Crompton Corporation (NYSE:CK), adding the stock to its exclusive list of Stocks to Sell Now. These stocks are currently rated as a Zacks Rank #5 (Strong Sell). Note that since 1988 the S&P 500 has outperformed the Zacks #5 Ranked stocks by 166.7% annually (11.3% vs. 4.2% respectively). While the rest of Wall Street continued to tout stocks during the market declines of the last few years, we were telling our customers which stocks to sell in order to save themselves the misery of unrelenting losses. Among the #5 ranked stocks Zacks highlights Crompton Corporation (NYSE:CK) this week. To see the full Zacks #5 Ranked list of Stocks to Sell Now then visit: http://stockstosellprbw.zacks.com/ Here is a synopsis of why Cromptom has a Zacks Rank of 5 (Strong Sell) and should most likely be sold or avoided for the next 1 to 3 months. Note that a #5/Strong Sell rating is applied to 5% of all the stocks we rank: Crompton Corporation (NYSE:CK) is engaged in the sale and manufacture of specialty chemicals and polymer processing equipment controls. The second quarter turned out to be tough for Crompton, as higher raw material and energy costs reduced unit volume from a generally weaker global economic environment, while lower selling prices had a negative impacted on earnings. For the quarter, the company's earnings result fell short of Wall Street's expectations while sales from continued operations fell -7% from the prior year, due mainly to the divestiture of the industrial specialties business in June 2002. Earnings estimates for both this year and next are below levels from one month ago. It was a difficult quarter for many companies that deal with chemicals, including Cambrex (NYSE: CBM) for example. However, Crompton is implementing a cost reduction program, and expects improved results and improved cash flow from operations once external factors improve. Therefore, it would probably be best for investors to wait on a position in Crompton until an improved environment adds more buoyancy to its earnings estimates. For over 15 years the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since 1988 the #1 Ranked stocks have generated an average annual return of +33.6% compared to the (a)S&P 500 return of only +11.3%. Plus this exclusive stock list has generated average gains of +13.3% during the last 3 years; a substantial return compared to the large losses suffered by most investors during that time frame. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). And since 1988 the S&P 500 has outperformed the Zacks #5 Ranked stocks by 166.7% annually (11.3% vs. 4.2% respectively). Thus, the Zacks Rank system can truly be used to effectively manage the trading in your portfolio. For continuous coverage of Zacks #1 and #5 Ranked stocks, then get your free subscription to "Profit from the Pros" e-mail newsletter where we highlight stocks to buy and sell using our time tested stock evaluation model. http://zacksrankprbw.zacks.com/ The Zacks Rank, and all of its recommendations, is created by Zacks & Co., member NASD. Zacks.com displays the Zacks Rank with permission from Zacks & Co. on its web site for individual investors. Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1981 to compile, analyze, and distribute investment research to both institutional and individual investors. The guiding principle behind our work is the belief that investment experts, such as brokerage analysts and investment newsletter writers, have superior knowledge about how to invest successfully. Our goal is to unlock their profitable insights for our customers. And there is no better way to enjoy this investment success, than with a FREE subscription to "Profit from the Pros" weekly e-mail newsletter. For your free newsletter, visit http://www.freeprofitbw.zacks.com Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates. * * * As reported in Troubled Company Reporter's August 12, 2003 edition, 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. CROWN BOOKS: Asks Court to Enter Final Decree to Close Cases ------------------------------------------------------------ The Liquidating Supervisor, Bernard A. Katz, and the Post- Effective Date Committee want the U.S. Bankruptcy Court for the District of Delaware to enter a final decree closing Crown Books Corporation's chapter 11 cases. The developments in Crown's chapter 11 cases militate in favor of closing these cases because: i) the order confirming the Plan has become final and is no longer subject tot appeal; ii) the Plan has been substantially consummated and the Effective Date has occurred; iii) no significant property transfers remain unexecuted under the Plan; iv) all Plan payments required to date have been made; and v) no motions or contested matters remain unresolved in these cases. The Committee submits that, as these cases have been substantially administered, a final decree and order closing these Cases should be granted. The possibility that this Court's jurisdiction will be invoked with respect to unanticipated matters which might subsequently arise presents no obstacle to the closing of these Cases. The Court can retain jurisdiction over such matters as may be prescribed by the Plan and the order confirming the plan, including the interpretation and enforcement of any Plan provision and orders of the Court. Crown is the largest discount book retailer in the country and also sells book-related and gift items. The Company filed for chapter 11 protection on February 12, 2001 (Bankr. Del. Case No. 01-00407). Ronda L. Thomas, Esq., and David M. LeMay, Esq., at Klett Rooney Lieber & Schorling PC serves as counsel to the Post- Effective Date Committee. CYBERADS INC: Hires Timothy L. Steers as New External Auditors -------------------------------------------------------------- Weinberg & Company, P.A., by letter dated August 13, 2003, was dismissed as the independent accountant for CyberAds, Inc. Weinberg did not receive the termination letter until August 19, 2003. Weinberg had been the independent accountant for, and audited the financial statements of, the Company. The reports of Weinberg on the financial statements of the Company for the past two fiscal years contained a modification expressing substantial doubt about the Company's ability to continue as a going concern. This modification was attributable to the circumstance that the Company had suffered recurring losses from operations, had a stockholders' deficit and a working capital deficit. The Company's Board of Directors unanimously approved the dismissal of Weinberg. The Company engaged Timothy L. Steers, CPA as its new independent accountants as of August 13, 2003 as the Company's Board of Directors determined that it would be more cost effective using the services of Steers. DELIA*S: Antitrust Condition for Acquisition by Alloy Satisfied --------------------------------------------------------------- Alloy, Inc. (Nasdaq:ALOY) and dELiA*s Corp. (Nasdaq:DLIA) announced jointly that on August 25, 2003, the Federal Trade Commission granted early termination of the waiting period required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in connection with Alloy's proposed acquisition of dELiA*s. As previously announced, on August 6, 2003 Alloy commenced a cash tender offer to purchase all of the outstanding shares of Class A common stock of dELiA*s for $0.928 per share, which is to be followed by a cash merger at the same per share price, for a total purchase price of approximately $50 million. The tender offer is expected to be consummated promptly after the expiration of the offer at midnight on September 3, 2003, unless extended. Alloy, Inc. is a media, marketing services and direct marketing company targeting Generation Y, a key demographic segment comprising the more than 60 million boys and girls in the United States between the ages of 10 and 24. Alloy's convergent media model uses a wide range of media assets to reach more than 25 million Generation Y consumers each month. Through Alloy's 360 Youth media and marketing services unit, marketers can connect with the Generation Y audience through a host of advertising and marketing programs incorporating Alloy's media and marketing assets such as direct mail catalogs, magazines, college and high school newspapers, Web sites, school-based media boards, college guides, and sponsored on- and off-campus events. Alloy generates revenue from its broad reach in the Generation Y community by providing marketers advertising and marketing services through 360 Youth and by selling apparel, accessories, footwear, room furnishings and action sports equipment directly to the youth market through catalogs, Web sites and magazines. For further information regarding Alloy, please visit our Web site at http://www.alloyinc.comand click on the "Corporate" tab. Information on 360 Youth's advertising and marketing services can be found at http://www.360youth.com dELiA*s Corp. is a multi-channel retailer that markets apparel, accessories and home furnishings to teenage girls and young women. The company reaches its customers through the dELiA*s catalog, http://www.dELiAs.cOmand 63 dELiA*s retail stores. * * * Current Capital Initiatives In its most recent Form 10-Q filed with SEC, dELia*s reported: "In February 2003, we entered into an agreement with JLP Daisy LLC, an affiliate of Schottenstein Stores, to license our dELiA*s brand on an exclusive basis for wholesale distribution in certain product categories. Group 3 Design Corp., a leading brand management firm, has been retained to manage these licensing activities, which will focus on the distribution of dELiA*s products primarily in mid- and upper-tier department stores. We received a $16.5 million cash advance against future royalties from the licensing ventures. Once JLP Daisy recoups its advance plus a preferred return, the Company will receive a majority of the royalty stream after brand management fees. The initial term of the master license agreement is 10 years, which is subject to extension under specified circumstances. The master license agreement may be terminated early under certain circumstances, including at the option of the Company upon payment to JLP Daisy of an amount based upon royalties received from the sale of the licensed products. In addition, the Company granted to JLP Daisy a security interest in the dELiA*s trademarks, although the only event that would entitle JLP Daisy to exercise its rights with respect to these trademarks is a termination or rejection of the master license agreement in a bankruptcy proceeding. In connection with the engagement of Group 3 Design as brand manager, an executive of Group 3 Design received a warrant to purchase 50,000 shares of our Class A Common Stock. "During and subsequent to fiscal 2002, we signed several amendments to our credit facility with Wells Fargo Retail Finance LLC. The most recent amendment, which was effective April 29, 2003, extended the life of the agreement to April 2006 and reduced our revolving line of credit limit from $25 million to $20 million so that our unused fees were reduced. Until October 29, 2004, we retain the right to increase the limit to $25 million at our option. The credit line is secured by our assets and borrowing availability fluctuates based on inventory levels. The April 2003 amendment increased the advance rate from the prior quarter based on inventory value and also expanded the borrowing base to include certain receivables. The agreement contains certain covenants and default provisions, including a limitation on our capital expenditures that the bank reset as of May 3, 2003. At our option, borrowings under this facility bear interest at Wells Fargo Bank's prime rate plus 25 basis points or at the LIBOR Rate plus 250 basis points. A fee of 0.375% per year is assessed monthly on the unused portion of the line of credit as defined in the agreement. As of May 3, 2003, the outstanding balance on our Wells Fargo credit facility, which is classified as a current liability, was $6.1 million, outstanding letters of credit were $3.7 million and unused available credit was $800,000. "During fiscal 2003, we incurred $1.2 million in financing charges and transaction fees primarily related to our licensing agreement. "We are currently subject to certain covenants under our mortgage loan agreement relating to our distribution facility in Hanover, Pennsylvania, including a covenant to maintain a fixed charge coverage ratio. Effective May 1, 2001, the bank agreed to waive the fixed charge coverage ratio covenant through August 6, 2003 in exchange for an adjustment in our payment schedule. The principal balance of $3.0 million as of May 3, 2003 is scheduled to be paid in full by August 2003. We are currently considering several options with respect to the mortgage, including a refinancing and other transactions, including a sale-leaseback that would enable us to satisfy our obligations. We expect to complete these efforts prior to the final payment date. If we do not finalize an arrangement by that time, we have the right to exercise a put option to sell the facility, which is being provided to us by a group of our officers and directors, and continue to use the facility under a new lease arrangement. "In May 2003, we received an equity infusion of $2.7 million from a group of our directors and officers. In addition to the equity transaction, the investing group provided us with a put option that would require them to purchase, but would not require us to sell, our Hanover distribution facility for $3.0 million, which would allow us to satisfy our outstanding mortgage. This put option expires in August 2003 and is intended to provide us with an alternative means of satisfying the mortgage in case we are not able to refinance, extend or otherwise satisfy the mortgage such as through a sale-leaseback arrangement. In consideration for the grant of the put option, the investors received warrants, exercisable for an aggregate 600,000 shares of our stock at $0.37 per share. We will record a related charge in the second quarter of fiscal 2003." DELTAGEN: Auctioning-Off Surplus Equipment Inventory in Calif. -------------------------------------------------------------- AuctioNet -- http://www.AuctioNet.com-- today announced the live and online Bidcast auction of the surplus equipment inventory to the ongoing operations of Deltagen, Inc., a provider of drug discovery tools and services to the biopharmaceutical industry. The pre-auction sale and the live auction event are by order of the U.S. Bankruptcy Court, Northern California. This sale showcases Deltagen's World Class Gene Function and Drug Research facility located in Redwood City, California. Completed in February of 2003, the 132,000 square-foot facility contains state of the art biotech/biomedical research and lab equipment, autoclaves/sterilizers, test equipment, optical inspection equipment, Information Technology equipment and executive office furnishings. The pre-auction sale and live auction event provide biotech and medical companies, research facilities and academic institutions access to nearly new equipment for a great relative value. "Our entire facility is state of the art, and most any research institution in the world will benefit from our technology and equipment," said Larry Hill, Chief Executive Officer of Deltagen. Included in these sales are Inverted Leica scopes for Micro- Injection, Gettinge-Castle sterilizers and tunnel washers, ABI 3100 DNA Sequencers, Agilent Gene Array Scanners, Applied Biosystem Thermocyclers, Beckman Coulter Centrifuges, Zeiss, Nikon and Leica Closed Circuit Television microscopes. There are Cisco routers, Dell, Compaq, Sun and Silicon Graphics servers as well as a wide range of consumer products such as laptops, flat-panel displays, digital projectors, desktop computers and Apple workstations. "The Deltagen facility is the newest, largest and best equipped BioTech Facility we've ever seen," said Nuri Otus, CEO of AuctioNet. "The scopes, sequencers and security monitoring systems alone would garner the attention of every research facility on the planet. This is going to be the largest sales event the biotechnology industry has ever seen." The sale will be conducted in two phases, a pre-auction sale and a live auction event. The Deltagen pre-auction sale begins on August 15th, 2003 and continues through September 30th. The live auction events are scheduled for October 15th and 16th and will be held at Deltagen's Redwood City, CA facility. The live auction event will also be featured on eBay's Business & Industrial Live Online Auctions. More information about the sale can be found online at http://www.auctionet.com Buyers can also register for the BidCast at http://www.auctionet.com/register AuctioNet, Inc. is a leading international specialty auctioneer and liquidator offering capital recovery services and asset valuations. The company specializes in remarketing high technology equipment and inventories, as well as complete facility auctions. Founded in 1995, AuctioNet's services include auction sale value analysis, inventory relocation, leased equipment analysis and reconciliation, onsite auctions, online auctions, auction BidCasts, orderly liquidations, and sealed-bid sales. AuctioNet's clients include crisis management firms, financial institutions, venture capital firms, asset-based lenders and secured lenders. The assets will be sold through an ongoing orderly liquidation, as well as a two-day auction live and online Bidcast on October 15 and 16, 2003. Buyers will be able to bid in-person or online. Detailed preview information, asset catalog, and online bidding instructions are available at http://www.AuctioNet.com Deltagen is a leading provider of drug discovery tools and services to the biopharmaceutical industry. Deltagen offers a suite of programs designed to enhance the efficiency of drug discovery including access to biological models, drug interaction and metabolism technologies and validated small molecule targets. Deltagen filed for Chapter 11 protection on June 27, 2003, in the U.S. Bankruptcy Court for the Northern District of California (San Francisco) (Bankr. Case No. 03-31906). EATON VANCE: Fitch Hatchets Class D Note Ratings Down to BB- ------------------------------------------------------------ Fitch Ratings downgrades one class of notes and affirms five classes of notes issued by Eaton Vance CDO III, Ltd. The transaction, a collateralized debt obligation, is supported by a diversified portfolio of leveraged loans and high-yield bonds. The rating action is based on deterioration of the credit fundamentals of the portfolio to the point where the risk is no longer consistent with the current ratings. The portfolio contains a number of securities whereby default is probable, although only a handful of assets are classified as defaulted. The Fitch weighted average rating factor is currently 56.09 ('B/B-') relative to the initial WARF of 48 ('BB-/B+'). The following class of Eaton Vance CDO III, Ltd. has been downgraded: -- Class D floating-rate notes to 'BB-' from 'BB+'. The following classes of Eaton Vance III have been affirmed: -- Class A-1 floating-rate notes 'AAA'; -- Class A-2 fixed-rate notes 'AAA'; -- Class B floating-rate notes 'A-'; -- Class C-1 floating-rate notes 'BBB+'; -- Class C-2 floating-rate notes 'BBB+'. Eaton Vance CDO III, Ltd., managed by Eaton Vance Management, was established in August 2000 to issue $400 million in notes and preferred shares. The turbulent market conditions of the last several years has resulted in some credit migration of the portfolio. Fitch has discussed the current status of the transaction with the collateral manager and believes that the manager has taken substantial action to preserve noteholder value in the face of difficult times. For example, the collateral manager has reduced the portfolio's high yield bond exposure over the last 18 months in favor of senior secured bank loans. This has provided more stability to the portfolio. In addition, the collateral manager has consistently redirected interest proceeds to purchase additional collateral to improve the principal coverage of the rated debt. Fitch will continue to monitor Eaton Vance CDO III, Ltd. to ensure its ratings are accurate. ELAN CORP: Receives C$1.2MM Payment for JV Termination Agreement ---------------------------------------------------------------- Spectral Diagnostics Inc. (TSX: SDI), has paid Elan Corporation, plc. Cdn.$1.2 million owing to it under the joint venture termination agreements. As a result of the payment, the development loan of Cdn.$4.8 million and accrued interest has been extinguished, as previously agreed. Under the terms of the joint venture termination agreements, Elan has rights to a royalty of future sales of the Endotoxin Activity Assay. Spectral Diagnostics Inc. regains all intellectual property and marketing rights associated with the EAA, and the sepsis diagnostics system. "This payment to Elan follows our successful private placement," stated Dr. Paul M. Walker, President, and CEO of Spectral Diagnostics Inc. "We are now in a position to begin marketing this novel assay. The EAA is the first FDA cleared assay to determine a patient's risk for developing severe sepsis when admitted to the ICU. Sepsis continues to be a source of high mortality and health expense in North America and Europe. Early identification of patients at risk, and initiation of appropriate therapeutic interventions has shown beneficial effects on outcome." The incidence of sepsis continues to grow, even now affecting more than 750,000 patients annually in North America, a higher incidence than colon cancer, breast cancer, or congestive heart failure. Sepsis is the leading cause of death in noncoronary intensive care units, and the 11th leading cause of death in the U.S. overall. It carries a mortality rate similar to that associated with heart attacks in patients not hospitalized. The economic burden on hospitals is significant, as patients who have developed severe sepsis require prolonged stays in the intensive care units with rigorous support of failing organs. Spectral is a developer of innovative technologies for comprehensive disease management. Spectral provides accurate and timely information to clinicians enabling the early initiation of appropriate and targeted therapy. Current products are rapid format tests measuring markers of myocardial infarction (Cardiac STATus(R) test.) New products include rapid diagnostics for infection (the Endotoxin Activity Assay.) The EAA and Cardiac STATus(R) products are manufactured by Spectral Diagnostics Inc. Spectral's common shares are listed on the Toronto Stock Exchange: SDI. As reported in Troubled Company Reporter's August 26, 2003 edition, Elan Corporation sought and received additional agreements from a majority of the holders of the guaranteed notes issued by Elan's qualifying special purpose entities, Elan Pharmaceutical Investments II, Ltd., and Elan Pharmaceutical Investments III, Ltd. The agreements extend to August 29, 2003, the EPIL II and EPIL III noteholders' waivers of compliance by Elan with certain provisions of the documents governing the EPIL II and EPIL III notes that required Elan to provide the noteholders with Elan's 2002 audited consolidated financial statements by June 29, 2003. The waivers had previously been set to expire Friday last week. Elan did not pay a fee in connection with these waivers. ELWOOD ENERGY: S&P Affirms & Removes BB Rating from Neg. Watch -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB' rating on Elwood Energy LLC's $382.2 million bonds due 2026, and removed the rating from CreditWatch with negative implications where it was placed on Feb. 28, 2003. The outlook is negative. "We removed the rating from CreditWatch because the 90-day preference period has passed for the $18.7 million escrow collateral that Aquila Inc. provided to Elwood in March 2003, reducing the risk that the collateral would not be available to Elwood under an Aquila bankruptcy," said Standard & Poor's credit analyst Rajeev Sharma. "Furthermore, the downward credit pressure on Aquila has eased in recent months," Mr. Sharma added. The negative outlook reflects the negative outlook on Aquila and the residual risk that collateral posted by Aquila for the benefit of Elwood may not be fully available at the present time if Aquila were to enter into bankruptcy. If the rating on Aquila falls further and the risk grows that Elwood would not have access to the performance collateral, then the rating on Elwood also will likely fall. If the rating on Aquila stabilizes or improves, then the rating on Elwood would likely be similarly affected. Under a power sales agreement, Aquila provides about 48% of Elwood's contractual net operating cash flow through 2012 and, thereafter, 100% of contractual cash flow until 2017. Under similar PSAs, Exelon Generation Co. and Engage, an unrated subsidiary of Westcoast Energy Inc., provide the rest of cash flow through 2012. Elwood is a 1,409 MW merchant peaking power plant that sells into the Mid-American Interconnected Network and is fully contracted through 2012 and partially through 2017. ENERGY VISIONS: Brethren Fails to Provide C$2MM Loan to Company --------------------------------------------------------------- Energy Visions Inc. (NASD: OTCBB: "EGYV" and TSXV: "EVI.S") announces that Brethren Venture Corporation of Mississauga, Ontario, has failed to provide the Cdn.$2,000,000 Loan referred to in its Letter of Commitment announced on June 11, 2003. Under the terms of such Letter of Commitment, Brethren stated that it was prepared to provide a Cdn.$2.0 Million loan to permit EVI to acquire shares of Pure Energy Inc., and to provide working capital for both PEI and EVI, subject to certain conditions. Brethren has advised EVI that it is experiencing financial difficulties, has not participated in the preparation of the documents necessary to complete the transaction, and has not responded to repeated EVI enquiries as to the status of the financing, including one final request to confirm by 4:00 p.m. August 25, 2003 that Cdn.$2,000,000 has been deposited in trust with legal counsel pending completion of the transaction within 10 business days. EVI is still intent upon trying to complete the PEI acquisition transaction but completion is contingent upon EVI's successfully raising the necessary funds. EVI's management will actively seek new funding to replace the Brethren financing. EVI CEO Wayne Hartford said, "The proposed Brethren financing was primarily intended to allow the acquisition of a majority interest in Pure Energy Inc. I thank all at PEI, Rabih Holdings Ltd. and Nova Scotia Business Inc. for their ceaseless efforts to make the PEI acquisition deal a reality." In June 2003, Hibar Systems Limited, the present principal shareholder of PEI acquired the laboratory assets of Battery Technologies Inc., in bankruptcy at a price of Cdn.$135,000. Hibar has verbally indicated that it will permit EVI to occupy space in its premises previously occupied by BTI at a rental of approximately Cdn.$5,000 per month, such sum to include the use of the above laboratory assets. Both EVI and Hibar anticipate that once the PEI acquisition transaction closes, EVI will be granted the right to acquire such BTI laboratory assets in the future, at Hibar's cost, and with detail terms to be negotiated. At EVI's shareholders meeting held on July 15, 2003, Messrs Ronald K. Braun and Mr. Anthony H. Mehta were elected new members of the Company's Board of Directors. Energy Visions Inc. is a developer of advanced battery and fuel cell technologies. The Company's balance sheet as of March 31, 2003 is upside-down by about $2 million. ENRON CORP: Court Allows Protane to Sell ProCaribe for $5 Mill. --------------------------------------------------------------- Enron Corporation Debtor Protane Corporation obtained permission from the U.S. Bankruptcy Court to: (a) sell substantially all of the assets of its ProCaribe division to Terminal Acquisition Company, Inc. free and clear of all liens, claims, interests, encumbrances, rights of set-off, recoupment, netting and deduction for $5,090,000; and (b) assume and assign these unexpired leases and executory contracts: -- an LPG Services Agreement, -- a Terminal Lease, -- a Tallaboa Pier Agreement, -- an Omnibus Consent and Agreement of EcoElectrica and The Chase Manhattan Bank dated as of October 31, 1997 and the Omnibus Consent Accession Agreement among ProCaribe and the Chase Manhattan Bank dated December 15, 1997, -- a License Agreement dated January 23, 1985 between Commonwealth Oil Refining Company, Inc. and Progasco, Inc., as predecessor to Protane, as confirmed by Letter signed by CORCO and Protane dated December 12, 1997, -- an Empire Throughput Agreement, to the extent renewed, -- a Tropigas Throughput Agreement, to the extent renewed, -- an Automobile Lease Agreement dated January 28, 2000, -- a Nitrogen Agreement dated January 1, 1987 between ProCaribe and Air Products and Chemicals, Inc., -- certain easements, and -- certain permits. The ProCaribe Business Protane, through its ProCaribe division, owns and operates a Liquified Petroleum Gas supply, storage and forwarding business in Penuelas, Puerto Rico. ProCaribe was established in 1986 and operates the largest refrigerated LPG storage terminal in the Caribbean basin with ability to receive large fully refrigerated tankers. ProCaribe represents 85% of the terminal and storage capacity in Puerto Rico. ProCaribe's facilities consist of three fully refrigerated tanks on its site with an aggregate storage capacity of approximately 23,000 metric tons. One of the three tanks is a new 11,200- metric ton tank designed for and capable of providing primary fuel supply and back-up fuel supply to EcoElectrica L.P., a partnership formed for the development, construction, operation and ownership of an electricity generating facility at Penuelas, Puerto Rico -- the EcoElectrica Project. EcoElectrica is an affiliate of Enron and Edison Mission Energy and owns this tank. ProCaribe operates and maintains the tank and provides back-up fuel services for EcoElectrica pursuant to the LPG Service Agreement. Protane leases the other two tanks and certain ancillary equipment, including the land where they are located, from Caribe Olefine, L.L.P., S.P. pursuant to a Restatement of Lease Agreement with Option to Purchase between Caribe and Protane, dated December 12, 1997 -- the Terminal Lease. The Terminal Lease expires on December 31, 2020. The Purchase and Sale Agreement On May 7, 2003, Protane, Terminal Acquisition Company, Inc. -- an entity organized by Empire for the purpose of consummating the sale transaction -- and Empire executed a Purchase Agreement, which provides these terms: A. Purchase Price The purchase price for the Assets to Terminal Acquisition will be $5,090,000, subject to a Working Capital Adjustment and an upward dollar for dollar adjustment in the amount of any Contingent Known Liabilities paid by Protane on and after the Contract Date. Terminal Acquisition placed in escrow an Earnest Money Deposit equal to $509,000 and will pay the remainder of the Purchase Price at Closing. B. Assets The Assets include, among others, (i) accounts receivable related to throughputs and sales of LPG by Protane for the Business, (ii) LPG inventory used in the Business, (iii) certain prepaid expenses related to the Business, (iv) the Contracts, (v) the Permits, and (vi) all computer software and technical computer manuals used by the Protane in the conduct of the Business. C. Assumed Liabilities Terminal Acquisition will assume the liabilities set forth in the Purchase Agreement, including, without limitation, (i) all liabilities, costs and expenses related to or in respect of the Assets and the Business incurred or accrued on and after the Closing Date, (ii) all liabilities, costs and expenses related to any item or account set forth in the Balance Sheet, (iii) all liabilities, costs and expenses incurred in the Ordinary Course of Business and unpaid since December 31, 2002, (iv) all liabilities, costs and expenses and performance obligations in respect of the Contracts and Permits on and after the Closing Date, and (v) certain Contingent Known Liabilities. D. Transfer Taxes Terminal Acquisition will pay any Transfer Taxes resulting from the transactions contemplated by the Purchase Agreement. E. Termination of Agreement The Purchase Agreement and the transactions contemplated therein may be terminated prior to the Closing by, inter alia: (i) the mutual written agreement of Protane and Terminal Acquisition; (ii) Protane at any time after the 45th day after the Contract Date if: (a) the Closing has not occurred by the close of business on the 45th day after the Closing Date, and (b) Protane is not in default of its obligations under the Purchase Agreement in any material respect; and (iii) Terminal Acquisition or Empire at any time after the Expiration Date. F. Joint and Several Liability Empire agreed to be jointly and severally liable for all of Terminal Acquisition's obligations under the Purchase Agreement. (Enron Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., 609/392-0900) EOTT ENERGY: Dist. Court Upholds Plan and Nixes Shell Oil Appeal ---------------------------------------------------------------- EOTT Energy LLC (OTCBB:EOTTV) announced that the Honorable Janis Graham Jack presiding over the United States District Court for the Southern District of Texas, Corpus Christi Division, denied an appeal from Shell Oil Company and certain of its affiliates, thereby upholding EOTT Energy's restructuring plan that had been confirmed in federal bankruptcy court on February 18, 2003. "We are pleased the judge ruled in our favor in denying Shell's appeal to unwind a restructuring plan that has essentially been fully accomplished," explained EOTT Energy Chairman and Chief Executive Officer Tom Matthews. "Our reorganization took effect on March 1. Since then, we've distributed equity units in the newly restructured company to holders of our former master limited partnership units. In addition, we have resolved virtually all of the 12,000 claims from unsecured creditors and began distributions of nearly 11 million additional equity units in August to holders of allowed unsecured claims. "[Tues]day's ruling brings us near to completion of our restructuring process," Matthews continued. "This will enable us to move forward with plans for additional capitalization to expand our core business operations in the U.S. and Canada." EOTT Energy LLC is a major independent marketer and transporter of crude oil in North America. EOTT Energy also processes, stores, and transports MTBE, natural gas and other natural gas liquids products. EOTT Energy transports most of the lease crude oil it purchases via pipeline that includes 8,000 miles of intrastate and interstate pipeline and gathering systems and a fleet of more than 230 owned or leased trucks. For current information for EOTT Energy, visit http://www.eott.com E.SPIRE: Chapter 11 Trustee Hires Bayard Firm as Special Counsel ---------------------------------------------------------------- Gary F. Seitz, Esq., the Chapter 11 trustee of e.spire Communications, Inc.'s estates, is asking the U.S. Bankruptcy Court for the District of Delaware for permission to employ and retain The Bayard Firm as Special Counsel, nunc pro tunc to July 25, 2003. The Chapter 11 Trustee has selected Bayard Firm because of its attorneys' experience and knowledge and believes that Bayard has no disqualifying conflict of interest. Bayard Firm has advised the chapter 11 Trustee that it may have previously represented, may currently represent, and may in the future represent, in matters totally unrelated to the Debtors' pending chapter 11 cases, entities that are claimants of the Debtors or other parties-in- interest in these chapter 11 cases. The services Bayard may be required to render for the Chapter 11 Trustee include: a) prosecuting discrete litigation and/or appeals on behalf of these estates; b) analyzing, and where appropriate, objecting to claims filed against these estates; c) reviewing and representing the Chapter 11 Trustee in all matters concerning retention of professionals in these cases; d) reviewing fee applications filed in these cases; e) assisting the Chapter 11 Trustee with discrete transactional matters; and f) rendering any other services that the Chapter 11 Trustee deems appropriate in his business judgment. The Chapter 11 Trustee requests that Bayard Firm be compensated on an hourly basis, which range from: directors $350 to $510 per hour associates $180 to $400 per hour paralegals and paralegal assistants $80 to $155 per hour e.spire Communications, Inc., is a facilities-based integrated communications provider, offering traditional local and long distance internet access throughout the United States. The Company filed for chapter 11 protection on March 22, 2001 (Bankr. Del Case No. 01-974). John D. McLaughlin, Jr., Esq., at Young, Conaway, Stargatt & Taylor, LLP, represents the Chapter 11 Trustee overseeing e.spire's estate. EUROGAS INC: Capital Deficits Raise Going Concern Uncertainty ------------------------------------------------------------- EuroGas Inc. has accumulated a deficit of $155,231,148 through June 30, 2003. EuroGas has had no revenue, losses from operations and negative cash flows from operating activities during the years ended December 31, 2002 and 2001 and during the six months ended June 30, 2003. At June 30, 2003, the Company had a working capital deficiency of $20,156,930 and a capital deficiency of $9,506,541. The Company has impaired most of its oil and gas properties. These conditions raise substantial doubt regarding the Company's ability to continue as a going concern. Realization of the investment in properties and equipment is dependent upon management obtaining financing for exploration, development and production of its properties. In addition, if exploration or evaluation of property and equipment is unsuccessful, all or a portion of the remaining recorded amount of those properties will be recognized as impairment losses. Payment of current liabilities will require substantial additional financing. Management of the Company plans to finance operations, explore and develop its properties and pay its liabilities through borrowing, through sale of interests in its properties, through advances received against future talc sales and through the issuance of additional equity securities. Realization of any of these planned transactions is not assured. Eurogas Inc. is primarily engaged in the acquisition of rights to explore for and exploit natural gas, coal bed methane gas, crude oil, talc and other minerals. The Company has acquired interests in several large exploration concessions and is in various stages of identifying industry partners, farming out exploration rights, undertaking exploration drilling, and seeking to develop production. The Company is also involved in a planning-stage co- generation and mineral reclamation project. FAIRFAX FINANCIAL: S&P Revises Outlook on BB Rating to Stable ------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Fairfax Financial Holdings Ltd. (NYSE:FFH) and related entities to stable from negative based on Standard & Poor's ongoing surveillance of the organization's liquidity management, underwriting results, and reserve adequacy. Standard & Poor's also said that it affirmed its ratings on these companies, including its 'BB' counterparty credit rating on Fairfax. "The decision to revise the outlook to stable was primarily driven by Fairfax's management's ability to adequately address liquidity concerns," explained Standard & Poor's credit analyst Matthew T. Coyle. In the second quarter of 2003, Fairfax raised about C$643 million of proceeds from the IPO of its majority-owned subsidiary, Northbridge Financial Corp., and the issuance of debt from its wholly owned subsidiary, Crum & Forster Holdings. Although a portion of the proceeds were earmarked for these two subsidiaries and other miscellaneous items, the majority of proceeds were used to increase the amount of cash balances held at the holding- company level. As of June 30, 2003, cash, short-term investments, and marketable securities at Fairfax increased to C$570 million from C$229 million at the end of the first quarter 2003. Standard & Poor's believes the significant increase in holding company cash and the subsequent issuance of C$273 million of convertible senior debt adequately address the concern about Fairfax's financial flexibility and its ability to fund near-term obligations. "This management team, in spite of historical financial difficulties, has demonstrated its resourcefulness in raising cash under less-than-desirable conditions," Mr. Coyle added. Another area of success has been investment management. In the first half of 2003, Fairfax reported pretax earnings of $719.5 million, which is about 4x greater than for the same period in 2002. About $806 million of reported pretax income was attributable to realized capital gains. The focus on generating realized capital gains has been a consistent and well-executed part of the Fairfax investment strategy. However, Standard & Poor's generally considers these types of earnings to be opportunistic and less reliable than traditional underwriting and interest and dividend income. Regarding underwriting results and reserve adequacy, Standard & Poor's believes the company has made progress but has yet to demonstrate a sustainable track record of improvement in either one of these areas. Although the company's second-quarter earnings release reported an improvement in underwriting results (from continuing operations) compared with the previous period, part of the improvement reflects a reclassification of businesses that are deemed to be continuing and in runoff. (Loss reserves pertaining to discontinued (runoff) lines of business accounted for almost 38% of Fairfax's net reserves in 2002 versus 21% in 2001 and 0% in 1998.) Another factor Standard & Poor's considered when evaluating the sustainability of Fairfax's underwriting results is the adequacy of loss reserves. This is an area that has consumed a significant amount of the organization's management and financial resources in preceding years. Although much progress has been made in addressing the issue, Standard & Poor's expects a modest but manageable amount of adverse development in the future. The stable outlook assumes that liquidity needs for the remainder of 2003 have been substantially addressed, including the $160 million of public debt maturing in Dec. of 2003. The next material cash outlay consists of C$160 million of debt maturing in December 2003. Thereafter, Fairfax has a US$100 million TIG intercompany note due mid-year 2004 and a US$100 million public debt obligation due in April of 2005. Afterwards, holding-company cash balances are expected to remain above $500 million. Another important factor contributing to the stable outlook is the expectation that earnings, operating cash flow, and capitalization will continue to improve. In addition, although a modest amount of reserve strengthening is expected, Standard & Poor's does not expect any material adverse developments in this area. The ability of the company to demonstrate a sustainable track record in each of these areas is an extremely important factor affecting whether Standard & Poor's affirms or raises the rating. Lastly, Standard & Poor's expects financial leverage--in particular double leverage-- to be reduced over time. FASTNET CORP: Delays Filing of June Quarter Report on Form 10-Q --------------------------------------------------------------- FASTNET Corporation filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Eastern District of Pennsylvania on June 10, 2003 for FASTNET Corporation and on June 13, 2003 for certain of its subsidiaries. On August 14, 2003, the Company filed a Form 12b-25 with the Securities and Exchange Commission to notify its shareholders that it required additional time to complete its financial statements on Form 10-Q for the quarterly period ended June 30, 2003. As of August 19, 2003, the Company has not yet completed its Form 10-Q as the Company is continuing to devote the overwhelming majority of its financial department resources toward the compliance with the Bankruptcy Court's and debtor-in-possession reporting and disclosure requirements, and assisting the Company and its advisors in the reorganization of the Company, which may also include the possible sale of certain of the Company's assets. The Company is continuing to work on completing its Form 10-Q and will file it when it is completed. FASTNET (NASDAQ:FSST) provides high-performance, dedicated and reliable broadband services to businesses that need to drive productivity, profitability and customer service via the Internet. Through private, redundant peering arrangements with the national IP backbone carriers, FASTNET delivers customer data through the fastest, least congested route to enhance reliability, improve performance, and eliminate downtime. Founded in 1994, FASTNET provides a complete suite of solutions for dedicated and broadband access, Internet security and data backup as well as wireless Internet connectivity, VPN design and implementation, managed hosting, Web site and e-commerce development and co-location. FEDERAL-MOGUL: Seeks $350MM Equity Investment from Citigroup ------------------------------------------------------------ Federal-Mogul Corporation (OTC Bulletin Board: FDMLQ) advised the U.S. Bankruptcy Court for the District of Delaware that it has approached Citigroup Venture Capital Equity Partners, L.P., which has expressed an interest in making an equity investment of $350 million in the company. As a condition to proceeding with such an investment, CVC has requested that Federal-Mogul agree to an exclusive 90-day negotiating period with CVC and to reimburse CVC for necessary fees and expenses incurred by it in connection with the due diligence review of the company's business and negotiation of the possible investment. In a motion filed with the court today, Federal-Mogul asked the court to approve such exclusive 90-day negotiating period with CVC, and to authorize Federal-Mogul to reimburse CVC for such necessary fees and expenses. "The board approved the motion because it believes that an equity investment in the company has potential to maximize the long-term value of the company. This action best serves the interests of the company's stakeholders, including asbestos claimants," said Chip McClure, Federal-Mogul chief executive officer and president. "An investment of the type CVC is proposing, if consummated, would create value for the long term by strengthening the balance sheet and enhancing liquidity, while helping ensure that we will continue to deliver innovative products and services to our customers." In its filing, Federal-Mogul cited a number of factors, including sustained weakness in the U.S. economy and automotive industry, which it believes could affect its future performance and thus make it advisable to consider an additional investment at this time. An infusion of new capital will reduce Federal-Mogul's long-term debt and significantly enhance its liquidity, thus strengthening the company's ability to compete and succeed in the increasingly competitive global auto parts market. Federal-Mogul has informed representatives of all parties involved in the reorganization plan, including the asbestos committee, the futures representative, the equity committee, and its secured creditors and unsecured creditors committee, of this potential investment. A copy of the motion will be made available on the company's Web site at http://www.federal-mogul.com On October 1, 2001, Federal-Mogul decided to separate its asbestos liabilities from its true operating potential by voluntarily filing for financial restructuring under Chapter 11 of the Bankruptcy Code in the United States and Administration in the United Kingdom. Federal-Mogul is a global supplier of automotive components and sub-systems serving the world's original equipment manufacturers and the aftermarket. The company utilizes its engineering and materials expertise, proprietary technology, manufacturing skill, distribution flexibility and marketing power to deliver products, brands and services of value to its customers. Federal-Mogul is focused on the globalization of its teams, products and processes to bring greater opportunities for its customers and employees, and value to its constituents. Headquartered in Southfield, Michigan, Federal-Mogul was founded in Detroit in 1899 and today employs 47,000 people in 24 countries. For more information on Federal-Mogul, visit the company's Web site at http://www.federal-mogul.com GENERAL DATACOMM: Delaware Court Confirms Joint Reorg. Plan ----------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware confirmed General Datacomm Industries' Plan of Reorganization after finding that the Plan complies with each of the 13 standards articulated in Section 1129 of the Bankruptcy Code: (1) the Plan complies with the Bankruptcy Code; (2) the Debtors have complied with the Bankruptcy Code; (3) the Plan was proposed in good faith; (4) all plan-related cost and expense payments are reasonable; (5) the Plan identifies the individuals who will serve as officers and directors post-emergence; (6) necessary regulatory approvals articulated in Section 1129(a)(6) is not applicable in this case; (7) creditors receive more under the plan than they would in a chapter 7 liquidation; (8) all impaired creditors have voted to accept the Plan, or, if they voted to reject, then the plan complies with the absolute priority rule; (9) the Plan provides for full payment of Priority Claims; (10) at least one non-insider impaired class voted to accept the Plan; (11) the Plan is feasible and confirmation is unlikely to be followed by a liquidation or need for further financial reorganization; (12) all amounts owed to the Clerk and the U.S. Trustee will be paid; and (13) the Plan provides for the continuation of all retiree benefits in compliance with 11 U.S.C. Sec. 1114. Any executory contracts or unexpired leases, which have not expired by their own terms shall be deemed rejected by the Debtors on the Effective Date. All executory contracts and unexpired leases listed in the Schedule of Assumed and Assumed and Assigned Executory Contracts and Unexpired Leases, shall be deemed assumed by the Debtors on the Effective Date. The Debtors' estates are substantively consolidated as provided for in the Plan. As of the Effective Date, the Reorganized Debtors may operate and manage their businesses and affairs and make distributions to creditors in accordance with the Plan free of any restrictions imposed by the Bankruptcy Code. General DataComm Industries, Inc., a worldwide provider of wide area networking and telecommunications products and services, filed for Chapter 11 protection on November 2, 2001 (Bankr. Del. Case No. 01-11101). James L. Patton, Esq., Joel A. Walte, Esq. and Michael R. Nestor, Esq., represent the Debtors in their restructuring efforts. In their July 2002 monthly report on form 8-K filed with SEC, the Debtors account $19,996,000 in assets and $77,445,000 in liabilities. GENEVA STEEL: Sunrise Hired to Provide Engineering Services ----------------------------------------------------------- Geneva Steel LLC wants to retain and employ Sunrise Engineering, Inc., to perform environmental engineering and technical services. The Debtor tells the U.S. Bankruptcy Court for the District of Utah that the employment of Sunrise Engineering is needed to continue its efforts to market and liquidate its assets. Sunrise, a Utah corporation, has been serving the civil and environmental engineering needs for municipal, industrial, and private clients throughout the Intermountain West for more than twenty-five years. Sunrise's environmental division specializes in Phase 1 environmental assessments, evaluation of underground storage tanks, remediation cost recovery, Brownfield development, spill prevention control and countermeasure plans, underground injection control, permitting assistance, storm water management plans, wetlands delineation, environmental impact analysis, and nutrient management plans for concentrated animal feed operations. The Debtor seeks to employ Sunrise to provide professional engineering services to assist in the characterization, evaluation, remediation, abatement, and reduction of environmental conditions at the plant on the Debtor's property, Sunrise may also assist in water rights evaluation, wetlands determinations, and other related activities. These environmental engineering and technical services will be performed primarily by KC Shaw, principal engineer, who was formerly employed as head of the Debtor's environmental engineering department. In addition, the Debtor may request that Sunrise to perform other related environmental engineering work. The Debtor believes that Sunrise is qualified to provide services to add value to the estate by facilitating the potential sale of the Debtor's property. As a former employee, KC Shaw has a great deal of institutional knowledge about and familiarity with the Debtor's operations and, as such, will not have to spend as much time getting up to speed before performing work. Mr. Shaw's hourly rate for this project is $95 per hour. Other professionals may provide services for the rate ranging from $85 to $115 per hour. Geneva Steel owns and operates an integrated steel mill located near Provo, Utah. The Company filed for chapter 11 protection on January 25, 2002 (Bankr. Utah Case No. 02-21455). Andrew A. Kress, Esq., Keith R. Murphy, Esq. and Stephen E. Garcia, Esq. at Kaye Scholer LLP represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $264,440,000 in total assets and $192,875,000 in total debts. GENTEK INC: De. Bankruptcy Court Approves Disclosure Statement -------------------------------------------------------------- GenTek Inc. (OTC Bulletin Board: GNKIQ), a diversified manufacturer of telecommunications and other industrial products, announced that the United States Bankruptcy Court for the District of Delaware issued an order approving the Disclosure Statement with respect to its Plan of Reorganization. The Court's action indicates that GenTek's Disclosure Statement contains adequate information for parties in interest to vote on the Plan. The Bankruptcy Court also authorized GenTek to begin soliciting votes with respect to the Plan from those of its pre- petition creditors who are entitled to vote. A confirmation hearing on the Plan has been scheduled for Oct. 7. GenTek's Plan reflects an agreement as to the principal terms of a consensual reorganization reached with its senior secured lenders and its official committee of unsecured creditors, each of which groups is recommending that parties in interest vote to approve the reorganization plan. Modifications and amendments to the previously filed reorganization plan made with the support of the senior secured lenders and the official committee reflect a reduction in the aggregate, funded debt upon emergence from approximately $380 million to $280 million. "We are extremely pleased that the Court has approved our Disclosure Statement," said Richard R. Russell, President and Chief Executive Officer of GenTek. "For more than a year we have worked closely with our principal creditor groups to develop a Plan that will maximize value for all stakeholders. With the strong support of our secured lenders and the unsecured creditors committee, GenTek is now positioned to emerge from Chapter 11 as a significantly stronger competitor with substantially reduced leverage." The Plan is subject to supplementation, modification and amendment prior to confirmation. The description of the Plan contained herein is qualified in its entirety by reference to the Plan. GenTek Inc. is a diversified manufacturer of telecommunications and other industrial products. Additional information about the company is available on GenTek's Web site at http://www.gentek-global.com GENUITY INC: Secures Nod to Limit Disclosure Statement Notice ------------------------------------------------------------- Genuity Inc., and its debtor-affiliates want to limit the notice of the hearing to consider their proposed disclosure statement. The Debtors do not intend to serve individual notices on their numerous equity security holders. Stephen Moeller-Sally, Esq., at Ropes & Gray, in Boston, Massachusetts, recounts that during the course of formulating and negotiating the Plan, the Debtors have arrived at a conclusion that there is no reasonable possibility of a distribution to equity interest holders. There is little uncertainty as to the value of the Debtors' assets, since these assets consist overwhelmingly of cash and cash equivalents. At the same time, the Debtors estimate that, under any circumstances, allowed secured, unsecured and priority claims will greatly exceed these assets, leaving nothing for the equity interest holders. Consequently, the Plan provides no distribution to equity interest holders. In connection with service of the notice of the deadline for filing proofs of claim in these cases, the Debtors compiled a notice list of more than 65,000 equity security holders. Mr. Moeller-Sally points out that copying and mailing over 65,000 Disclosure Statement Notices will entail significant time and expense to the Debtors. In lieu of providing individualized service to the equity security holders of the Disclosure Statement Notices, the Debtors propose to file a copy of the Disclosure Statement Notice on the EDGAR filing system instead. These filings are ordinarily picked up by news services and distributed in the financial press, where they will be generally available to the equity security holders. After approval of a disclosure statement, Mr. Moeller-Sally continues, the Debtors will provide equity security holders with notice of the hearing to consider confirmation of the Plan and other notices relating to the Plan and disclosure statement as may be appropriate. * * * Judge Beatty grants the Debtors' request. No later than 25 days before the deadline for objecting to the disclosure statement, the Debtors will: (a) issue a press release with respect to the Disclosure Statement Notice, which will be filed on the EDGAR filing System; and (b) publish the Disclosure Statement Notice once in the national edition of The Wall Street Journal. (Genuity Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) GT DATA CORP: Company's Ability to Continue Operations Uncertain ---------------------------------------------------------------- GT Data Corporation's condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company has negative working capital of $935,905, a stockholders' deficit of $786,954, and a lack of operational history, among others, that raise substantial doubt about its ability to continue as a going concern. The Company hopes to increase earnings from additional revenue services and other cost- cutting measures. In the absence of significant revenues and profits, the Company intends to fund operations through additional debt and equity financing arrangements which management believes may be insufficient to fund its capital expenditures, working capital, and other cash requirements for the fiscal year ending December 31, 2003. Therefore, the Company may be required to seek additional funds to finance its long-term operations. The successful outcome of future activities cannot be determined at this time and there are no assurances that if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive results. These circumstances, among others, raise substantial doubt about the Company's ability to continue as a going concern. HIGH VOLTAGE ENG'G: Ratings Drop to D After Interest NonPayment --------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its corporate credit and senior unsecured debt ratings on High Voltage Engineering Corp. On Aug. 19, 2003, Standard & Poor's lowered its corporate credit and senior unsecured debt rating to 'D' following High Voltage's failure to make an $8 million interest payment due Aug. 15, 2003, on its $155 million 10.5% senior unsecured notes. Standard & Poor's does not expect that the interest payment will be made within the 30-day grace period. High Voltage currently is negotiating with bondholders to restructure these notes and, if a deal is reached, Standard & Poor's expects bondholders to be impaired. Wakefield, Massachusetts-based High Voltage is a manufacturer of diversified industrial and technology products, serving depressed industrial markets. "The company has experienced weak operating performance, and has a heavy debt burden and constrained liquidity," said Standard & Poor's credit analyst John Sico. HORIZON PCS: Two Units Sue Sprint, et al. for Breach of Contract ---------------------------------------------------------------- On August 21, 2003, Horizon Personal Communications, Inc. and Bright Personal Communications Services, LLC, subsidiaries of Horizon PCS, Inc. filed a lawsuit in the United States District Court for the Southern District of Ohio, Eastern Division, against Sprint Corporation, Sprint Spectrum, L.P., Wirelessco, L.P. and Sprintcom, Inc., alleging wrongful conduct on the part of Sprint in its relationship and business dealings with Horizon. In the Complaint, Horizon asserts claims under the federal RICO laws and similar Ohio state laws, and also asserts fraud, negligent misrepresentation, conversion, breach of contract and breach of fiduciary duties. Horizon PCS and its debtor-affiliates filed for Chapter 11 reorganization on August 15, 2003, in the U.S. Bankruptcy Court for the Southern District of Ohio (Columbus) (Lead Bankr. Case No. 03-62424). HUDSON'S BAY: Second Quarter Results Show Slight Improvement ------------------------------------------------------------ Hudson's Bay Company announced results for the three-month period ending July 31, 2003. Sales and revenue for the three-month period ending July 31, 2003 was $1,689.2 million, compared to $1,693.7 million in the same period last year. The Bay (including Home Outfitters) achieved sales and revenue of $607.5 million in the quarter, an increase of 2.9 per cent over the same period last year (a 0.6 per cent decrease on a comparable store basis). Zellers sales and revenue in the quarter was $1,059.6 million, a 2.2 per cent decrease over the same period last year (a 3.0 per cent decrease on a comparable store basis). Net earnings for the quarter increased to $5.2 million or $0.03 per share compared to $4.7 million or $0.02 per share last year, the result of lower interest costs and income tax rates. EBIT was $17.6 million compared to $22.4 million in the same quarter of the previous year. The lower EBIT reflects marginally higher operating costs, including the advancement of $4 million in inventory count costs from the second part of the year and lower credit earnings, primarily the result of higher securitization costs. "Sales trends in several merchandise categories improved in the second quarter as compared to the first quarter," said George Heller, President and CEO, Hudson's Bay Company. "Sales growth opportunities still exist in apparel, electronics and soft home categories. We are confident that new and exciting programs and products being introduced for the back-to-school and holiday shopping periods will capture these opportunities and result in comparative store sales growth and increased profitability in the back half of the year. We continue to focus and realize on improvements in cost structure, gross margins and inventory management." For the first six months, sales and revenue was $3,223.7 million, approximately the same level as last year. The net loss per share was $0.50 versus $0.13 per share for the first half of last year. After excluding costs recorded in Q1 2003 totaling $10.4 million to discontinue the Martha Stewart product line and to record a prior year's sales tax assessment, normalized net loss per share for the first half of 2003 was $0.41, versus a net loss per share of $0.13 for the corresponding period of last year. Hbc, for fiscal 2003, has adjusted its outlook and now anticipates normalized earnings per share in the range of $0.90 to $1.00. Hbc continues to expect free cash flow (defined as cash inflow before financing activities less all dividends) in the range of $175 million to $200 million, the result of improved working capital. Commenting on the adjusted outlook, George Heller stated: "Given the unprecedented events affecting retailers in the first half of the year, we are cautious about the remainder of fiscal 2003. However, given that we held sales substantially flat through this trying period, there is the potential that the retail environment, and correspondingly Hbc's financial results over the next six months, will be stronger." Management's Discussion and Analysis New Developments On July 15, 2003, Hudson's Bay Company announced the arrangement of a 364-day $650 million secured revolving asset-based credit facility. The new facility, which is available for general corporate purposes, replaced the Company's existing unsecured $480 million operating line. The new credit facility includes a letter of credit capacity and is secured by the Company's merchandise inventory. In the Company's view, this new facility provides Hbc with enhanced flexibility and increases the scope and range of Hbc's financial options. For the three months ended July 31, 2003, Home Outfitters opened two stores which brings the existing store portfolio to 42 stores. The two new stores are located in Quebec. The Company expects to have 45 stores by the end of the fiscal year. First Six Months For the first six months of 2003, sales and revenue of $3,223.7 million were equal to the level in the corresponding period of 2002. The sales increase in Home Outfitters was offset by a decline in the Bay (excludes Home Outfitters) and Zellers. Comparable store sales in the first half of 2003 were down 1.5% at Zellers and 2.3% at the Bay (excludes Home Outfitters) and were virtually flat at Home Outfitters compared to last year. In Zellers, hardline sales in 2003 were up mainly in pharmacy and grocery, offset entirely by lower softline sales. The Bay's sales decline occurred in most product groups except for Home Outfitters which reflects primarily the opening of new stores in 2002 and 2003. For the Bay and Zellers, sales in 2003 were unfavorably impacted primarily by unseasonably colder weather conditions in the first quarter compared to last year. Normalized EBIT for the first six months of 2003 amounted to a loss of $13.7 million compared to a profit of $29.3 million in the same period of 2002. The normalized EBIT decline of $43.0 million was due mainly to lower profit in Zellers ($6.1 million) and the Bay ($32.5 million) and increased loss in Other EBIT of $4.4 million. The Company's lower normalized EBIT also reflected a reduction in the net gain of $4.1 million arising from the sale of receivables through the securitization program described in the Company's Management's Discussion and Analysis section of the 2002 Annual Report. Zellers' normalized EBIT in the first half of 2003 decreased by $6.1 million reflecting largely lower credit card income due mainly to a lower net gain ($3.8 million) related to the Company's securitization program, increased securitization costs and higher gross write-offs, and the costs ($4.0 million) of advancing inventory counts from the second half of the year, offset partly by slightly higher gross margin rates reflecting in part lower product costs the result of both leveraging Hbc's total purchases and the stronger Canadian dollar. Zellers' normalized EBIT in the first half of 2003 includes store closure and opening costs of $2.3 million compared to $3.8 million in the same period of 2002. The Bay's normalized EBIT decreased $32.5 million with 79.5% of the profit decline in the first quarter of 2003. The profit decline at the Bay reflected mainly a lower sales volume at the Bay (excludes Home Outfitters), a reduced gross margin rate due partly to the impact of initiatives undertaken to stimulate sales, and a slight increase in the operating loss at Home Outfitters. Included in the Bay's first six months results were store pre-opening and closing costs of $0.8 million compared to $0.9 million in the first six months of 2002. Other EBIT includes unallocated corporate expenses and miscellaneous profits and losses from various ongoing and non- recurring secondary retail and other activities. Other EBIT in the first six months of 2003 was a loss of $18.5 million or $4.4 million higher than the loss of $14.1 million in the same period in 2002 reflecting mainly lower revenues on rental properties, lower pension credits, the inclusion of consulting costs, and incremental costs for a prior year's store closure, offset partly by additional income related to Hbc's loyalty program, and the absence of customer relationship management program costs in 2003. Normalized interest expense in 2003 was $18.9 million or $5.5 million lower than in the first six months of 2002. The decrease in normalized interest expense reflects mainly lower long-term debt levels and the inclusion of interest income earned on prior years' income tax refunds, offset partly by the absence of interest income earned in the first quarter of 2002 (up to April 1, 2002) on the funds received from the $200 million of convertible unsecured subordinated debentures (subordinated debentures) issued in November 2001. Hbc used the funds from the subordinated debentures on April 1, 2002, to repay the 7.0% equity subordinated debentures and the 6.25% series C debentures. The normalized effective income tax rate for the first half of 2003 was 31.2% which was 6.3 percentage points below the average Canadian income tax rates. Normalized net loss in the first half of 2003 was $22.5 million or $21.1 million higher than the net loss in the first six months of 2002 of $1.4 million. The increase in the normalized net loss of $21.1 million was due mainly to a lower EBIT, offset partly by reduced interest costs. Compared to the first half of 2002, the increased normalized net loss in 2003 was due partly to a lower gain, net of tax, related to Hbc's securitization program of $2.6 million ($0.03 per share). After deducting Hbc's dividends for subordinated debentures, normalized net loss per share in the first six months of 2003 was $0.41 compared to a loss per share in the same period of 2002 of $0.13. Second Quarter Sales and revenue in Q2 2003 of $1,689.2 million were slightly below the Q2 2002 level reflecting lower sales in Zellers and the Bay (excludes Home Outfitters), offset largely by increased sales in Home Outfitters. Comparable store sales decreased at Zellers and the Bay (excludes Home Outfitters) in Q2 2003 as compared to Q2 2002, while comparable store sales increased at Home Outfitters. EBIT was $17.6 million compared to EBIT in Q2 2002 of $22.4 million. The $4.8 million decrease in EBIT reflected a lower profit in the Bay ($6.6 million), offset partly by a higher profit in Zellers ($1.8 million). Other EBIT in Q2 2003 was equivalent to the loss in Q2 2002 of $7.4 million reflecting mainly lower revenues on rental properties, lower pension credits, and the inclusion of consulting costs, offset entirely by higher third party income related to Hbc's loyalty program and lower general administrative costs. Interest expense in Q2 2003 was $7.9 million or $4.1 million lower than the Q2 2002 level of $12.0 million. The decrease in interest expense reflects mainly lower long-term debt levels and the inclusion of interest income earned on prior years' income tax refunds, offset partly by higher short-term interest expense. The effective income tax rate for Q2 2003 was 45.7% which was 8.2 percentage points above the average Canadian income tax rates reflecting the impacts of the large corporations tax and non- deductible expenditures. Net earnings in Q2 2003 was $5.2 million or $0.5 million higher than net earnings in Q2 2002 of $4.7 million reflecting mainly reduced interest costs, offset largely by a lower EBIT. After deducting Hbc's dividends for subordinated debentures, earnings per share in Q2 2003 was $0.03 compared to earnings per share in Q2 2002 of $0.02. Canadian Retail Environment Department Store Sales the six months ended June 2003 were up 3.0% from the same period last year. Sales at the broader group, Department Store Type Merchandise reported a 3.2% growth, compared to the DSTM group in the same period last year. Retailers are still facing a difficult retail environment. Due to new store openings and expansions, retail sales increases are expected to be in the mid-single digit range for 2003. During the second quarter of 2003, Wal-Mart relocated two of its stores, and is expected to open a number of new stores in the last half of 2003, including three of its warehouse concepts. Giant Tiger, an Ontario based discount retailer opened its second store in London, Ontario in May and announced plans to open 10 additional stores in Southern Ontario by the end of 2003. In July, lingerie retailer La Senza Corporation announced the sale of the assets of its 178 store Suzy Shier women's apparel business to YM Inc., which runs teenage apparel chains. During Q2 2003, sales and revenue increased 2.9% to $607.5 million with the sales improvement in Home Outfitters being offset by reduced sales in most apparel and soft home groups. On a comparable store basis, the Bay's sales (excluding Home Outfitters) in Q2 2003 declined by 0.6% compared to the same period in 2002 and Home Outfitters' comparable store sales increased 0.9% from last year. The sales increase in Home Outfitters reflected the effect of new stores opened during 2002 and in 2003. EBIT in Q2 2003 was $7.4 million compared to $14.0 million in Q2 2002. The EBIT decrease was due mainly to the impacts of a lower sales volume at the Bay, increased amortization costs related to financial and merchandising systems implementations in 2002, and a slight increase in the operating loss at Home Outfitters. Included in EBIT were pre-opening and closing costs of $0.5 million in Q2 2003 compared to $0.9 million in Q2 2002. Operating Highlights for Q2 2003 During the second quarter, the Bay executed the following key activities in support of its strategy: - Relocated the Bay's department store located in Victoria, British Columbia into the former Eaton's location. - Continued the growth of private and captive brands throughout various merchandising classifications. These brands represent internally developed brands as well as brands available to the Bay through its arrangement with Federated Merchandising Groups. - Opened two new Home Outfitters stores in the second quarter bringing the number of stores to 42. Financing Activities At July 31, 2003, Hbc's total debt of $637 million, after deducting $51 million in unrestricted investments and short-term deposits, was almost equal to the debt level at July 31, 2002, of $639 million and $35 million above the January 31, 2003, debt level of $602 million due mainly to the normal seasonal change in inventory levels. Included in the July 31, 2003 debt level was $535 million of long-term debt, including $271 million due within one year. In July 2003, the Company arranged a 364-day $650 million secured revolving asset-based credit facility which replaced Hbc's existing unsecured $480 million operating line. The new credit facility includes a letter of credit capacity and is secured by the Company's merchandise inventory. At July 31, 2003, the Company had drawn $129 million on its new asset-based credit facility (excluding letters of credit) compared to no draw on its credit operating facility last year. The utilization of the committed credit operating facility was higher during 2003 compared to the first six months of 2002 due to the use of the funds partially to repay $113 million of the 6.25% series D debentures (matured March 14, 2003) and also to finance higher working capital. The liquidation commencement dates for the $900 million of securitized credit card receivables financing are January 31, 2004 (as to $300 million), January 31, 2005 (as to $200 million) and March 31, 2006 (as to $400 million). The Company has $400 million of debt due within one year (excluding short-term bank indebtedness) comprising of the $129 million drawn on the asset- based credit facility, the $146 million of the 6.35% series E debentures which will mature in December 2003 and the $125 million of the 7.10% series F debentures (matures May, 2004). Additionally, the Company has $300 million of securitized credit card receivables that will begin liquidation on January 31, 2004. Such liquidation would result in collections otherwise available to the Company being remitted to the independent Trusts with an interest in such receivables. The remittance of $300 million would result in the Company's interest in the credit card receivables increasing by an equivalent amount. The Company is investigating alternatives including the roll-over of the $300 million of securitized receivables in one or more securitization conduits. In the Company's view, the funds to pay the amounts due within one year will be available through various sources of funding. Funds are generated through cash from operations and improvements in working capital. The Company also has the ability to reduce capital spending to fund debt requirements, however, a long-term decline in capital expenditures can negatively impact profit growth. Other principal sources of funding are: the issuance of long-term debentures, a further securitization of credit card receivables, the sale and leaseback of real estate properties, a syndicated loan arrangement with a group of lenders, the issuance of convertible subordinated debentures, and the issuance of common equity. The Company's debt:equity ratio at July 31, 2003 was 0.27:1 compared to the July 31, 2002 ratio of 0.28:1. If the Company had financed its business by issuing $900 million of debt on the security of its credit card receivables, rather than by selling undivided co-ownership interests in the receivables, then the Company's debt:equity ratio would have been 0.65:1, compared to 0.67:1 at July 31, 2002. Foreign exchange and floating rate interest rate risks are managed by forward rate agreements, interest rate swaps and caps under guidelines established and reviewed periodically by the Board of Directors of Hbc. At July 31, 2003, the Company had U.S. $58 million of forward foreign exchange contracts and $50 million of interest rate swaps. Historically, the Company has purchased approximately $450 million in U.S. denominated purchases on an annual basis. The improvement in 2003, if sustained, of the Canadian dollar would benefit gross margins in the later half of 2003. The Company's debt is rated by Standard and Poor's Canada and by Dominion Bond Rating Service. During the second quarter of 2003, S&P and DBRS issued a change in the outlook of the Company from stable to negative. The Company's debt is currently classified as non-investment grade which results in a higher cost to borrow funds in the future and potentially limits the Company's ability to borrow funds in some markets. A summary of the Company's rating is provided in the following table: May 2003 April 2002 November 2001 -------------------------------------------------------- Ratings Outlook Ratings Outlook Ratings Outlook ------- ------- ------- ------- ------- ------- S&P: Unsecured debentures BB+ Negative BB+ Stable BBB- Negative Convertible unsecured subordinated debentures BB Negative BB Stable BB+ Negative DBRS: Unsecured debentures BB Negative BB Stable BBB Negative (high) (high) (low) Convertible unsecured subordinated debentures BB Negative BB Stable BB Negative (high) IMAGEMAX INC: Senior Lenders Agree to Forbear Until September 30 ---------------------------------------------------------------- ImageMax, Inc. (OTCBB:IMAG) has entered into a Forbearance Agreement with its senior lenders, Commerce Bank, NA and FirsTrust Bank, in connection with the previously disclosed existing defaults as of June 30, 2003, under its senior credit facility. Pursuant to the Forbearance Agreement, the senior lenders agreed to forbear from exercising their rights under the senior credit facility with respect to the Default through September 30, 2003, upon the satisfaction of certain conditions set forth in the Forbearance Agreement. Under the terms of the Forbearance Agreement, the Company believes that its over-advance position of $886,000 under its revolving credit line as of June 30, 2003 has been substantially reduced. The Forbearance Agreement does not amend, revise, or waive the financial covenants set forth in the Company's senior credit facility for the quarter ending September 30, 2003. There is no assurance that the Company will be able to meet these covenants. In the event that the Company is not in compliance, the Company will need to obtain waivers of such default or an extension of the Forbearance Agreement in order to continue to have access to its credit facilities for the balance of the 2003 fiscal year. Additionally, the Company expects to receive a waiver from its subordinated debt holders with respect to the default which has occurred, as a consequence of the Default, under the Company's agreements with its subordinated debt holders. INDYMAC ABS: S&P Takes Rating Actions on Various Notes ------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on five classes (four fixed-rate loan groups) from four transactions issued by Home Equity Mortgage Loan Asset-Backed Trust (IndyMac ABS Inc.). Concurrently, ratings are affirmed on the remaining classes from the same securitizations. The lowered ratings reflect: -- Erosion of credit support due to deteriorating collateral pool performance; -- Realized losses that generally exceed excess interest cash flow; -- Serious delinquencies (90-plus days, foreclosure, and real estate owned) averaging 29.32%; and -- A consistent loss trend that is expected to continue based on the current level of delinquencies. The lowered ratings to 'D' from 'CCC' on classes BF from series SPMD 2000-C and SPMD 2001-A reflect a complete depletion of overcollateralization, resulting in cumulative principal write- downs of $730,363 and $466,340, respectively. As of the July 2003 remittance period, the mortgage pools backing the classes with lowered ratings had serious delinquencies ranging between 22.74% (SPMD 2000-A fixed-rate loan group) and 32.61% (SPMD 2000-C fixed-rate loan group). Furthermore, cumulative realized losses, as a percentage of original pool balance, ranged between 1.36% ($2,215,189; SPMD 2001-A fixed-rate loan group) and 2.53% ($3,128,072; SPMD 2000-B fixed-rate loan group). More importantly, at least 50% of the cumulative realized losses for the securitizations occurred during the most recent 12 months. Currently, the range of manufactured housing collateral in the downgraded transactions represents between 18.25% and 25.92% of their current pool balances. Manufactured housing loans have experienced high loss severities caused by the large inventory of repossessed units. These loss severities have been as follows (series; loss severity): -- 2000-A; 65.71% -- 2000-B; 68.01% -- 2000-C; 43.17% -- 2001-A; 45.67% Standard & Poor's will continue monitoring the performance of the transactions each month to ensure that the ratings remain consistent with the credit support available. The affirmations reflect sufficient levels of credit support to maintain the current ratings, despite the high level of delinquencies and poor performance trend. Credit support for the BF classes is provided by excess interest and overcollateralization; all of the other classes receive additional support from subordination. The collateral for these transactions consists of either fixed- or adjustable-rate home equity first and second lien loans secured primarily by one- to four-family residential properties. RATINGS LOWERED Home Equity Mortgage Loan Asset-Backed Trust Rating Series Class To From SPMD 2000-A BF BBB- BBB SPMD 2000-B BF B BBB SPMD 2000-C BF D CCC SPMD 2001-A MF-2 BB BBB SPMD 2001-A BF D CCC RATINGS AFFIRMED Home Equity Mortgage Loan Asset-Backed Trust Series Class Rating SPMD 2000-A AF-3 AAA SPMD 2000-A MF-1 AA SPMD 2000-A MF-2 A SPMD 2000-B AF-1 AAA SPMD 2000-B MF-1 AA SPMD 2000-B MF-2 A SPMD 2000-C AF-4,AF-5,AF-6,AF-IO AAA SPMD 2000-C MF-1 AA SPMD 2000-C MF-2 A SPMD 2001-A AF-4,AF-5,AF-6,AF-IO AAA SPMD 2001-A MF-1 AA INTEGRATED HEALTH: Court OKs Stipulation with American Express -------------------------------------------------------------- On January 29, 2002, Integrated Health Services, Inc., and its debtor-affiliates filed a complaint against American Express Company pursuant to Rule 7001 of the Federal Rules of Bankruptcy Procedure. The Debtors sought to recover preferential and fraudulent conveyances made to American Express amounting to at least $1,246,277, plus interest from the date of the Transfers. Pursuant to Section 105(a) of the Bankruptcy Code and Rule 9019(a) of the Federal Rules of Bankruptcy Procedure, the Debtors ask the Court to approve a stipulation settling the Adversary Proceeding. Alfred Villoch, III, Esq., at Young, Conaway, Stargatt & Taylor, LLP, in Wilmington, Delaware, relates that in settlement of the Adversary Proceeding, American Express will pay the Debtors $475,000. In the event American Express fails to timely pay the Settlement Amount, Mr. Villoch tells the Court that American Express will be obligated to pay the Debtors 10% interest per annum accruing daily from the date the Settlement Payment became due until the Debtors actually receive the payment. If the Court approves the Stipulation, the Adversary Proceeding will be dismissed with prejudice and closed. The Adversary Proceeding may be re-opened for either of the parties to enforce the Stipulation. Upon payment of the Settlement Amount, the parties will exchange mutual releases. American Express will waive any right to receive a distribution on account of any and all claims otherwise allowable under Section 502(h); provided, however, that nothing in the Stipulation will prejudice or be deemed to constitute a waiver of: -- any other claims filed by or on behalf of American Express in these bankruptcy cases, or -- the Debtors' right to assert any and all defenses they may have with respect to any other such claims asserted by or on American Express' behalf. Mr. Villoch points out that the settlement enables the Debtors to receive substantially all of the relief they could have reasonably expected to receive from prosecuting the Adversary Proceeding. * * * Judge Walrath approves the stipulation revolving the adversary proceeding between the Debtors and American Express. (Integrated Health Bankruptcy News, Issue No. 63; Bankruptcy Creditors' Service, Inc., 609/392-0900) KAISER: Bar Date for La. PI Claimants Extended to September 30 -------------------------------------------------------------- Kaiser Aluminum Corporation and its debtor-affiliates continue to discuss a possible settlement relating to the handling, method of compensation, and liquidation of Louisiana Hearing Loss and Coal Tar Pitch Volatiles exposure claims in connection with any plan or plans of reorganization. In the interim, the Debtors agree to extend the deadline for filing Louisiana Hearing Loss and Coal Tar Pitch Volatiles claims until September 30, 2003. Should the parties come up with an agreement before that time, the Claims addressed by the Agreement will no longer be subject to the September 30, 2003 Bar Date. (Kaiser Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) KMART CORP: Settles Claims Dispute with General Electric Capital ---------------------------------------------------------------- Kmart Corporation and its debtor-affiliates lease self-checkout units from General Electric Capital Corporation. The self- checkout equipment is used to allow customers to pay for merchandise without a Kmart associate's assistance. As part of their restructuring strategy, the Debtors decided to reject the Agreement. The Debtors determined that the equipment is no longer cost-effective for them and their ongoing business. The equipment uses outdated technology, which costs the Debtors large sums in repair and maintenance charges. The Debtors also noted that the lease payments under the Agreement no longer bear any relation to the value of the equipment. They could purchase new self-checkout units today for about two-thirds as much as they pay in lease payments. GE Capital and the Debtors engaged in settlement discussions. Eventually, the Debtors and GE Capital reached a settlement on the dispute. Both parties agree that the Agreement will be rejected as of the effective date of the Debtors' Plan and the equipment will be returned to GE Capital. The Debtors will also make a $5,375,000 payment to GE Capital to settle all of its claims against them. This includes administrative claims for postpetition rent and unsecured rejection claims. In conjunction with the settlement agreement, the Debtors will dismiss all preferential transfer claims against Panasonic Company. The Debtors believe that Panasonic may assert defenses that would offset the claims they sought. The dismissal of the claims against Panasonic was part of GE Capital's condition in accepting the Settlement. GE Capital and Panasonic are parties to a factoring agreement concerning invoices related to an adversary proceeding. In May 2003, the Debtors commenced an adversary proceeding against Panasonic to recover $31,671,325 in preferential transfers made within the 90 days before the Petition Date. The Debtors argued that they were already insolvent at the time the transfers were made. The transfers, therefore, allowed Panasonic to receive more than it would have received had the Debtors' cases been under Chapter 7 of the Bankruptcy Code, had the transfers not been made, or had Panasonic received payment of the debt in accordance with Bankruptcy Code provisions. (Kmart Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 609/392-0900) LEAP WIRELESS: Wants Plan-Filing Exclusivity Extended to Dec. 9 --------------------------------------------------------------- Robert A. Klyman, Esq., at Latham & Watkins, in Los Angeles, California, reports that the Leap Wireless Debtors have made concerted efforts both before and after the Petition Date to ensure an uncomplicated transition to Chapter 11, reduce their on- going expenses, generally stay current on their postpetition obligations and promptly pay bills as they come due, address the myriad of legal and operational issues and problems that invariably arise in large cases, and establish a framework for their reorganization. The Debtors have made these achievements: A. First Day Motions Through the First Day Motions, the Debtors were granted authority to continue many of the standard practices essential to their operations, including the payment of prepetition claims of utilities, vendors, suppliers, employees and other necessary entities. B. Motion to Appoint Equity Committee In May 2003, Gabelli Asset Management, Inc., beneficial holder of 750,000 shares of Leap common stock, sought for the appointment of an equity security holders committee. MCG PCS, Inc., holder of 21,021,431 or 35.9% of Leap shares, supported the request. The Debtors, the Official Committee of Unsecured Creditors and the Informal Vendor Debt Committee opposed the request. On June 16, 2003, the Court denied the request. C. Disclosure Statement and Plan of Reorganization Before the Petition Date, the Debtors heavily negotiated the terms of a restructuring plan with the Informal Vendor Debt Committee and the Informal Noteholder Committee. The Debtors filed their reorganization plan and disclosure statement on May 9, 2003. After subsequent revisions to address the Court's comments as well as the objections raised by interested parties, the Court approved the Disclosure Statement on July 31, 2003. The Debtors commenced soliciting Plan votes on August 7, 2003. The Court will hold a confirmation hearing beginning on September 29, 2003. D. Rejection of Unexpired Leases and Executory Contracts The Debtors have filed four motions rejecting various cell site leases, retail store leases, office leases and executory contracts and one motion assuming and rejecting certain cell site leases. The rejection of these leases and contracts saved these estates hundreds of thousands of dollars in administrative expenses. The Debtors also entered into amendments to over 200 cell site leases, which will save the estates over $1,000,000 annually in rent. The Debtors expect to file a motion to assume the leases as amended in the next two weeks. E. Adequate Assurance of Future Payment for Utilities The Utility Order provided that the Debtors' record of payment of prepetition utility bills, their demonstrated ability and inclination to pay future bills, and the administrative claim priority afforded to the Utility Companies, together, constitute adequate assurance of future payment for utility services, pursuant to Section 366(b) of the Bankruptcy Code. The Utility Order also established procedures should the Utility Companies request a reasonable security deposit as an additional adequate assurance of payment. The Debtors received 21 requests for additional adequate payment assurance -- 13 of which the Debtors determined were reasonable. After extensive negotiations, the Debtors have reached agreements with all utilities requesting further adequate payment assurance. In certain cases, the Debtors entered into stipulations, which were approved by the Court on July 31, 2003. F. Bar Date for Proof of Claim Filings The Debtors knew that establishing a deadline for filing proofs of claim was essential for them to accurately determine the amount and nature of claims in these cases. Determining the amount, nature and priority of the claims will enable the Debtors to analyze the impact that the claims have on their Plan. On April 14, 2003, the Court entered an order fixing June 28, 2003 as the bar date for filing proofs of claim. The Court also set September 8, 2003 as a Supplemental Claims Bar Date. G. Other Efforts and Activities The Debtors obtained the Court's authority to employ Latham & Watkins LLP as general bankruptcy counsel, UBS Securities LLC as financial advisors, PricewaterhouseCoopers LLP as accountants and Frank E. Rogozeinski, Inc. as special litigation counsel. The Debtors have also obtained approval to employ and compensate numerous "ordinary course" professionals. Further, the Debtors recently filed motions to approve the sale of certain PCS licenses to Edge Acquisitions. Although the Court recently approved the Disclosure Statement, the Debtors do not want the Exclusivity Periods to expire before they can see their Plan through to conclusion. The Debtors have faced considerable opposition to the Disclosure Statement, and they expect further opposition from MCG. The Debtors have successfully resolved nearly every objection and have the support of the Informal Vendor Debt Committee and the Creditors' Committee. However, the end of the Solicitation Period, currently October 10, 2003, is merely three days after the last scheduled day for the Confirmation Hearing, October 7, 2003. Any delay will cause the Exclusivity Periods to expire before confirmation is complete. Mr. Klyman asserts that the Debtors should be allowed to seek confirmation with the opportunity to address any objections that may arise and without the threat of expiration of the Solicitation Period. Section 1121(b) of the Bankruptcy Code gives a debtor the exclusive right to file a Chapter 11 plan of reorganization for an initial period of 120 days from the Petition Date. If the debtor files a plan within this exclusive period, then the debtor has the exclusive right for 180 days from the Petition Date to solicit acceptances to its plan. Section 1121(d) of the Bankruptcy Code provides that the Court may extend the Exclusivity Periods "for cause" upon request of a party-in- interest and after notice and hearing. Because the Bankruptcy Code does not define "cause" for the exclusive periods extension, courts have looked to the legislative history of Section 1121(d) for guidance. From the legislative history, it is clear that Congress did not intend that the 120-day and 180-day periods to be a hard and fast rule. Rather, Congress intended that the Exclusivity Periods be of adequate duration, given the circumstances, for the debtor to formulate, negotiate and draft a consensual plan without the dislocation and disruption to its business that would occur with the filing of competing plans. Mr. Klyman emphasizes that cause exists for an extension of the Exclusivity Periods in these cases. Leap's bankruptcy is a large and complex Chapter 11 case, involving 66 debtors, significant assets in over 20 different states, about $2,600,000,000 in total liabilities and thousands of creditors. The Debtors provide service to 1,460,000 customers and had $184,300,000 in gross revenue for the quarter ending June 30, 2003. Currently, the Debtors are parties to thousands of executory contracts and non- residential leases for everything from cell site towers to network switches to administrative offices. Furthermore, over a mere three and a half months, the Debtors successfully negotiated a joint reorganization plan with the Informal Vendor Debt Committee and the Unsecured Creditors' Committee, filed their Disclosure Statement accompanying the Plan and received Court approval of the Disclosure Statement over numerous objections and significant opposition from MCG. Mr. Klyman maintains that these are extraordinary achievements in light of the size and complexity of Leap's cases. Mr. Klyman points out that the termination of the Exclusivity Periods at this time would create an uncertain, chaotic environment, which would inevitably disrupt confirmation of the Plan and the Debtors' chances for a successful reorganization. Expiration of the Exclusive Periods could lead to the filing of competing plans that would needlessly deflect the attention of the Debtors and other interested parties and would likely lead to significantly increased administrative expenses with no real benefit to the estates. Accordingly, the Debtors ask the Court to extend: (i) the exclusive period in which they may file a plan of reorganization to December 9, 2003; and (ii) the exclusive period in which they may solicit acceptances of that plan to February 9, 2004. (Leap Wireless Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) LEVCO FOOTWEAR GROUP: Voluntary Chapter 11 Case Summary ------------------------------------------------------- Debtor: Levco Footwear Group 350 Fifth Avenue Suite 538 New York, New York 10118 Bankruptcy Case No.: 03-15364 Type of Business: Shoe retail stores Chapter 11 Petition Date: August 26, 2003 Court: Southern District of New York (Manhattan) Judge: Burton R. Lifland Debtor's Counsel: Yann Geron, Esq. Geron & Associates, P.C. 13 East 37th Street Suite 800 New York, NY 10016 Tel: 212-682-7575 Fax: 212-682-4218 Estimated Assets: $1 Million to $10 Million Estimated Debts: $1 Million to $10 Million LOEWEN GROUP: Four Directors Disclose Common Stock Purchases ------------------------------------------------------------ Azalea K. Angeles reports that, in July 2003, Paul A. Houston of Toronto, purchased 3,150 shares of the common stock of Alderwoods Group, Inc., at $6.45, bringing Mr. Houston's total owned shares to 16,035. Mr. Houston is the President and a Director of AGI. Charles M. Elson, also of Toronto, purchased 639 shares of the common stock of AGI at a price of $0, bringing his total ownership to 21,813 shares. Mr. Elson is a Director of AGI. David R. Hilty of Toronto purchased 881 shares of AGI's common stock for a price of $0, bringing his total to 6,502 shares. Mr. Hilty is also a director of AGI. Olivia F. Kirtley of Toronto, a Director of AGI, purchased 345 shares of AGI's common stock at $0, and now owns a total of 6,074 shares. (Loewen Bankruptcy News, Issue No. 75; Bankruptcy Creditors' Service, Inc., 609/392-00900) MASSEY ENERGY: Revises Projections for 3rd Quarter 2003 Results --------------------------------------------------------------- Massey Energy Company (NYSE: MEE) expects to report lower financial results than previously projected for its third quarter ending September 30, 2003, due primarily to lower productivity and shipment shortfalls. "The disappointing productivity and shipping that we reported in July has continued in August," said Don L. Blankenship, Massey Energy Chairman and CEO. "While we are currently seeing improvement, we don't expect to achieve our previous guidance for the quarter." In its July 30, 2003 second quarter earnings release, the Company projected third quarter shipments of 10.5 to 11.5 million tons, earnings of $0.08 to $0.18 per share and EBITDA of $65 to $75 million, including the net effect of a business interruption claim settlement of $0.13 per share. The Company reported that it now expects shipments of 10.3 to 10.7 million tons, a loss of $0.12 to breakeven per share, including the revised net effect of the claim settlement of $0.15 per share, and total EBITDA of $40 to $55 million. "A number of relatively minor but cumulative production and shipping problems have occurred that have negatively impacted our results," said Blankenship. The Company reported that both longwall moves so far in the quarter have taken significantly longer than anticipated. One more longwall move is scheduled to take place in early September. "While the third quarter's results will be disappointing, we expect a fourth quarter return to the cash cost improvement trend we saw in the second quarter," concluded Blankenship. On a more positive note, the Company reported that the coal industry sales market in Central Appalachia continues to strengthen. Many utility customers have been active this quarter in soliciting bids for 2004, leading to improved pricing. Since the end of July, Massey's sales commitments for 2004 have increased by over 3 million tons at favorable prices and now total approximately 35 million tons. Massey Energy Company, headquartered in Richmond, Virginia, is the fourth largest coal company in the United States based on produced coal revenue. As reported in Troubled Company Reporter's July 15, 2003 edition, Standard & Poor's Ratings Services revised its outlook on Massey Energy Company to stable from negative. At the same time, Standard & Poor's assigned its BB+ rating to Massey's $355 million secured credit facility. In addition, Standard & Poor's affirmed its existing ratings on the company. The new $355 million bank credit facility was rated 'BB+', one notch above the corporate credit rating. The new facility consists of a $250 million term loan due 2008 and a $105 million revolver due 2007 and is secured by various assets including certain account receivables, inventory, and certain property, plant & equipment. The term loan has a manageable amortization schedule of $0.6 million per quarter until maturity, and an early maturity trigger based on whether Massey's existing 6.95% senior notes are refinanced before January 1, 2007. MEDISOLUTION LTD: June 30 Balance Sheet Upside-Down by $6.5 Mil. ---------------------------------------------------------------- MediSolution Ltd. (TSX: MSH), a leading Canadian healthcare information technology company, announced its financial results for the first quarter ended June 30, 2003. Revenue increased by 8% to $11.7 million in the quarter ended June 30, 2003 compared to the prior year. The growth in revenue was achieved primarily in the Administrative Solutions segment driven by increased payroll processing revenues, which were positively impacted by one-time payroll processing transactions during the quarter. Revenues in the Healthcare Information Systems segment were the same as the prior year. The Company achieved EBITDA of $0.9 million during the quarter compared to $0.6 million reported in the prior year. This improvement is largely due to the increase in revenue. The loss for the quarter ended June 30, 2003 was reduced to $0.7 million from $1.3 million reported in the prior year. MediSolution's June 30, 2003 balance sheet shows a working capital deficit of about $13 million and a total shareholders' equity deficit of about $6.5 million. Highlights During the quarter, MediSolution signed $2.5 million in new contracts, despite being faced with a challenging environment as a result of severe acute respiratory syndrome. The unprecedented circumstances surrounding SARS, with regards to both the severity and speed at which it affected the hospitals and healthcare industry, caused decision makers to focus on other areas than IT spending, deferring the signing of expected contracts. The new contracts included the following customers: - Jewish General Hospital, Sir Mortimer B. Davis, Montreal (Quebec), for Virtuo(R), a financial and materials management information system; - Centre hospitalier Pierre-Le Gardeur, Repentigny (Quebec), for MediHR(R), a human resources information management system, and MediTime(R), a scheduling system. MediSolution also announced during the quarter the signing of an agreement with Microsoft that appoints MediSolution as a Microsoft Business Solutions HR Centre of Excellence Partner for healthcare in the United States. This agreement enables MediSolution to accelerate growth of the MediHR(R) product and services in the US market. MediHR(R), enhances the efficiency of human resources by improving the accuracy and timeliness of employee information. Outlook "We are pleased to be able to report our fourth consecutive quarter of year over year revenue growth," said Allan D. Lin, MediSolution's President and Chief Executive Officer. "We look forward to a strong contribution to revenue in the latter part of the year from our new US management team established earlier this year. MediSolution is planning to deliver on our financial goal to achieve an increase of 10% in revenue for the 2003-2004 fiscal year." MediSolution Ltd. is a leading Canadian healthcare information technology company with offices in Canada and the United States. The company markets a comprehensive suite of information systems and professional services to the healthcare industry. More information about MediSolution is available at http://www.medisolution.com META HEALTH: Issuing 650K Common Shares Under Reorg. Agreement -------------------------------------------------------------- Meta Health Services Inc. has made application to the TSX Venture Exchange (TSX-VEN) for approval of the issuance of 650,000 common shares at a price of $0.50 per share in satisfaction of certain obligations of Meta under a reorganization agreement made October 31st, 2000 with, among others, the holders of Class "A" Preferred Shares of Medcare Logistics Inc. On February 17, 1999, Meta purchased all of the issued and outstanding common shares of Medcare. The 26 issued and outstanding Medcare Class "A" Preferred Shares of Medcare are held by Rogan Holdings Inc. (holding 20 Medcare Preferred Shares), Lawrence Chan, (holding 4 Medcare Preferred Shares), and William Divitcoff, (holding 2 Medcare Preferred Shares). Rogan and Divitcoff are also shareholders of Meta, currently holding approximately 30.4% and 0.3% of the outstanding common shares of Meta, respectively. Under the Reorganization Agreement the parties agreed to make an application to the applicable regulatory authorities to obtain approval for the conversion of the Medcare Preferred Shares into an equal number of series 1 first preferred shares of Meta. The Meta Preferred Shares were to contain the same terms as the Medcare Preferred Shares as well as the following additional features: 1. Each Meta Preferred Share would be convertible at a price of $0.72 per share or such other escalating prices as the TSX-VEN should approve, into common shares of Meta, for a term equivalent to the maximum period acceptable to the TSX-VEN; and 2. The dividends payable on the Meta Preferred Shares would, at the discretion of the board of directors of Meta, be paid in common shares of Meta based on a conversion ratio to be determined in accordance with the five-day weighted average trading price of the common shares of Meta on the TSX-VEN immediately prior to the due date of such dividends. For the reasons described below, application was not immediately made to the TSX-VEN pursuant to the Reorganization Agreement. On November 15, 2000, Meta issued a press release to announce its decision to discontinue Medcare's operations and proceed with the liquidation of the assets of Medcare as a result of the general non-performance of Medcare after its acquisition by Meta. A proposal pursuant to Part III of the Bankruptcy and Insolvency Act (Canada) was accepted by the Supreme Court of British Columbia in Bankruptcy on January 15, 2001. The liquidation of Medcare was completed as of January 24, 2002. Meta was required to wait until the liquidation proceedings were complete before making an application to regulatory authorities to exchange the Medcare Preferred Shares for Meta Preferred Shares. Pursuant to the Reorganization Agreement, Meta has a contractual obligation to the Medcare Preferred Shareholders to issue Meta Preferred Shares. However, based on further discussions between Meta and the Medcare Preferred Shareholders, the parties have now agreed that it is in their best interests to issue common shares of Meta to the Meta Preferred Shareholders in lieu of the Meta Preferred Shares, for the following reasons. The 7% cumulative dividend requirement of the proposed Meta Preferred Shares would be a hardship to Meta, which has limited cash flow. Further, issuing common shares will be much simpler than designating and issuing Meta Preferred Shares, thereby further saving Meta legal and administrative fees and management time. The 650,000 common shares will be allocated as follows: Rogan 500,000 Chan 100,000 Divitcoff 50,000 Rogan is the largest shareholder of Meta, currently holding approximately 30.4% of the outstanding common shares. Rogan is owned by a family trust, of which Dr. Gordon Organ, a director of Meta, is a beneficiary. The issuance of common shares to Rogan is exempt from the valuation and minority approval requirements of TSX-VEN Policy 5.9 and Ontario Securities Commission Rule 61-501. The Board of Directors of Meta approved of the issuance of common shares described in this press release at a meeting held on Dec. 12, 2002. Dr. Organ abstained from voting on the transaction. For the reasons described above, the board concluded that it is in the best interests of Meta to issue the common shares in satisfaction of its obligations pursuant to the Reorganization Agreement. MET-COIL SYSTEMS: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Met-Coil Systems Corporation 260 North Elm Street Westfield, Massachusetts 01085 Bankruptcy Case No.: 03-12676 Type of Business: The Debtor manufactures coil sheet metal processing equipment and integrated systems for producing blanks from sheet metal coils. Chapter 11 Petition Date: August 26, 2003 Court: District of Delaware Judge: Mary F. Walrath Debtors' Counsel: James C. Carignan, Esq. Jason W. Harbour, Esq. Morris Nichols Arsht & Tunnell 1201 N. Market Street PO Box 1347 Wilmington, DE 19899 Tel: 302-658-9200 Fax: 302-658-3989 Estimated Assets: $10 Million to $50 Million Estimated Debts: $50 Million to $100 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ MB Financial Bank, N.A. Bank Loan $5,500,000 3232 West Peterson Avenue Chicago, IL 60659 Attn: Peter Straus Tel: 773-645-5028 Fax: 773-861-2899 Baker & McKenzie Professional $672,661 130 East Randolph Drive Chicago. IL 60601 Attn: David Hackett Tel: 312-861-8000 Fax: 312-861-2899 Wildman, Harrold, Allen Professional $401,132 & Dixon 225 West Wacker Drive Suite 3000 Chicago, IL 60606 Attn: Ron Heard Tel: 312-201-2000 Fax: 312-201-2555 Donohue Brown Mathewson Professional $113,110 & Smyth Groundwater Services, Inc. Trade $103,066 Ingersoll-Rand Company Trade $73,326 Schiff Hardin & Waite Professional $51,551 Hypertherm, Inc. Trade $51,537 Jorgensen, Earle M Co. Trade $49,807 Thermal Remediation Serv., Trade $48,142 Inc. BDI Trade $40,729 Pacesetter Steel Service Trade $34,074 Fletcher-Reinhardt Co. Trade $28,909 Hartfiel Company Trade $26,128 Precision Industries Trade $20,756 Duro Dyne Corp Trade $19,672 Motion Industries, Inc. Trade $19,405 Production Products Ltd. Trade $17,295 Industrial Engineering Trade $17,086 Pioneer Workspace Trade $16,286 Solutions MIRANT CORP: Bringing-In AP Services LLC for Crisis Management -------------------------------------------------------------- Pursuant to Section 363 of the Bankruptcy Code, Mirant Corp., and its debtor-affiliates seek the Court's authority to employ AP Services, LLC as their crisis managers and thereby designate Robert Dangremond as their Chief Restructuring Officer under the terms of the Engagement Letter dated July 14, 2003. Ian T. Peck, Esq., at Haynes and Boone LLP, in Dallas, Texas, relates that under the terms of the Engagement Letter: (a) AP will provide certain temporary employees to the Debtors to assist them in their restructuring; (b) Mr. Dangremond will assist the Debtors in their operations with an objective of restructuring the Debtors, and manage the Debtors' restructuring efforts, including negotiating with parties-in-interest, and coordinating the "working group" of the Debtors' employees and external professionals who are assisting the Debtors in the restructuring; and (c) The Temporary Employees will assist Mr. Dangremond. According to Mr. Peck, Mr. Dangremond is well suited to provide the restructuring services the Debtors require. Mr. Dangremond is affiliated with the restructuring firm AlixPartners, LLP. AlixPartners is a leading corporate restructuring advisor, which has a wealth of experience in providing services in Chapter 11 cases and has an excellent reputation for the services it has rendered on the Debtors' behalf in cases throughout the United States. AlixPartners has provided restructuring services to numerous large cases, including that of Kmart Corporation, WorldCom, Inc. and Fleming Companies, Inc. Pursuant to the Engagement Letter, the Debtors will provide Mr. Dangremond with D&O insurance coverage. Furthermore, Mr. Dangremond will be entitled to the benefit of the most favorable indemnities the Debtors provide to their officers and directors, whether under the by-laws, certificates of incorporation, by contract or otherwise. The firm will charge the Debtors these hourly rates: Principal $420 - 670 Senior Associates 325 - 495 Associates 375 - 390 Accountants and Consultants 225 - 280 Analysts 150 - 180 Paraprofessionals 105 - 110 In addition to the hourly rates, AP will also seek reimbursement of out-of-pocket expenses incurred in connection with the assignment, including travel, lodging, postage and a communications charge to cover telephone and facsimile charges that is calculated at $4 per billable hour of time worked on the Debtors' behalf. Douglas C. Werking, an associate with AP Services, informs Judge Lynn that AP received a $750,000 retainer under the Engagement Letter to be applied against the compensation, including expenses, specific to the engagement. Any unearned portion of the retainer will be returned to the Debtors upon the termination of the engagement. Aside from the hourly fees and reimbursable expenses, Mr. Werking states that AP will be compensated for its efforts by the payment of a $5,000,000 Success Fee. The Success Fee will be due based on confirmation of a Plan of Reorganization or upon closing of a sale of a majority of the Debtors' assets. AP acknowledges that the Success Fee is not payable if its employment is terminated for cause or if there is a conversion of the case. AP further acknowledges that the Success Fee is subject to Court approval when earned. Since AP is not being employed as a professional under Section 327 of the Bankruptcy Code, Mr. Peck says that AP will not be submitting quarterly fee applications pursuant to Sections 330 and 331 of the Bankruptcy Code. However, on a monthly basis, AP will file a notice of compensation earned and expenses incurred for the previous month with the Court and the U.S. Trustee. According to Mr. Werking, to the best of his knowledge, neither he, nor AlixPartners and AP and their principals, employees, agents or affiliates, have any connection with the Debtors, their creditors, the U.S. Trustee or any other party with an actual or potential interest in these Chapter 11 cases, except as disclosed. Mr. Werking assures the Court that AP holds no adverse interest as to the matters for which it has been employed by the Debtors. To the extent that certain individuals will be employed by the Debtors on a part-time basis, AP promises that there will be no simultaneous engagement existing which would constitute a conflict or adverse interest as to the matter for which it has been employed by the Debtors. Mr. Peck contends that under Section 363(c), the Debtors are authorized enter into transactions and use the estate's property in the ordinary course of business. The Debtors routinely hire and fire senior executives. The absence of executives capable of achieving a successful reorganization would severely hinder the Debtors' ability to reorganize in an efficient and effective manner. Thus, Mr. Peck argues that AP Services' employment should be approved because: (a) Mr. Dangremond is qualified for the position for which he is being employed; and (b) the Debtors believe that the terms of the Engagement Letter are within the range of those for senior executive officers employed with companies of comparable size, value and reputation. * * * On an interim basis, Judge Lynn authorizes the Debtors to employ AP Services as their crisis managers. (Mirant Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) MORGAN STANLEY: Fitch Affirms 3 Class Ratings at Lower-B Level -------------------------------------------------------------- Fitch Ratings upgrades Morgan Stanley Capital's commercial mortgage pass-through certificates, series 1997-C1 as follows: -- $38.4 million class C to 'AA+' from 'AA-'; -- $35.2 million class D to 'A' from 'BBB+'. In addition, Fitch affirms the following certificates: -- $18.1 million class A-1B 'AAA'; -- $139.5 million class A-1C 'AAA'; -- Interest only class IO-1 'AAA'; -- $51.3 million class B 'AAA'. -- $19.2 million class F 'BB+'; -- $11.2 million class G 'BB'; -- $20.8 million class H 'B'. Fitch does not rate the $6.4 million class E, nor the $20.6 million class J. The rating upgrades and affirmations follow Fitch's annual review of the transaction, which closed in March 1997. The upgrades are primarily the result of increased subordination levels due to loan payoffs and amortization. As of the August 2003 distribution date, the pool's collateral balance has been reduced by 44%, to $360.8 million from $640.7 million at issuance. GMAC Commercial Mortgage Corp, the master and special servicer, provided year-end 2002 financials for 90% of the pool. According to the information provided, the YE 2002 weighted average debt service coverage ratio declined to 1.75 times from 1.83x at YE 2001, but remains above issuance at 1.42x for the same loans. Only two loans (1.4%) have a DSCR below 1.0x. One loan (1.8%) is currently being specially serviced. The loan is real estate owned and secured by an office property located in Dallas, Texas. The property is currently listed for sale. Fitch identified loans of concern and applied various stress scenarios. Even under these stress scenarios, subordination levels remain sufficient to upgrade the ratings. Fitch will continue to monitor this transaction, as surveillance is ongoing. NAT'L STEEL: Gets Nod to Implement Liquidation Retention Program ---------------------------------------------------------------- National Steel Corporation and its debtor-affiliates obtained the Court's authority to implement the Liquidation Retention Program for their remaining employees. As previously reported, ech employee's Liquidation Retention Payment would be paid on the date that the Debtors terminate the employee without cause. Employees who are terminated for cause or who resign before termination would not be entitled to any payments under the program. Any payment due under the Liquidation Retention Program is additive to payments that an employee may be entitled to under the Initial Program, and the Liquidation Retention Program will not be deemed to alter or modify the previously approved program in any way. The Debtors and the employees have also agreed that any payments that remain due under the Initial Program will not be paid unless and until the employee is eligible to receive a payment under the Liquidation Retention Program. Payments under the Liquidation Retention Program are "extremely modest for a case of this magnitude -- less than $2,000,000 in the aggregate." Early in National Steel Corporation and its debtor-affiliates' Chapter 11 cases, the Court approved an employee retention and severance program designed to minimize management and other key employee turnover by providing incentives. The initial program included four separate components: (a) A retention program covering 95 key employees; (b) A severance program covering 1,500 non-union employees without employment contracts; (c) A severance program covering 11 key executive officers and nine other key management employees with prepetition employment contracts; and (d) Continuation of a prepetition deferred compensation plan. After the Sale of the Debtors' assets to United States Steel Corporation, substantially all of their employees have either become employees of U.S. Steel or have been terminated. Excluding those employees administering certain of their pension plans on behalf of the Pension Benefit Guaranty Corporation, the Debtors' continuing workforce is comprised of 26 individuals requested to remain with the Debtors. The Debtors acknowledge that these remaining employees and their collective expertise and knowledge to efficiently wrap up the estates' affairs are essential to the successful wind-down of the Debtors' business in a manner that maximizes the recovery to creditors. To ensure that the employees will continue to work for a liquidating estate and to complete the tasks that remain for these estates, the Debtors decided to implement a Liquidation Retention Program. (National Steel Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 609/392-0900) NATIONSRENT INC: IBJ Whitehall Demands Admin. Expense Payment ------------------------------------------------------------- The NationsRent Debtors and IBJ Whitehall Business Credit Corporation are parties to an October 29, 1999 Master Equipment Lease Agreement. As part of their restructuring strategy, the Debtors rejected the Lease. In view of the Lease rejection, IBJ asserted these administrative expense claims against the Debtors: (1) $875,493 in unpaid postpetition rent; (2) $42,203 in postpetition attorney's fee and cost; (3) $1,619,001 in rental return fees; (4) $3,247 in reimbursement of postpetition taxes IBJ paid; (5) $74,446 in damages from the Debtors' failure to return the leased equipment to specified locations; (6) $72,194 in total damages as a result of the Debtors' failure to return equipment in "rental ready" condition before the effective date of the lease rejection; (7) $35,599 in damages for the Debtors' failure to turn over the proceeds they received from selling an IBJ equipment; and (8) other amounts incurred under the Lease before the Effective Rejection Date. By this motion, IBJ wants the Court to compel the Debtors to pay the Administrative Expense Claims. (NationsRent Bankruptcy News, Issue No. 36; Bankruptcy Creditors' Service, Inc., 609/392-0900) NEENAH FOUNDRY: Mails Subscription Materials re Rights Offering --------------------------------------------------------------- Neenah Foundry Company has mailed subscription materials relating to the Rights Offering described in its Prepackaged Joint Plan of Reorganization filed August 5, 2003. The subscription materials are being sent to the holders of record as of August 22, 2003 of the Company's outstanding 11-1/8 % series A, B, D and F senior subordinated notes due 2007. Holders of the notes will receive these subscription materials through their nominees. The subscription materials will include instructions as to how holders may elect to participate in the Rights Offering. Subscription rights will expire at 5:00 p.m., New York City time on September 24, 2003. Neenah Foundry Company manufactures and markets a wide range of iron castings and steel forgings for the heavy municipal market and selected segments of the industrial markets. Neenah is one of the larger independent foundry companies in the country, with leading market share of the municipal and industrial markets for gray and ductile iron castings and forged steel products. Additional information about Neenah is available on the Company's Web site at http://www.nfco.com NEPTUNE SOCIETY: Selling All Operating Assets to The Apogee Cos. ---------------------------------------------------------------- The Neptune Society, Inc. (OTCBB:NPTI), one of the country's largest publicly traded cremation specialists, has entered into a letter of intent with The Apogee Companies, Inc., a private company controlled by Roy P. Disney, to sell substantially all of the operating assets of Neptune Society's cremation service business which is currently operated under the names "The Neptune Society," "The Trident Society" and other trade names of Neptune Society and its subsidiaries. The board of directors of Neptune Society have approved the terms of the Letter of Intent. Under the terms of the Letter of Intent, Apogee will form a new entity which will purchase substantially all of the operating assets (including accounts receivables) of Neptune Society and its subsidiaries for the following consideration: -- $8,500,000 in cash; -- a debenture in the principal amount of $3,000,000 bearing interest at the rate of 6% per annum, payable three years after the closing date of the acquisition; -- the assumption of certain liabilities and obligations of Neptune Society, including existing loans in the amount of approximately $7,400,000 and certain other specified liabilities and contract rights; and -- the transfer of all shares of common stock and rights to acquire common stock of Neptune Society held by Apogee and other investors in Apogee Affiliate. Neptune Society will retain certain assets, including its cash and cash equivalents and a refund of sales taxes paid to the State of California in the amount of approximately $750,000. The cash portion of the purchase price will be adjusted to the extent that trade payables and accrued liabilities assumed by the Apogee Affiliate exceed a normalized level of trade payables and accrued liabilities and to the extent that the collectable portion of accounts receivable are less than a normalized level of accounts receivable, in both cases under terms to be negotiated and set forth in the definitive asset purchase agreement. The Apogee Affiliate has agreed to assume, and Neptune Society has agreed to assign, the existing employment or consulting agreements of certain of Neptune Society's Key Executives, subject to their respective consents. Apogee's obligation to complete the acquisition is subject to satisfaction, or waiver by Apogee, of a number of conditions, including among other things, the completion of due diligence by Apogee to its absolute satisfaction, approval of the transaction by Neptune Society's board of directors and shareholders and the execution and delivery of a definitive asset purchase agreement. There is no assurance that the conditions to the proposed transaction with Apogee will be met, or, if met, that the transaction will be consummated as planned. The letter of intent (with the exception of the confidentiality provisions) will expire 30 days after the parties begin the negotiation and preparation of the definitive asset purchase agreement. The definitive asset purchase agreement may be terminated by written notice of either party six months after its execution and delivery if the transaction has not closed. Until the letter of intent has expired or the definitive asset purchase agreement has been terminated, the Neptune Society will operate its business consistent with ordinary course consistent with past practice and will not negotiate or enter into any agreement to sell its assets or capital stock. Neptune intends to file a copy of the Letter of Intent on Form 8-K with the Securities and Exchange Commission. * * * As reported in Troubled Company Reporter's August 14, 2003 edition, The Neptune Society, Inc., paid the remaining $1.8 million balance of the acquisition debt related to its 1999 purchase of the Neptune Society business. The Company satisfied this obligation, in part, from the proceeds of a $1,500,000 debt financing by Capex, LLP, of Denver, Colorado. In connection with the debt financing, the Company also restructured its obligation under the 13% Debentures held by Capex and another debentureholder. This restructuring favorably amended the previous fixed charge coverage ratio obligation and cured certain possible conditions of default under the debentures. The restructured debentures in the aggregate principal amount of $7.4 million are repayable over the upcoming four years, with the Company holding the right to prepay the debentures at any time without penalty. The Company paid a refinancing fee of 600,000 shares and the parties replaced the convertibility rights under the Debentures with warrants granting the lenders the right to acquire the equivalent number of shares (1,666,667) up to July 31, 2008 at a price of $3.00 per share. The number of shares reserved under the warrants may be subject to increase in connection with future equity issuances by the Company. NORTHWESTERN CORP: Shareholders Meeting Adjourned Until Sept. 15 ---------------------------------------------------------------- NorthWestern Corporation (NYSE: NOR) adjourned its stockholders meeting to allow continued voting on proposal to amend the Company's Restated Certificate of Incorporation. Stockholders elected two members of Class III of the Board of Directors to hold office until 2006. Those elected included Marilyn R. Seymann, president and chief executive officer of M One, Inc., and Lawrence J. Ramaekers, formerly president and chief executive officer of ANC Rental Corporation, and current chief operating officer of MicroWarehouse. Stockholders also ratified the appointment of Deloitte & Touche LLP as auditors for the year ending Dec. 31, 2003. The adjourned meeting will reconvene to vote on the proposal to amend the Company's Restated Certificate of Incorporation at 10:00 a.m. Central time on September 15, 2003, at the Sheraton Convention Center in Sioux Falls, South Dakota. NorthWestern Corporation is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving more than 598,000 customers in Montana, South Dakota and Nebraska. NorthWestern also has investments in Expanets, Inc., a nationwide provider of networked communications and data services to small and mid-sized businesses, and Blue Dot Services Inc., a provider of heating, ventilation and air conditioning services to residential and commercial customers. Northwestern's June 30, 2003, balance sheet shows a working capital deficit of about $1.1 billion while net capital deficit tops $504 million. NRG ENERGY: Court Modifies Stay Allowing Sr. Debentures Transfer ---------------------------------------------------------------- Joseph T. Moldovan, Esq., at Morrison, Cohen, Singer & Weinstein, LLP, in New York, relates that in March 2001, NRG Energy, Inc. issued 11,500,000 equity units to certain investors. Each Equity Unit consists of a corporate unit comprising a $25 principal amount of NRG's Senior Debentures and a Purchase Obligation to acquire Xcel Energy Inc.'s common stock no later than May 18, 2004. The Equity Units are governed by a Purchase Contract Agreement, dated March 31, 2001, between NRG and The Bank of New York, as purchasing contract agent for the holders of the Equity Units. Wilmington Trust Company succeeded The Bank of New York as the purchasing contract agent. Pursuant to the terms of a Pledge Agreement among NRG, The Chase Manhattan Bank, as collateral agent, custodial agent and securities intermediary, and Wilmington, Wilmington pledged the NRG 06 Senior Debentures to Chase Manhattan, for NRG's benefit, as security for the performance of the Purchase Obligations. The Purchase Agreement provides that upon a Termination Event, the Purchase Obligations will immediately and automatically terminate, without the necessity of any notice or action by any person. "Termination Event" is defined under the Purchase Agreement to include NRG's Chapter 11 filing. Accordingly, the Purchase Obligations have terminated. The Pledge Agreement also provides that upon receipt by Chase Manhattan of written notice from NRG or Wilmington that there has occurred a Termination Event, Chase Manhattan will release the NRG 06 Senior Debentures from the Pledge and will transfer the Senior Debentures to Wilmington for the benefit of the Equity Unit holders, free and clear of any lien, pledge or security interest or other interest created under the Pledge Agreement. In their May 14, 2003 Disclosure Statement, the Debtors acknowledged that a Termination Event has occurred and that there is no longer any basis for Chase Manhattan to maintain custody of the Senior Debentures. In light of the Debtors' Chapter 11 filing, Wilmington provided Chase Manhattan a written notice of the Termination Event in accordance with the Pledge Agreement. Despite being duly notified, Chase Manhattan has declined to release the Senior Debentures to Wilmington. Accordingly, Wilmington asks the Court to modify the automatic stay, to the extent applicable, to authorize and direct the Debtors to issue a directive to Chase Manhattan to immediately transfer the Senior Debentures to Wilmington for the benefit of the Equity Unit holders. The stay should be lifted, Mr. Moldovan asserts, because the unequivocal terms of the Pledge Agreement require Chase Manhattan to release the Senior Debentures upon the occurrence of a Termination Event -- in this case the Debtors' Chapter 11 filing -- and duly provided written notice. Both conditions precedent to the Senior Debentures' release have occurred. Moreover, the Debtors acknowledge that there is no basis for Chase Manhattan to maintain custody of the Senior Debentures. * * * Pursuant to Section 362(d)(1) of the Bankruptcy Code, the Court modifies the automatic stay for the purpose of authorizing and directing NRG to issue direction to the Collateral Agent to immediately transfer the NRG 06 Senior Debentures to Wilmington for the benefit of the holders of the Equity Units, thereby enabling any transfer agent to immediately effectuate such transfer to the holders of the Equity Units, and to require the Collateral Agent to follow NRG's direction. (NRG Energy Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392- 0900) ON COMMAND: June 30 Net Capital Deficit Doubles to $34 Million -------------------------------------------------------------- On Command Corporation (OTC Bulletin Board: ONCO), a leading provider of in-room interactive services, business information and guest services for the lodging industry, announced its financial results for the quarter and six months ended June 30, 2003. Total net revenue for the second quarter of 2003 was $59.6 million compared to $61.0 million in the second quarter of 2002, a decrease of 2.3%. The decrease in total net revenue is primarily due to a decline in room revenue to $57.5 million in the second quarter of 2003 from $59.1 million in the second quarter of 2002. Room revenue declined primarily because of a decrease in occupancy rates and a reduction in the average number of rooms served by the Company. Adjusted EBITDA (defined by On Command as revenue less direct costs of revenue and other cash operating expenses, excluding depreciation and amortization and asset impairments and other charges) for the second quarter of 2003 was $14.0 million, a decrease of 17.6% compared to the second quarter of 2002 of $17.0 million. For the six months ended June 30, 2003, Adjusted EBITDA was $29.8 million compared to $32.1 million in the comparable period in 2002, a decrease of 7.2%. Please see schedule 1 attached for a reconciliation of 2003 and 2002 Adjusted EBITDA to loss from operations. Loss from operations for the second quarter ended June 30, 2003 was $6.4 million compared to $8.7 million for the corresponding period of 2002. The Company reported a net loss attributed to common stockholders of $11.9 million for the quarter, compared to a $14.3 million net loss for the corresponding period in 2002. Revenue per room for the second quarter was $22.77 compared to $22.88 for the same period in 2002, the decrease due primarily to a decrease in occupancy rates during the comparable periods. Highlights for the second quarter: -- Installed the digital platform in 21,000 rooms, bringing the total number of digital rooms to 333,000 or 37.6% of the total owned room base of 885,000; -- Installed the digital music product in more than 47,000 rooms and the TV Internet service to more than 14,600 rooms, bringing total digital music rooms to 250,000 and TV Internet capability to 278,000 rooms; -- Installed a digital upgrade in more than 53,100 rooms, delivering an average uplift in room revenue from upgraded rooms of 22% compared to analog-based systems without the upgrade; -- Reduced capital spending and other investments for the six months ended June 30, 2003 to $25.9 million, compared to $28.6 million in the first six months of 2002. At June 30, 2003, On Command's balance sheet shows a working capital deficit of about $270 million, and a total shareholders' equity deficit of about $34 million. "We were pleased with being able to keep room revenue essentially flat in the second quarter of 2003 compared to the second quarter last year, despite the drop in occupancy as a result of the war with Iraq and its lingering effect on the hospitality industry during the quarter," said Chris Sophinos, president and chief executive officer of On Command. On Command Corporation -- http://www.oncommand.com-- is a leading provider of in-room entertainment technology to the lodging and cruise ship industries. On Command is a majority-owned subsidiary of Liberty Satellite & Technology, Inc. (OTC Bulletin Board: LSTTA, LSTTB). On Command entertainment services include: on-demand movies; television Internet services using high-speed broadband connectivity; television email; short form television features covering drama, comedy, news and sports; PlayStation video games; and music-on-demand services through Instant Media Network, a majority-owned subsidiary of On Command Corporation and the leading provider of digital on-demand music services to the hotel industry. All On Command products are connected to guest rooms and managed by leading edge video-on-demand navigational controls and a state-of-the art guest user interface system. The guest menu system can be customized by hotel properties to create a robust platform that services the needs of On Command hotel partners and the traveling public. On Command and its distribution network services more than 1,000,000 guest rooms, which touch more than 300 million guests annually. On Command's direct served hotel properties are located in the United States, Canada, Mexico, Spain, and Argentina. On Command distributors serve cruise ships operating under the Royal Caribbean, Costa and Carnival flags. On Command hotel properties include more than 100 of the most prestigious hotel chains and operators in the lodging industry: Accor, Adam's Mark Hotels & Resorts, Fairmont, Four Seasons, Hilton Hotels Corporation, Hyatt, Loews, Marriott (Courtyard, Renaissance, Fairfield Inn and Residence Inn), Radisson, Ramada, Six Continents Hotels (Inter- Continental, Crowne Plaza and Holiday Inn), Starwood Hotels & Resorts (Westin, Sheraton, W Hotels and Four Points), and Wyndham Hotels & Resorts. ORBITAL SCIENCES: Names Leo Millstein SVP and General Counsel ------------------------------------------------------------- Orbital Sciences Corporation (NYSE:ORB) has named Mr. Leo Millstein Senior Vice President, General Counsel and Corporate Secretary of the Dulles, VA-based space technology company. Mr. Millstein comes to Orbital with over 20 years of combined experience in the satellite industry at INTELSAT and COMSAT. In addition, Mr. Millstein has served as a Partner at Dryer, Ellis, Joseph & Mills, a Washington, DC-based law firm and, most recently, as General Counsel of MERANT, plc, an international information technology company. In his role at Orbital, Mr. Millstein will provide legal support to the company's executive management and the Board of Directors on major business issues, such as government contracting and regulatory compliance, corporate governance, litigation activities, SEC reporting, mergers and acquisitions and other corporate transactions. He will oversee a staff of three in-house attorneys in the company's legal department plus additional professional staff members involved in public relations, corporate communications, export control and related areas. "On behalf of Orbital's executive team and Board of Directors, I am pleased to welcome Leo to the company. We anticipate that his exceptional background in the satellite industry and the legal profession will add a great deal of value to our corporate management efforts," said Mr. David W. Thompson, Orbital's Chairman and Chief Executive Officer. Mr. Millstein began his career in 1975 as Corporate Counsel at COMSAT, a satellite communications company, where he handled general legal matters for 10 years. In 1985, he left COMSAT to join Washington, DC-based Dryer, Ellis, Joseph & Mills as a Partner. In 1989, Mr. Millstein returned to the satellite industry for the next 11 years, joining INTELSAT, an international satellite communications organization, as Deputy General Counsel. He later served INTELSAT as Director of Corporate Restructuring. In 2000, Mr. Millstein joined MERANT, plc as Vice President, General Counsel and Secretary, where he carried out responsibilities similar to those that he will oversee at Orbital. Mr. Millstein holds a B.S. degree in Aeronautical and Astronautical Engineering from Purdue University and earned his law degree from George Washington University. He is married to Linda Finkelman and has a daughter. Orbital (Fitch, B+ Senior Secured Credit Facility & B 2nd Priority Secured Notes Ratings) develops and manufactures small space systems for commercial, civil government and military customers. The company's primary products are satellites and launch vehicles, including low-orbit, geostationary and planetary spacecraft for communications, remote sensing and scientific missions; ground- and air-launched rockets that deliver satellites into orbit; and missile defense boosters that are used as interceptor and target vehicles. Orbital also offers space-related technical services to government agencies and develops and builds satellite-based transportation management systems for public transit agencies and private vehicle fleet operators. More information about Orbital can be found at http://www.orbital.com OTTAWA SENATORS: Closes Asset Sale to Capital Sports ---------------------------------------------------- PricewaterhouseCoopers Inc., the court-appointed Monitor of the Ottawa Senators Hockey Club Corporation announced that the sale of the Ottawa Senators to Capital Sports & Entertainment Inc. has closed. The closing, effective Tuesday, is the result of a tremendous effort by all parties involved. PricewaterhouseCoopers Inc. was appointed Monitor of the OSHCC on January 9, 2003, in court proceedings commenced by OSHCC for a restructuring of its affairs and protection from its creditors. Among its duties, PricewaterhouseCoopers Inc. was responsible for the sale of OSHCC's assets and overseeing the sale process. OUTSOURCING SOLUTIONS: Plan Confirmation Objections Due Monday -------------------------------------------------------------- The U.S. Bankruptcy Court for the Eastern District of Missouri ruled on the adequacy of the Disclosure Statement prepared by Outsourcing Solutions, Inc., and its debtor-affiliates, to explain their Third Amended Reorganization Plan. The Court found that the Disclosure Statement contains the right kind and amount of information to allow creditors to make informed decisions whether to accept or reject the Plan. The Plan is now in creditors' hands and they are making those decisions. A confirmation hearing before the Honorable Barry S. Schermer to will convene on Sept. 30, 2003, at 2:00 p.m., St. Louis Time, to consider whether the Plan should be approved. Preliminary objections, if any, to the confirmation of the Debtors' Plan must be received on or before Sept. 1, by: 1. Gregory D. Willard, Esq. Bryan Cave LLP One Metropolis Square 211 North Broadway Suite 3600 - OSI St. Louis, Missouri 63102-2750 2. Mayer Brown Rowe & Maw, LLP 1675 Broadway New York, NY 10019 Attn: Brian Trust, Michael Richman and Carol Morrison No later than Sept. 8, the objector must meet with the Counsel for the Debtors and attempt in good faith to resolve the objections. If subsequent to the meeting resolutions cannot be reached, the objecting creditor must file a written objection to the Confirmation of the Plan before 4:30 p.m. on Sept. 12 and serve copies to each of the parties named in the Master Service List (available through PACER). Outsourcing Solutions, Inc., and its subsidiaries are collectively one of the largest providers of business process outsourcing, or BPO, receivables services in the U.S. The Debtors filed for Chapter 11 relief on May 12, 2003, (Bankr. E.D. Mo. Case No. 03- 46349). Gregory D. Willard, Esq., at Bryan Cave LLP represents the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed total assets of $626 million and total debts of $699 million. PARADIGM MEDICAL: Cash Resources Insufficient to Continue Ops. -------------------------------------------------------------- Due to the declining sales, significant recurring losses and cash used to fund operating activities, the auditors' report of Paradigm Medical Industries Inc. for the year ended December 31, 2002 included an explanatory paragraph that expressed substantial doubt about the Company's ability to continue as a going concern. The Company indicates that it has taken significant steps to reduce costs and increase operating efficiencies. In addition, the Company is attempting to obtain additional funding through the sale of its common stock. Traditionally the Company has relied on financing from the sale of its common and preferred stock to fund operations. If the Company is unable to obtain such financing in the near future it may be required to reduce or cease its operations. The Company sold approximately 696,000 shares of common stock for approximately $84,000 during the 6 months ended June 30, 2003 under the $20,000,000 equity line of credit with Triton West Group, Inc. Paradigm Medical Industries is engaged in the design, development, manufacture and sale of high technology diagnostic and surgical eye care products. Given the "going concern" status of the Company, management has focused efforts on those products and activities that will, in its opinion, achieve the most resource efficient short-term cash flow to the Company. As seen in the results for the quarter ended June 30, 2003, diagnostic products have been the major focus and the Photon(TM) and other extensive research and development projects have been put on hold pending future evaluation when the financial position of the Company improves. The new management team has reviewed the financial position of the Company including the financial statements. In the course of this review, management made certain adjustments that are included in the quarter ended June 30, 2003, including an increase in the reserve of obsolete inventory of $332,000, an increase in the allowance for doubtful accounts receivable of $160,000, impairment of fixed assets and intangibles of $159,000, and increases in accruals to settle outstanding disputes in the amount of $443,000. Although management believes these adjustments are sufficient, it will continue to monitor and evaluate the Company's financial position and the recoverability of the Company's assets. Net sales decreased by $1,444,000, or 51%, to $1,372,000 for the six months ended June 30, 2003, from $2,816,000 for the comparable period in 2002. Sales of the Company's diagnostic products were $1,135,000, or 83% of total revenues, during the first six months of 2003 compared with $1,965,000, or 70% of total revenues, for the comparable period of 2002. Sales of surgical products totaled $152,000, or 11% of total revenues, for the first six months of the current year in comparison with $470,000, or 17%, of total revenues in the comparable period of 2002. In the first six months of 2003 sales of the Ultrasonic Biomicroscope were $210,000, or 15% of total revenues, compared to $889,000, or 32% of total revenues, in the same period of 2002. Sales from the Blood Flow Analyzer(TM) increased by $108,000 to $243,000, or 18% of total revenues, during the first two quarters of 2003 compared with $135,000, or 5% of total revenues, in the same period of last year. During the first half of 2003 sales from other ultrasonic products totaled $129,000, or 9% of total revenues, compared with $346,000, or 12% of total revenues, in the same period last year. Sales of the perimeter and corneal topographer generated $552,000, or 40% of total revenues, in the first two quarters of 2003 compared with $595,000, or 21% of total revenues, during the same period of 2002. The Company believes that its sales have been adversely affected by the slowdown in the economy. In addition, it has reduced its sales force in an effort to reduce costs. The Company's objective is to focus its sales efforts on the products with the highest potential for sales and strong margins. As of June 30, 2003, Paradigm Medical Industries had 4 sales people as compared to 8 at June 30, 2002. In the past, the Company has relied heavily upon sales of its common and preferred stock to fund operations. There can be no assurance that such equity funding will be available on terms acceptable to the Company in the future. The Company will continue to seek funding to meet its working capital requirements through collaborative arrangements and strategic alliances, additional public offerings and/or private placements of its securities or bank borrowings. The Company is uncertain whether or not the combination of existing working capital, benefits from sales of the Company's products and the private equity line of credit will be sufficient to assure the Company's operations through December 31, 2003. PILLOWTEX: Wins Nod to Pay $2.3MM in Prepetition Employee Wages --------------------------------------------------------------- William H. Sudell, Jr., Esq., at Morris, Nichols, Arsht & Tunnell, in Wilmington, Delaware, relates that in connection with the closure of the their facilities, the Pillowtex Debtors were forced to discharge 6,550 of their 7,750 hourly and salaried employees. The remaining workforce -- the Continuing Employees -- represent what the Debtors believe to be the minimum labor force necessary to maintain and preserve the assets of the estates and conduct an orderly liquidation. Barring unforeseen circumstances, it is anticipated that the majority of the Continuing Employees will be terminated within six months of the Petition Date -- the Transition Period. As of the Petition Date, Mr. Sudell informs Judge Walsh that all of the Employees were owed or had accrued various sums for: -- wages, salaries, sick pay, vacation pay, holiday pay and other accrued compensation estimated to be $9,269,000; and -- reimbursement of their business expenses estimated to reach $140,000. In addition, as of the Petition Date, the Debtors had made deductions from Employees' paychecks to make payments on behalf of Employees for charitable contributions, garnishments, tax levies, support payments, savings programs, benefit plans, insurance programs, union dues and other similar programs totaling $584,000. According to Mr. Sudell, the Prepetition Compensation, Prepetition Employee Business Expenses and Prepetition Deductions were due and owing as of the Petition Date because, among other things: (a) the Debtors filed their Chapter 11 petitions in the midst of their regular and customary salary, compensation and hourly wage payroll periods, as well as in the midst of their regular reimbursement cycle for Employee Business Expenses; (b) many payroll and expense reimbursement checks issued to Employees have not yet been presented for payment or have not yet cleared the banking system and, accordingly, were not honored and paid as of the Petition Date; (c) employees have not yet been paid of their salaries, contractual compensation and wages, or reimbursed for their business expenses; and (d) other forms of compensation related to prepetition services have not yet been paid to, or for the benefit of, employees because the benefits were not payable at the time, but will become payable in the future. The Debtors intend to pay 100% of the Prepetition Deductions and Prepetition Employee Business Expenses for all Employees. The Debtors also propose to pay: -- the unpaid wages and salaries owed to all Employees for the prepetition periods; -- amounts in respect of accrued and unused vacation, holiday, sick days and short-term disability for all hourly Continuing Employees whom the Company has specifically designated to continue to provide services subsequent to the Petition Date; and -- amounts in respect of accrued and unused vacation and holiday pay for all salaried Continuing Employees who are employed by the Company for at least 30 days following the Petition Date. After reviewing their books and records, the Debtors do not anticipate that the amount of prepetition wages and salaries owing to any Employee will exceed the amount that would be entitled to priority treatment under Sections 507(a)(3) and (4) of the Bankruptcy Code. The Debtors seek to pay approximately $2,345,000 in Prepetition Compensation. Furthermore, Mr. Sudell relates that the Debtors maintain a number of employee benefit programs, including health, dental and life insurance programs, as well as other benefit programs. As of the Petition Date, the Debtors were obligated to make certain contributions to or pay benefits under the benefit plans -- the Prepetition Benefits. Mr. Sudell reports that those Prepetition Benefits were not paid prior to the Petition Date because: (i) certain of the Debtors' obligations under the applicable benefit plans that accrued either in whole or in part prior to the Petition Date will not become payable in the ordinary course of the Debtors' businesses until a later date; (ii) amounts deducted from the Employees' paychecks issued and paid prior to the Petition Date have not been remitted to the applicable third-party private or government obligee; and (iii) amounts accrued and owing in respect of the Prepetition Compensation will not be deducted from the Employees' paychecks for Prepetition Compensation until those paychecks are processed and issued. Among the Prepetition Benefits the Debtors need to pay are: A. Self-Insured Welfare Programs The Debtors maintain self-insured plans that provide general health, dental and short-term disability coverage -- the Self-Insured Plans. Under the Self-Insured Plans, the Debtors assume liability for and pay certain benefits directly to the Employees or to third party administrators, which, in turn, pay the benefits directly to the Employees or the Employees' service providers rather than paying premiums for independent insurance coverage. The Debtors anticipate that, after the Petition Date, the Employees will continue to submit various claims for Prepetition Benefits to the Administrators or the Debtors. The Debtors anticipate that, based on historical levels of unfilled claims, approximately $6,000,000 in claims for Prepetition Benefits under the Self-Insured Plans will be submitted by Employees postpetition. B. Third-Party Insured Programs Some of the Debtors also maintain certain insured benefit plans under which the Debtors, Employees or both contribute to the payment of premiums for insurance or other coverage provided by third parties. The Insured Plans include life insurance plans and disability insurance coverage, unemployment insurance and excess medical benefit coverage on a per occurrence basis for medical expenses and excess medical benefit. Based on historical levels of premium under the Insured Plans, the Debtors accrued but have not paid premium contributions of at least $898,000 as of the Petition Date. C. Company-Sponsored Benefit Programs The Debtors maintain certain other benefit programs under which the Debtors, the Employees or both contribute to the benefits provided to the Employees -- the Non-insured Programs. These programs include pension plans, 401(k) savings plans and tuition reimbursement programs. The Debtors estimate that they have accrued but unpaid obligations of at least $2,720,000. Accordingly, pursuant to Sections 105, 507(a)(3) and 363(b) of the Bankruptcy Code, the Debtors ask the Court to: (a) authorize them, in accordance with their stated policies and in their sole discretion, to: -- pay certain prepetition employee wages, salaries, contractual compensation of $1,512,000; -- pay portions of the sick pay, vacation pay, holiday pay and other accrued compensation estimated to be $343,000 for hourly employees and $259,000 of the salaried employees; -- reimburse the $140,000 in prepetition employee business expenses; -- make payments for which employee payroll deductions were made; -- make prepetition contributions and pay 100% of the benefits under certain employee benefit plans; and -- pay all processing costs and administrative expenses incident to the foregoing payments and contributions, which is estimated to be $230,000; and (b) authorize and direct the applicable banks and other financial institutions to receive, process, honor and pay all related checks drawn on the Debtors' payroll and other disbursement accounts to make the payments. Mr. Sudell emphasizes that the payment of these prepetition employee obligations is crucial because any delay in paying the requested payments will destroy the Debtors' relationships with the Continuing Employees whose morale are already impaired by the closure of the Debtors' facilities and the termination of the vast majority of the workforce. The payments are also needed to enable the employees to meet their own personal obligations. Furthermore, Mr. Sudell points out that the Debtors cannot ignore the potential reprisals from terminated employees and the potential negative impact of these actions on the assets available for distribution to the Debtors' creditors in the event that the payments are not made. Mr. Sudell believes that the amount of the prepetition wages, salaries and contractual compensation owing to each Employee will not exceed the sum of $4,650 allowable as a priority claim under Section 507. Mr. Sudell contends that paying the Prepetition Processing Costs is warranted because: (a) failure to pay might disrupt the third-party providers' services with respect to the Prepetition Compensation, Prepetition Deductions and Prepetition Benefits, as well as similar postpetition payments; (b) these types of program administration charges may be entitled to priority under Section 507; and (c) the Debtors have available cash and anticipated access to the DIP Financing sufficient to pay promptly all Requested Employee Payments and all Prepetition Processing Costs on an ongoing basis and in the ordinary course of their businesses. * * * Judge Walsh grants the Debtors' request in all respects. (Pillowtex Bankruptcy News, Issue No. 49; Bankruptcy Creditors' Service, Inc., 609/392-0900) POLAROID CORP: Has Until Nov. 30 to Move Pending Actions to Del. ---------------------------------------------------------------- Polaroid Corporation and its debtor-affiliates obtained the Court's approval extending their time to remove pending proceedings to the later to occur of: (i) November 30, 2003; or (ii) 30 days after entry of an order terminating the automatic stay with respect to any particular action sought to be remove. With the extension, the Debtors have additional time to determine which of the state court actions, if any, they will remove. The Debtors are parties to a number of different judicial and administrative proceedings currently pending in various courts or administrative agencies throughout the country. The Actions involve a wide variety of claims, some of which are extremely complex. The Actions consist of all forms of environmental, commercial, employment-related, product liability, trademark and patent litigation. Because of the number of Actions involved and the wide variety of claims, the Debtors require additional time to determine the Actions to be removed and transferred to the district. (Polaroid Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 609/392-0900) PROTARGA: Wants Court OK to Retain Wolf Greenfield as IP Counsel ---------------------------------------------------------------- Protarga, Inc., asks for permission from the U.S. Bankruptcy Court for the District of Delaware to employ Wolf, Greenfield & Sacks, PC as Special Intellectual Property Counsel. The professional services that Wolf Greenfield will render to the Debtor include representation with respect to intellectual property issues concerning the Debtor's assets. Michael Albert, Esq., a shareholder of Wolf Greenfield assures the Court that the firm does not represent any interest adverse to the Debtor or to its estates in the matters with respect to which it is engaged. The current hourly rates that Wolf Greenfield charges it clients are: Shareholders $375 to $525 per hour Associates $175 to $350 per hour Technology Specialists $150 to $220 per hour Legal Assistants $110 to $150 per hour Edward R. Gates, a shareholder of the firm, will personally be the one to supervise this engagement. His current hourly rate is $525 per hour. Protarga, Inc., headquartered in King of Prussia, Pennsylvania, is a clinical stage pharmaceutical company that is developing Targaceutical(R) drugs for new medical therapies. The Company filed for chapter 11 protection on August 14, 2003 (Bankr. Del. Case No. 03-12564). Raymond Howard Lemisch, Esq., at Adelman Lavine Gold and Levin, PC represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated assets of over $1 million and estimated debts of over $10 million. QUANTUM CORP: Holding Annual Shareholders' Meeting on Wednesday --------------------------------------------------------------- Quantum Corp. (NYSE: DSS), a leading provider of data protection systems, will hold its Annual Shareholders Meeting on Sept. 3, 2003 at 10 a.m. PDT. Event Title: Quantum Corporation 2003 Shareholders Meeting Event Date: Wednesday, Sept. 3, 2003 Start Time: 10 a.m. PDT Location: Quantum Corporation 1650 Technology Drive Suite 800 San Jose, CA 95110 Webcast: A live webcast will be available at http://www.quantum.com/investors Event URL: http://www.firstcallevents.com/service/ajwz387803870gf12.html Quantum Corp., founded in 1980, is a global leader in data protection, meeting the needs of business customers with enterprise-wide storage solutions and services. Quantum is the world's largest supplier of half-inch cartridge tape drives, and its DLTtape(TM) technology is the standard for tape backup and archiving of business-critical data for the mid-range enterprise. Quantum is also a leader in the design, sale and service of autoloaders and automated tape libraries used to manage, store and transfer data. Over the past year, Quantum has been one of the pioneers in the emerging market of disk-based backup, offering a solution that emulates a tape library and is optimized for data protection. Quantum sales for the fiscal year ended March 31, 2003, were $871 million. Quantum Corp., 1650 Technology Dr., San Jose, CA 95110, 408-944-4000, http://www.quantum.com As reported in Troubled Company Reporter's July 28, 2003 edition, Standard & Poor's Ratings Services affirmed its 'BB-' corporate credit and senior unsecured ratings on Quantum Corp. and assigned a 'B' rating to Quantum's proposed $175 million subordinated convertible bond. The outlook is stable. Quantum had $288 million of debt outstanding as of June 30, 2003. QUANTUM CORPORATION: Zacks.com Says Dump the Stock Now ------------------------------------------------------ Zacks.com says shareholders should dump their equity positions in Quantum Corporation (NYSE:DSS), adding the stock to its exclusive list of Stocks to Sell Now. These stocks are currently rated as a Zacks Rank #5 (Strong Sell). Note that since 1988 the S&P 500 has outperformed the Zacks #5 Ranked stocks by 166.7% annually (11.3% vs. 4.2% respectively). While the rest of Wall Street continued to tout stocks during the market declines of the last few years, we were telling our customers which stocks to sell in order to save themselves the misery of unrelenting losses. Among the #5 ranked stocks Zacks highlights Quantum Corporation (NYSE:DSS) this week. To see the full Zacks #5 Ranked list of Stocks to Sell Now then visit: http://stockstosellprbw.zacks.com/ Here is a synopsis of why Quantum has a Zacks Rank of 5 (Strong Sell) and should most likely be sold or avoided for the next 1 to 3 months. Note that a #5/Strong Sell rating is applied to 5% of all the stocks we rank: Quantum Corporation (NYSE:DSS) is one of the world's leading storage suppliers in the markets it serves: desktop hard disk drives, tape drives, network attached storage appliances, solid state systems, hard disk drives for the consumer electronics and digital video recording market, and DLTtape automation systems. Many of Quantum's most recent revisions have been to the downside, and its earnings estimates for this year have slipped from an expected profit one month ago to an expected loss. In late July, the company reported lower revenue of $202 million for its fiscal fist quarter, and a non-GAAP loss of 3 cents per share, which was narrower than the consensus. However, earlier in that month, Quantum had lowered its revenue and earnings expectations for the quarter. The company's results were driven mainly by lower-than- expected media revenue, and, to a lesser extent, lower tape drive revenue. Analysts have kept their distance from other struggling companies involved in computer office equipment as well, such as Overland Storage (NASDAQ: OVRL) and Drexler Technology (NASDAQ: DRXR), just to name a couple. Nevertheless, Quantum has improved many fundamentals of its business as part of an aggressive plan to return Quantum to sustained growth and profitability, and experienced several positive year-over-year comparisons. Quantum should have plenty of opportunity to fulfill its potential moving forward, but investors may want to hold off on a position in the company right now and watch for its earnings estimates to show more upward mobility. Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1981 to compile, analyze, and distribute investment research to both institutional and individual investors. The guiding principle behind our work is the belief that investment experts, such as brokerage analysts and investment newsletter writers, have superior knowledge about how to invest successfully. Our goal is to unlock their profitable insights for our customers. And there is no better way to enjoy this investment success, than with a FREE subscription to "Profit from the Pros" weekly e-mail newsletter. For your free newsletter, visit http://www.freeprofitbw.zacks.com Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates. As reported in Troubled Company Reporter's July 28, 2003 edition, Standard & Poor's Ratings Services affirmed its 'BB-' corporate credit and senior unsecured ratings on Quantum Corp. and assigned a 'B' rating to Quantum's proposed $175 million subordinated convertible bond. The outlook is stable. Quantum had $288 million of debt outstanding as of June 30, 2003. RAPTOR INVESTMENTS: Shoos-Away Weinberg and Hires Webb & Company ---------------------------------------------------------------- At a meeting held on June 23, 2003, the Board of Directors of Raptor Investments, Inc., approved the engagement of Webb & Company, P.A. as independent auditors of the Company for the fiscal quarter ended June 30, 2003, to replace the firm of Weinberg & Company, P.A.., who were dismissed as the Company's independent accountants effective June 23, 2003. The audit report of Weinberg & Company, P.A. for the year ended December 31, 2002 and for the year ended December 31, 2001 contained a modification expressing substantial doubt about the Company's ability to continue as a going concern. * * * LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2003, the Company had a stockholder's deficiency of $429,528. As of June 30, 2003 the Company incurred net profit of $151,741. The Company plans to generate revenue in the future by retaining business consulting clients in the private and public sector. In addition, the Company plans to seek the acquisition of additional income producing assets such as J&B Wholesale Produce, Inc. Management feels that liquidity, cash available for operations, and business conditions generally are favorable to the continued operations, and expansion, of the company's J&B Wholesale Produce Operations. The material positive changes in the financial condition of the company, from the like period in fiscal 2002, and from the first fiscal quarter of 2003 to the second fiscal quarter of 2003, are attributable to the acquisition of and operations of J&B Wholesale Produce. The management of J&B continues to pursue more higher yielding produce customers, which should improve long- term liquidity. In addition, management has set minimum daily order amounts, and sought to limit the number of smaller, unprofitable or less profitable accounts which it services, to further expand the business and maximize profit while limiting the cost per delivery of the company. Management continues to streamline the day-to-day operations of J&B, has moved most back- office activities away from the produce warehouse facility, and has upgraded the computers of the company. The company closed on the real property which houses J&B Wholesale Produce, Inc. The funds to close on the property were provided by the lender, Gelpid Associates LLC. Management feels that the company has adequate disclosure controls and procedures in place to insure the accurate and timely reporting of the financial condition of the company to it's auditors, and to the public. ROBOTIC VISION: Fails to Meet Nasdaq Filing Requirements -------------------------------------------------------- Robotic Vision Systems, Inc. (RVSI) (NasdaqSC: ROBV) announced that on August 25, 2003, it has received a Nasdaq Staff Determination letter stating that as RVSI's Form 10-Q for the quarter ended June 30, 2003, had not been reviewed by RVSI's independent auditors in accordance with SEC Rule 10-01(d) of Regulation S-X, such auditors having resigned as of June 30, 2003, the Staff considered that filing incomplete and therefore delinquent for purposes of Nasdaq's filing requirement, as set forth in Marketplace Rule 4310(c)(14). RVSI's trading symbol will be changed from ROBV to ROBVE, effective the open of business on August 27, 2003, to reflect this filing delinquency. On July 31, 2003, A Nasdaq Listing Qualification Panel held a hearing to consider RVSI's request for a temporary waiver from the $35.0 million market value of listed securities requirement imposed by the Marketplace Rule 4310(c)(2)(B). At that time, RVSI also addressed its plan and timeline to achieve compliance with the $1.00 closing bid price requirement imposed by Marketplace Rule 4310(c)(4). The Panel has not as yet rendered its decision. In the interim, RVSI has regained compliance with the market value of listed securities requirement. RVSI has advised the Listing Qualification Panel of its Board's approval of new independent auditors and its timeline to cure the filing delinquency noted in the Staff's Determination letter, and has requested a temporary waiver of Marketplace Rule 4310(c)(14) to enable it to regain compliance with such Rule. Robotic Vision Systems, Inc. (NasdaqSC: ROBV) -- whose June 30, 2003 balance sheet shows a total shareholders' equity deficit of about $13 million -- has the most comprehensive line of machine vision systems available today. Headquartered in Nashua, New Hampshire, with offices worldwide, RVSI is the world leader in vision-based semiconductor inspection and Data Matrix-based unit- level traceability. Using leading-edge technology, RVSI joins vision-enabled process equipment, high- performance optics, lighting, and advanced hardware and software to assure product quality, identify and track parts, control manufacturing processes, and ultimately enhance profits for companies worldwide. Serving the semiconductor, electronics, aerospace, automotive, pharmaceutical and packaging industries, RVSI holds approximately 100 patents in a broad range of technologies. For more information visit http://www.rvsi.com SAMSONITE CORP: Completes Private Recapitalization Transactions --------------------------------------------------------------- Pursuant to a Recapitalization Agreement dated May 1, 2003 between Samsonite Corporation, Ontario Teachers' Pension Plan Board, Bain Capital (Europe) LLC and ACOF Management, L.P., on July 31, 2003, the Investors purchased 106,000 shares of 2003 Convertible Preferred Stock from Samsonite in a private transaction at a per share price of $1,000 for an aggregate purchase price of $106,000,000. Samsonite also exchanged all of the issued and outstanding shares of 13-7/8% Senior Redeemable Exchangeable Preferred Stock for a combination of 53,994 shares of 2003 Convertible Preferred Stock (with an aggregate liquidation preference of $53,994,000), 204,814,660 shares of common stock and warrants to purchase 15,515,892 shares of common stock at an exercise price of $0.75 per share. The shares of Preferred Stock are convertible into shares of common stock at an initial conversion price of $0.42, subject to adjustment pursuant to the terms of the Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of 2003 Convertible Preferred Stock and Qualifications, Limitations and Restrictions Thereof. The Certificate of Designation also provides for dividend rights and customary liquidation, voting and other rights. In connection with the Recapitalization, CIHI received in exchange for its 104,012 shares of Old Preferred Stock (i) 24,969 shares of Preferred Stock, convertible into an aggregate of 59,450,000 shares of common stock at any time and (ii) 63,888,430 shares of common stock. Canadian Imperial Holdings Inc., an indirectly-owned subsidiary of Canadian Imperial Bank of Commerce, beneficially owns and has sole power to vote and sole power of disposition over 123,338,430 shares of Samsonite common stock, or approximately 43.4% of Samsonite's outstanding common stock through its ownership of 63,888,430 shares of common stock and 59,450,000 shares of convertible Preferred Stock which are convertible into common stock at any time. Samsonite (S&P, B Corporate Credit Rating, Stable) is a global manufacturer and distributor of luggage, casual bags, business cases, and other travel-related products. Despite a somewhat narrow business focus, Samsonite has a leading market position in the competitive hard and soft-sided luggage industry with well- known brands that include Samsonite, Lark, and American Tourister. Furthermore, the company benefits from its global sourcing capabilities and broad, geographically diverse distribution network, selling in more than 100 countries worldwide. SR TELECOM: Will Hold Q2 Results Conference Call on Friday ---------------------------------------------------------- SR Telecom posts this announcement: OPEN TO: Analysts, investors and media DATE: Friday, August 29, 2003 TIME: 10:00 A.M. Eastern Standard Time CALL: 514-807-8791 (FOR ALL MONTREAL AND OVERSEAS PARTICIPANTS) 1-800-814-3911 (FOR ALL OTHER NORTH AMERICAN CALLERS) Please dial-in 15 minutes before the conference begins. If you are unable to call in at this time, you may access a tape recording of the meeting by calling 1-877-289-8525 and entering the passcode 21014307(pound key) on your phone. This recording will be available on Friday, August 29 as of 12:00 P.M. until 11:59 P.M. on Friday, September 5. An archive of the conference call will also be available at http://www.srtelecom.com http://www.newswire.caor at http://www.q1234.com. SR Telecom (S&P, B+ Corporate Credit and Senior Unsecured Debt Ratings) is a world leader and innovator in Point- to-Multipoint Wireless Access solutions, which include equipment, network planning, project management, installation and maintenance services. Its products, which are used in over 110 countries, are among the most advanced and reliable PMP wireless telecommunications systems available today. Serving telecom operators worldwide, SR Telecom's fixed wireless solutions provide high-quality voice and data for applications ranging from carrier class telephone service to high-speed Internet access. TDZ HOLDINGS: Half-Year 2003 Results Enter Positive Territory ------------------------------------------------------------- TDZ Holdings Inc., announced its results for the six months ended June 30, 2003. Overview As a result of the restructuring that occurred in April 1999, the only material assets of TDZ Holdings Inc., are its 33% minority equity interest in Nualt Enterprises Inc., and certain receivables the proceeds of which will be dedicated to paying the Contingent Rights. Nualt is the principal holding company of the Construction Technology Business and the Residential Real Estate Business. The Company's investment in Nualt has been pledged to collateralize the Company's guarantees of the debt of Nualt and its subsidiaries. It is anticipated that all available cash flow of Nualt will be used to repay its indebtedness. The Residential Real Estate Business is limited to completing the development, marketing, construction and sale of its remaining high-density real estate projects located in Toronto, Ontario. As at June 30, 2003, two phases comprising approximately 775 units were under construction, one phase comprising approximately 489 units was being marketed in the pre-construction stage, and 4 units were held as inventory in one building that had previously been completed and closed. Summary of results Net income for the six months ended June 30, 2003 was $4,903,000 on revenues of $145,000 as compared to a net loss of $443,000 on revenues of $153,000 for the six months ended June 30, 2002. The net income was the result of the equity share of Nualt's income. Nualt's net income for the six months ended June 30, 2003 includes approximately $16,007,000 of foreign currency translation gains that are non-recurring in nature. The Company has included in income $5,282,000 for its 33% share of this amount. Cash provided by operations before other working capital items was $2,000 during the six months ended June 30, 2003. Overall there was a $18,000 net increase in cash during this period. All of the general and administrative costs of the Company are reimbursed by the Businesses as revenue to the Company. After exhaustion of all projects in the Residential Real Estate Business all of the general and administrative costs of the Company shall be reimbursed solely by the Construction Technology Business. If at any time the Construction Technology Business is sold the Company shall become responsible for funding all of its own general and administrative expenses. Obligations due to guarantee of debt of Nualt At April 28, 1999, Nualt had a shareholder's deficiency of $69,776,000. Since the Company (as a result of its restructuring) assumed guarantee obligations for approximately $190,000,000 (as at April 28, 1999) of the debt of Nualt and its subsidiaries, the Company recorded a liability for the estimated fair value of these guarantees. The fair value of these obligations at April 28, 1999 has been determined to be the full amount of Nualt's shareholder deficiency at that date. As at June 30, 2003 these guarantee obligations aggregate approximately $103,000,000. The net investment in Nualt is accounted for by the equity method and accordingly includes the Company's share of net income or loss of Nualt since April 28, 1999. During the period April 29, 1999 to June 30, 2003, Nualt had cumulative net losses of $5,048,000 and the Company recorded its 33% cumulative share in the amount of $1,666,000. Contingent Rights The Contingent Rights are payable by the Company solely out of any payments made by the Businesses pursuant to the Cash Flow Notes issued in favour of the Company. Payments made on the Cash Flow Notes are being distributed at the discretion of the Contingent Rights trustee within the terms of the Trust Indenture. The trustee distributed approximately $413,000 to holders of the Contingent Rights during 2003 (2002 - $761,000; 2001 - $816,000; 2000 - $327,000). An additional $102,000 was remitted to the trustee during August 2003. TECO ENERGY: Selling Hardee Power Station for $115 Mill. + Debts ---------------------------------------------------------------- TECO Energy's TECO Power Services subsidiary has signed an agreement to sell its interest in the 370-megawatt Hardee Power Station in Florida to GTCR and Invenergy for $115 million and the assumption of all outstanding project-related debt. The transaction is expected to close by the end of September, subject to certain regulatory and lender approvals. TECO Energy expects to record an estimated $60-million book gain (pre-tax) on the sale and net incremental cash of approximately $110 million. Merrill Lynch is advising TPS in the transaction. Chairman and CEO Robert D. Fagan said, "This transaction will further strengthen TECO Energy's financial position. In April, we identified a number of potential assets that could be sold to improve our financial position, including Hardee Power Station. With this agreement, we've demonstrated our commitment to the plan, and our continued refocus on our regulated utility operations." The Hardee Power Station will continue to serve both Seminole Electric Cooperative and Tampa Electric under established long- term power purchase contracts. A TECO Power Services subsidiary will continue to operate the facility after the change of ownership. TECO Power Services is a subsidiary of TECO Energy, Inc. (NYSE: TE), a diversified, energy-related holding company headquartered in Tampa, Florida. Other TECO Energy businesses include Tampa Electric, Peoples Gas System, TECO Transport, TECO Coal and TECO Solutions. For more information, visit online: http://www.tecoenergy.com Formed in 2001, Chicago-based Invenergy is a developer, owner and operator of power generation and energy delivery assets. Invenergy is led by Michael Polsky, previously CEO of SkyGen Energy. Partnered with GTCR Golder Rauner LLC, a leading private equity firm, Invenergy is pursuing acquisitions of large-scale power plants currently being divested by utilities, IPPs and financial institutions. For more information, visit http://www.invenergyllc.com Founded in 1980, GTCR Golder Rauner is a leading private equity investment firm currently managing more than $6 billion of equity capital invested in a wide range of companies and industries. For more information, visit http://www.gtcr.com * * * As reported in Troubled Company Reporter's April 29, 2003 edition, Fitch Ratings downgraded the outstanding ratings of TECO Energy, Inc. and Tampa Electric Company as shown below. The Rating Outlook for both issuers has been revised to Negative from Stable. TECO Energy, Inc.: -- Senior unsecured debt lowered to 'BB+' from 'BBB'; -- Preferred stock lowered to 'BB' from 'BBB-'. TECO Finance (guaranteed by TECO) -- Medium term notes lowered to 'BB+' from 'BBB'; -- Commercial paper withdrawn. Tampa Electric Company: -- First mortgage bonds lowered to 'A-' from 'A'; -- Senior unsecured debt lowered to 'BBB+' from 'A-'; -- Unsecured pollution control revenue bonds (Hillsborough County, Florida IDA for Tampa Electric) lowered to 'BBB+' from 'A-'; -- Commercial paper unchanged at 'F2'; -- Variable rate mode unsecured pollution control revenue bonds (Hillsborough County, Florida IDA for Tampa Electric) unchanged at 'F2'. The downgrade of TECO Energy's ratings reflect the higher-than- expected debt leverage on a cash flow basis (gross debt measured against earnings before interest taxes depreciation and amortization), and the negative impact on earnings and cash flow measures from increased interest expense, weaker projected earnings and higher-than-anticipated capital expenditures. TELESOURCE INT'L: Deficits Raise Going Concern Doubts ----------------------------------------------------- Telesource International, Inc. was incorporated in Delaware in 1994. Telesource was formed in 1994 to facilitate various intra- corporate activities and, until July 1999, was a wholly owned subsidiary of Sayed Hamid Behbehani & Sons Co. W.L.L., a Kuwait- based civil, electrical and mechanical construction company. Telesource is an international engineering and construction company, engaged in constructing single family homes, airports, radio towers and in the construction and operation of energy conversion power plants. In Tinian, an island in the Commonwealth of Mariana Islands (U.S. Territory), the Company operates a diesel fired electric power generation plant for the sale of electricity to the local power grid. The Company's facility in Lombard, Illinois, annually handles the procurement, export and shipping of U.S. fabricated products for use by the Company's subsidiaries or for resale to customers outside of the mainland. The Company conducts its operations through three subsidiaries. The Company's Mariana subsidiary, Telesource CNMI, Inc., handles construction and management of the Company's energy conversion facilities in the Commonwealth of Mariana Islands and operates a branch office in Guam to take advantage of future opportunities. The Company's second subsidiary, Commsource International, is an international export company that facilitates the purchase of equipment in the U.S. The Company's third subsidiary, Telesource Fiji, Ltd., handles the Company's construction activities in Fiji. The Company's condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the fiscal years of 2000 through 2002, the Company experienced significant operating losses with corresponding reductions in working capital and net worth. As of June 30, 2003, the Company's current liabilities exceeded its current assets by $22,776,699. The Company relies heavily on bank financing to support its operations and its ability to refinance its existing bank debt is critical to provide funding to satisfy the Company's obligations as they mature. As of June 30, 2003 the Company had total outstanding debt of $35,329,400 of which $25,829,400 is due in the next twelve months. As of June 30, 2003 the Company had an accumulated deficit of $31,872,080 and total stockholders' deficit of $19,069,471. The Company incurred operating losses of $1,636,372 and $617,981 for the six months ended June 30, 2003 and 2002 and operating losses of $3,118,300, $4,903,676 and $1,516,103 for the years ended December 31, 2002, 2001 and 2000, respectively. The Company's net working capital deficiency, total stockholders' deficit, recurring losses and negative cash flows from operations raise substantial doubt about the Company's ability to continue as a going concern. To address the going concern issue, management has implemented financial and operational restructuring plans designed to improve operating efficiencies, reduce and eliminate cash losses and position Telesource for profitable operations by also increasing revenues. Management expects the increase in revenues to be achieved by securing additional substantial projects during 2003 and through increasing revenues from existing long term power plant operation and maintenance agreements as a result of continued expansion on the island of Tinian. However, no assurance can be given that such increased revenues will be achieved. Although management believes that the Company will be cash flow positive in 2003 including debt payments, the Company has and expects to continue to seek support from its principal stockholder, SHBC, for its operations, for working capital needs, debt repayment, and business expansion as may be required. SHBC has pledged its continued support of the Company. SHBC has agreed to guarantee or provide letters of credit covering $33,398,200 of the Company's total debt of $35,329,400. SHBC has further agreed that any additional funding provided to the Company by SHBC to the Company will not be due until after March 31, 2004. SHBC is the Company's majority shareholder. In addition to the fundings from SHBC, the Company has also completed the sale of $3.2 million worth of preferred stock since June 30, 2003 and expects to receive firm commitments for the sale of an additional $4.5 million in preferred stock during the third quarter of 2003. The proceeds from the sale of this preferred stock will be used to satisfy maturing debt obligations and for working capital needs. TESORO PETROLEUM: CEO to Present at Lehman '03 Energy Conference ---------------------------------------------------------------- Tesoro Petroleum Corporation (NYSE:TSO) announced that Bruce A. Smith, Chairman, President and Chief Executive Officer, will be a speaker at the Lehman Brothers 2003 CEO Energy/Power Conference on Wednesday, September 3, 2003 at 8:00 a.m. Eastern Time. Interested parties may listen to the webcast of the presentation and view the accompanying slides over the Internet by logging on to Tesoro's Internet site at http://www.tesoropetroleum.comand clicking on the "What's New" section. Individuals wishing to listen to Tesoro's presentation from its Internet site will need Windows Media(TM) Player, which can be downloaded free of charge from http://www.microsoft.com/windows/windowsmedia/download/default.asp Please allow at least fifteen minutes to complete the download. Tesoro Petroleum Corporation, a Fortune 500 Company, is an independent refiner and marketer of petroleum products and provider of marine logistics services. Tesoro operates six refineries in the western United States with a combined capacity of nearly 560,000 barrels per day. Tesoro's retail-marketing system includes approximately 575 branded retail stations, of which over 200 are company operated under the Tesoro(R) and Mirastar(R) brands. As reported in Troubled Company Reporter's August 15, 2003 edition, Standard & Poor's Ratings Services affirmed its 'BB-' corporate credit rating on midsize independent oil refiner and marketer Tesoro Petroleum Corp. At the same time, Standard & Poor's revised its outlook on the company to stable from negative. San Antonio, Texas-based Tesoro has about $2 billion of debt outstanding. TRENWICK: Wants Schedule Filing Deadline Moved to October 20 ------------------------------------------------------------ Trenwick America Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to extend their time to file schedules of assets and liabilities, schedules of current income and expenditures, schedules of executory contracts and unexpired leases and statement of financial affairs. Pursuant to Section 521 of the Bankruptcy Code and Bankruptcy Rule 1007, the Debtors are required to file schedules of assets and liabilities, schedules of current income and expenditures, schedules of executory contracts and unexpired leases, and statements of financial affairs within 15 days after the Petition Date. The Debtors request the Court to extend the schedules filing deadline through October 20, 2003, without prejudice to their ability to request additional time should it become necessary. On the Petition Date, each of the Debtors filed with this Court a list of creditors holding the 20 largest unsecured claims against each of the Debtors' estates. Due to the complexity and diversity of their operations, the Debtors anticipate that they will be unable to complete their Schedules and Statements in the time required. To prepare the required Schedules and Statements, the Debtors must compile information from books, records and documents relating to a multitude of transactions stored at various locations, including the United States and Bermuda. Collection of the necessary information requires an expenditure of substantial time and effort on the part of the Debtors' employees. Given the significant burdens already imposed on the Debtors' management by the commencement of these Chapter 11 Cases, the Debtors request additional time to complete and file the required Schedules and Statements. The Debtors have mobilized their employees and professionals to work diligently on the assembly of the necessary information. Prior to the Petition Date, the Debtors were involved in substantial negotiations with their creditors regarding the terms of their restructuring, which culminated in the signing of the Letter of Intent. The Debtors' resources and personnel were, thus, focused prepetition towards the restructuring agreement with the Debtors' creditors and were unable to focus their attention on assembling the information necessary to completing the Schedules and Statements. At present, the Debtors anticipate that they will require at least 60 days after the Petition Date to complete and file their Schedules and Statements. Trenwick America Corporation, headquartered in Stamford, Connecticut, is a holding company for operating insurance companies in the U.S. The Company filed for chapter 11 protection on August 20, 2003 (Bankr. Del. Case No. 03-12635). Christopher S. Sontchi, Esq., and William Pierce Bowden, Esq., at Ashby & Geddes and Benjamin Hoch, Esq., with Irena Goldstein, Esq., and Carey D. Schreiber, Esq., at Dewey Ballantine LLP represent the Debtors in their restructuring efforts. As of June 30, 2003, the Debtor listed approximate assets of $400,000,000 and debts of $293,000,000. U.S. STEEL: Appoints Michael L. Chapman GM of Facility Marketing ---------------------------------------------------------------- United States Steel Corporation (NYSE: X) has appointed Michael L. Chapman as general manager-facility marketing and business planning, succeeding James W. Mellin who has elected to retire after 36 years of service. The appointment is effective September 1. In his new position at the company's headquarters in Pittsburgh, Chapman, 50, will be responsible for planning and scheduling production at all of U. S. Steel's steelmaking and finishing facilities to ensure that the company meets the needs of its customers while maximizing the cost benefits of product mix and plant location. He is currently general manager of business planning for U. S. Steel Kosice (USSK) in the Slovak Republic. "Mike has excellent credentials to fill this important and challenging position," said U. S. Steel President and Chief Operating Officer John P. Surma. "He has three decades of broad and proven operational and planning experience at U. S. Steel, including his latest key assignment with USSK in Central Europe." Chapman began his U. S. Steel career in 1973 as a steelworker at U. S. Steel's Texas Works in Baytown, Texas. He advanced into the management ranks in 1978 as turn foreman-refractories and was promoted to shift manager-casting in 1984. In 1987, Chapman was transferred to the Pittsburgh headquarters where he became a buyer in the purchasing department. He served in several different managerial purchasing capacities until 1992, when he was named manager-environmental procurement and reporting in the environmental department. Two years later he was named reengineering manager-procurement and reporting in the planning and quality assurance department. After managing several business planning functions in Pittsburgh, he was transferred to U. S. Steel's Gary (Ind.) Works in 1997 as manager- operations planning and primary scheduling. He was transferred the following year to U. S. Steel's Fairless Works near Philadelphia as manager-business planning. In 2001, he assumed his most recent position with USSK. Chapman attended Lee College and Texas A & M University and, in 1988, received a bachelor of science degree in business from Robert Morris University in Pittsburgh. For more information about U. S. Steel visit http://www.ussteel.com * * * As reported in Troubled Company Reporter's May 9, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit rating on integrated steel producer United States Steel Corp. to 'BB-' from 'BB' based on concerns about the firm's increased financial risk. Standard & Poor's removed its ratings on Pittsburgh, Pennsylvania- based United States Steel from CreditWatch, where they were placed with negative implications on Jan. 9, 2003. The current outlook is negative. The company had about $1.7 billion in lease-adjusted debt at March 31, 2003. At the same time, Standard & Poor's assigned its 'BB-' rating to United States Steel Corp.'s $350 million senior notes due 2010. VALCOM INC: Enters into Partnership Agreement with New Zoo Revue ---------------------------------------------------------------- ValCom, Inc. (OTCBB:VACM) (Frankfurt:VAM) has entered into a partnership agreement with O. Atlas Enterprises, Inc., owner of "NEW ZOO REVUE". This partnership is being formed to revitalize the New Zoo Revue by producing a two-hour animated feature film and television series with production starting this fall and completion fall of 2004. It is estimated that over 100 million children have seen the "New Zoo Revue", which has aired in over 25 countries and over 80% of the US Television Market, since 1971. "The New Zoo Revue", an already multi-million-dollar show, and almost 30 years after premiering, it is still being watched by approximately 60% of the country. Feature films are bringing in billions of dollars each year through ticket sales and products thereof for animated children's films such as "Finding Nemo", with $320 million plus, "Shrek", at over $325 million in ticket sales, DVD and Video sales, and "Monsters Inc." with over $217 million in total domestic ticket sales. ValCom and O. Atlas Enterprises plan to capture a large piece of the pie by bringing the already well-known and successful children's show "New Zoo Revue" and product line up to date through animation with a 2-hour feature film. With the ability to produce the animated version at such low cost with ValCom's studios, cameras, equipment, editing bays, and a top-notch animator out of Israel, large profits are more than attainable. Unlike shows such as "Sesame Street" or "Electric Company," which concentrate on counting and reading skills, New Zoo Revue teaches values - a way of life for young people, with episodes having such titles as "Fairness," "Honesty," "Drugs" and "Feelings." The children's show conveys concepts of cooperation and guidance for living in our society. The purpose is to inspire children to become more caring, more constructive and more feeling citizens of the world in which we live, through a musical comedy starring 3 life-sized animals including Freddie the Frog, Henrietta Hippo, and Charlie The Owl and is currently airing on Golden Eagle, Shop at Home Network, and Sky Angel Network. This program meets the requirements of the FCC for children's content with the show being both entertaining and educational. Barbara Atlas, President and owner of O. Atlas Enterprises and founder of the "New Zoo Revue", is credited for having a positive influence in teaching values to our children since 1971. "The postwar babies had been taught to succeed at school, but never really taught the rules we should all live by. When kids watch the show long enough, they start to get up in the morning and like what they see in the mirror. By offering quality children's programming, not only do the children benefit, but society does as a whole," stated Mrs. Atlas. "We believe there is a significant strategic rationale to support a combination of our two companies. It is a pleasure to partner with such a dynamic and talented woman, as well as taking an already successful children's show to an entirely different level through animation. This could be one of the best business opportunities yet for ValCom and its shareholders," stated Mr. Vellardita, President and CEO of ValCom, Inc. In 1967, Barbara designed a lovable green frog beanbag named Freddie, which instantly caught on. The demand became too much for her staff of seven to keep up with, so she licensed the frog to PLAYCO, an International Toy Manufacturing Company. In 1969, Barbara was called by KWHY-TV in Los Angeles to design products for a children's show, but Barbara in-turn made the station an offer for a 13-week contract to create her own show. As a result of her work, Barbara Atlas has earned recognition from the City of Los Angeles, the State of California and The White House, where NEW ZOO REVUE made three in-person appearances. The show has received a four star rating from the National Educational Association and the National School Board Association, and was officially endorsed by the NEA. O. Atlas Enterprises syndicates and represents a variety of entertainment properties, from children's shows, sports & fitness programs and CDs to a variety of projects currently under development. Based in Valencia, California, ValCom, Inc. is a diversified and vertically integrated, independent entertainment company. ValCom, Inc. through its operating divisions and subsidiaries plans to create and operate full service facilities that accommodate film, television and commercial productions with its four divisions that are comprised of: studio, film and television, camera/equipment rentals, and broadcast television ownership. The Company owns/operates 12 acres of land and approximately 200,000 square feet of commercial building space with 12 film and television production sound stages. ValCom maintains long-term contracts with Paramount Pictures for their hit CBS's series "JAG" and "NCIS". ValCom's equipment/camera and personnel rental business, Half-day Video, is a leading competitor in the Hollywood community. The Company and its partnership operate ValCom Broadcasting KVPS-TV Channel 8 in Palm Springs, CA. * * * Liquidity and Going Concern Uncertainty In its Form 10-QSB filed with the Securities and Exchange Commission, ValCom reported: "The Company's condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has a net loss of $1,823,954 and a negative cash flow from operations of $405,019 for the nine months ended June 30, 2003, and a working capital deficiency of $8,602,508 and an accumulated deficit of $9,950,145 at June 30, 2003. These conditions raise substantial doubt about the Company's ability to continue as a going concern." WASHINGTON MUTUAL: Fitch Rates Class I-B-4 & II-B-4 Notes at BB --------------------------------------------------------------- Fitch rates Washington Mutual Mortgage Securities Corp.'s mortgage pass-through certificates, series 2003-AR9 as follows: Group I certificates: -- $1,157,813,300 classes I-A-1, I-A-2A, I-A-2B, I-A-3 through 1-A-7 'AAA'; -- $100 class R 'AAA'; -- $12,507,300 class I-B-1 'AA'; -- $9,529,300 class I-B-2 'A'; -- $4,764,700 class I-B-3 'BBB'; -- $1,786,800 class I-B-4 'BB'. Group II certificates: -- $300,303,500 class II-A 'AAA'; -- $3,242,400 class II-B-1 'AA'; -- $2,316,000 class II-B-2 'A'; -- $1,235,100 class II-B-3 'BBB'; -- $463,200 class II-B-4 'BB'. The 'AAA' rating on the group I senior certificates reflects the 2.80% subordination provided by the 1.05% class I-B-1, 0.80% class I-B-2, 0.40% class I-B-3, 0.15% privately offered class I-B-4, 0.15% privately offered class I-B-5 and 0.25% privately offered class I-B-6. The class I-B-5 and I-B-6 certificates are not rated by Fitch. The ratings on the class I-B-1, I-B-2, I-B-3, I-B-4 Certificates are based on their respective subordination. The 'AAA' rating on the group II senior certificates reflects the 2.75% subordination provided by the 1.05% class II-B-1, 0.75% class II-B-2, 0.40% class II-B-3, 0.15% privately offered class II-B-4, 0.15% privately offered class II-B-5 and 0.25% privately offered class II-B-6. The class II-B-5 and II-B-6 certificates are not rated by Fitch. The ratings on the class II-B-1, II-B-2, II-B- 3, II-B-4 Certificates are based on their respective subordination. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings reflect the quality of the mortgage collateral, strength of the legal and financial structures, and Washington Mutual Mortgage Securities Corp.'s servicing capabilities as master servicer. Fitch currently rates Washington Mutual Bank, FA 'RMS2+' for master servicing. The trust is secured by two groups of mortgage loans, which respectively collateralize the group I and II certificates. The two groups are not cross-collateralized. The transaction is comprised of conventional, adjustable-rate mortgage loans that have a 30-year maturity. The mortgage loans have a fixed interest rate for the first five years. Thereafter, the interest rate will adjust annually based on the weekly average yield on U.S. Treasury Securities (one-year CMT) plus a margin. The group I collateral consists of 1,813 conventional mortgage loans with an aggregate principal balance of $1,191,166,030.36. The loans are secured by first liens on residential properties. Approximately 84.80% of the group I mortgage loans have interest- only payments scheduled during the initial five-year period, with principal and interest payments beginning on the first adjustment date. The weighted average loan-to-value (LTV) for the mortgage loans in the pool is approximately 64.70%. The average balance of the mortgage loans is $657,014 and the weighted average coupon of the loans is 4.529%. The weighted average FICO credit score for the group is 745. Second and investor-occupied homes comprise 3.57% and 0.04% of the group I loans, respectively. Rate/Term and cashout refinances represent 51.19% and 25.46%, respectively of the group I mortgage loans. The states that represent the largest portion of mortgage loans are California (64.90%) and New York (5.82%). All other states represent less than 5% of the group I loans. The group II collateral consists of 424 conventional mortgage loans, with an aggregate principal balance of $308,795,463.79. The loans are secured by first liens on residential properties. Approximately 90.80% of the group II mortgage loans have interest- only payments scheduled during the initial five-year period, with principal and interest payments beginning on the first adjustment date. The weighted average loan-to-value for the mortgage loans in the pool is approximately 62.50%. The average balance of the mortgage loans is $728,291 and the weighted average coupon of the loans is 4.529%. The weighted average FICO credit score for the group is 750. Second homes comprise 3.47% of the group II loans and there are no investor-occupied loans. Rate/Term and cashout refinances represent 58.87% and 25.31%, respectively, of the Group II mortgage loans. The states that represent the largest portion of mortgage loans are California (65.16%) and New York (5.59%). All other states represent less than 5% of the group II loans. None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. The certificates are issued pursuant to a pooling and servicing agreement dated Aug. 1, 2003 among Washington Mutual Mortgage Securities Corp., as depositor and master servicer, and Deutsche Bank National Trust Company, as trustee. For federal income tax purposes, elections will be made to treat the trust fund as two real estate mortgage investment conduits. WASHINGTON MUTUAL: Fitch Rates Class B-4 and B-5 Notes at BB/B -------------------------------------------------------------- Fitch rates Washington Mutual Mortgage Securities Corp.'s mortgage pass-through certificates, series 2003-S8 as follows: -- $655.6 million class A-1 - A-6, X, P & R senior certificates 'AAA'; -- $3.7 million class B-1 'AA'; -- $1.3 million class B-2 'A'; -- $995,000 class B-3 'BBB'; -- $664,000 privately offered class B-4 'BB'; -- $664,000 privately offered class B-5 'B'. The 'AAA' rating on the class A-1 through A-6, X, P, and R senior certificates reflects the 1.20% subordination provided by the 0.55% class B-1, 0.20% class B-2, 0.15% class B-3, 0.10% privately offered class B-4, 0.10% privately offered class B-5 and 0.10% privately offered class B-6 certificates. The ratings on the class B-1, B-2, B-3, B-4, and B-5 certificates are based on their respective subordination. Fitch believes the above credit enhancement will be adequate to support mortgagor defaults as well as bankruptcy, fraud and special hazard losses in limited amounts. In addition, the ratings reflect the quality of the mortgage collateral and the strength of the legal and financial structures. The mortgage pool consists of fully amortizing, 15-year fixed-rate mortgage loans secured by first liens on residential properties. As of the cut-off date, the mortgage pool consists of 1,304 loans, with an aggregate principal balance of approximately $663,565,676 and a weighted average original loan-to-value ratio of 58%. Approximately 19.93% of the loans were originated under a reduced documentation program. Cash-out and rate/term refinance loans represent 14.16% and 76.55% of the mortgage pool, respectively. Second homes account for 2.43% of the pool. The average loan balance is $508,869. The weighted average FICO score is 739. The states that represent the largest portion of the mortgage loans are California (42.05%), Illinois (7.20%), and Washington (5.69%). None of the mortgage loans are 'high cost' loans as defined under any local, state or federal laws. The certificates are issued pursuant to a pooling and servicing agreement dated Aug. 1, 2003 among Washington Mutual Mortgage Securities Corp., as depositor and master servicer, and U.S. Bank, N.A., as trustee. For federal income tax purposes, elections will be made to treat the trust fund as two real estate mortgage investment conduits. WEIGHT LOSS FOREVER: Needs New Funds to Meet Cash Requirements -------------------------------------------------------------- Weight Loss Forever International, Inc., a Nevada corporation, franchises weight loss centers under the trade names Weight Loss Forever, Beverly Hills Weight Loss & Wellness, through subsidiary corporations, Weight Loss Management, Inc. and Beverly Hills Franchising Corp. At June 30, 2003, the Company franchised approximately 20 Weight Loss Forever centers and 20 Beverly Hills Weight Loss &; Wellness clinics. The Company, in addition to being a franchisor, had previously operated company-owned locations. As of May 31, 2002, the Company disposed of all its company-owned locations to concentrate on franchising. The franchised locations are primarily in Virginia, North Carolina, New England and Florida. The Company receives a non-refundable franchise fee, generally $20,000, from entities which enter into an agreement with the Company to own and operate a retail location. The franchisees are required to purchase the necessary furniture, fixtures, equipment and inventory either from the Company, from an affiliate of the Company, or from a source approved by the Company. During the term of the agreement, the Company receives a service fee equal to six percent of gross sales, payable weekly.At the end of March 2003, the Company unilaterally reduced the services fee which is paid by Beverly Hills Weight Loss & Wellness franchisees, on a temporary basis while changes were instituted by the Company, to three percent of gross sales. New agreements provide for a franchise term of ten years subject to renewal. The agreements provide for other fees and charges based on various conditions and circumstances. The Company provides operational assistance, training, periodic inspections, and continuing new product development. The Company also has the right to establish an advertising fund to which the franchisees would contribute. This fund has not yet been established. The Company's consolidated financial statements have been presented on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The liquidity of the Company has been adversely affected by significant losses from operations. The Company reported net losses of $76,310 and $440,654 for the years ended December 31, 2002 and 2001, respectively and reported a net loss from operations of $140,865 for the six months ended June 30, 2003. These conditions raise substantial doubt about the Company's ability to continue as a going concern without additional capital contributions and/or achieving profitable operations. Management's plans are to generate revenue from the sale of new franchises and to raise additional capital through either debt or equity instruments. As of June 30, 2003, the Company had cash in the amount of $6,456 which is a decrease from the cash of $21,951 it had at December 31, 2002. Although the sale of its WLFI VA subsidiary significantly reduced its current liabilities, as of June 30, 2003, its current liabilities were $239,572 which was still in excess of its current assets of $14,043. The Company has not generated cash flow from its operations. In fact, its operating activities consumed $8,496 for the six months ended June 30, 2003. The Company intends to meet its cash needs over the next 12 months through the sale of securities in either public or private offerings, or from the proceeds of the exercise of its outstanding warrants. There is no assurance that it will be able to sell additional securities or that its warrants will be exercised. WORLDCOM INC: Ad Hoc Committee Asks Court to Nix Consolidation -------------------------------------------------------------- The Ad Hoc MCI Trade Claims Committee asks the Court to rule that the proposed settlement between the Worldcom Debtors and the holders of MCIC senior debt claims as contemplated in the Debtors' Reorganization Plan is improper and fails as a matter of law. The Ad Hoc Committee tells the Court that there are no disputed issues of fact in this matter and the Court can dispose of that matter in a summary judgment proceeding. Confirmation of WorldCom's plan will be expedited with this discrete decided by the Court at this early juncture. Edward S. Weisfelner, Esq., at Brown Rudnick Berlack & Israels LLP, in New York, explains that the "settlement" proposed in the Debtors' Plan turns fairness on its head by providing the MCIC Senior Debt Holders, whose claims were expressly subordinate to those of MCI trade creditors, with more than a billion dollars to which they can establish no entitlement unless and until the trade creditors have been paid in full. This more than doubles the recovery of MCIC Senior Debt Holders under the Plan. The "settlement" also does not provide any benefit to the estate. The proffered basis for the MCIC Senior Settlement is the Debtors' contentions that (a) the litigation of MCIC Senior Debt Holders' opposition to substantive consolidation would be "complex and protracted" and (b) the MCIC Senior Debt Claims had "distinct" arguments against substantive consolidation from those other creditors. "In order to buy peace with the holders of MCIC Senior Debt Claims -- and, presumably, remove the specter of 'complex and protracted' litigation on substantive consolidation and avoid the 'distinct' arguments against substantive consolidation -- the Debtors agreed to provide an enormous concession to the holders of MCIC Senior Debt Claims," Mr. Weisfelner says. The Plan contemplates diverting over $1,000,000,000 in MCI assets to the MCIC Senior Debt Holders in exchange for the MCIC Senior Debt Holders foregoing objections to substantive consolidation. The Plan is premised on the substantive consolidation of most of the Debtors' estates, including the MCI companies. The Settlement raises the distribution of MCI Senior Debt Claims from 35.7% to 80%. Mr. Weisfelner argues that the MCIC Senior Debt Holders' claims against the estates are junior to the interests of MCI trade creditors. They could not recover on their claims unless and until MCI trade creditors recover 100% from the MCI assets. "The inequity of the proposed settlement is palpable -- and indisputable -- particularly when viewed from the perspective of MCI creditors," Mr. Weisfelner tells the Court. Mr. Weisfelner points out that if the Debtors prevail against the MCIC Senior Debt Holders, there would be a "pure" substantive consolidation, in which MCI trade creditors would share equally with MCIC Senior Debt Holders. If the MCIC Senior Debt Holders succeed on their threatened objection, the deconsolidated result would give MCI trade creditors preferred access to MCI assets, and therefore would be paid before MCIC Senior Debt Holders. A "complete victory" by the MCIC Senior Debt Holders would merely put them in line behind the structurally superior trade claims, Mr. Weisfelner maintains. Mr. Weisfelner also notes that several other parties have now questioned the substantive consolidation presupposition of the Plan. Therefore, the Debtors cannot simply argue that the Settlement with the MCIC Senior Debt Holders will avoid costly and protracted litigation. (Worldcom Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 609/392-0900) YOUTHSTREAM MEDIA: June Quarter Net Loss Narrows to $1 Million -------------------------------------------------------------- YouthStream Media Networks, Inc. (OTC Bulletin Board: YSTM) announced the results of its operations for the three months ended June 30, 2003, reporting net sales of $682,000 and a net loss of $1,032,000, as compared to net sales of $1,438,000 and a net loss of $12,833,000 for the three months ended June 30, 2002. Included in net loss for the three months ended June 30, 2002 was a loss from discontinued operations of $2,222,000 and a gain on disposal of discontinued operations of $865,000. For the nine months ended June 30, 2003, the Company reported net sales of $3,967,000 and a net loss of $3,277,000, as compared to net sales of $6,839,000 and a net loss of $20,788,000 for the nine months ended June 30, 2002. Included in net loss for the nine months ended June 30, 2003 was a loss on the closing of retail stores of $1,790,000 and a gain on debt settlement of $2,800,000, which were included in loss from continuing operations, and a gain from discontinued operations of $153,000. Included in net loss for the nine months ended June 30, 2002 was a loss from discontinued operations of $3,892,000 and a gain on disposal of discontinued operations of $877,000. During June 2003, the Company changed its fiscal year from June 30 to September 30. Accordingly, the interim consolidated financial statements referred to herein are for the three months and nine months ended June 30, 2003 and 2002. The results of operations for the three months and nine months ended June 30, 2002 have been restated to reflect the discontinuance of the Company's online segment and the sale of its media assets during August 2002. The Company's remaining operations consist of the sale of decorative wall posters through on-campus sales events, retail stores and internet sales to teenagers and young adults. Sales decreased for the three months and nine months ended June 30, 2003, as compared to the three months and nine months ended June 30, 2002, as a result of the closing of 25 retail stores and negative same store sales. The Company currently operates 18 stores in 13 states, plus Washington, D.C., throughout the East and mid-West. Recent Developments During January 2003, the Company completed a debt restructuring, resolving default claims by the holders of the Company's outstanding notes, in the aggregate principal amount of $18,000,000, to exchange those notes, including approximately $2,100,000 of accrued interest, for a cash payment of $4,500,000, preferred stock with a face value of $4,000,000, 3,985,000 shares of common stock, and $4,000,000 principal amount of promissory notes issued by the Company's retail subsidiary and secured by the Company's pledge of all of its stock in the subsidiary. During June 2003, the $4,000,000 principal amount of promissory notes was restructured into unsecured debt obligations of the Company. The Company recognized a gain from this debt restructuring, which qualified as a "troubled debt restructuring" pursuant to Statement of Financial Accounting Standards No. 15, "Accounting for Debtors and Creditors for Troubled Debt Restructurings", of $2,754,000, which was classified as a part of continuing operations. The gain from this transaction was $0.07 per common share for the three months and nine months ended June 30, 2003. At the conclusion of the debt restructuring, the Company's existing board of directors resigned and was replaced by three new directors, Jonathan V. Diamond, Hal G. Byer and Robert Scott Fritz. Jonathan V. Diamond was named Chief Executive Officer and Robert N. Weingarten was named Chief Financial Officer. The Company's new management intends to continue efforts to settle the Company's outstanding obligations and reduce operating costs. The Company believes that its current cash resources, combined with revenues from continuing operations and borrowings from related parties, will be adequate to fund its operations during the remainder of fiscal 2003. However, to the extent the Company's estimates are inaccurate and/or the Company is unable to successfully settle outstanding obligations and reduce operating costs, the Company may not have sufficient cash resources to maintain operations. In such event, the Company may be required to consider a formal or informal restructuring or reorganization. The Company's new management is exploring various strategic alternatives, including the sale of the Company's remaining business operations and the acquisition of one or more new business opportunities. However, there can be no assurances that such efforts will be successful. The Company may finance any acquisitions through a combination of debt and/or equity securities. * Spaulding Finalizes Alliance With Business Evaluation Systems --------------------------------------------------------------- The Spaulding Group, Inc., a full-service consulting and business brokerage firm, has effectuated a formal strategic alliance with Business Evaluation Systems which specializes in business appraisal reviews, business enhancement and consulting. Headquartered in Tampa, FL, The Spaulding Group offers performance consulting and business brokerage services to small and mid-sized businesses throughout the United States. Under the terms of the agreement, the Company will be able to supply formal business appraisal services for clients throughout the Gulf Coast of Florida. BES is the largest and oldest business appraisal company in the United States. In the last 25 years, it has been involved in the appraisal of more than 9,000 firms ranging in value from $50,000 to over $600 million. Some of the reasons why businesses require valuation include: buying or selling a business; estate planning for gifts or inheritance; institutional financing; marital dissolution; buying out a partner or shareholder; litigation support; litigation issues involving economic damages, loss of profits or bankruptcy; allocation of purchase price among tangible and intangible assets and taxation issues for probate or federal estate taxes. The Spaulding Group is a full-service consulting and business brokerage firm offering performance consulting, succession planning and business brokerage services to small and mid-sized businesses and high net worth individuals. For more information, please visit the Company's Web site at http://www.spauldinggroupinc.com * Dewey Ballantine Hires Philipp von Ilberg as Frankfurt Partner ---------------------------------------------------------------- International law firm Dewey Ballantine LLP has hired top finance and capital markets lawyer Philipp von Ilberg as a partner resident in its Frankfurt office. He will join Dewey Ballantine on 1 October, 2003 from Clifford Chance Punder. Mr. von Ilberg will play a key role in Dewey Ballantine's expansion in Germany. The wealth of experience he brings to the Firm in ground-breaking capital markets and corporate finance transactions as well as in the area of acquisition finance will complement and enhance the Frankfurt office's existing corporate and finance capabilities. "Philipp von Ilberg's appointment represents a significant step for Dewey Ballantine in the continued development of our German practice," said Morton A. Pierce, Chairman of Dewey Ballantine's Global M&A Group. "Philipp's expertise will greatly contribute to the development of our corporate and finance practice in Germany and is an important step forward for our broader European strategy." Mr. von Ilberg began his legal career at Deutsche Bank Corporate Finance and joined Clifford Chance Punder in 1997 where he was made partner. His practice has involved the representation of corporations such as Deutsche Telekom, Fraport, Siemens, and T- Online as well as financial institutions such as Credit Suisse First Boston, Deutsche Bank, Dresdner Kleinwort Wasserstein and West LB. Dr. Geza Toth-Feher, head of Dewey Ballantine's German Practice, said: "Philipp von Ilberg is a blue-chip addition to our German team. We are delighted that Philipp is joining our firm in Frankfurt, and excited about providing clients with an even deeper reserve of finance capabilities." Philipp von Ilberg commented: "I am looking forward to playing a significant part in the growth of Dewey Ballantine's German practice. My practice dovetails neatly with Dewey Ballantine's close relationships with the investment banking community and complements the Firm's focus on expanding those relationships across Europe." Founded in 1909, Dewey Ballantine LLP is a leading international law firm with more than 550 attorneys located in New York, Washington, D.C., Los Angeles, Palo Alto, Houston, Austin, London, Warsaw, Budapest, Prague and Frankfurt. Dewey Ballantine's German Practice in London and Frankfurt builds on the strength of the London office's UK and U.S. corporate and finance capability to provide clients with expert legal advice on German-related M&A, public M&A, acquisition finance, private equity and capital markets transactions. The German Practice enhances Dewey Ballantine's existing European capability and enables the Firm to advise clients on German- related issues in a seamless, integrated manner from London, Frankfurt, or both offices, as clients may require. Dewey Ballantine's German Practice currently consists of a team of ten German-speaking lawyers (two partners and eight associates), eight of whom are German-qualified or dual-qualified (German and English). * DebtTraders' Real-Time Bond Pricing ------------------------------------- Issuer Coupon Maturity Bid - Ask Weekly change ------ ------ -------- --------- ------------- Federal-Mogul 7.5% due 2004 14.5 - 16.5 0.0 Finova Group 7.5% due 2009 43.5 - 44.5 +0.5 Freeport-McMoran 7.5% due 2006 102.5 - 103.5 0.0 Global Crossing Hldgs 9.5% due 2009 4.5 - 5.0 +0.25 Globalstar 11.375% due 2004 3.0 - 3.5 -0.5 Lucent Technologies 6.45% due 2029 68.25 - 69.25 -0.75 Polaroid Corporation 6.75% due 2002 11.0 - 12.0 0.0 Westpoint Stevens 7.875% due 2005 20.0 - 22.0 0.0 Xerox Corporation 8.0% due 2027 84.0 - 86.0 -1.5 Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. 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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. 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