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/raid1/www/Hosts/bankrupt/TCR_Public/031106.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, November 6, 2003, Vol. 7, No. 220 Headlines 24 HOUR FITNESS: S&P Rates Credit Facility & Term Loan at B ACETEX CORP: Sept. 30 Working Capital Deficit Widens to $204MM ACTUANT CORP: Prices $125 Mill. Convertible Debentures Offering AFC ENTERPRISES: Reports Third-Quarter 2003 Operating Results ALLIED WASTE: Unit Commences $250 Million Senior Debt Offering ALLIED WASTE: Files Proxy Statement re Preferred Stock Exchange ALLIS-CHALMERS: 85% of Shareholders Consent to Equity Deals AMERICA WEST: October Revenue Passenger Miles Slide-Up 2.4% ARMOR HOLDINGS: Appoints Robert Schiller New Company President ARMOR HOLDINGS: Operating Results Improve in Third Quarter ASBURY AUTOMOTIVE: Panel Says Obligations to Kendrick Satisfied ATLANTA URBAN: S&P Junks $7-Million Housing Revenue Bond Rating AZTEC CRANE: Trustee Employs Adair & Myers as Special Counsel BROCADE COMMS: Will Publish Q4 and FY 2003 Results on Nov. 20 BUDGET: Committee Gets Nod to Hire InteCap as Valuation Expert CAPITOL COMMUNITIES: Name Changed to Capitol First Corporation CATELLUS DEV'T: Reports Slight Growth for Third-Quarter 2003 CENTRAL UTILITIES: Signs-Up Creel Sussman as Bankruptcy Counsel CENTURY CONTROLS: Callahan Johnston Resigns as Ind. Accountants CHARTER COMMS: S&P Rates Unit's $500-Mil. Sr. Debt at CCC- CLEARING SERVICES: E.D. Mo. Court Fixes SIPA Claims Bar Date CONEXANT: S&P Affirms B Rating & Notes Improved Performance CONSTELLATION BRANDS: Reaffirms 3rd Quarter & Full Year Guidance CRESCENT REAL ESTATE: Third-Quarter Results Sink into Red Ink DALEEN TECH.: Walking Away from Allegiance BillingCentral Pact DIEDRICH COFFEE: Red Ink Continued to Flow in Fiscal 1st Quarter DOANE PET: S&P Cuts Credit & Senior Secured Debt Ratings to B- DYNEGY: S&P Places Illinois Power Unit's Credit Rating on Watch ENRON: AT&T Wants Prompt Payment of $7MM Admin. Expense Claim EVERGREEN INT'L: Appoints John A. Irwin Chief Financial Officer FALCON PRODUCTS: S&P Places Credit & Debt Ratings on Watch Neg. FEDERAL-MOGUL: UST Appoints Asbestos Property Damage Committee FFP OPERATING: Wants Schedule-Filing Deadline Moved to Dec. 8 FRAWLEY CORP: Recurring Losses Raise Going Concern Uncertainty FRONT PORCH: Taps J.H. Cohn to Replace Ernst & Young as Auditors GINGISS GROUP: May Dept. Stores Buying Assets for $23 Million GINGISS GROUP: Brings-In Pachulski Stang as Bankruptcy Attorneys GLOBAL GOLF: Breaks Ties with Accountants, Ronald R. Chadwick GS MORTGAGE: Fitch Affirms BB- $18-Mill. Class B Notes' Rating HARRAH'S ENTERTAINMENT: Board Declares Quarterly Cash Dividend HAYES LEMMERZ: Seeking Approval of Plan Distribution Procedures HORIZON GROUP: Commences Restructuring of Three Loans in Default ILLINOIS POWER: Fitch Puts Junk Debt Ratings on Watch Positive INTEGRATED HEALTH: Court Approves Litchfield Settlement JP APARTMENTS: Case Summary & 21 Largest Unsecured Creditors LINCOLN INT'L: Potter & Company Bolts from Auditing Engagement LTV CORP: Oil States Asks Court to Appoint Bankruptcy Trustee MARINER POST-ACUTE: Asks Court to Estimate Tort Claim Liability MCDERMOTT INT'L: Sept. 30 Net Capital Deficit Widens to $420 Mil MEASUREMENT SPECIALTIES: Q2 Results Enter Positive Territory MERCURY AIR: Will File Form 10-K for FY 2003 by November 12 MIRANT CORP: MAGI Committee Signs-Up Cox & Smith as Co-Counsel NORTHWOODS CAPITAL: Fitch Affirms BB $7MM Class VI Notes Rating NRG ENERGY: Wants Approval of Beijing Guohua Sale Agreement OAKWOOD HOMES: S&P Hatchets Related Ratings on 3 Note Classes OWENS CORNING: Balks At Ohio Workers' Bureau's $9.2-Mill. Claim PG&E NATIONAL: Noteholder Committee Taps Chadbourne & Parke LLP PHILIP MORRIS: Will Appeal Jury Verdict for Missouri Smoker PILLOWTEX CORP: Closes Sale of Assets to GGST LLC for $121 Mill. PMA CAPITAL: Counterparty Rating Cut to Speculative-Grade Level PRIME RETAIL: Shareholders' Meeting Adjourned Until November 18 PRIMEDEX HEALTH: Confirmation Order is Final & Plan Takes Effect PRIMUS TELECOMMS: Sept. 30 Balance Sheet Upside-Down by $118MM PW EAGLE: Will Host Third-Quarter Conference Call on Tuesday QWEST COMMS: Creates Systems Integrator Alliances Division RADIO UNICA: Wants to Continue Employing Ordinary Course Profs. RESTRUCTURE PETROLEUM: Section 341(a) Meeting on December 5 SAN REMO: Buddy Ford Serving as Chapter 11 Bankruptcy Attorney SATURN (SOLUTIONS): Delays Filing of Fin'l Statements in Canada SHOLODGE INC: Completes Tender Offer for Sr. Subordinated Notes SILICON GRAPHICS: Proposes Exchange Offer for Convertible Notes SK GLOBAL AMERICA: SK Corp. Director Kim Choong Hwan Resigns SMART & FINAL: Reports Strong Third-Quarter Operating Results STARWOOD HOTELS: Launches Tender Offer for Westin Hotels Limited SUNTERRA CORP: Distributes New Common Stock to Unsecured Creditors TELESYSTEM INT'L: 3rd-Quarter Results Swing-Up to Positive Zone TELETECH: William S. Beans Heads Communications & Media Biz Unit TENNECO AUTOMOTIVE: Fitch Affirms Debt Ratings at Lower-B Level THE PANTRY INC: Completes Acquisition 138 Golden Gallon Stores TYCO INTERNATIONAL: Red Ink Continued to Flow in Fourth Quarter UNITED AIRLINES: Wants Nod to Sell Orbitz Stock for $217 Million UNITEDGLOBALCOM: Extends Exchange Offer for UGC Europe Shares US AIRWAYS: Posts 8.8% Increase in Traffic for October 2003 U.S. CAN: September 28 Balance Sheet Upside-Down by $352 Million USG CORP.: L&W Wants to Pay $16 Million to Buy Unnamed Supplier VENTAS INC: Will Present at CIBC Healthcare Conference Tuesday WALTER INDUSTRIES: Third-Quarter 2003 Net Loss Tops $9.3 Million WARNACO GROUP: Offers to Swap Old 8-7/8% Senior Notes Due 2013 WCI STEEL: First Creditors Meeting to Convene on November 17 WEYERHAEUSER CO.: Will Padlock Sawmill at Grande Cache, Alberta WICKES INC: Commences Exchange Offer for 11-5/8% Sr. Sub. Notes WHEELING-PITTSBURGH: WHX Director Louis Klein Buys 1,500 Shares WORLDCOM INC: Pushing for Approval of Progress Settlement Pact W.R. GRACE: Urging Court to Appoint Hamlin as Future Claims Rep. ZIFF DAVIS: Robert Lee is Publisher of New Consumer Lifestyle Mag. * Canadian Senate Panel Says Bankruptcy Legislation Too Harsh * IIC Lauds Senate Report on Insolvency Legislation in Canada * Fitch Says Elec. Power Bankruptcies Shape U.S. Market Future * Timothy S. McCann Joins Kirkpatrick in Fan Francisco as Partner * DebtTraders' Real-Time Bond Pricing ********* 24 HOUR FITNESS: S&P Rates Credit Facility & Term Loan at B ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B' ratings to 24 Hour Fitness Worldwide Inc.'s proposed $65 million secured revolving credit facility due in 2008, and to the proposed $275 million term loan B due 2009. The bank loans were rated at the same level as the corporate credit rating. Proceeds are expected to be used to refinance existing debt and for general corporate uses. In addition, Standard & Poor's revised its outlook on the ratings to positive from negative. All existing ratings, including 'B' corporate credit rating, were affirmed. San Ramo, Calif.-based 24 Hour Fitness is an operator of mid-market fitness clubs. As of Sept. 30, 2003, the company had $485 million of debt outstanding, including redeemable preferred stock. "The outlook revision reflects enhanced liquidity from the proposed transaction and the company's improving credit measures," said Standard & Poor's credit analyst Andy Liu. The ratings reflect 24 Hour Fitness's debt-financed growth strategy, high financial risks, and the highly competitive fitness industry. These considerations are partially offset by the company's modest geographic diversity, several market leading club clusters, strong brand name, and positive discretionary cash flow. Stabilization of new clubs and growth in higher-margin ancillary services, including personal training and apparel, have contributed to increased revenue. The divestiture of European operations and the turnaround at Asian clubs should contribute to higher EBITDA margin as well. For the 12 months ended Sept. 30, 2003, the company's EBITDA margin was 14%, a 320 basis point improvement from the end of 2001. Operating cash flow has increased during the past several years, attributable to acquisitions, new club openings, and existing club sales growth. This trend is likely to continue as the company refocuses on domestic club growth. 24 Hour Fitness generated positive discretionary cash flow in the past two and a half years, despite weak economic conditions. With the economy showing signs of stabilizing and with the divestiture of its European club operations, discretionary cash flow generation is expected to increase in 2004, tempered by higher capital expenditures. ACETEX CORP: Sept. 30 Working Capital Deficit Widens to $204MM -------------------------------------------------------------- Acetex Corporation announced results for the three months ended September 30, 2003, determined under Canadian generally accepted accounting principles. These results include a net loss of U.S. $10.4 million and EBITDA (defined as operating earnings plus amortization) of U.S. $5.4 million. Net sales of U.S. $88.8 million were generated during the period from the sale of acetyls products and specialty polymers and films. For the nine months ended September 30, 2003, net loss was U.S. $11.1 million and EBITDA was U.S. $27.0 million. Sales for the same period were U.S. $229.1 million. On August 5, 2003, we completed the acquisition of AT Plastics Inc., a Canadian company that manufactures and sells specialty polymers and films in North America and around the world. The results of operations set out above consolidate the acquired business from August 5, 2003. On a pro forma basis, calculated as if the acquisition of AT Plastics had completed at the beginning of the period presented, Acetex would have realized EBITDA of U.S. $8.3 million on sales of U.S. $103.3 million for the three months ended September 30, 2003, and EBITDA of U.S. $40.5 million on sales of U.S. $329.7 million for the nine months ended September 30, 2003. At September 30, 2003, the Company's balance sheet shows that its total current liabilities outweighed its total current assets by about $204 million. "The most important news in the third quarter was the successful conclusion of the acquisition of AT Plastics on August 5," said Brooke N. Wade, Chairman and Chief Executive Officer of Acetex Corporation. "The acquisition provides diversity, operating strength and the potential for very significant value creation to Acetex. To refinance the long-term debt of AT Plastics we issued an additional U.S. $75.0 million of our existing series of bonds. The issuance of additional bonds was very well received by investors and were sold at a price of 109.5. Unfortunately, we experienced an unscheduled shutdown at our main Acetyls facility at Pardies, France, resulting in an interruption in production of 18 days and a reduction in EBITDA of U.S. $6.0 million for the third quarter. The reported financial results include the results of AT Plastics from the closing date of August 5, 2003. To better understand the results of operations it is useful to look at the pro forma EBITDA including AT Plastics results for the full quarter, which is U.S. $8.3 million. These results would have been U.S. $6.0 million better had we not suffered the unscheduled shutdown." Acetex Corporation has two primary businesses - its European Acetyls Business and the Specialty Polymers and Films Business. Our Acetyls business is Europe's second largest producer of acetic acid and polyvinyl alcohol and third largest producer of vinyl acetate monomer. These chemicals and their derivatives are used in a wide range of applications in the automotive, construction, packaging, pharmaceutical and textile industries. Specialty polymers developed and manufactured by Acetex are used in the manufacture of a variety of plastics products, including packaging and laminating products, auto parts, adhesives and medical products. The films business focuses on products for the agricultural, horticultural and construction industries. Acetex (S&P, B+ Corporate Credit Rating, Stable) directs its operations from its corporate head office in Vancouver, Canada. Acetex has plants in France, Spain, and Edmonton, Alberta, and sells to customers in Europe, the United States, Canada, and around the world. Acetex's common shares are listed for trading under the symbol "ATX" on The Toronto Stock Exchange, which has neither approved nor disapproved the information contained herein. ACTUANT CORP: Prices $125 Mill. Convertible Debentures Offering --------------------------------------------------------------- Actuant Corporation (NYSE:ATU) announced the pricing of the private offering of $125 million aggregate principal amount of its Convertible Senior Subordinated Debentures due 2023 in a private, unregistered offering to "qualified institutional buyers," pursuant to Rule 144A under the Securities Act of 1933, as amended. The sale of the Debentures is expected to close on November 10, 2003. Actuant also granted the initial purchasers of the Debentures a 13 day over-allotment option to purchase up to an additional $25 million aggregate principal amount of the Debentures. The Debentures will bear interest at a rate of 2.0% per year and, during certain periods and subject to certain conditions, the Debentures will be convertible by holders into shares of Actuant's common stock initially at a conversion rate of 25.0564 shares of common stock per $1,000 principal amount of Debentures, which is equivalent to an initial conversion price of approximately $39.91 per share of common stock, subject to adjustment in certain circumstances. Proceeds from the offering will be used to repay a portion of the borrowings under the Company's senior credit facility and for other general corporate purposes, which may include possible repurchases of outstanding 13% Senior Subordinated Notes due 2009, working capital and possible future acquisitions. The Debentures and the shares of common stock issuable upon conversion of the Debentures have not been registered under the Securities Act of 1933 and may not be offered or sold absent registration or an applicable exemption from the registration requirements of the Securities Act. This press release does not constitute an offer to sell or the solicitation of an offer to buy any of the Debentures or the shares of common stock issuable upon conversion of the Debentures, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful. Actuant Corporation's August 31, 2003 balance sheet shows a total shareholders' equity deficit of about $11.6 million. AFC ENTERPRISES: Reports Third-Quarter 2003 Operating Results ------------------------------------------------------------- AFC Enterprises, Inc. (Pink Sheets: AFCE), the franchisor and operator of Popeyes(R) Chicken & Biscuits, Church's Chicken(TM), Cinnabon(R) and the franchisor of Seattle's Best Coffee(R) in Hawaii, on military bases and internationally, announced operating performance results for the third quarter of 2003, which included the Company's fiscal period 8 (7/14-8/10), period 9 (8/11-9/7) and period 10 (9/8-10/5). The Company also provided an update on other key business matters. Results for periods 8 and 9 were previously announced in a press release dated September 19, 2003. Overall Performance Domestic System-wide Comparable Store Sales AFC reported that blended domestic system-wide comparable store sales at its restaurants, bakeries and cafes were down 1.4 percent for the third quarter of 2003, compared to down 2.8 percent for the third quarter of 2002. The Company continued to see improvements in domestic system-wide comparable store sales, with the third quarter of 2003 representing AFC's strongest quarterly comparable sales performance since the second quarter of 2002. The Company's continued focus on operational enhancements and expanded promotions helped improve average check for the third quarter of 2003. The average check in the third quarter of 2003 was up 1.7 percent for Popeyes, 4.5 percent for Church's, and 0.4 percent for Cinnabon. Specific drivers that helped improve comparable store sales in the third quarter of 2003, in addition to the factors cited in the September 19, 2003, release included: - Popeyes revised domestic system promotions and limited time offers with more favorable price-points and product types such as two different shrimp offerings and a new bone-in chicken family offering. Part of this strategy included the brand's concentration on limited time offers with boneless chicken and seafood products that do not require discounting of the core menu. - Church's continued to expand the use of mixed bundles and increased trade up opportunities with Honey Butter biscuits and limited time offer dessert items such as lemon fried pies. - Cinnabon benefited from improvements in captive venue traffic, and its capture rate of guests improved with such programs as its Caramel flavor promotion that was the brand's most successful marketing campaign in 2003. Brand building initiatives to be implemented for the fourth quarter of 2003 that compliment those cited in the September 19, 2003 release include the following: - Popeyes will return its focus to historically successful limited time offers such as crawfish in November and holiday family bundle offers in December. In addition, Popeyes will introduce an offering of healthy alternative products, including Roasted Turkey over vegetable rice, Roasted Turkey Po'Boy Sandwiches, and the Cajun Turkey program. - Popeyes has revised its operational support structure to reposition its talent so that the majority of their time will be spent directly supporting franchisees in the field. - Church's will continue to concentrate its menu strategy on flavor and portability, including product tests of Zesty Tenders, Zesty Tender Crunchers, Zesty Thigh Fillets, and Texas Chicken. - Church's will continue to test its new menu-board program, showcasing trade-up opportunities and help improving speed of service. The menu-board program is scheduled for a system-wide rollout in the first quarter of 2004. - Cinnabon will complete the national product launch of Cinnapoppers(TM), a bite-sized brown sugar and cinnamon pastry that will be available in all Cinnabon bakeries in the fourth quarter. - Cinnabon will continue to expand its licensing initiatives, partnering with General Mills to introduce the new Cinnabon Cinnamon Streussel jumbo muffins by Betty Crocker. AFC reconfirmed its previously projected full-year blended domestic system-wide comparable store sales of down 2.5-3.5 percent. By brand, both Church's and Cinnabon have experienced slightly better than expected domestic system-wide comparable store sales leading the Company to revise the full-year projection for Church's from down 3.5-4.5 percent to down 3.0-4.0 percent and Cinnabon from down 5.5-6.5 percent to down 4.0-5.0 percent. However, Popeyes domestic system-wide comparable store sales have been revised from down 1.5-2.5 percent to down 2.0-3.0 percent primarily due to the less than expected performance of certain third quarter limited time offers. New System-wide Openings The AFC system opened 69 restaurants, bakeries and cafes during the third quarter of 2003, compared to 99 total system-wide openings in the third quarter of 2002. The new unit opening decline over prior year is primarily a result of a continued cautious approach by franchisees on building new units due to the current economic climate. In addition, the temporary suspension of the Company's domestic franchise sales-related activities has resulted in the loss of opportunities to sell a commitment and have an opening in the same year. Of the 69 openings in the third quarter, 38 were in international markets and the remaining 31 were domestic. On a system-wide basis, AFC had 4,033 units at the end of the third quarter of 2003. The composition of units at the end of the third quarter of 2003 was comprised of 3,127 domestic units and 906 international units in Puerto Rico and 35 foreign countries. The unit count represented 453 Company owned and 3,580 franchised restaurants, bakeries and cafes. AFC still projects to record 345-370 new unit openings in 2003. This figure is comprised of 175-180 Popeyes restaurants, 55-65 Church's restaurants, 70-75 Cinnabon bakeries and 45-50 Seattle's Best Coffee international cafes. The Company is revising the net new units estimate from 185-210 to 170-195 as the unit closings are now projected to be approximately 175 for the year. Unit closings typically occur due to a loss or expiration of lease rights and closing of under-performing units. Expected closings change throughout the year based upon whether lease rights are renewed or terminated, and ongoing assessments of unit performance. Commitments and Conversions The Company remains unable to participate in certain domestic franchise sales-related activities, including the sale of new commitments and the sale of Company-owned units to franchisees (conversions) because it has not yet finalized its 2003 franchise offering circulars or renewed its state franchise registrations, both of which require AFC's 2002 audited financial statements. AFC will reengage in domestic franchise sales, including possible select market conversions to franchisees, after finalizing and filing the 2003 franchise offering circulars and renewing its franchise registrations. This process will immediately follow the release of its 2002 audited financial statements and the release of quarterly 2003 financial statements, as may be required. At the end of the third quarter of 2003, AFC had a total of 2,405 outstanding commitments for future development, which included 197 that were signed in 2003. Due primarily to the domestic franchising constraints, the Company now expects to sign approximately 350-400 total new commitments for future development in 2003. However, the remaining domestic commitments projected to be signed in 2003 will be dependent on the timing of the filing of the required financial statements. "We continue to see improvements in the business demonstrating that our actions to stimulate performance are having results," said Dick Holbrook, President and COO of AFC Enterprises. "This has been a challenging year for AFC on many fronts and I am extremely proud of our team for rising up to this challenge in order to best position the Company for the future." Other Key Business Matters Listing Status AFC continues to work diligently to complete the restatements and audit of its financial statements for 2002, 2001, and 2000 and to file its 2002 Form 10-K, as well as its quarterly reports on Form 10-Q for the first three quarters of 2003, as soon as possible. Upon completion and filing of such statements, the Company intends to begin the listing application process. Credit Facility As previously announced on October 30, 2003, AFC's lenders recently agreed to an amendment of the Company's credit facility to extend the filing timeline of the Company's financial statements. The Company's outstanding debt under its credit facility agreement, net of investments, at the end of the third quarter of 2003 was approximately $126 million versus $218 million at the end of 2002. Unusual Expenses AFC is projecting to incur $19-$20 million of unusual expenses in 2003. This is an increase from the $17-$18 million estimated in AFC's September 19, 2003 press release due to the ongoing costs of the audit process. These unusual expenses are related to the productivity initiative, the extended audit process for fiscal years 2002, 2001 and 2000, shareholder litigation and expenses related to the amendment of the Company's credit facility agreement. Concluding Remarks Commenting on AFC's key business matters, Chairman and CEO Frank Belatti summarized, "I look forward to the conclusion of the audit process. Despite this near-term challenge, the Company has made significant progress on confronting obstacles and seizing opportunities. There are numerous accomplishments we are proud of in the third quarter, including the recovery of our brands' operational performance, the immediate recognition of savings from the productivity initiative and recording the lowest debt level in the Company's history. We continue to identify and address areas in the business that will make us better." AFC Enterprises, Inc. is the franchisor and operator of 4,015 restaurants, bakeries and cafes as of September 7, 2003, in the United States, Puerto Rico and 35 foreign countries under the brand names Popeyes(R) Chicken & Biscuits, Church's Chicken(TM) and Cinnabon(R), and the franchisor of Seattle's Best Coffee(R) in Hawaii, on military bases and internationally. AFC's primary objective is to be the world's Franchisor of Choice(R) by offering investment opportunities in highly recognizable brands and exceptional franchisee support systems and services. AFC Enterprises had system-wide sales of approximately $2.7 billion in 2002 and can be found on the World Wide Web at http://www.afce.com * * * Credit Facility and Current Ratings The Company's outstanding debt under its credit facility agreement, net of investments, at the end of Period 9 of 2003 was approximately $125 million, down from approximately $218 million at the end of 2002 as a result of cash generated from ongoing operations and the sale of its Seattle Coffee Company subsidiary. On August 25, 2003, Standard & Poor's Ratings Services raised the Company's senior secured bank loan ratings to 'B' from 'CCC+' and on August 28, 2003, Moody's Investor Service lowered the Company's secured credit facility rating from Ba2 to B1. ALLIED WASTE: Unit Commences $250 Million Senior Debt Offering -------------------------------------------------------------- Allied Waste Industries, Inc. (NYSE: AW) announced that its wholly-owned subsidiary, Allied Waste North America, Inc., is commencing an offering of $250 million in Senior Notes due 2010 in a private placement. Allied intends to use the proceeds from the proposed sale of these senior notes to retire a portion of AWNA's 10% Senior Subordinated Notes due 2009 through open market repurchases or otherwise. The senior notes being sold by AWNA will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The senior notes are being offered only to qualified institutional buyers under Rule 144A and outside the United States in compliance with Regulation S under the Securities Act. Allied Waste Industries, Inc. (S&P, BB Corporate Credit Rating, Stable Outlook), is the second largest, non-hazardous solid waste management company in the United States, providing non-hazardous waste collection, transfer, disposal and recycling services to approximately 10 million customers. As of June 30, 2003, the Company operated 333 collection companies, 171 transfer stations, 171 active landfills and 64 recycling facilities in 39 states. ALLIED WASTE: Files Proxy Statement re Preferred Stock Exchange --------------------------------------------------------------- Allied Waste Industries, Inc. (NYSE: AW) has filed the definitive proxy statement related to the previously announced agreement with the holders of its $1 billion face amount 6-1/2% Series A Senior Convertible Preferred Stock to exchange all of the outstanding shares of Series A Convertible Preferred Stock for shares of Allied Waste common stock. The Company has scheduled a special meeting of shareholders for December 18, 2003 to vote on the exchange. Shareholders of record as of November 3, 2003 will be entitled to vote on the exchange. Assuming a favorable outcome, the Company expects the transaction to close shortly thereafter. Under the terms of the agreement, the holders will be restricted from selling the shares of common stock they receive in the transaction for one year subsequent to the closing. The Company expects to mail the proxy material on or about November 6, 2003 to shareholders. Additional information about the exchange is contained in a definitive proxy filed with the Securities and Exchange Commission. Shareholders are urged to read this proxy statement because it contains important information about the exchange. A free copy may be obtained at the Securities and Exchange Commission's website at http://www.sec.govor from the Company. Allied Waste Industries, Inc. (S&P, BB Corporate Credit Rating, Stable Outlook), is the second largest, non-hazardous solid waste management company in the United States, providing non-hazardous waste collection, transfer, disposal and recycling services to approximately 10 million customers. As of June 30, 2003, the Company operated 333 collection companies, 171 transfer stations, 171 active landfills and 64 recycling facilities in 39 states. ALLIS-CHALMERS: 85% of Shareholders Consent to Equity Deals ----------------------------------------------------------- Notice is being given to stockholders of record of Allis-Chalmers Corporation as of October 17, 2003 that a Written Consent in Lieu of an Annual Meeting of Stockholders has been executed with an effective date of November 25, 2003. As explained in the Information Statement, holders of 85% of the Company's common stock and 100% of the Company's Series A 10% Cumulative Convertible Preferred Stock have executed the written consent: (1) electing directors of the Company, (2) approving a reverse stock split, (3) approving an amendment to the terms of the Company's outstanding Series A 10% Cumulative Convertible Preferred Stock, (4) approving the Company's 2003 Incentive Stock Plan and (5) ratifying the reappointment of Gordon, Hughes & Banks, LLP as the Company's independent accountants for fiscal 2003. The Board of Directors believes it would not be in the best interest of the Company and its stockholders to incur the costs of holding an annual meeting or of soliciting proxies or consents from additional stockholders in connection with these actions. Based on the foregoing, the Board of Directors has determined not to call an Annual Meeting of Stockholders, and none will be held this year. Stockholders of record of the Company's common stock and Series A 10% Cumulative Convertible Preferred Stock at the close of business on October 17, 2003 have received the Notice of Consent in Lieu of Annual Meeting of Stockholders. Allis-Chalmers Corp.'s March 31, 2003 balance sheet shows that its total current liabilities exceeded its total current assets by about $12 million. The Company's total shareholders' equity further dwindled to about $826,000 due to an accumulated deficit of about $9 million. AMERICA WEST: October Revenue Passenger Miles Slide-Up 2.4% ----------------------------------------------------------- America West Airlines (NYSE: AWA) reported traffic statistics for October 2003. Revenue passenger miles (RPMs) were a record 1.8 billion, an increase of 2.4 percent from October 2002. Capacity for October 2003 was 2.3 billion available seat miles (ASMs). The passenger load factor for the month of October was a record 77.8 percent, up 3.9 points from October 2002. The airline reported a record year-to-date load factor of 76.8 percent, up 3.0 points from 2002. Year-to-date RPMs were a record 17.8 billion, a 7.5 percent increase from 2002. ASMs increased 3.3 percent for the current year to a record 23.2 billion. "With our seventh consecutive month of record passenger loads and continued strong unit revenue performance, we have further confirmation that the time is right for America West to implement growth plans and capitalize on growing consumer demand for low- fare service," said Scott Kirby, executive vice president, sales and marketing. "A growing number of customers are realizing that America West's service is right on par with the high-cost carriers, but our business fares are a fraction of the price. With our increased operations at our Las Vegas hub, which will begin in early January 2004, and new nonstop, transcontinental operations between Los Angeles and New York and Los Angeles and Boston, which began last week, we look forward to bringing our low fares to more customers across the country." Founded in 1983 and proudly celebrating its 20-year anniversary in 2003, America West Airlines (S&P, B Long-Term Corporate Credit Rating, Stable Outlook) is the nation's second largest low-fare airline and the only carrier formed since deregulation to achieve major airline status. America West's 13,000 employees serve nearly 55,000 customers a day in 92 destinations in the U.S., Canada and Mexico. ARMOR HOLDINGS: Appoints Robert Schiller New Company President -------------------------------------------------------------- Armor Holdings (NYSE: AH), a leading manufacturer of security products and armored vehicles, named Robert R. Schiller as its President, effective January 1, 2004. The appointment of Mr. Schiller to President coincides with the announcement by the Company that it has formed an Aerospace and Defense Group effective with the completed of its acquisition of Simula, Inc., which is expected to conclude in December 2003. Mr. Schiller has been with Armor Holdings since 1996. The Company also announced the formation of the new Armor Holdings, Inc. Aerospace & Defense Group, effective upon the closing of the Company's previously announced acquisition of Simula. Mr. Robert F. Mecredy, Armor Holdings Inc. Corporate Vice President for Government Affairs since 2001, has been named as AHI Aerospace & Defense Group President. Mr. Mecredy will be responsible for Armor Holdings, Inc. U.S. military and government business, comprising the company's military vehicle armoring at its Mobile Security Division and all of the operations of Simula. Prior to joining Armor Holdings, Mr. Mecredy served as President and CEO of Firearms Training Systems, Inc. and Director of Army and Marine Corps programs for Raytheon. Mr. Mecredy completed 21 years of military service in 1987 as Deputy Director of the Army Staff, Congressional Affairs Officer, and White House Liaison Officer. "Our business is supporting Domestic and National Defense matters with products that protect individuals through personal and vehicle safety systems such as the Up-Armored Humvee," said Robert Schiller, COO/CFO of Armor Holdings. "The acquisition of Simula expands our commitment to Defense and the new Aerospace & Defense Group will consolidate our selling, program management, and operational oversight to this extremely important business segment." Armor Holdings (S&P, BB Corporate Credit Rating, Stable), included in FORBES magazine's list of "200 Best Small Companies" in 2002, and a member of the S&P Smallcap 600 Index, is a leading manufacturer of security products for law enforcement personnel around the world through its Armor Holdings Products division and is one of the world's largest and most experienced passenger vehicle armoring manufacturers through its Mobile Security division. Armor Holdings Products manufactures and sells a broad range of high quality branded law enforcement equipment. Such products include ballistic resistant vests and tactical armor, less-lethal munitions, safety holsters, batons, anti-riot products and a variety of crime scene related equipment, including narcotic identification kits. Armor Holdings Mobile Security, through its commercial business, armors a variety of vehicles, including limousines, sedans, sport utility vehicles, and money transport vehicles, to protect against varying degrees of ballistic and blast threats. Through its military program, it is the prime contractor to the U.S. Military for the supply of armoring and blast protection for High Mobility Multi-purpose Wheeled Vehicles, commonly known as HMMWVs. ARMOR HOLDINGS: Operating Results Improve in Third Quarter ---------------------------------------------------------- Armor Holdings, Inc. (NYSE: AH) announced revenues and earnings for the three-months and nine-months ended September 30, 2003. For the three-month period ended September 30, 2003, revenue from continuing operations increased 12.8% to $90.9 million compared to $80.6 million reported for the three-month period ended September 30, 2002. Products Division revenue increased 3.5% to $50.8 million for the three-month period ended September 30, 2003, compared to $49.0 million reported in the same period last year. Mobile Security Division revenue increased 27.2% to $40.1 million for the three-month period ended September 30, 2003, compared to $31.5 million reported in the same period last year. Internal revenue growth from continuing operations was 9.4% in total, 2.1% for the Products Division and 20.4% for the Mobile Security Division. In the three-months ended September 30, 2003, the Company recorded a net impairment charge of $1.3 million in discontinued operations to maintain the carrying value of discontinued operations (ArmorGroup) at $43.4 million, management's best estimate of its disposal value. The Company has also revalued intellectual property utilized by its discontinued operations. The revaluation was necessary to comply with tax code provisions, and resulted in incremental non-cash tax expense in the amount of $635,000 or $0.02 per share, for the three and nine month periods ended September 30, 2003. The tax adjustment is recorded in continuing operations as required by generally accepted accounting principles, and resulted in utilization of foreign tax credits previously recognized as a reduction of tax expense in a prior year. The Company's consolidated net income (loss) and diluted earnings (loss) per share for the three-months ended September 30, 2003 and 2002, were $6.1 million, or $0.22 per share, and $(14.7) million, or $(0.49) per share, respectively. Integration and other non- recurring charges for the period ended September 30, 2003 associated with acquisitions completed in the prior twelve months decreased to $368,000 from $1.4 million in the comparable period in the prior year. Net income and diluted earnings per share from continuing operations after integration and other non-recurring charges were $6.1 million and $0.22 per share for the three-months ended September 30, 2003, compared to $3.0 million and $0.10 per share in the comparable period in the prior year. Net income and diluted earnings per share from continuing operations before integration and other non-recurring charges were $6.3 million and $0.22 per share for the three-months ended September 30, 2003, compared to $7.1 million and $0.24 per share for the comparable period in 2002. The Company generated cash flow from operations for continuing operations in the three months ended September 30, 2003 of approximately $20.2 million compared to $3.4 million in the same period last year. For the three-months ended September 30, 2003, net income (loss) from discontinued operations was $6,000, or $0.00 per share compared to a net loss from discontinued operations of ($17.7) million, or ($0.60) per share for the three-months ended September 30, 2002. In the three-months ended September 30, 2003, the Company recorded an impairment charge of $1.3 million, as discussed above to maintain the carrying value of our discontinued operations at the same $43.4 million book value carried at June 30, 2003. "We are pleased with the performance exhibited by all of our businesses during the third quarter," said Warren B. Kanders, Chairman and Chief Executive Officer of Armor Holdings, Inc. "We are experiencing continued demand for our products with emphasis on those products used by our military in the conflict in Iraq. During the fourth quarter we expect to complete both the disposition of our ArmorGroup Services business, as well as our previously announced acquisition of Simula, Inc. We also expect that our strong balance sheet and operating performance will allow us to continue to pursue acquisitions which we expect will further our growth and strategic objectives." For the nine-month period ended September 30, 2003, revenue from continuing operations increased 14.1% to $253.0 million compared to $221.8 million reported for the nine-month period ended September 30, 2002. Products Division revenue increased 10.0% to $144.1 million for the nine-month period ended September 30, 2003, compared to $131.0 million reported in the same period last year. Mobile Security Division revenue increased 20.0% to $108.9 million for the nine-month period ended September 30, 2003, compared to $90.7 million reported in the same period last year. Internal revenue growth from continuing operations was 7.5% in total, 6.2% for the Products Division and 9.3% for the Mobile Security Division. The Company's consolidated net income (loss) and diluted earnings (loss) per share for the nine-months ended September 30, 2003 and 2002 were $15.8 million, or $0.56 per share, and ($4.7) million, or ($0.15) per share, respectively. The nine-month results in the period ended September 30, 2003, includes $4.6 million of integration and other non-recurring charges (including a $3.3 million ($2.1 million non-cash) severance charge related to the recent departure of the Company's former Chief Executive Officer) compared to $4.5 million during the same period in 2002. The balance of the 2003 integration and other non-recurring charges of $1.3 million relates to acquisitions completed in the prior twelve months. Net income and diluted earnings per share from continuing operations after integration and other non-recurring charges were $14.8 million and $0.52 per share for the nine-months ended September 30, 2003, compared to $13.4 million and $0.43 per share in the comparable period in the prior year. Net income and diluted earnings per share from continuing operations before integration and other non-recurring charges were $17.7 million and $0.62 per share for the nine-months ended September 30, 2003, compared to $19.4 million and $0.62 per share for the comparable period in 2002. The Company generated cash flow from operations for continuing operations in the nine-months ended September 30, 2003 of approximately $32.9 million compared to $(472,000) in the same period last year. At September 30, 2003, the Company's continuing operations business segments had cash balances of $154.8 million and total long-term debt, including current portion, of $160.9 million compared to $10.8 million and $21.7 million, respectively, reported at June 30, 2003. As of September 30, 2003, the Company had zero outstanding on its $60 million revolving line of credit compared to $15 million at June 30, 2003. For the nine-months ended September 30, 2003, net income (loss) from discontinued operations was $983,000, or $0.04 per share compared to a net loss from discontinued operations of ($18.0) million, or ($0.58) per share for the nine-months ended September 30, 2002. In the nine-months ended September 30, 2003, we recorded an impairment charge of $1.3 million as previously discussed to maintain the carrying value of our discontinued operations at the same $43.4 million book value carried at June 30, 2003. Gross margins from continuing operations for the three and nine- months ended September 30, 2003, were 31.8% and 30.3%, respectively, compared to 30.5% and 31.2% in the comparable period in 2002. For the three and nine-months ended September 30, 2003, gross margins in the Products Division were 36.1% and 34.5%, compared to 36.7% and 37.5% reported in the same period last year. The small decrease in third quarter Products Division gross margins resulted primarily from a negative change in product mix within our hard armor and less lethal businesses. For the three and nine-months ended September 30, 2003, gross margins in the Mobile Security Division were 26.4% and 24.7%, compared to 21.0% and 22.2% reported in the same period in the prior year. The increase in the Mobile Security Division's gross margins was primarily attributable to favorable manufacturing overhead cost absorption relating to increased manufacturing volumes in our Cincinnati manufacturing facility and operational efficiencies in our Cincinnati manufacturing facility as that plant continues to reduce its per vehicle labor and material costs. For the three and nine-months ended September 30, 2003, the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations were $14.1 million and $32.2 million, compared to $11.6 million and $31.3 million in the comparable periods in 2002. For the three and nine-months ended September 30, 2003, the Company's EBITDA from continuing operations before integration and non-recurring charges were $14.5 million and $36.7 million, compared to $12.9 million and $35.8 million, respectively, in the comparable periods in 2002. "We continue to improve our business performance with an emphasis on internal growth, operating margins and free cash flow generation," said Robert R. Schiller, Chief Operating Officer and Chief Financial Officer. "During the third quarter, we successfully completed the issuance of $150 million of 8.25% Senior Subordinated Notes due in 2013, as well as the corresponding interest rate swap, lowering our effective interest rate to six-month Libor set in arrears plus a spread ranging from 2.735% to 2.75%. This capital will enable us to complete our announced purchase of Simula, Inc. and provide capital to continue our strategy of growth through acquisition. Looking forward, we expect fourth quarter revenue to be approximately $100 million, excluding Simula, with net income from continuing operations before integration and non-recurring charges to be between $0.28 and $0.30 per share." Armor Holdings (S&P, BB Corporate Credit Rating, Stable), included in FORBES magazine's list of "200 Best Small Companies" in 2002, and a member of the S&P Smallcap 600 Index, is a leading manufacturer of security products for law enforcement personnel around the world through its Armor Holdings Products division and is one of the world's largest and most experienced passenger vehicle armoring manufacturers through its Mobile Security division. Armor Holdings Products manufactures and sells a broad range of high quality branded law enforcement equipment. Such products include ballistic resistant vests and tactical armor, less-lethal munitions, safety holsters, batons, anti-riot products and a variety of crime scene related equipment, including narcotic identification kits. Armor Holdings Mobile Security, through its commercial business, armors a variety of vehicles, including limousines, sedans, sport utility vehicles, and money transport vehicles, to protect against varying degrees of ballistic and blast threats. Through its military program, it is the prime contractor to the U.S. Military for the supply of armoring and blast protection for High Mobility Multi-purpose Wheeled Vehicles, commonly known as HMMWVs. ASBURY AUTOMOTIVE: Panel Says Obligations to Kendrick Satisfied --------------------------------------------------------------- Asbury Automotive Group, Inc. (NYSE: ABG), one of the largest automotive retail and service companies in the U.S., announced that a decision has been rendered in a private arbitration proceeding relating to amounts claimed by the Estate of Brian E. Kendrick. Mr. Kendrick, the Company's former Chief Executive Officer, died in October 2001. The arbitration panel unanimously concluded that the Company had fully satisfied its obligations under Mr. Kendrick's Employment Agreement when it tendered the 2001 bonus payment of $525,000 and 17,876 shares of stock in early 2002, and no further amounts are due the Estate. The Estate had sought damages in excess of $30 million in connection with alleged oral agreements and oral amendments to Mr. Kendrick's written employment agreement. The payment has been previously reserved for this purpose, and accordingly will not have an impact on Asbury's reported financial results. Asbury Automotive Group, Inc. (S&P, BB- Corporate Credit Rating, Stable), headquartered in Stamford, Connecticut, is one of the largest automobile retailers in the U.S., with 2002 revenues of $4.5 billion. Built through a combination of organic growth and a series of strategic acquisitions, Asbury now operates through nine geographically concentrated, individually branded "platforms." These platforms currently operate 95 retail auto stores, encompassing 138 franchises for the sale and servicing of 35 different brands of American, European and Asian automobiles. Asbury believes that its product mix includes one of the highest proportions of luxury and mid-line import brands among leading public U.S. automotive retailers. The Company offers customers an extensive range of automotive products and services, including new and used vehicle sales and related financing and insurance, vehicle maintenance and repair services, replacement parts and service contracts. ATLANTA URBAN: S&P Junks $7-Million Housing Revenue Bond Rating --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on Atlanta Urban Residential Finance Authority's, Georgia's $7 million multifamily housing revenue bonds (Cascade Pines Affordable Housing project) series 1995 to 'CCC' from 'B'. The outlook is negative. The trustee for this issue has informed Standard & Poor's that funds from the debt service reserve fund were used to compensate for deficiencies in revenues to pay the Sept. 1, 2003, debt service payments on the series 1995 bonds. Approximately $180,000 was drawn from the debt service reserve fund. Approximately $412,000 is still available in the debt service reserve fund. It is unclear at this time if further funds will be necessary to compensate for deficiencies in project income for the next principal and interest payment. The transaction was originally underwritten to perform at 1.41x debt service coverage. The issue has performed below underwritten levels over the past four fiscal years, and according to the issuer, continues to underperform year to date. Unaudited year-end 2002 financial statements provided by the issuer, indicate that the debt service coverage was .53x maximum annual debt service. Year-to-date unaudited August 2003 financial statements indicate that the issue continues to perform well below 1.00x MADS. Standard & Poor's is in the process of obtaining further information from the issuer, owner and trustee, to further ascertain the financial condition of this issue, and will review the transaction upon receipt of this information. AZTEC CRANE: Trustee Employs Adair & Myers as Special Counsel ------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Texas gave its stamp of approval to the application of the Chapter 11 Trustee of Aztec Crane Corporation's estate to employ Adair & Myers, PLLC as his Special Counsel. Randy W. Williams, the Chapter 11 Trustee overseeing Aztec' Crain's restructuring, expects Adair & Myers' services to include: a) negotiating and drafting pleading and agreements regarding preservation of assets of the Estate and obtaining Court approval; b) negotiating and drafting pleadings and agreements for the sale of other disposition of assets of the Estate and obtaining Court approval; c) pursuing cause of action against the Debtors' insiders and third parties; d) assisting with defense of Motion for Relief from Automatic Stay; and e) assisting with the evaluation of the nature, extent and validity of liens on property of the Estate. The professionals who will primarily offer their services in connection with this engagement are: Thomas W. Graves Partner $250 per hour Lewis W. Jost Associate $205 per hour Marc Douglas Myers Associate $205 per hour Headquartered in Houston, Texas, Aztec Crane Corporation provides crane service for North-Central Texas. The Company filed for chapter 11 protection on September 9, 2003 together with Tavaero Jet Center Inc. (Bankr. S.D. Tex. Case No. 03-42844). Aaron Keiter, Esq., at Strother Keiter & Mulder, P.C., represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed assets of more than $14 million and debts of over $1 million. BROCADE COMMS: Will Publish Q4 and FY 2003 Results on Nov. 20 ------------------------------------------------------------- Brocade Communications Systems, Inc. (Nasdaq: BRCD), the world's leading provider of infrastructure for Storage Area Networks, will announce its fourth quarter and fiscal year 2003 financial results after the close of the market on Thursday, November 20, 2003. Financial results will be released over PR Newswire and First Call after the close of the market on Thursday, November 20, 2003. Following the press release, Brocade will host a conference call at 2:00 p.m. PT (5:00 p.m. ET). The call is being webcast live via the Internet at http://www.brocade.com/investors A replay of the conference call will be available via webcast for twelve months at http://www.brocade.com/investors Brocade (S&P, B+ Corporate Credit and B- Subordinated Debt Ratings, Stable Outlook) offers the industry's leading intelligent platform for networking storage. The world's leading systems, applications, and storage vendors have selected Brocade to provide a networking foundation for their SAN solutions. The Brocade SilkWorm(R) family of fabric switches and software is designed to optimize data availability and storage and server resources in the enterprise. Using Brocade solutions, companies can simplify the implementation of storage area networks, reduce the total cost of ownership of data storage environments, and improve network and application efficiency. For more information, visit the Brocade Web site at http://www.brocade.com BUDGET: Committee Gets Nod to Hire InteCap as Valuation Expert -------------------------------------------------------------- The Official Committee of Unsecured Creditors of the Budget Group Debtors obtained permission from the Court, pursuant to Sections 327(a), 328(a) and 1103 of the Bankruptcy Code and Rule 2014 of the Federal Rules of Bankruptcy Procedure, to retain Scott D. Phillips of InteCap, Inc. as its valuation expert, nunc pro tunc as of September 8, 2003. The Committee retains Mr. Phillips and InteCap in connection with the litigation between Budget Rent-A-Car Corporation of America and Budget Rent-A-Car International, Inc. The retention relates to the representation of BRACC creditors alone, not BRACII. As valuation experts, Mr. Phillips and InteCap will provide certain independent professional consulting services including, without limitation, providing valuation of estate assets and providing expert testimony at trial, if necessary. Mr. Phillips is InteCap's managing director. InteCap is an international consulting firm with its principal office located at 101 N. Wacker Drive, Suite 1600 in Chicago, Illinois. InteCap employs 200 consulting professionals in nine offices around the world. InteCap provides a broad range of corporate consulting services to its clients, including, without limitation, services pertaining to economic, valuation, and strategy issues related to intellectual property and complex commercial disputes. InteCap and its senior professionals have extensive experience in the valuation of intellectual property rights. Mr. Phillips is the head of InteCap's national trademark practice and one of the foremost experts in his field. His expertise in transactional, tax, litigation, strategy and financial reporting matters involving trademarks, patents, trade secrets, and copyrights has been provided to a wide array of clients, including Fortune 500 companies. InteCap will be compensated on a monthly basis for hourly professional fees incurred. InteCap will also be reimbursed for all reasonable out-of-pocket expenses. InteCap's professional fees will be based on these hourly rates: Managing Directors $395 - 545 Directors 250 - 345 Associates 190 - 235 Analysts 125 - 175 The Debtors will indemnify and hold InteCap, its officers, employees, agents and affiliates, harmless for all claims, liabilities, demands and causes of action that arise from their involvement with providing expert services, except to the extent that the claims, liabilities, demands and causes of action resulted from willful misconduct. (Budget Group Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) CAPITOL COMMUNITIES: Name Changed to Capitol First Corporation -------------------------------------------------------------- Capitol First Corporation (OTC Bulletin Board: CPCY) has completed a change in its name from Capitol Communities Corporation, as well as the formation of two new wholly owned subsidiaries through which it will hold and conduct its respective business operations. The Company has been advised that as a result of the name change, its OTC Bulletin Board stock-trading symbol will be changed to "CFRC," effective on Wednesday, November 5, 2003. Capitol Development, Inc. was formed as a wholly owned subsidiary of the Company in order to administer Capitol First's future real estate development activities. The new subsidiary will focus on developing relationships with Preferred Development Partners, qualified developers with whom the Company may enter into joint ventures. Capital Development also intends to acquire and develop its own projects. Interfund Mortgage Corp. was formed as a wholly owned subsidiary of the Company in order to administer Capitol First's future efforts in the real estate funding area. Working in partnership with Capitol Development, Interfund plans to maximize the opportunities provided by Capitol Development's PDP relationships by offering construction/development financing. Interfund also intends to initiate a high-yield secured lending program by offering high-interest financing generally not financed by traditional lending institutions due to various factors such as time constraints, borrower credit issues, higher than normal loan- to-value ratios or situations requiring additional and/or cross collateral. Management intends to conduct due diligence on all lending in order to determine that the underlying collateral has enough value to warrant the loan. "With our name change complete and a new corporate structure in place, and initial funding in the amount of $3 million secured, we are beginning to move forward more aggressively with the implementation of several key initiatives contained in our strategic plan," said Ashley Bloom, Capitol First's Vice President and Treasurer. "We have already identified several land acquisition opportunities and anticipate acquiring one or more properties within the next quarter. In addition, we have begun to target opportunities that offer the potential for both positive cash flow and the ability to participate in the projects, either by joint venturing or high-yield lending." Capitol First Corporation is a real estate development and finance company, which, through a wholly owned subsidiary, currently has residential and commercial land holdings in the master planned community of Maumelle, Arkansas. The Company is currently seeking to expand its transaction base, focusing primarily on real estate, funding and related business opportunities in high-growth markets. * * * Financial Condition In its most recent Form 10-QSB filing, Capitol Communities reported: "The Company needs to cure its current illiquidity in order to diversify its portfolio, acquire new business opportunities and generate revenues. Accordingly, the Company is in the process of liquidating all or portions of the Maumelle Property and raise sufficient capital to commence meaningful operations. There can be no assurance, however, that the Company will be able to sell portions and/or all of the Maumelle Property for a fair market value or at all, or raise sufficient capital in order to implement its growth strategy. "At March 31, 2003, the Company had total assets of $10,250,603 an increase of $3,278,242 or 47% as compared to total assets of $6,972,179, as of the Company's fiscal year ended September 30, 2002. The Company had cash of $497,492 as of March 31, 2003 compared to $16,981 at September 30, 2002. The increase of assets was primarily due to the purchase of the Company's membership interest in TradeArk Properties, LLC. "The current portion of notes receivable increased to $1,000,000 on March 31, 2003 from $500,000 on September 30, 2002. The increase was primarily a result of a $1,000,000 note becoming current, and a $500,000 note paid by West Maumelle, L.P. "Total liabilities of the Company at March 31, 2003 were $7,757,591, an increase of $3,466,584 from the September 30, 2002 total of $4,291,007. The current liability for notes payable increased by $3,466,584 during the six months, from $2,029,168 to $3,470,158. "Long term debt increased to $1,601,074, as of March 31, 2003 from $1,216,000, as of September 30, 2002, an increase of $385,074.40. "Shareholders' Equity decreased by $188,160 to $2,493,012 from $2,681,172 for the period ended September 30, 2002. The decreased was primarily the result of a reclassification of the notes receivables by an officer and controlling shareholder of the Company, for an offset of accrued expenses, the settlement of certain notes for equity, the year to date loss and a reclassification of $261,000 offsetting debt for Preferred Stock, Series A." CATELLUS DEV'T: Reports Slight Growth for Third-Quarter 2003 ------------------------------------------------------------ Catellus Development Corporation (NYSE: CDX) reported earnings per share for the third quarter of 2003 of $0.23, compared to $0.16 for the same period in 2002. EPS for the nine months ended September 30, 2003, was $0.70, compared to $0.89 for the same period in 2002. Net income for the third quarter of 2003 was $20.9 million, compared to $14.7 million for the same period in 2002. Net income for the nine months ended September 30, 2003, was $63.6 million, compared to $79.8 million for the same period in 2002. The increase in net income for the third quarter of 2003 is attributed to, in part, the growth of the rental portfolio and the timing of sales activity, which was accelerated to the first half of 2002 and disproportionately weighted toward the second half of 2003. "Sales activity picked up significantly in the third quarter and is expected to be strong through year-end," said Nelson C. Rising, chairman and CEO of Catellus. "Our guidance for 2003 has not changed." "We are very pleased with the performance of our growing rental portfolio. The occupancy rate is over 95 percent, and net operating income is up 11.1 percent for the first three quarters of the year," added Mr. Rising. "With the pending REIT conversion, we have made excellent progress toward our goal of restructuring our businesses to operate more efficiently and better position ourselves to operate as a REIT focused on industrial property." REIT Conversion -- As previously announced, Catellus stockholders approved the company's conversion to a real estate investment trust, or REIT, at the company's annual meeting of stockholders held on September 26, 2003. -- It was also previously announced, on October 8, 2003, that Catellus' Board of Directors declared a distribution of accumulated earnings and profits of $3.83 per share, or approximately $350 million, in connection with its decision to elect REIT status. The special dividend is payable December 18, 2003, to stockholders of record at the close of business November 4, 2003. -- On November 7, 2003, election materials and forms will be sent to stockholders of record as of close of business November 4, 2003. Stockholders will have three options for how they wish to receive the E&P distribution: all stock, all cash, or 20 percent cash and 80 percent stock. -- The total cash distribution will be limited to $100 million. If more than $100 million in cash were to be elected, only those stockholders electing all cash would have the cash portion of their distribution reduced on a pro rata basis, with the remainder paid in stock. -- The paying agent must receive the completed election forms by December 1, 2003. Information about returning the completed election forms to the appropriate entity will be provided in the packet of election materials. -- The trading price of the stock used to determine how many shares will be issued to those stockholders receiving stock will be based on the average closing price for the five trading days from December 2, 2003, through December 8, 2003. -- Payment of cash and stock will be made December 18, 2003. The stock received as part of the E&P distribution will not be entitled to the regular third quarter dividend. -- The stock dividend from the E&P distribution will affect per share calculations. For example, assuming that the $100 million cash limit is paid out, and that the average closing price of the stock from December 2 through December 8 is $22.36 (closing price on November 3, 2003), the company will issue approximately 11.2 million shares of stock on December 18, 2003, to stockholders of record at the close of business on November 4, 2003. Although having no effect on our aggregate earnings, Funds From Operations, or the indicated dividend amount, the effect of the share issuance will be made retroactively and result in our earnings per share, FFO per share, and dividend per share being adjusted downward by the amount of the stock dividend, or approximately 11 percent. Rental Portfolio -- For the third quarter of 2003, net operating income from the rental portfolio, including equity in earnings of operating joint ventures, increased 7.8 percent to $52.8 million, from $49.0 million for the same period in 2002. For the nine months ended September 30, 2003, NOI from the rental portfolio, including equity in earnings of operating joint ventures, increased 11.1 percent to $166.8 million, from $150.2 million for the same period in 2002. -- At September 30, 2003, the rental portfolio totaled 38.2 million square feet. The net increase of approximately 800,000 square feet from June 30, 2003, is due to the completion of two development properties. -- The two distribution warehouse facilities totaling approximately 800,000 square feet that were completed and added to the rental portfolio during the third quarter of 2003 include a 578,000 square foot build-to-suit in San Bernardino County, California, and a 223,000 square foot build-to-suit in Shawnee, Kansas. The two buildings are 100 percent leased and represent a total investment of $28.7 million with a projected return on cost of 10.4 percent. -- At September 30, 2003, the rental portfolio's occupancy was 95.3 percent, compared to 94.4 percent at June 30, 2003, and 94.5 percent at year-end 2002. Development and Investment Activity -- At September 30, 2003, total construction in progress was 3.4 million square feet, of which 2.4 million square feet will be added to Catellus' rental portfolio upon completion; 300,000 square feet is build-to-suit-for-sale; and approximately 695,000 square feet will be owned in joint ventures. -- For the 2.4 million square feet under construction that will be added to Catellus' rental portfolio upon completion, the projected total cost of development is $83.1 million. These buildings are 70 percent preleased, and when fully leased, they are projected to yield a return on cost of 9.8 percent. -- During the quarter, the company announced the successful re-entitlement of a portion of Pacific Commons, a business park located in Silicon Valley, from office and hotel to retail. Concurrently, two ground leases for land that can accommodate 260,000 square feet of retail space were announced. Subsequent to that announcement, the company executed a third ground lease with Costco for land that will support retail space and a garden center totaling 157,000 square feet. -- During the quarter, a 187,000 square foot retail property was completed in joint venture and leased to Wal-Mart at Traer Creek in Avon, Colorado. Subsequently, Catellus sold its interest in this joint venture to its partner. -- During the quarter, Catellus completed the sale of Vista Range, a residential-community development in Denver, Colorado, entitled for 2,149 homes. Dividend -- The Board of Directors declared Catellus' first regular quarterly cash dividend at its Board meeting on October 8, 2003, for the quarter ended September 30, 2003, of $0.30 per common share payable on November 25, 2003, to stockholders of record as of close of business on November 4, 2003. Supplemental Reporting Measure -- As part of Catellus' REIT conversion, the company provides a supplemental performance measure of Funds From Operations, as defined by the National Association of Real Estate Investment Trusts, which Catellus believes provides a useful measure, along with GAAP net income, of its operating performance. -- Additionally, the company provides FFO in two segments: Core and Urban/Residential/Other. The first segment, or Core Segment, reflects the focal part of Catellus' business that it expects will be ongoing and central to its future operations. -- The second segment, or Urban/Residential/Other Segment, reflects the company's urban and residential businesses, including residential lot development, urban development, and desert land sales, which the company fully intends to transition out of over time. This segment also includes REIT conversion costs, including third party costs, net tax liability reversals due to the REIT conversion, and the effects of the stock option exchange. -- Core Segment FFO is consistent with what the company has given historically for FFO guidance and is consistent with what the company referred to as "Modified FFO" at quarter ended June 30, 2003. -- Both segments will be fully disclosed in the footnotes to the financial statements for year-end 2003. Prior to the effective date of the REIT conversion, scheduled for January 1, 2004, the company will present FFO adjusted for hypothetical tax savings as if the company had operated and been taxed as a REIT. -- FFO, including both segments as defined above, for the third quarter of 2003 was $45.2 million compared to $35.2 million for the same period last year, and for the first nine months of 2003 and 2002 was $131.5 million and $133.4 million, respectively. -- Core Segment FFO for the third quarter of 2003 was $32.7 million, compared to $29.3 million for the same period in 2002. On a per share basis, Core Segment FFO for the third quarter of 2003 was $0.35, compared to $0.33 for the same period in 2002. Core Segment FFO for the nine months ended September 30, 2003, was $109.6 million, compared to $102.8 million for the same period in 2002. On a per share basis, Core Segment FFO for the period ended September 30, 2003, was $1.20, compared to $1.15 for the same period in 2002. Catellus Development Corporation (S&P, BB Corporate Credit Rating, Positive) is a publicly traded real estate development company that owns and operates approximately 38.2 million square feet of predominantly industrial property in many of the country's major distribution centers and transportation corridors. The company's principal objective is sustainable, long-term growth in earnings, which it seeks to achieve by applying its strategic resources: a lower-risk/higher-return rental portfolio, a focus on expanding that portfolio through development, and the deployment of its proven land development skills to select opportunities where it can generate profits to recycle back into its business. More information on the company is available at http://www.catellus.com CENTRAL UTILITIES: Signs-Up Creel Sussman as Bankruptcy Counsel --------------------------------------------------------------- Central Utilities Production Corp., sought and obtained approval from the U.S. Bankruptcy Court for the Eastern District of Texas to retain and employ Creel, Sussman & Moore, LLP as counsel in this proceeding. Creel Sussman is an experienced bankruptcy law firm in Dallas, Texas. The Company tells the Court that they require an experienced bankruptcy counsel for the administration of this chapter 11 case and the formulation of plan of reorganization to be accepted by its creditors. In this regard, Creel Sussman will be engaged to assist the Debtor in compliance with 11 U.S.C. and assist in the formulation, confirmation and consummation of a plan of reorganization and any and all related litigation. The Creel Sussman professionals working on this engagement are: L.E. Cree, III $450 per hour Weldon L. Moore $275 per hour Paralegal/Legal Assistant $50 per hour Headquartered in Carrollton, Texas, Central Utilities Production Corp., an oil and gas exploration and production, filed for chapter 11 protection on August 29, 2003 (Bankr. E.D. Tex. Case No. 03-44067). William Tranthom, Esq., represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $74,000,000 in total assets and $3,000,000 in total debts. CENTURY CONTROLS: Callahan Johnston Resigns as Ind. Accountants --------------------------------------------------------------- On October 27, 2003, Century Controls International, Inc. received a letter of resignation dated October 22, 2003, from its independent public accountants, Callahan, Johnston & Associates, LLC. Callahan performed audits of the Company's financial statements for the years ended February 28, 2003 and 2002. Their audit reports for each of the years ended February 28, 2003 and 2002 were modified as to the uncertainty of the Company's ability to continue as a going concern. The Company's Board of Directors has yet to select new independent public Accountants for the Company. CHARTER COMMS: S&P Rates Unit's $500-Mil. Sr. Debt at CCC- ---------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CCC-' rating to the $500 million senior unsecured notes due 2013 of CCO Holdings LLC, an indirect, wholly owned subsidiary of cable TV system operator Charter Communications Inc. (CCC+/Developing/--). Proceeds from the notes, which will be issued under Rule 144A with registration rights, will be used to repay a portion of indebtedness under the four secured credit facilities of Charter's subsidiaries. All outstanding ratings on Charter were affirmed. The outlook is developing. Although the proposed CCO notes are structurally senior to the 'CCC-' rated debt of Charter Communications Holdings LLC and CCH II LLC, the substantial amount of priority obligations, largely in the form of secured bank debt structurally ahead of the new CCO notes, constrains the rating on these notes to two notches below the 'CCC+' corporate credit rating. The new notes extend Charter's debt maturities and increase bank borrowing availability to $1.2 billion, from $735 million as of Sept. 30, 2003. This liquidity, together with roughly $90 million in proceeds from the Oct. 1, 2003, sale of a cable system in Port Orchard, Washington and about $765 million in asset sale proceeds expected in 2004, put Charter in a better position to repay $618 million and $156 million of convertible debt maturing in 2005 and 2006, respectively. "Ratings on Charter continue to reflect high financial risk from elevated leverage due to acquisition- and capital spending-related debt, tightening bank covenants, and rising bank debt amortization," said Standard & Poor's credit analyst Eric Geil. The company also faces considerable operating challenges from weak video subscriber trends, limited ability to raise prices in the face of intense competition from satellite TV providers, and pressure from rising programming costs. Furthermore, Charter is the subject of an SEC investigation into its accounting practices. These factors are partly tempered by a good business risk profile from the company's position as the dominant provider of pay TV services in its markets, respectable EBITDA margins, strong growth in high-speed data services, opportunities for increased cash flow from digital video services, scale benefits from a large subscriber base totaling roughly 6.5 million, and system asset values. As of Sept. 30, 2003, Charter's liquidity was modest, consisting of roughly $135 million cash and $1.2 billion available from various credit facilities as limited by financial covenants (pro forma for the $500 million bank debt repayment from the CCO notes). These covenants tighten in subsequent quarters and could reduce the company's borrowing availability, depending on operating performance. Holdings was not in compliance with the 8.75x debt to EBITDA debt incurrence test of its public bonds as of Sept. 30, 2003, and is restricted in its ability to distribute cash upward for servicing the convertible debt. However, Charter Communications Holding Co. LLC, the direct parent of Holdings, had $39 million cash and was owed $37 million in intercompany loans as of Sept. 30, 2003, compared with roughly $43 million in annual interest payments required by the convertible notes. Holdings also has the ability to upstream additional cash under public bond restricted payment carve-outs. CLEARING SERVICES: E.D. Mo. Court Fixes SIPA Claims Bar Date ------------------------------------------------------------ On September 8, 2003, the Honorable Catherine D. Perry of the U.S. Bankruptcy Court for the Eastern District of Missouri granted protection afforded by the Securities Investor Protection Act to the creditors of Clearing Services of America, Inc. Thomas K. Vandiver was appointed Trustee for the Liquidation of the brokerage house's business, and the law firm of Sonnenschein Nath & Rosenthal LLP, was appointed to serve as Counsel for the Trustee. SIPA Claims must be received by the Trustee within sixty days after October 17, 2003. All claims must be filed with the Trustee, at: Thomas K. Vandiver, as Trustee for the Liquidation of Clearing Service of America PO Box 753 Midtown Station New York, NY 10018 CONEXANT: S&P Affirms B Rating & Notes Improved Performance ----------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B' corporate credit rating on Conexant Systems Inc. and revised its outlook on the company to stable from negative, recognizing Conxant's improving operating performance following a series of business realignments in recent quarters and benefits anticipated from a pending merger with GlobespanVirata Inc. Newport Beach, California-based Conexant has $582 million of debt outstanding. Conexant supplies semiconductors for cable modems, digital subscriber lines and set-top boxes. "Conexant's pending merger with Red Bank, New Jersey-based GlobespanVirata Inc., expected by the end of the first quarter of 2004, should provide improved liquidity compared to Conexant's current levels and should contribute to profitability by the end of that year," said Standard & Poor's credit analyst Bruce Hyman. GlobespanVirata is a major supplier of wireline and wireless communications semiconductors for digital subscriber-line telephony and for home networking. The two companies are well-positioned in the broadband communications sector, and the merged company should benefit from cross-selling of their product lines and elimination of some duplicate R&D projects, although there are some revenue risks because of a moderate degree of equivalent devices in the two companies' product lines. Pricing pressures are quite high, and market conditions are expected to remain aggressive. In addition to the integration challenges of the pending merger, GlobespanVirata made a substantial acquisition in August 2003 that is still being integrated. CONSTELLATION BRANDS: Reaffirms 3rd Quarter & Full Year Guidance ---------------------------------------------------------------- Constellation Brands, Inc. (NYSE: STZ), a leading international producer and marketer of beverage alcohol brands, reaffirmed its guidance for diluted earnings per share both on a comparable basis and a reported (GAAP) basis for the third quarter ending November 30, 2003 and fiscal year ending February 29, 2004. The Company expects additional imported beer sales ahead of the recently announced Mexican price increase to benefit modestly earnings per share in its third quarter ending November 30, 2003. Notwithstanding the benefit to the third quarter from additional imported beer sales, the Company has maintained its EPS guidance which takes into account the potential impact on shipments caused by California retail strikes and fires. The impact of the beer price increase on the fourth quarter ending February 29, 2004 is expected to be neutral to EPS, with additional sales in the early part of the quarter, offset by initial re-balancing of inventories toward the end of the quarter. Finally, it is anticipated that the benefit to Constellation's full year EPS ending February 29, 2004 from additional imported beer sales ahead of the price increase will be offset by further re-balancing of inventories in the early part of fiscal year 2005. The Company will be informing its distributors on the timing and the amount of the price increase towards late November. Constellation Brands, Inc. (S&P, BB Corporate Credit and Senior Unsecured Debt Ratings) is a leading international producer and marketer of beverage alcohol brands, with a broad portfolio across the wine, spirits and imported beer categories. The Company is the largest multi-category supplier of beverage alcohol in the United States; a leading producer and exporter of wine from Australia and New Zealand; and both a major producer and independent drinks wholesaler in the United Kingdom. Well-known brands in Constellation's portfolio include: Corona Extra, Pacifico, St. Pauli Girl, Black Velvet, Fleischmann's, Mr. Boston, Estancia, Simi, Ravenswood, Blackstone, Banrock Station, Hardys, Nobilo, Alice White, Vendange, Almaden, Arbor Mist, Stowells and Blackthorn. CRESCENT REAL ESTATE: Third-Quarter Results Sink into Red Ink ------------------------------------------------------------- Crescent Real Estate Equities Company (NYSE:CEI) announced results for the third quarter 2003. Funds from operations available to common shareholders before impairments related to real estate assets for the three months ended September 30, 2003 were $43.5 million, or $0.37 per share and equivalent unit (diluted). FFO for the nine months ended September 30, 2003 was $121.3 million or $1.04 per share and equivalent unit (diluted). These compare to FFO of $50.0 million or $0.43 per share and equivalent unit (diluted), for the three months ended September 30, 2002 and $167.3 million or $1.42 per share and equivalent unit (diluted) for the nine months ended September 30, 2002. Funds from operations is a supplemental non- GAAP financial measurement used in the real estate industry to measure and compare the operating performance of real estate companies, although these companies may calculate funds from operations in different ways. A reconciliation of our FFO before and after impairments related to real estate assets to GAAP net income for the Company is included in the financial statements accompanying this press release. Net loss to common shareholders for the three months ended September 30, 2003 was $3.3 million, or $0.03 per share (diluted). Net loss to common shareholders for the nine months ended September 30, 2003 was $28.7 million or $0.29 per share (diluted). This compares to net income available to common shareholders of $21.2 million or $0.20 per share (diluted), for the three months ended September 30, 2002 and $38.5 million or $0.37 per share (diluted), for the nine months ended September 30, 2002. According to John C. Goff, Chief Executive Officer, "Our third quarter FFO of $.37 per share was above our expected range of $.30 to $.32 per share. Included in our expected range was an $.08 per share gain from the sale of a commercial land parcel in downtown Houston which, as you'll recall, was delayed from the second quarter. In addition, we generated $.03 per share of lease termination fees, which are above our typical quarterly amount, and we recognized a $.02 per share gain from the sale of a commercial land parcel in Houston's Greenway Plaza, which we expected to occur in the fourth quarter. "While overall economic news is increasingly positive, job growth continues to be muted. Consequently, we remain cautious about the timing of a recovery in our office business. From today's vantage point, we see improvements in occupancy in late 2004 when job growth is expected to return." On October 15, 2003, Crescent announced that its Board of Trust Managers had declared cash dividends of $.375 per share for Common, $.421875 per share for Series A Convertible Preferred, and $.59375 per share for Series B Redeemable Preferred. The dividends are payable November 15, 2003, to shareholders of record on October 31, 2003. BUSINESS SECTOR REVIEW Office Sector (66% of Gross Book Value of Real Estate Assets as of September 30, 2003) Operating Results Office property same-store net operating income declined 14.4% for the three months ended September 30, 2003 over the same period in 2002. Average occupancy for these properties for the three months ended September 30, 2003 was 84.2% compared to 89.6% for the same period in 2002. As of September 30, 2003, the overall office portfolio's leased occupancy was 86.2%, and its economic occupancy was 84.4%. During the three months ended September 30, 2003 and 2002, Crescent received $5.3 million and $3.0 million, respectively, of lease termination fees. Crescent's policy is to exclude lease termination fees from its same-store NOI calculation. Office property same-store net operating income declined 12.5% for the nine months ended September 30, 2003 over the same period in 2002. Average occupancy for these properties for the nine months ended September 30, 2003 was 84.7% compared to 90.0% for the same period in 2002. During the nine months ended September 30, 2003 and 2002, Crescent received $8.3 million and $4.8 million, respectively, of lease termination fees. The Company leased 1.7 million net rentable square feet during the three months ended September 30, 2003, of which 1.3 million square feet were renewed or re-leased. The weighted average full service rental rate (which includes expense reimbursements) decreased 12.2% from the expiring rates for the leases of the renewed or re- leased space. All of these leases have commenced or will commence within the next twelve months. Tenant improvements related to these leases were $1.90 per square foot per year and leasing costs were $1.06 per square foot per year. The Company leased 4.0 million net rentable square feet during the nine months ended September 30, 2003, of which 2.4 million square feet were renewed or re-leased. The weighted average full service rental rate (which includes expense reimbursements) decreased 12.2% from the expiring rates for the leases of the renewed or re- leased space. All of these leases have commenced or will commence within the next twelve months. Tenant improvements related to these leases were $1.83 per square foot per year and leasing costs were $1.03 per square foot per year. Denny Alberts, President and Chief Operating Officer, commented, "As expected, in the third quarter our total office economic occupancy declined from 85.1% to 84.4%. While we continue to lease at a good pace, market conditions, particularly in Dallas and Denver, are expected to keep us from seeing any lift in occupancy until next year. Therefore, we anticipate ending this year at 85% to 86% economic occupancy, or an average economic occupancy of 84% to 85% for the year. "We signed leases for 1.7 million square feet in the third quarter. Total leases that have commenced or will commence in 2003 are 4.7 million square feet. The weighted average full service rental rate of these commencing leases is $21.00 per square foot. "Further, we have approximately 1.3 million total square feet of leases expiring by the end of the year. The weighted average full service rental rate for these leases is $19.58 per square foot. To date, 76% of that expiring space has been addressed - 52% by signed leases and 24% by leases in negotiation. Of the remaining 24%, or 320,000 square feet, appearing to be at risk, the majority relates to leases which continue to roll month to month, and substantially all of the rest is addressed by a lease that will commence in March of 2004." Acquisitions On August 27, 2003, Crescent announced it had acquired BayView Colonnade L.L.C. and, as a result, The BAC Colonnade Office Building is now a part of Crescent's portfolio. The Colonnade is an 11-story, 216,000 square-foot Class A building located in the Coral Gables submarket of Miami, Florida. The building's leased occupancy as of September 30, 2003 was 92%. On October 9, 2003, Crescent announced it has partnered with JPMorgan Fleming Asset Management in the acquisition of One BriarLake Plaza, a 20-story, 502,000 square foot Class A office building located in the Westchase submarket of Houston, Texas. The leased occupancy of this three year old building, as of September 30, 2003, was 90%. Under the joint-venture arrangement, JPMorgan Fleming Asset Management has a 70% interest in the property, while Crescent has a 30% interest and has been retained to provide management and leasing services to the venture. Resort and Residential Development Sector (23% of Gross Book Value of Real Estate Assets as of September 30, 2003) Destination Resort Properties Same-store NOI for Crescent's five consolidated resort properties increased 6% for the three months ended September 30, 2003 over the same period in 2002. The average daily rate decreased 3% and revenue per available room remained flat for the three months ended September 30, 2003 compared to the same period in 2002. Weighted average occupancy was 76% for the three months ended September 30, 2003 compared to 74% for the three months ended September 30, 2002. Same-store NOI for Crescent's five consolidated resort properties declined 12% for the nine months ended September 30, 2003 over the same period in 2002. The average daily rate decreased 1%, while revenue per available room remained flat for the nine months ended September 30, 2003 compared to the same period in 2002. Weighted average occupancy was 72% for the nine months ended September 30, 2003 compared to 71% for the nine months ended September 30, 2002. Upscale Residential Development Properties Crescent's overall residential investment generated $2.8 million and $13.8 million in FFO for the three months and nine months ended September 30, 2003, respectively. This compares to $4.3 million and $32.4 million in FFO generated for the three and nine months ended September 30, 2002, respectively. Investment Sector (11% of Gross Book Value of Real Estate Assets as of September 30, 2003) Business-Class Hotel Properties Same-store NOI for Crescent's four business-class hotel properties decreased 1% for the three months ended September 30, 2003 over the same period in 2002. The average daily rate increased 2% and revenue per available room increased 3% for the three months ended September 30, 2003 compared to the same period in 2002. Weighted average occupancy was 73% for the three months ended September 30, 2003 and 2002. Same-store NOI for Crescent's four business-class hotel properties decreased 3% for the nine months ended September 30, 2003 over the same period in 2002. The average daily rate increased 1% and revenue per available room increased 2% for the nine months ended September 30, 2003 compared to the same period in 2002. Weighted average occupancy was 73% for the nine months ended September 30, 2003 compared to 71% for the nine months ended September 30, 2002. Temperature-Controlled Facilities Investment Crescent's investment in temperature-controlled facilities generated $4.2 million and $16.3 million in FFO for the three and nine months ended September 30, 2003, respectively. This compares to $3.7 million and $14.5 million of FFO generated for the three and nine months ended September 30, 2002, respectively. EARNINGS OUTLOOK Crescent's management reaffirms its 2003 FFO guidance range of $1.55 to $1.80 per share. This range anticipates the completion of various operating initiatives during the fourth quarter, including residential and other land sales, which may or may not occur in that period or at the levels anticipated. In addition, the Company has provided documentation related to this guidance in its third quarter supplemental operating and financial data report. Refer to the following two paragraphs for details about accessing the conference call, presentation, and the supplemental operating and financial data report. SUPPLEMENTAL OPERATING AND FINANCIAL DATA Crescent's third quarter supplemental operating and financial data report is available on the Company's Web site -- http://www.crescent.com-- in the investor relations section. To request a hard copy, please call the Company's Investor Relations department at (817) 321-2180. Crescent Real Estate Equities Company (NYSE: CEI) is one of the largest publicly held real estate investment trusts in the nation. Through its subsidiaries and joint ventures, Crescent owned and managed, as of September 30, 2003, a portfolio of 74 premier office properties totaling 29.7 million square feet, located primarily in the Southwestern United States, with major concentrations in Dallas, Houston, Austin and Denver. In addition, the Company has investments in world-class resorts and spas and upscale residential developments. * * * As previously reported in Troubled Company Reporter, Standard & Poor's affirmed its ratings on Crescent Real Estate Equities Co., and Crescent Real Estate Equities L.P., and removed them from CreditWatch, where they were placed on Jan. 23, 2002. The outlook remains negative. Ratings Affirmed And Removed From CreditWatch Issue To From Crescent Real Estate Equities Co. Corporate credit rating BB BB/Watch Neg $200 million 6-3/4% preferred stock B B/Watch Neg $1.5 billion mixed shelf prelim B/B+ prelim B/B+/Watch Neg Crescent Real Estate Equities L.P. Corporate credit rating BB BB/Watch Neg $150 million 6 5/8% senior unsecured notes due 2002 B+ B+/Watch Neg $250 million 7 1/8% senior unsecured notes due 2007 B+ B+/Watch Neg DALEEN TECH.: Walking Away from Allegiance BillingCentral Pact -------------------------------------------------------------- On October 30, 2003, Daleen Solutions, Inc., an indirect wholly owned subsidiary of Daleen Technologies, Inc., delivered to Allegiance Telecom Company Worldwide a Notice of Election Not to Renew the BillingCentral Agreement between the parties under the current contractual terms. In May 2003, Allegiance filed a petition under Chapter 11 of the U.S. Bankruptcy Code, and on October 30, 2003, the Company received a letter from Allegiance indicating that it believes the Notice of Election Not to Renew to be in violation of the automatic stay under the Bankruptcy Code. Although the Company does not believe it to be necessary, on October 31, 2003, the Company filed a Motion of Daleen Solutions, Inc. for Relief From the Automatic Stay Under Section 362 of the Bankruptcy Code and subsequently delivered to Allegiance a second Notice of Election Not to Renew. The current agreement expires on December 31, 2003, and the Company is attempting to negotiate the terms of a new contract with Allegiance. If a new agreement between the parties cannot be reached, it is possible that Allegiance will contest in the bankruptcy court whether the notices of non-renewal delivered by Daleen are in violation of the U.S. bankruptcy law. There can be no assurance that terms for a new contract will be agreed upon or that this business relationship will continue after December 31, 2003. If Allegiance ceases to do business with the Company and the Company fails to obtain additional financing or fails to engage in one or more strategic alternatives, it may have a material adverse effect on the Company's ability to operate as a going concern. Daleen Technologies, Inc. is a global provider of high performance billing and customer care software solutions that manage the revenue chain for traditional and next-generation communication service providers, retailers and distributors of digital media, and technology solutions providers. DIEDRICH COFFEE: Red Ink Continued to Flow in Fiscal 1st Quarter ---------------------------------------------------------------- Diedrich Coffee, Inc. (Nasdaq: DDRX) announced operating results for its first fiscal quarter of 2004, which ended September 24, 2003. For the quarter, the Company reported a net loss of $301,000, or $0.06 per share, compared to a nominal loss of $10,000 or $0.00 per share reported during the first quarter of the prior fiscal year. Roger Laverty, Diedrich's Chief Executive Officer stated, "The Company's business is highly seasonal, with the first quarter being the weakest quarter of our fiscal year and the second quarter being the strongest. The first quarter includes the slow summer season while the second quarter includes the holiday season, a peak business period for our shopping mall based Gloria Jean's coffeehouses. We've taken advantage of our slower first quarter to implement programs that we believe will produce future benefits although they have somewhat increased short-term costs." Laverty went on to say, "The program initiatives allocate additional financial and human resources to our core operations. We began a major improvement program for our Southern California company operated Diedrich Coffee stores, installed new in-store operating systems, and also significantly increased our in-store staffing and supervisory personnel. These changes are designed to provide our customers with an even more pleasurable experience in our coffeehouses and reverse the recent trend in same store sales. At the same time we have dedicated senior management to the Gloria Jean's franchise operation, by far our greatest growth opportunity. Cost of the new initiatives affected first quarter results but represent an important investment in the Company's future." Revenue Revenue declined in the first quarter versus the prior year, as expected. During the past year, we closed several units, including our remaining units in the Arizona market, and sold several company owned Gloria Jean's locations to new franchisees. Same store sales declined for the quarter, but improved versus the trend experienced in the last quarter of fiscal 2003. Total revenue for the twelve weeks ended September 24, 2003, was $11,311,000, a decrease of $1,035,000 (8.4%) compared with revenue of $12,346,000 for the prior year period. This decrease consists of a $984,000 (12.5%) decline in retail sales and a $161,000 (5.3%) decline in wholesale revenue, partially offset by an increase in franchise revenue of $110,000 (7.6%). The decline in retail sales for the first quarter versus the prior year quarter was primarily the result of the planned closure of six stores and the sale of six Company operated units to franchisees. The divestiture of the 12 units resulted in a $741,000 reduction in retail sales. The decline in retail sales was also due to negative comparable store sales of 3.3% for Company operated stores during the quarter. An increase of $22,000 in e-commerce sales slightly offset the other decreases. The decline in wholesale revenue primarily reflects $200,000 (15.0%) lower sales of roasted coffee to franchisees, as a result of 19 fewer domestic franchise stores in the current year quarter, and a slight decrease in wholesale revenue from chain restaurants and specialty retailers. These reductions were partially offset by an increase of $62,000 (4.6%) in office coffee service sales. Franchise revenue increased $110,000 (7.6%) primarily due to a dissolution settlement of the Malaysia franchise agreement. A $44,000 (3.6%) decline in franchise royalties was the net impact of a decrease in domestic royalties, partially offset by an increase in international royalties. The Company had 19 fewer domestic franchise stores at quarter end versus the prior year, but 52 more international franchised outlets, for a 33 unit net increase in worldwide franchise locations. Although royalty fees from international franchises are lower than those from domestic franchises, the international market offers great promise for growth. System-wide comparable store sales at Gloria Jean's units open at least one year increased 0.6% during the first fiscal quarter, compared to the prior year quarter. System-wide comparable store sales at Diedrich Coffee brand coffeehouses declined 5.7% for the quarter, as compared with the prior year, while comparable store sales at the Company's Coffee People locations declined 0.4% during this same period. Costs and Expenses Cost of sales and related occupancy costs decreased from 46.3% of revenue in the prior year quarter to 45.2% in the current quarter. While occupancy costs as a percentage of revenue showed little change, cost of sales showed improvement in both the retail and wholesale segments. The retail improvement resulted primarily from our investment in new in-store operating systems to help us better control costs. The wholesale improvement resulted from our decision in the fourth quarter of fiscal 2003 to purchase equipment used to package our Keurig products; the royalty we previously paid had been included in cost of sales. Overall, operating expenses remained constant year to year, at 32.7% of total revenue. Retail operating expenses as a percentage of revenue increased as a result of our decision to improve customer service by increasing staff at the stores. However, the retail percentage increase was offset by a reduction in operating expenses in our wholesale and franchise segments. For the current quarter, general and administrative expense increased 2.0% as a percentage of revenue, primarily due to the decline in revenue discussed above and also due to the addition of a Director of Store Operations as well as other store supervisory staff. The purpose of the staff additions is to improve future operating performance. With headquarters in Irvine, California Diedrich Coffee specializes in sourcing, roasting and selling the world's highest quality coffees. The Company's three brands are Gloria Jean's Coffees, Diedrich Coffee, and Coffee People. The Company's 430 retail outlets, the majority of which are franchised, are located in 35 states and 10 foreign countries. Diedrich Coffee also sells its coffees through more than 230 wholesale accounts including office coffee service distributors, restaurants and specialty retailers, via mail order and the Internet. For more information about Diedrich Coffee, call 800/354-5282, or visit the Company's Web sites at http://www.diedrich.com http://www.gloriajeans.com or http://www.coffeepeople.com As reported in Troubled Company Reporter's September 30, 2003 edition, the Company was in the process of amending its bank credit agreement, as it is presently not in compliance with certain financial covenants therein because of the fourth quarter impairment charges. The Company believes it will be able to execute an amendment on terms that will not materially interfere with its ability to execute its business plan. Beyond the covenant modifications noted above, the Company expects the amendment to eliminate the $1,000,000 line of credit for new coffeehouse development during fiscal 2004, but renew availability of a recently expired $500,000 working capital line until April 2004. The amendment is also expected to eliminate an existing covenant requiring the Company to maintain $800,000 of cash on deposit with the bank, and substitute a new requirement that the Company maintain a restricted cash balance on deposit with the bank to collateralize its equipment term loan in an amount equal to the lesser of $800,000 or the balance of the loan. Matt McGuinness, Chief Financial Officer for Diedrich Coffee stated that, "based on the expected terms of this amendment, our current cash balances and the strength of our balance sheet, and our expectations regarding operating results for the current fiscal year, we are confident that we have the capital resources available to remodel our Diedrich Coffee stores and to fund necessary initiatives to stimulate the growth of our franchise system." DOANE PET: S&P Cuts Credit & Senior Secured Debt Ratings to B- -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior secured debt ratings on pet food manufacturer Doane Pet Care Co. to 'B-' from 'B'. Standard & Poor's also lowered the senior unsecured and subordinated debt ratings on Doane to 'CCC' from 'CCC+'. The outlook is negative. Total debt outstanding at Sept. 27, 2003, was about $555 million. The downgrade follows Doane's recent announcement after its 2003 third-quarter financial results that, due to substantially higher than expected commodity costs, which continue to increase at unprecedented rates, management will not forecast 2003 fourth- quarter and full-year adjusted EBITDA and operating cash flows. While Doane met its third-quarter bank financial covenants, pricing flexibility remained limited and raw material costs have soared higher despite the company's past hedging efforts. Standard & Poor's is very concerned about Doane's ability to improve its financial performance and cash flows in the near term sufficiently to meet its credit facility's financial covenants in the fourth quarter of 2003. Management has recently revised its pricing strategy and risk management process. Although the company's current negotiations with a majority of its customers to pass through changes in commodity costs could lead to additional cash inflows, the timing and outcome of these negotiations are uncertain. Doane's raw material costs, together with packaging costs, represent 75% of its cost of goods sold. "The ratings continue to reflect Brentwood, Tenn.-based Doane's heavy debt burden, which stems from a past LBO and an aggressive acquisition strategy," said Standard & Poor's credit analyst Jean C. Stout. "The ratings also reflect the company's narrow business focus and its participation within a highly competitive industry. These factors are somewhat mitigated by the company's strong business position in the relatively stable but mature pet food industry." Doane competes principally in the domestic dry pet food segment and has a market share of about 24% by volume. It is also the largest manufacturer of private label pet food in the U.S. The approximately $12 billion domestic pet food industry is relatively stable and mature and has exhibited unit growth in the low single- digits for the past few years. The dry pet food segment represents more than half of the U.S. market and is growing faster than moist products due to quality and taste improvements, as well as convenience of use. In 2002, private label pet food sales represented approximately 30% of industry sales. DYNEGY: S&P Places Illinois Power Unit's Credit Rating on Watch --------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B' corporate credit rating on electric utility Illinois Power Co., a subsidiary of Dynegy Inc., on CreditWatch with positive implications following the announcement that Exelon Corp. has agreed to purchase Illinois Power. Standard & Poor's also affirmed its 'B' corporate credit rating on Dynegy. The outlook on Dynegy and its subsidiary Dynegy Holdings Inc. remains negative. The affirmation of the remaining Dynegy units reflects Standard & Poor's current assessment of the firm's business model, risk level, and financial profile. "The proposed transaction, if consummated, could improve Dynegy's balance sheet and its liquidity position since the proposed deal will eliminate $170 million in annual interest payments associated with the $2.3 billion intercompany note and $1.8 billion in Illinois Power debt to be assumed by Exelon," said Standard and Poor's credit analyst John Kennedy. "Still, even if Dynegy is able to dispose of its Illinois Power obligations, the firm will still be burdened with a massive amount of debt leverage retained from the prior failed business strategy," added Mr. Kennedy. Notably, the firm's business model is dependent on increasing power prices as a source of improved cash flow needed for debt reduction. The ratings on Dynegy reflect the continued challenges the firm faces in regard to generating sufficient cash flow, maintaining access to capital markets for debt refinancing, preserving an adequate liquidity position, and meeting obligations over the next 12 months. The negative outlook reflects the continued uncertainty around Dynegy's ability to generate sustainable cash flow given the current environment in electric generation, as well as the price volatility in gathering and processing of natural gas liquids. Given Dynegy's current financial profile, the firm is susceptible to adverse economic conditions, which could result in stagnant generation prices and volatile gathering and processing natural gas liquids margins. Rating stability and/or upward ratings momentum is principally predicated on the predictability and sustainability of incremental cash flows to meet debt service obligations and reduce indebtedness. ENRON: AT&T Wants Prompt Payment of $7MM Admin. Expense Claim ------------------------------------------------------------- Kenneth A. Rosen, Esq., at Lowenstein Sandler PC, in New York, relates that prior to the Petition Date, relates that AT&T Corporation provided communication services to certain Enron Debtors under various accounts with a $900,000 average monthly billings under various contracts between the Debtors and AT&T. The contracts between the Debtors and AT&T expired. Thus, AT&T charges tariff rates as authorized by various tariffs filed with the Federal Communications Commission. Nevertheless, AT&T continues to supply communication services to the Debtors. According to Mr. Rosen, the Debtors filed and served a number of disconnection requests with AT&T. AT&T has disconnected all circuits contained in the disconnection requests. Mr. Rosen informs the Court that currently, the Debtors owe AT&T $6,916,189 for outstanding postpetition amounts. Mr. Rosen notes that AT&T reserved the right to amend this amount in the event additional outstanding postpetition amounts are discovered. Pursuant to Section 503(b) of the Bankruptcy Code, AT&T is entitled to receive payment on account of the postpetition charges as an administrative expense claim. These charges were incurred by the Debtors postpetition and were essential to and benefited the Debtors' estates since: -- the Debtors were able to continue to operate postpetition; and -- the Debtors became more marketable for purposes of selling their assets as a going concern. Accordingly, AT&T asks the Court to allow its administrative expense claim and compel the Debtors to immediately pay $6,916,189 to it. (Enron Bankruptcy News, Issue No. 85; Bankruptcy Creditors' Service, Inc., 609/392-0900) EVERGREEN INT'L: Appoints John A. Irwin Chief Financial Officer --------------------------------------------------------------- Evergreen International Aviation, Inc. announced the appointment of John A. Irwin as Chief Financial Officer, effective October 31, 2003. Prior to Mr. Irwin's appointment, Michael R. Barr, who is no longer with the Company, served in this position. Mr. Irwin has been with the Company for over 18 years, serving most recently as one of its directors, a member of the Executive Committee and as the Treasurer and Vice President of Risk Management. Mr. Irwin also serves in numerous other capacities for the Company's subsidiaries, including, most notably, as a director and the Vice President of Finance for Evergreen International Airlines, Inc. Mr. Irwin's tenure and integral familiarity with the Company's operations are a key component of the strong continuity of Evergreen's management. Mr. Irwin commented on the decision announced October 31, 2003 by Standard & Poor's Ratings Services to lower its corporate credit rating on the Company to 'B-' from 'B', the senior secured rating to 'B' from 'B+', and the senior second secured rating to 'CCC+' from 'B-'. "We were surprised and disappointed about the recent Standard & Poor's decision," said Mr. Irwin. "We continue to believe that our cash flow from operations and availability under our credit facility will provide us with sufficient liquidity and capital resources to operate our business and pay our obligations as they come due. Evergreen has a $12.8 million interest payment and a $2 million retirement plan payment due Nov. 15, 2003. At October 31, 2003, the Company had $1.5 million of cash and an aggregate of approximately $15 million of borrowing capacity (portions of which are determined by a borrowing base) under its bank credit facility and other financing arrangements. We anticipate that the Company's liquidity will improve over the next six months as we will not have many of the one time costs associated with our refinancing that we incurred over the past six months." Based in McMinnville, Oregon, Evergreen is a leading integrated provider of worldwide airfreight transportation and aircraft ground handling and logistics, helicopter, light fixed wing aircraft, aircraft maintenance and repair services and parts and equipment sales. Evergreen's subsidiary companies provide diversified aviation services that include: worldwide air freight transportation, cargo and mail handling, airport passenger services, specialized helicopter services such as aerial spraying and petroleum support, aircraft maintenance, repair and overhaul services, storage, and buying, selling, leasing and trading aircraft, aircraft parts and engines. Evergreen provides services to a broad base of long-standing customers, including the U.S. Air Force Air Mobility Command, the U.S. Postal Service, freight forwarders, domestic and foreign airlines, industrial manufacturers and other government agencies. FALCON PRODUCTS: S&P Places Credit & Debt Ratings on Watch Neg. --------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B' corporate credit and 'CCC+' subordinated debt ratings on furniture manufacturer Falcon Products Inc. on CreditWatch with negative implications. "The CreditWatch placement reflects continued softness in Falcon's market segments, including furniture manufactured for hospitality, food service, and contract customers," said credit analyst Martin S. Kounitz. "Because of the weakness in these segments, Falcon's credit measures and liquidity are below Standard & Poor's expectations." While St. Louis, Missouri-based Falcon has taken steps to improve its credit profile, including refinancing its bank debt in June 2003 and consolidating plants for efficiency gains and cost reductions, Standard & Poor's remains concerned about the company's prospects for profit improvement. In the food service segment, Falcon has not yet fully replaced revenues after completing a contract with Boston Market to renovate restaurants. Hotel customers, with high vacancy rates, are continuing to defer investment to refurbish rooms. In the contract segment, volume is flat. As a result, Falcon's debt leverage remains high, and covenant compliance is tight. Standard & Poor's will meet with management to assess its business and financial plan given the current challenging market conditions. FEDERAL-MOGUL: UST Appoints Asbestos Property Damage Committee -------------------------------------------------------------- Pursuant to Section 1102(a)(1) of the Bankruptcy Code, Roberta A. DeAngelis, Acting United States Trustee for Region 3, appoints five entities to serve on the Official Committee of Asbestos Property Damage Claimants in the Federal-Mogul Debtors' Chapter 11 cases: 1. Anderson Memorial Hospital c/o Speights & Runyan Attn: Daniel A. Speights P.O. Box 685 200 Jackson Avenue East, Hampton, SC 29924 Phone: 803-943-4444 Fax: 803-943-4599; 2. Jacksonville College c/o Dies & Hile, LLP Attn: Martin W. Dies 1009 West Green Avenue Orange, TX 77630 Phone: 409-883-4394 Fax: 409-883-4814; 3. Moxie Real Estate c/o Richard E. Griffith 5539 Peach Street Erie, PA 16509 Phone: 814-838-1234 Fax: 814-868-9090; 4. Richard Blyth 1632 Victoria Avenue Los Angeles, CA 90019 Phone: 323-468-6203 or 323-734-0559 Fax: 323-734-2950; and 5. The Hill School Attn: Timothy D. Forester 717 East High Street Pottstown, PA 19464 Phone: 610-326-1000 Fax: 610-705-1761. (Federal-Mogul Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-0900) FFP OPERATING: Wants Schedule-Filing Deadline Moved to Dec. 8 ------------------------------------------------------------- FFP Operating Partners, LP wants more time to file the required Schedules of Assets and Liabilities, Schedules of Executory Contracts and Unexpired Leases and Statement of Financial Affairs. The Debtor submits that cause exists for extension of time for filing of schedules and statements in this case. The Debtor points out that it has in excess of 1,500 employees and approximately 2,281 retail locations. Due to the complexity and diversity of its operations, it anticipates that it will be unable to complete its Schedules and Statements in the time required under Bankruptcy Rule 1007. To prepare the required Schedules and Statements, the Debtor must gather information from books, records and documents relating to a multitude of transactions. Consequently, collection of the necessary information requires an expenditure of substantial time and effort on the part of the employees, especially considering the nature of the cash management system of the Debtor. Given the significant burdens already imposed on the management by the commencement of this Chapter 11 case, the Debtor requests additional time to complete and file the required Schedules and Statements. The Debtor has mobilized its employees to work diligently on the assembly of the necessary information and anticipates that it will be able to file its Schedules and Statements, all in the appropriate formats prescribed by the Bankruptcy Code, the Bankruptcy Rules, and the Local Bankruptcy Rules through December 8, 2003. Headquartered in Fort Worth, Texas, FFP Operating Partners, LP, together with other subsidiaries of FFP Partners, L.P., owns and operates convenience stores, truck stops, and self-service motor fuel outlets over a twelve state area. The Company filed for chapter 11 protection on October 23, 2003 (Bankr. N.D. Tex. Case No. 03-90171). Mark Joseph Petrocchi, Esq., at Colvin and Petrocchi represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed over $10 million in assets and debts of over $50 million. FRAWLEY CORP: Recurring Losses Raise Going Concern Uncertainty -------------------------------------------------------------- For the quarter ended September 30, 2003, Frawley Corporation's real estate operating loss was $92,000 compared to a loss in 2002 of $87,000. During the nine months ended September 30, 2003, real estate losses were $248,000 as compared to a loss of $255,000 for the same period in 2002. Real estate losses continue as the Company incurs carrying costs and costs of improvements required to sell the property. Although the Company is actively seeking a buyer for its undeveloped real estate, the County of Los Angeles has adopted more stringent rules covering the development of raw land. These revised regulations have made it more difficult to develop the Company's property. Due to the Hospital's continued losses and its inability to pay interest on its secured $1,022,000 loan on the Hospital property for more than a year, the Board of Directors of the Company had unanimously voted to sell or close this business in 2002. Effective February 1, 2002, the Company entered into a Settlement Agreement with a related party holding outstanding notes payable in the amount of $1,022,000, secured by the Hospital property in Seattle, Washington. Under the terms of the agreement, the Company sold the Hospital land, building and related property and equipment to the related party for a purchase price in the amount of the principal of the notes ($1,022,000) and accrued interest ($174,000). Also effective February 1st, 2002, the Company entered into a lease agreement with the related party whereby the Company is permitted to lease the Hospital facility for 36 months, with an option to repurchase the property from the related party at an amount equal to the original principal indebtedness plus accumulated interest and attorney fees. The original principal amount of indebtedness of $1,022,000 was owed to Frances Swanson, individually, and Frances Swanson Successor Trustee of the Frawley Family Trust. Frances Swanson is the Chairman's sister. Prior to the sale of the Schick Program on October 1, 2002, for the nine months ended September 30, 2002, the health care discontinued operations net income was approximately $506,000. The net income reflects a gain from the Settlement Agreement of $781,000, which resulted from the reduction of debt in the amount of $1,022,000 and accrued interest of $174,000 less the net book value of assets sold for $415,000. If the Company had not entered into the Settlement Agreement, the net loss for the Hospital would have been $275,000 for the nine months ended September 30, 2002. On October 1st 2002, the Company entered into asset sale of the Schick Program to a non-related third party group of former patients of the Hospital program in the amount of $316,000 plus various assumed liabilities. The sales price comprised of $50,000 in cash, a note receivable for $250,000 for a term of five years at an interest rate of 8% per annum and a 5% interest in the new owner's limited partnership. The Company recorded a gain on the sale of approximately $158,000. The Hospital incurred legal expenses of approximately $81,000 related to the sale. As part of the asset sale, the new owners acquired the same option to purchase the Hospital real estate as the Company had. In addition, the Company allowed the new owners to operate the Hospital program under the existing state and federal permits until such time the new owners could obtain their own. In January 2003, the Company was informed that the new owners had obtained all the necessary permits to operate the Hospital and ceased using the Company's permits. During the first nine months of 2002, Michael Frawley, the Company's Chairman, loaned the Hospital $55,000 to meet operating expenses. To complete the sale, the Company's Chairman agreed to release the Company from its indebtedness to him in the amount of $55,000 and agreed to a new note of $55,000 to be paid by the new owners at the end of 2003. The proceeds from the sale were distributed as follows: $50,000 was deposited into Karr Tuttle & Campbell Trust account, Schick's attorney's, and used as partial payment of outstanding legal fees. The $250,000 note was assigned to the Chatham Brothers toxic waste PRP Trust. On October 1, 2003, the Chatham Brothers toxic waste PRP trust received the first annual payment from the $250,000 note as scheduled. The Company's recurring losses from continuing operations and difficulties in generating cash flow sufficient to meet its obligations raise substantial doubt about its ability to continue as a going concern. Real estate and corporate overhead are producing losses that the operating business is unable to absorb. The required investments in real estate are currently funded by loans. The Company intends to meet its obligations through real estate sales. The limited resources available to the Company will be directed at reducing operating expenses and selling real estate. The Company continues to incur legal expenses and had an obligation in 2003 to contribute to the Chatham Brothers toxic waste cleanup lawsuit. FRONT PORCH: Taps J.H. Cohn to Replace Ernst & Young as Auditors ---------------------------------------------------------------- On October 24, 2003, Front Porch Digital Inc. dismissed Ernst & Young LLP as its independent accountants. The report of Ernst & Young LLP for the Company's fiscal years ended December 31, 2002 and 2001, was qualified due to a going concern uncertainty. On October 24, 2003, Front Porch Digital's Board of Directors recommended and approved the decision to change independent accountants. The Company engaged J.H. Cohn LLP as its new independent accountants as of October 24, 2003. GINGISS GROUP: May Dept. Stores Buying Assets for $23 Million ------------------------------------------------------------- The Gingiss Group, Inc., (Gary's Operating, Inc., GII Acquisition, Inc., and Gingiss Formalwear, Inc.) has entered into an Asset Purchase Agreement with After Hours Formalwear, Inc., an affiliate of The May Department Stores Company, Incorporated (NYSE: MAY). Pursuant to this agreement, the above entities are selling to After Hours intellectual property including but not limited to the rights to the names "Gingiss Formalwear" and "Gary's Tux Shop," 125 company operated stores, and related inventory and personal property for $23 million subject to certain adjustments. Concurrently, The Gingiss Group, Gary's Operating, Inc., GII Acquisition, Inc., Gingiss International, Inc. and Gingiss Formalwear, Inc., filed voluntary petitions for relief pursuant to Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The Company has requested that the Bankruptcy Court approves certain sale procedures that will govern an auction at which the Company will solicit qualified competitive bids. Such auction is anticipated in early December 2003, with a closing to occur shortly thereafter. The Company has also obtained a commitment from its existing secured lender to provide debtor in possession financing with which to sustain operations. Mark Syrstad, the Company's Chief Executive Officer, said: "We are pleased that we were able to reach agreement with After Hours and to secure financing that will allow us to continue operations. We believe that the transaction maximizes value for all creditor constituencies, will preserve jobs, and will provide for continued outstanding service to our customers." The Company emphasizes its commitment to its customers and to maintaining the level of service and customer satisfaction for which it is known. To that end, an information line has been established for brides and grooms currently registered with the Company's stores. That number is 800-621-7125. The Company operates 236 company owned stores under the names "Gingiss Formalwear" and "Gary's Tux Shops," and is the only national chain of retail stores specializing in the rental and sale of formalwear. The Company maintains distribution centers in Boston, Chicago, Fort Lauderdale, Honolulu Los Angeles, and Seattle, and maintains its corporate offices in Addison, IL. GINGISS GROUP: Brings-In Pachulski Stang as Bankruptcy Attorneys ---------------------------------------------------------------- The Gingiss Group, Inc., and its debtor-affiliates are seeking permission from the U.S. Bankruptcy Court for the District of Delaware to retain and employ Pachulski, Stang, Ziehl, Jones & Weintraub PC as General Bankruptcy Counsel in their chapter 11 cases. The Debtors want to retain Pachulski Stang as their attorneys because of the Firm's particular expertise in the areas of insolvency, business reorganization, and other debtor/creditor matters. The principal attorneys and paralegals presently designated to represent the Debtors and their current standard hourly rates are: Laura Davis Jones $560 per hour Jeffery N. Pomerantz $445 per hour James E. O'Neill $395 per hour Samuel R. Maizel $390 per hour Erin Gray $370 per hour Gabrielle Albert Rohwer $300 per hour Sandra G. McLamb $235 per hour Marta Wade $130 per hour Marlene Chappe $125 per hour As Counsel, it is expected that Pachulski Stang will: a. advise the Debtors on the requirements of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, and the requirements of the United States Trustee pertaining to the administration of the Estates; b. prepare motions, applications, answers, orders, memoranda, reports and papers in connection with the administration of the Estates; c. protect and preserve the Estates by prosecuting and defending actions commenced by or against the Debtors and preparing objections to claims filed against the Estates; d. investigate and prosecute preference, fraudulent transfer, and other actions arising under the Debtors' avoiding powers; and e. render such other advice and services as the Debtors may require in connection with the Chapter 11 cases. Headquartered in Addison, Illinois, The Gingiss Group, Inc., a national men's formal wear rental and retail company, filed for chapter 11 protection on November 3, 2003 (Bankr. Del. Case No. 03-13364). James E. O'Neill, Esq., and Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub represent the Debtors in their restructuring efforts. The Debtors listed debts of over $50 million in their petition. GLOBAL GOLF: Breaks Ties with Accountants, Ronald R. Chadwick ------------------------------------------------------------- Effective September 23, 2003, the auditor client relationship between Global Golf Holdings Inc. and Ronald R. Chadwick P.C. ceased. The Company and the Board of Directors have subsequently approved of the engagement of the firm of Peterson Sullivan PLLC of Seattle, Washington. Chadwick did not resign or decline to stand for reelection, but were dismissed to allow the appointment of PS. During his tenure, Chadwick's reports did include an explanatory paragraph where they expressed substantial doubt about the Company's ability to continue as a going concern. GS MORTGAGE: Fitch Affirms BB- $18-Mill. Class B Notes' Rating -------------------------------------------------------------- Fitch upgrades the GS Mortgage Securities Corp. II, commercial mortgage pass-through certificates, series 1996-PL, as follows: -- $16.8 million class C to 'AAA' from 'AA' -- $16.8 million class D to 'AA' from 'A'; -- $15 million class E to 'A' from 'BBB-' In addition, Fitch affirms the following classes: -- $41.5 million class A-2 'AAA'; -- $18.4 million class B 'AAA'; -- Interest-only class X-1 'AAA'; -- Interest-only class X-2 'AAA'; -- Interest-only class X-3 'AAA'; -- $19.6 million class F 'BB-'. Fitch does not rate the $21.9 million class G certificates. The upgrades reflect an increase in the credit enhancement levels resulting from prepayments. As of the October 2003 distribution date, the pool's principal balance has been reduced by approximately 73%, to $148.9 million from $552.1 million at issuance. Protective Life, the master servicer, collected year-end 2002 financials for 91% of the pool by balance. The 2002 weighted average debt service coverage ratio is 1.31 times, compared to 1.29x at issuance. Two loans representing 6.9% of the outstanding balance are currently in special servicing. The larger loan (5.2%), which is also the largest loan in the pool, is a $7.8 million retail property located in North Adams, MA. The property is currently 70% occupied and transferred to the special servicer when its anchor tenant, Kmart, entered bankruptcy and rejected its lease. Fitch applied various hypothetical stress scenarios taking into consideration the above concerns. Even under these stress scenarios, the resulting subordination levels were sufficient to upgrade the designated classes. Fitch will continue to monitor this transaction, as surveillance is ongoing. HARRAH'S ENTERTAINMENT: Board Declares Quarterly Cash Dividend -------------------------------------------------------------- The board of directors of Harrah's Entertainment, Inc. (NYSE: HET) declared a regular quarterly cash dividend of 30 cents per share, payable November 26, 2003, to shareholders of record as of the close of business on November 12, 2003. Founded 65 years ago, Harrah's Entertainment, Inc. (Fitch, BB+ Senior Subordinated Rating, Stable Outlook) operates 26 casinos in the United States, primarily under the Harrah's brand name. Harrah's Entertainment is focused on building loyalty and value with its target customers through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership. HAYES LEMMERZ: Seeking Approval of Plan Distribution Procedures --------------------------------------------------------------- The Reorganized Hayes Lemmerz Debtors and the HLI Creditor Trust jointly ask the Court to approve certain additional procedures with respect to distributions, pursuant to the Plan. Specifically, the Debtors and the Trust ask the Court to declare that: (a) any holder of an Administrative Claim, Priority Tax Claim, Other Priority Claim, Miscellaneous Secured Claim, General Unsecured Claim or Subordinated Securities Claim, who is also subject to a Trust Avoidance Claim will not have an Allowed Claim and be entitled to receive a distribution pursuant to the Plan, until the time the Trust Avoidance Claim against the holder is resolved; and (b) in the event that the Reorganized Debtors, as Disbursing Agent, or the Trust require a holder of an Allowed Claim to provide an Internal Revenue Service Form W-9 or Form W-8, if applicable, or establish an adequate basis for exemption from withholding, the Disbursing Agent or Trust will be authorized to reserve any distribution otherwise payable to the holder, until the time the holder provides the necessary form or establishes an adequate basis for exemption from withholding. Trust Avoidance Claim Parties Pursuant to the Plan, on the Effective Date, the Debtors transferred to the Trust, for and on behalf of the Trust's beneficiaries, the Trust Assets including the Trust Avoidance Claims. The transfer was subject to certain repayment obligations. Under the Plan, the Trust has the authority, duty and obligation to liquidate the Trust Claims, including prosecuting and resolving the Trust Avoidance Claims, while the Reorganized Debtors, as Disbursing Agent, have the obligation to administer and, if necessary, object to Claims asserted in these cases. As of October 4, 2003, the Trust is attempting to liquidate the Trust Avoidance Claims, including attempting to resolve the Trust Avoidance Claims on a consensual basis. In fact, the Court recently approved procedures developed by the Trust and the Reorganized Debtors to approve settlements of Trust Avoidance Claims negotiated by the Trust. A number of Trust Avoidance Claims have been resolved on a consensual basis pursuant to these procedures, according to J. Eric Ivester, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, in Chicago, Illinois. In the event that the Trust is unable to consensually resolve all of the Trust Avoidance Claims in the upcoming months, the Trust expects to prosecute any unresolved Trust Avoidance Claims by commencing adversary proceedings in the Bankruptcy Court. In many instances, the Avoidance Claims Parties, which are parties asserting Administrative Claims, Priority Tax Claims, Other Priority Claims, Miscellaneous Secured Claims, General Unsecured Claims or Subordinated Securities Claims via proofs of claim or requests for payment of administrative claims, are also subject to unresolved Trust Avoidance Claims. Because the Reorganized Debtors are responsible for claims administration and claims objections, but the Trust is responsible for prosecuting and resolving Trust Avoidance Claims, the Reorganized Debtors and the Trust want to protect against any situations that arguably might prevent the Trust from prosecuting a Trust Avoidance Claim and therefore preclude the subsequent recovery of Trust Assets. Unfortunately, postponing administration of the Claims asserted by the Avoidance Claims Parties is not practical given the number of Trust Avoidance Claims and the limitations on the Reorganized Debtors with respect to claims objections. Therefore, the Reorganized Debtors and the Trust endeavored to preserve both the Reorganized Debtors' ability to continue claims administration and the Trust's ability to prosecute the Trust Avoidance Claims against the Avoidance Claims Parties. The Reorganized Debtors and the Trust took steps to coordinate their activities in order to protect against the possibility of any inadvertent issues arising with respect to the Trust Avoidance Claims during the claims administration process. Prior to filing any claims objection, the Reorganized Debtors provided and will continue to provide the Trust with the names of any Avoidance Claims Parties that are subject to the objection so that the Trust may take any steps that the Trust deems necessary to protect its rights at hearings on the claims objections. Also, at the Trust's request, the Reorganized Debtors have included language in their recently filed claims objections and related proposed orders providing that the objections are intended to be without prejudice to the rights of the Trust to prosecute avoidance actions against each claimant listed in the objections. Mr. Ivester points out that in order to avoid potentially prejudicing the Trust Avoidance Claims during the claims administration process, the Reorganized Debtors and the Trust want the Court to approve a supplemental provision governing the Claims asserted by the Avoidance Claims Parties. Accordingly, the Reorganized Debtors and the Trust don't want the Claims asserted by an Avoidance Claim Party to be treated as Allowed Claims, pursuant to the Plan or operation of a previously entered Court Order, until all Trust Avoidance Claims against the Avoidance Claim Party are: -- resolved pursuant to a Court order entered pursuant to the Settlement Procedures Order; -- resolved pursuant to a Court order entered in an adversary proceeding commenced by the Trust with respect to a Trust Avoidance Claim against a particular Avoidance Claim Party; or -- either expressly waived by the Trust in its discretion or deemed to be waived for failure to prosecute in the appropriate statutory period. Tax Forms Pursuant to the Plan, the Reorganized Debtors, as Disbursing Agent, and the Trust are authorized and obligated to make distributions to holders of various Claims. The distributions may include: -- Cash, -- shares of New Common Stock, -- shares of New Preferred Stock, and -- Series B Warrants. Mr. Ivester notes that in general, United States Federal Income Tax Law requires that, prior to receiving any distribution, a holder of an Allowed Claim must: -- provide the disbursing entity with the claimholder's correct taxpayer identification number; and -- make certain certifications on Internal Revenue Service Form W-9 to avoid or establish an exemption from any backup withholding that may apply to the distribution. If a claimholder does not provide the entity that is tendering the distribution a properly completed Form W-9 or Form W-8, or establish an adequate basis for an exemption from backup withholding prior to the time of the distribution, the claimholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, the disbursing entity may be required to withhold 28% of the amount of any reportable payment made to the claimholder and remit the amount to the United States Treasury. At present, the Reorganized Debtors and Trust want to avoid the necessity of backup withholding, particularly with respect to the distribution of any securities where withholding would be impracticable, since the requirement to backup withholding would impose a significant administrative burden on the parties. For this reason, the Reorganized Debtors and the Trust propose this supplemental procedure to eliminate the potential need for backup withholding: (i) Before making any distribution to a claimholder for which an Internal Revenue Service Form W-9 or Form W-8 is required, the Reorganized Debtors or the Trust, will file with the Court and serve on the claimholder a notice that informs the claimholder of his or her obligation to complete and return the Form W-9 or Form W-8 prior to receiving any distribution under the Plan; (ii) On the return of a properly completed form, the Reorganized Debtors or the Trust, will then make the appropriate distribution; and (iii) Until a properly completed form is returned, the Reorganized Debtors or Trust would not be obligated to make any distributions to the claimholder. Additionally, Mr. Ivester emphasizes that in order to withhold in connection with the distribution of a security, the security must be valued to determine the amount of any reportable payments and sold to generate cash, as the United States Treasury will accept remittances of withholding tax only in cash. Supplemental Procedures Should Be Approved Section 502(d) of the Bankruptcy Code provides that: "Notwithstanding Sections (a) and (b) of this section, the court will disallow any claim of any entity from which property is recoverable under Sections 542, 543, 550, or 553 of the Bankruptcy Code or that is a transferee of a transfer that is avoidable under Sections 522(f), 522(h), 544, 545, 547, 548, 548, or 724(a) of the Bankruptcy Code, unless the entity or transferee has paid the amount, or turned over the property, for which the entity or transferee is liable under Sections 522(i), 542, 543, 550, or 553 of the Bankruptcy Code." Mr. Ivester explains that the Reorganized Debtors and the Trust are not seeking to disallow any claim subject to the Trust Avoidance Claims, but instead postpone the allowance of any claim until the resolution of any Trust Avoidance Claim against the claimholder. The Reorganized Debtors and the Trust believe that approval of these supplemental procedures with respect to the Avoidance Claims Parties is authorized by and merely effectuates Section 502 and, more importantly, clarifies and resolves potential issues with respect to Trust Avoidance Claims that otherwise might arise during the claims administration process under various interpretations of Section 502(d). Mr. Ivester further notes that under Section 1142(b): "[T]he court may direct the debtor and any other necessary party to execute or deliver . . . any instrument required to effect a transfer of property dealt with by a confirmed plan, and to perform any other act . . . that is necessary for the consummation of the plan." Thus, Section 1142 provides the basis for the requested supplemental procedures requiring the holders of Allowed Claims to complete and return Form W-9 or Form W-8, to either the Reorganized Debtors or the Trust prior to receiving any distributions on the Claims. Mr. Ivester tells the Court that by approving the procedures, the Court will enable the Reorganized Debtors and the Trust to ensure that they make distributions in a timely manner, without potential liability for backup withholding taxes. Without a completed Form W-9 or Form W-8 from claimholders whose distributions are subject to information reporting and withholding, the Reorganized Debtors or the Trust may be exposed to liability for backup withholding taxes if they do not withhold from distributions that are made to individuals or entities subject to backup withholding taxes. In the case of distributions of securities, which are to be distributed by the Reorganized Debtors, the Reorganized Debtors would be placed in the virtually impossible position of being forced to sell the securities in order to generate cash for withholding purposes before making any distributions. Accordingly, approval of the additional procedures is appropriate. Mr. Ivester asserts that the Reorganized Debtors and the Trust will be highly benefited once the Court approves the request, due to the: -- elimination of the administrative burden and the associated cost of selling any securities in order to implement the appropriate withholding in the event a Claimholder does not provide or properly complete its Form W-9 or Form W-8, to the Reorganized Debtors or the Trust prior to receiving any distribution; and -- reduction of the administrative burden of the Reorganized Debtors and the Trust of making repeated attempts to collect the Forms from applicable holders of Allowed Claims prior to making distributions to the holders. (Hayes Lemmerz Bankruptcy News, Issue No. 40; Bankruptcy Creditors' Service, Inc., 609/392-0900) HORIZON GROUP: Commences Restructuring of Three Loans in Default ---------------------------------------------------------------- Horizon Group Properties, Inc. (Nasdaq: HGPI), an owner, operator and developer of factory outlet centers and land developer, has begun restructuring three loans which had been in default since October 2001. The planned restructuring includes the payoff at a discount of the loans secured by the outlet centers in Sealy, Texas and Gretna, Nebraska and the reinstatement to current status of the loan secured by the outlet center in Traverse City, Michigan. The loan secured by the outlet center in Sealy was repaid on November 4, 2003 and the loan secured by the outlet center in Gretna is expected to be repaid on or before November 7, 2003. The reinstatement of the loan secured by the outlet center in Traverse City is expected to be completed by November 20, 2003. The loans to be repaid currently have an aggregate principal balance of approximately $18 million, excluding accrued interest and penalties. The reinstatement to current status of the loan secured by the outlet center in Traverse City will result in the forgiveness of approximately $600,000 of accrued penalties and default interest. The planned restructuring of the GST Loans requires the payment of all current interest and principal on the Traverse City loan as of the date of its reinstatement together with additional payments totaling $4.0 million. The Traverse City loan has a current principal balance of approximately $5 million, bears interest at the rate of 8.46%, amortizes over 25 years and matures in August 2009. In connection with the planned restructuring of the GST Loans, HGPI sold a 49% interest in Gretna, Sealy, Traverse City Outlet Centers, L.L.C., the entity that owns the three outlet centers subject to the GST Loans, to an affiliate of Howard M. Amster, a director and significant shareholder of HGPI for $1.96 million. GST is one of the entities subject to a pending sale agreement in which HGPI would sell a 49% interest in the entities that own all of HGPI's outlet centers and HGPI's corporate office building to Mr. Amster for a total purchase price of $11.5 million. That transaction is still pending, with due diligence scheduled to be completed by November 14, 2003. The sale of the 49% interest in GST to Mr. Amster does not affect the total purchase price for the pending sale to Mr. Amster of the remaining entities. Mr. Amster also made a loan to HGPI of $2.04 million in connection with the restructuring of GST Loans. HGPI is required to use proceeds from Mr. Amster's loan, together with the funds from the sale to Mr. Amster of 49% of GST, to complete the planned debt restructuring. The loan from Mr. Amster bears interest at 8% and matures on August 3, 2004. "The terms of the restructuring provide us with the flexibility to reposition the centers in Sealy and Gretna and build upon the strong performance of Traverse City," said Gary J. Skoien, Chairman, President and Chief Executive Officer of Horizon Group Properties. "The Traverse City area continues to experience strong growth as a vacation and leisure destination, increasing demand for retail space. There is significant complimentary development occurring nearby that we expect to draw additional customers to our center." Based in Chicago, Illinois, Horizon Group Properties, Inc. has 9 factory outlet centers in 7 states totaling more than 1.8 million square feet and a 650 acre mixed use land development in Huntley, Illinois. ILLINOIS POWER: Fitch Puts Junk Debt Ratings on Watch Positive -------------------------------------------------------------- Illinois Power Company's 'B' senior secured debt, 'CCC+' indicative senior unsecured rating and 'CC' trust preferred securities have been placed on Rating Watch Positive by Fitch Ratings. The rating action follows the announcement that Dynegy Inc. (DYN, senior unsecured rated 'CCC+', Rating Outlook Positive by Fitch), the parent company of IP, has entered into an agreement with Exelon Corp. (senior unsecured rated 'BBB+', Rating Outlook Stable) through which Exelon will acquire substantially all of the operational assets of IP. The $2.225 billion purchase price includes the assumption of approximately $1.8 billion of outstanding IP debt, a $150 million promissory note from Exelon, and approximately $275 million of cash. The transaction is contingent upon the Illinois Commerce Commission's approval of the asset purchase as well as purchase power agreements and the extension of bundled rates for both IP and Exelon's other Illinois utility subsidiary, Commonwealth Edison Co. (senior unsecured rated 'BBB+', Rating Outlook Stable), through 2010. Other necessary approvals include the Federal Energy Regulatory Commission, the Securities and Exchange Commission, Hart Scott Rodino review and other regulatory agencies. In addition, the passage of legislation that is expected to be introduced in the Illinois General Assembly during its November session is necessary to facilitate the acquisition. The legislation would give the ICC the authority to set rates for four years after the transition period ends in 2006, as well as complete its review of the IP/Exelon deal within nine months. Pending the receipt of approvals, the transaction is expected to close in the fourth quarter of 2004. The Rating Watch Positive status applied to IP reflects the higher rating of Exelon as compared with that of current owner, DYN. The ratings for IP are constrained by those of DYN due to a large intercompany note, as well as the structural and functional ties between the affiliated companies. As part of the transaction with Exelon, IP will have effectively severed these ties as the $2.3 billion intercompany note will be eliminated and IP will enter into a new full requirements purchase power agreement with Exelon subsidiary, Exelon Generation (senior unsecured rated 'BBB+', Rating Outlook Stable). On a standalone basis, IP has historically demonstrated a stable financial profile, with low risk transmission and distribution operations. Following the approvals required for Exelon's acquisition, the IP business will operate as a separate subsidiary of Exelon Corp. IP is a transmission and distribution utility serving more than 590,000 electric and 410,000 gas customers in Decatur, Illinois. DYN provides electricity, natural gas and natural gas liquids to wholesale customers in the US and to retail customers in Illinois. INTEGRATED HEALTH: Court Approves Litchfield Settlement ------------------------------------------------------- At the Integrated Health Services, Inc. Liquidating LLC's request, the Court, pursuant to Rule 9019(a) of the Federal Rules of Bankruptcy Procedure and Section 105(a) of the Bankruptcy Code, approved a settlement agreement between IHS Liquidating and Litchfield Investment Company, L.L.C. and dismissed Litchfield's counterclaim and attorneys' fees claims with prejudice. Alfred Villoch, III, Esq., at Young, Conaway, Stargatt & Taylor, LLP, in Wilmington, Delaware, informs the Court that on August 31, 1994, IHS, Integrated Health Services of Lester, Inc., and Litchfield Asset Management Company entered into a Facilities Agreement, which served as their master transaction agreement. Pursuant to the Facilities Agreement, among other things, IHS- Lester agreed to lease 41 long-term care facilities and two retirement centers from Litchfield Asset Management. On June 30, 1997, Litchfield Asset Management conveyed certain rights, title and interest in the Facilities to Litchfield Investment. On September 30, 1997, IHS, IHS-Lester and Litchfield Investment entered into the First Amendment to the Facilities Agreements, which provided for, among other things, the termination of the 1994 Leases and the execution of new leases, effective as of September 30, 1997. On December 26, 2001, the Court allowed the Debtors to reject these Leases. The Main Claim On February 1, 2002, IHS and IHS-Lester filed a multi-count complaint with the Court seeking to recover just over $50,000,000 in refundable lease deposits that were paid to Litchfield Investment pursuant to the Leases and which had been previously paid to Litchfield Asset Management pursuant to the 1994 Leases. On April 3, 2002, IHS and IHS-Lester asked for the Court's partial summary judgment on a number of the claims in their Complaint, including the claim that Article 4 2(b) was an unenforceable penalty clause as a matter of law. At a hearing on May 13, 2002, the Court denied IHS and IHS-Lester's request for partial summary judgment. Following the Court's decision, Mr. Villoch reports that the parties engaged in discovery. On February 14, 2003, Litchfield Investment asked the Court for summary judgment on all counts of IHS and IHS-Lester's complaint. The Court denied the request on April 16, 2003. The Counterclaim and Attorneys' Fees Claims On October 31, 2002, Litchfield Investment filed its first amended answer which, inter alia, asserted a counterclaim for breach of contract against IHS and IHS-Lester under the Leases and sought damages for $950,000 allegedly incurred as a result of the Debtors' alleged breach of certain postpetition contractual obligations. Litchfield Investment also asserted claims for: (1) attorneys' fees, costs, and disbursements incurred in connection with its defense against the Main Claim, as well as any post-trial proceedings and appeals; and (2) attorneys' fees, costs, and disbursements incurred in the presentation and prosecution of the Counterclaim, as well as attorneys' fees, costs, and expenses incurred in any post-trial proceeding and appeals. On March 17, 2003, IHS and IHS-Lester asked the Court for a summary judgment dismissing the Counterclaim. IHS and IHS-Lester argued that: -- even assuming that a breach occurred, Litchfield Investment is seeking to recover damages it has not suffered and will not suffer in the future; -- Litchfield Investment did not pay for any repairs made by the new tenant; -- they are is not liable to the new tenants for any repairs; and -- Litchfield Investment did not suffer any diminution in rent. In addition, IHS and IHS-Lester argued that if Litchfield Investment is awarded damages, it would be put in a better position than it would have occupied had there been no alleged breach. Litchfield Investment responded with a cross-motion for partial summary judgment on April 2, 2003 arguing that Litchfield, not the new tenant, is responsible for funding the repairs at issue, IHS and IHS-Lester have not been released from their repair obligations, and it will not be unjustly enriched. Mr. Villoch relates that the Court denied both requests on April 25, 2003. On June 9, 2003, the Court conducted a trial at which IHS and IHS-Lester presented their case-in-chief. At the conclusion of the hearing, Litchfield Investment moved for judgment as a matter of law under Rule 7052 of the Federal Rules of Bankruptcy Procedure. On August 12, 2003, the Court held a hearing on Litchfield's Rule 7052 motion. The Court ruled in Litchfield Investment's favor and granted its request on September 2, 2003. IHS and IHS-Lester timely filed an appeal on September 11, 2003 and a Rule 7054(a) motion on September 16, 2003 requesting entry of final judgment so that they could take an immediate appeal of the Court's order granting Litchfield's Rule 7052 motion. The Stipulation On September 15, 2003, IHS, IHS-Lester and Litchfield Investment entered into a Stipulation and Agreement regarding the amount of attorneys' fees, expert fees, and costs Litchfield Investment incurred in connection with the Adversary Proceeding. Under the Stipulation, the parties agreed, among other things, that Litchfield's Legal Costs through July 31, 2003 were $447,956 and that this amount is reasonable. The parties further stipulated and agreed that: (a) Litchfield's Legal Costs from August 1, 2003 through the date of the last appeal noticed to the U.S. District Court for the District of Delaware for proceedings before the Court, will be deemed necessary and reasonable so long as the Legal Costs do not exceed $115,000; and (b) Litchfield's necessary and reasonable Legal Costs in connection with any appeals would not exceed $145,000 for the Main Claim and $87,500 for the Counterclaim, depending on the number of appeals taken and whether those appeals required briefing. The Settlement Agreement On September 17, 2003, Mr. Villoch reports that IHS Liquidating accepted a settlement proposal with respect to the Counterclaim and Attorneys' Fees Claims. Accordingly, the parties drafted a settlement agreement. Under the Settlement Agreement, IHS Liquidating and Litchfield Investment agreed to settle the Counterclaim and Attorneys' Fees Claims for $560,000. The settlement does not alter or limit in any way IHS Liquidating's rights to continue prosecuting the Main Claim. Mr. Villoch contends that the Settlement Agreement fully and finally resolves, on fair and reasonable terms, the disputed legal and factual issues related to the Counterclaim and Attorneys' Fees Claims, the litigation of which undoubtedly would be both costly and time-consuming. Having analyzed the merits of the parties' positions on the Counterclaim and Attorneys' Fees Claims, and the likely risks and expenses attendant to litigating the numerous issues emanating from this dispute, IHS Liquidating determined that entering into a settlement in accordance with the Settlement Agreement is a more favorable course of action. Mr. Villoch relates that the Settlement Agreement is the product of arm's-length negotiations and reflects IHS Liquidating's extensive analysis and consideration of the relevant legal, factual and economic issues. While IHS Liquidating believes that it has the stronger position on the law and relevant facts and that the Court should deny Litchfield Investment's Counterclaim and Attorneys' Fees Claims, there is the risk that Litchfield Investment could prevail in whole or in part. The Settlement Agreement allows IHS Liquidating to resolve disputed legal and factual issues, and to avoid the incurrence of additional time and expense that would accompany a litigated resolution. Preparation for the trial will require IHS Liquidating and its counsel to expend a significant amount of time preparing trial and demonstrative exhibits to, inter alia, counter the 20 Capital Reserve Summaries prepared by Litchfield Investment's expert, which list $950,000 in recommended capital reserves for allegedly "immediate" repairs. Each assessment prepared by Litchfield Investment's expert describes recommended capital reserves for items like painting, re-striping of pavement, seal coating, electrical connection maintenance, upgrades to larger capacity washers and dryers, and replacement of roofs and nurse call systems. Countering each and every damage claim will be tune consuming and will require extensive expert preparation and testimony. Furthermore, the litigation of the Attorneys' Fees Claim will require IHS Liquidating and its counsel to expend a significant amount of time researching and preparing briefs to counter Litchfield's claims. While the parties stipulated to the amount of the Attorneys' Fees Claims, the issue of whether Litchfield Investment is entitled to attorneys' fees at all and if so whether those claims qualify for administrative priority remains hotly disputed. The parties stipulated that Litchfield's Attorneys' Fees Claims in connection with the Adversary Proceeding are $447,956 through July 31, 2003 and up to $115,000 for the period from August 1, 2003 until the conclusion of the proceedings before the Court in the Adversary Proceeding. Thus, in addition to the $950,000 in alleged damages Litchfield Investment claimed in its Counterclaim, IHS Liquidating could also be faced with the prospect of an additional cost of up to $563,957 for the Attorneys' Fees Claims should Litchfield Investment prevail on these claims at trial. Finally, even if IHS Liquidating were to prevail in litigation over the Counterclaim and Attorneys' Fees Claims, it would still likely to incur further time and expense in defending the decision on appeal. This potential cost is significant as the parties stipulated that Litchfield Investment's necessary and reasonable expenses in connection with any appeals related to the Main Claim, the Counterclaim, and the Attorneys' Fees Claims could be up to $232,500, for a total of $796,457. That is in addition to the cost to IHS Liquidating of defending the Counterclaim and Attorneys' Fees Claims and handling any resulting appeals. Based on these reasons, and recognizing the risks and costs attendant to litigating these disputed legal and factual issues, Mr. Villoch contends that the Settlement Agreement is a more favorable alternative and that the terms are fair and reasonable. (Integrated Health Bankruptcy News, Issue No. 66; Bankruptcy Creditors' Service, Inc., 609/392-0900) JP APARTMENTS: Case Summary & 21 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: JP Apartments, Inc. 350 Fifth Avenue Suite 3304 New York, NY 10118 Bankruptcy Case No.: 03-17017 Type of business: Real estate Chapter 11 Petition Date: November 05, 2003 Court: Southern District of New York (Manhattan) Debtor's Counsel: Jules A. Epstein, Esq. Jules A Epstein, PC 600 Old Country Road Suite 338 Garden City, NY 11530 (516) 745-0066 Fax : (516) 222-1499 Email: jaepc1@aol.com Total Assets: 14,158,000 Total Debts: 10,608,654 List of Debtor's 21 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Alpha And Omega, Inc. $225,000 c/o Daniel Cobrink 475 Park Avenue South 16th Floor New York, NY 10016 Wolf Landau $115,000 c/o Lowenthal & Kofman, PC Flatbush Financial Center 2001 Flatbush Avenue Brooklyn, NY 11234 Penina Hodara $90,000 c/o Cooper, Paroff, & Cooper 80-02 Kew Gardens Road Kew Gardens, NY 11415 Barry Timberg $43,375 c/o Mitchell Nathanson 90 Merrick Avenue East Meadow, NY 11554 KEYSPAN Utility Services $30,327 Keyspan Delivery Metro Tech Center ATT: 15th Floor LEGAL Brooklyn, NY 11201 (718) 403-2183 KEYSPAN Utility Services $11,230 Metro Tech Center ATT: 15th Floor LEGAL Brooklyn, NY 11201 (718) 403-2183 KEYSPAN Utility Services $7,389 Metro Tech Center ATT: 15th Floor LEGAL Brooklyn, NY 11201 (718) 403-2183 KEYSPAN Utility Services $7,262 Metro Tech Center ATT: 15th Floor LEGAL Brooklyn, NY 11201 (718) 403-2183 KEYSPAN Utility Services $6,792 Metro Tech Center ATT: 15th Floor LEGAL Brooklyn, NY 11201 (718) 403-2183 KEYSPAN Utility Services $5,079 Metro Tech Center ATT: 15th Floor LEGAL Brooklyn, NY 11201 (718) 403-2183 KEYSPAN Utility Services $5,015 Metro Tech Center ATT: 15th Floor LEGAL Brooklyn, NY 11201 (718) 403-2183 KEYSPAN Utility Services $3,803 Metro Tech Center ATT: 15th Floor LEGAL Brooklyn, NY 11201 (718) 403-2183 KEYSPAN Utility Services $3,392 Metro Tech Center ATT: 15th Floor LEGAL Brooklyn, NY 11201 (718) 403-2183 KEYSPAN Utility Services $3,368 Metro Tech Center ATT: 15th Floor LEGAL Brooklyn, NY 11201 (718) 403-2183 KEYSPAN Utility Services $3,339 Metro Tech Center ATT: 15th Floor LEGAL Brooklyn, NY 11201 (718) 403-2183 Con Edison Utility Services $2,571 Con Edison Law Department Bankruptcy Group 4 Irving Place, RM 1875 South New York, NY 10003 KEYSPAN Utility Services $2,056 Metro Tech Center ATT: 15th Floor LEGAL Brooklyn, NY 11201 (718) 403-2183 Con Edison Utility Services $1,391 Con Edison Law Department Bankruptcy Group 4 Irving Place, RM 1875 South New York, NY 10003 Con Edison Utility Services $950 Con Edison Law Department Bankruptcy Group 4 Irving Place, RM 1875 South New York, NY 10003 Con Edison Utility Services $895 Con Edison Law Department Bankruptcy Group 4 Irving Place, RM 1875 South New York, NY 10003 Con Edison Utility Services $861 Con Edison Law Department Bankruptcy Group 4 Irving Place, RM 1875 South New York, NY 10003 LINCOLN INT'L: Potter & Company Bolts from Auditing Engagement -------------------------------------------------------------- On July 28, 2003, Lincoln International Corporation received written notice from its independent public accountant, Potter & Company, LLP, that "effective immediately" it would "no longer be feasible" for them "to provide services for SEC companies" due to the Sarbanes-Oxley Act. The company has identified a successor independent accounting firm to complete its audit. Lincoln's terminating certifying accountants, Potter & Company, LLP, have stated that "no disagreements" exist between their firm and the Company and that the provisions of the Sarbanes-Oxley Act and the resulting impact on their role as certifying accountants for the Company in relation to the costs of professional malpractice insurance was the reason for terminating their relationship with the Company. The Company has paid the balance owed to Potter & Company for their professional services, and they have stated their intention and willingness to "cooperate with the successor auditor". The reports of Potter & Company on the financial statements of the Company for the past two fiscal years were qualified as to uncertainty about the Company's ability to continue as a going concern. LTV CORP: Oil States Asks Court to Appoint Bankruptcy Trustee ------------------------------------------------------------- Oil States International, Inc., and Oil States Industries, Inc., represented by Eric T. Moser, Esq. at Kirkpatrick & Lockhart LLP in Pittsburgh, asks U.S. Bankruptcy Court Judge Bodoh to appoint a trustee for the bankruptcy estate of LTV Corporation. LTV Corp. has no employees and no officers other than persons who are employees and officers of the other Debtors in these bankruptcy proceedings. It has become apparent -- at least to Mr. Moser and OSI -- that LTV Corp.'s conflicted officers are unable and unwilling to take the steps necessary to investigate, prosecute and otherwise maximize the value of substantial intercompany rights that LTV Corp. has against the other Debtors, and that LTV Corp. has no one who can legally discharge LTV Corp.'s fiduciary duties to its estate and creditors in this regard. LTV Corp.'s intercompany rights against the other Debtors, which may total more than $100 million in the aggregate, represent the largest assets of LTV Corp. -- and the largest source of recovery for the creditors of LTV Corp.'s estate. Nevertheless, LTV Corp. has steadfastly refused to retain independent counsel or independent financial advisors to investigate or evaluate the claims or even to conduct an independent analysis of what the value of those rights is. Instead, based solely on undisclosed advice of counsel who also represented the other sides on each claim, and on an evaluation of intercompany rights prepared by the employees of one of its adversaries, LTV Steel Company, Inc., LTV Corp.'s current conflicted officers have recently proposed to release and waive substantially all of its claims in favor of its affiliated Debtors in exchange for virtually no consideration as part of a comprehensive Settlement and Release Agreement executed by all the Debtors. Under the circumstances, Oil States respectfully submits that LTV Corp.'s abdication of its fiduciary duty to maximize the value of its estate for the benefit of its creditors -- indeed, LTV Corp.'s total inability to advance LTV Corp.'s causes of action and rights against the other Debtors because LTV Corp.'s only officers are employees and officers of those other Debtors, with legal duties of loyalty to those other Debtors -- constitutes compelling cause for the appointment of a Chapter 11 trustee to investigate, evaluate, pursue and protect LTV Corp.'s substantial assets. Oil States accordingly requests the immediate appointment of such a trustee. In accord with the express language of Bankruptcy Code Section 1104(a)(1), courts have consistently held that the appointment of a trustee is mandatory upon a determination of cause. Cause exists for the appointment of a chapter 11 trustee because the current officers and professional advisers of LTV Corp. are hopelessly conflicted regarding the intercompany claims and have not and cannot legally fulfill their fiduciary duties to maximize and protect the assets of LTV Corp. for its creditors. DIP's Duty It is axiomatic that a debtor in possession in a chapter 11 case has a fiduciary duty to maximize the value of its estate for the benefit of its creditors. The willingness of courts to leave debtors in possession is premised upon an assurance that the officers and managing employees can be depended upon to carry out the fiduciary responsibilities of a trustee. In order to fulfill this function of maximizing the estate's value, however, a debtor in possession must have officers and professional advisors who are free from debilitating conflicts of interest, so that they can zealously advance the interests of its creditors. Officers Conflicted At the present time, LTV Corp. has no employees and only a few officers, all of whom are also officers of LTV Steel and of almost all of the other Debtors. Accordingly, in attempting to liquidate its assets, LTV Corp.'s officers are necessarily subject to competing and irreconcilable fiduciary duties to the various estates they serve. This conflict is acute in the case of intercompany claims between the various Debtors' estates, which represent far and away the largest assets of the LTV Corp. estate. If these officers were to serve as zealous advocates for the interests of LTV Corp. as against the other Debtors, they would necessarily be required to take positions that are directly adverse to the interests of the other Debtors they serve, thereby violating their fiduciary duties to those other Debtors' estates. Alternatively, if they were to fail to advocate the interests of LTV Corp. as against the other Debtors, they would necessarily violate their fiduciary duties to LTV Corp. Faced with this Hobson's choice, LTV Corp.'s officers elected to serve solely as "brokers" of an intercompany settlement hammered out by other constituencies -- none of whom represented the interests of LTV Corp. Unfortunately, this involved an abdication of their responsibility to advance the rights of LTV Corp. (and its creditors) by vigorously asserting and pursuing intercompany claims against the estates of the other Debtors, and constitutes cause for the appointment of a Chapter 11 trustee. Counsel Conflicted The need for a trustee for LTV Corp. in this case is particularly overwhelming because LTV Corp.'s supposed "counsel" on intercompany claim matters is also subject to irreconcilable conflicts of interest, preventing them from independently evaluating and advising LTV Corp. on its legal position and from serving as zealous advocates for the interests of their client. In fact, they purport to represent the inherently conflicting interests of all of the competing Debtors in connection with the Intercompany Settlement, despite the fact that the Bankruptcy Code expressly prohibits a debtor's professionals from simultaneously representing both a debtor and interests adverse to the debtor's estate. Under the circumstances, where huge intercompany claims and rights against other affiliated Debtors are the principal remaining asset of LTV Corp.'s estate and there is no unconflicted officer or employee to act for LTV Corp. and no unconflicted professionals to evaluate, advise, and pursue those claims, cause clearly exists for the appointment of a trustee for the estate of LTV Corp. Intercompany Settlement Is Gross Mismanagement LTV Corp.'s records state that at the beginning of its Chapter 11 case, LTV Corp. owned almost $40 million in cash and cash equivalents. In addition, shortly after the filing of its case, LTV Corp. received an additional $14.6 million in cash from Oil States. Incredibly, however, despite repeated requests from Oil States, LTV Corp.'s officers have been unable to provide a meaningful explanation of what happened to this more than $54 million in assets, some portion of which (or perhaps all of which, LTV Corp. does not say) apparently somehow was transferred to or for the benefit of LTV Corp.'s affiliated Debtors during the LTV Corp. bankruptcy. This wholesale abandonment of assets and inability to account for assets constitutes gross mismanagement of the assets of LTV Corp., to the resulting apparent benefit of other affiliates, and is further cause for the appointment of a Chapter 11 trustee. (LTV Bankruptcy News, Issue No. 57; Bankruptcy Creditors' Service, Inc., 609/392-00900) MARINER POST-ACUTE: Asks Court to Estimate Tort Claim Liability --------------------------------------------------------------- The Mariner Post-Acute Network, Inc., and Mariner Health Group Debtors ask the Court to estimate the maximum amount of certain personal injury claims so they can establish a reserve in that amount and make the initial, pro rata distribution to the holders of allowed unsecured claims. Specifically, the Reorganized Debtors want the Court to estimate the amount of 162 MPAN and 65 MHG personal injury claims. The Reorganized Debtors believe that most of the personal injury claims exceed their maximum potential liability on the claims, given the insurance available for the claims. The Reorganized Debtors explain that a determination is the only obstacle to making a distribution under the Plan to the holders of 17,000 MPAN and 4,500 MHG Allowed Claims. The Plan is a pro rata plan, meaning all general unsecured creditors shares pro rate in a fixed amount of stock and warrants in Reorganized Mariner. Due to this nature, one cannot calculate any creditor's distribution until all claims are estimated or liquidated. Pursuant to the Plan, the Estimated Maximum Amount of a claim is the greater amount that the claim may be allowed for purposes of distributions and reserves under the Plan. A determination of the Estimated Maximum Amount does not preclude the Debtors from continuing to dispute the validity of the remainder of the claim, but ensures that the amount of the Allowed Claim for Plan purposes will not in any event exceed the Estimate Maximum Amount. The Reorganized Debtors clarify that the fixing of an Estimated Maximum Amount is solely for the purpose of determining the distributions to be made from the estates pursuant to the Plan and maintaining the reserves for the claim. The fixing of an Estimated Maximum Amount will not be deemed to establish the allowed claim amount for any purpose unrelated to determining the distributions to be made from the estates and maintaining the reserves. Some of the claims are covered by insurance to some extent, depending on the facility and the date of loss. In some instances, a claimant has alleged that the acts occurred crossing multiple insurance policy years or insurance policies themselves. In that case, to provide for the maximum possible amount of the claim against the estate, the Debtors propose an Estimated Maximum Amount of the claim as the aggregate of the self-insured retention or deductible for each policy year. In some instances, the claims allege fraud, elder abuse, or some other acts that are not covered by insurance. These allegations are made to enable a claimant to seek punitive damages or to escape damage caps under state law. The Debtors assure the Court that the actual damage suffered by these claimants are the same as those suffered for ordinary negligence. Since no distribution is made on account of punitive damages under the Plan, the Debtors did not assume the existence of any caps on actual damages in arriving at the proposed Estimated Maximum Amount. Some of the 227 MPAN and MHG personal injury claims and the Estimated Maximum Amount the Reorganized Debtors proposed are: Estimated MPAN Creditor Name Claim No. Maximum Amount ------------------ --------- -------------- Alvarado, Jesus 9576 $1,000,000 Alvarado, Juan 9578 1,000,000 Alvarado, Hector 9580 1,000,000 Barerra, Melquidez 9404 1,000,000 Barerra, Soila 9403 1,000,000 Bean, Leanna 9401 1,500,000 Benevides, Patricia 9577 1,000,000 Bew, Mosetta 7758 500,000 Blann, Jettie 7757 1,000,000 Chadbourne, Sherley Ann 4000 500,000 Christian, Willie 7756 1,000,000 Clark, Jennie Johnson 9394 1,000,000 Coston, Mable Audrey 9246 1,000,000 Crawford, Lola 9501 1,000,000 Crook, Mamie 7755 1,000,000 Crow, John Henry 2749 1,000,000 DeGraef, Johanna 10333 1,000,000 Edwards, Charles 7754 1,000,000 Moore, Cleo 10392 1,500,000 Pitts, Dovie 7747 1,500,000 Sanders, Willie 10154 1,500,000 Stephens, Felcie 9519 1,000,000 Sledge, Bennie 9359 1,500,000 Smith, Alan 9360 1,000,000 Sanders, Hollis 7742 1,000,000 Cammorota, Pasquale 10465 1,000,000 Cooper, Shirley 10460 1,500,000 Covert, Donald 9413 1,000,000 Gray, Lillie Mae 6500 1,000,000 6892 1,000,000 6890 1,000,000 6859 1,000,000 Green, Rebecca 7344 1,000,000 Hinojosa, Gilberto 5956 1,000,000 Hollinger, Susie 10458 1,500,000 10459 1,500,000 Kitcher, Barbara Margaret 9415 1,000,000 Le Vee, Frances Enid 10388 1,000,000 Mency, Narvis 9416 1,000,000 Neyra, Lenin 1283 1,000,000 Nunez, Celia 8191 1,000,000 Pena, Amanda 8188 1,000,000 Wenckens, Harold 1284 1,000,000 Williams, Booker 2016 1,000,000 6393 Estimated MHG Creditor Name Claim No. Maximum Amount ----------------- --------- -------------- Bright, Bennie 1909 $1,000,000 Bruno, Ewart 2720 1,000,000 Clark, Jennie Johnson 3359 1,000,000 Correll, Margarita 1296 1,000,000 Crawford, Lola 3434 1,000,000 Franks, Themer 1719 1,000,000 Jones, Clara 3615 1,000,000 Lasita, Josephine 3381 1,000,000 Lawson, Eleanor 3382 1,000,000 Meizinger, Mary 3905 1,000,000 Milam, Georgia 3909 1,000,000 Mosier, Troy Lee 2487 1,000,000 North Lonnie 2761 100,000 Pagan, Angela 3912 1,000,000 Phelps, Frances 3469 1,000,000 Richards, Mary Grace 3918 1,000,000 Sanders, Willie 3681 1,500,000 Schram, Helen 2714 1,000,000 Smith, Alan 3370 1,000,000 Thomas, Joseph 1867 1,000,000 Urias, Dolores 3365 1,000,000 Winbush, Christine 50006 1,000,000 Aviles, Carmen 3227 1,000,000 Bonk, Ann 2552 1,000,000 Eythell, Vivan 3869 1,000,000 Foote, John 1907 1,000,000 Maisonet, Petra 3224 1,000,000 Perdomo, Ana 3226 1,000,000 Ramuno, Dolores 3963 1,000,000 The Reorganized Debtors contend that the proposed Estimated Maximum Amount is reasonable given the ability of insurance dollars, the Plan provisions and the measure of actual damages for the claim. Although the Reorganized Debtors recognize that it is possible for the aggregate amount of all allowed personal injury claims, when finally litigated and liquidated, to exceed the insurance coverage available for a particular year, they contend that the possibility is very remote. In the history of the Reorganized Debtors and their predecessors, the insurance coverage has never been exceeded. Withdrawal of Bankruptcy Court Reference While the Reorganized Debtors believe that the Bankruptcy Court has jurisdiction to hear their request, they are aware that certain affected personal injury plaintiffs may contend that the matter is non-core and that the Bankruptcy Court lacks jurisdiction to hear it under 28 U.S.C. Sections 157(b)(2)(B) and 157(b)(5). These personal injury plaintiffs may characterize the matter as seeking the estimation of personal injury tort claims for purposes of allowance of the claims and subsequent distribution. Without waiving their right to assert that the Bankruptcy Court may estimate personal injury claims, the Reorganized Debtors ask Judge Walrath to withdraw the reference of the request from the Bankruptcy Court to the U.S. District Court for the District of Delaware to facilitate the timely resolution of the request. The Reorganized Debtors explain that a timely resolution of the matter is crucial to thousands of creditors. Because the Plan is a pro rata plan all general unsecured creditors share pro rate in a fixed amount of stock and warrants in reorganized Mariner. As a result, one cannot calculate any creditor's distribution until all claims are estimated or liquidated. The Debtors prefer to have the Bankruptcy Court resolve the matter quickly rather than cause several months of delay fighting with certain personal injury plaintiffs over which court should hear the request. Even if the personal injury plaintiffs are wrong, months may be wasted litigating over a forum, prejudicing the rights of thousands of creditors to receive distributions while this procedural wrangling takes place. (Mariner Bankruptcy News, Issue No. 52; Bankruptcy Creditors' Service, Inc., 609/392-0900) MCDERMOTT INT'L: Sept. 30 Net Capital Deficit Widens to $420 Mil ---------------------------------------------------------------- McDermott International, Inc. (NYSE: MDR) reported income from continuing operations of $10.1 million, or 15 cents per diluted share, for the third quarter of 2003 compared to a loss from continuing operations of $366.3 million, or $5.91 per diluted share, for the same period in 2002. Including $1.7 million of income from discontinued operations, net income for the 2003 third quarter was $11.8 million, or 18 cents per diluted share. Net loss for the third quarter of 2002 was $357.1 million, or $5.76 per diluted share, which included income from discontinued operations of $9.3 million. Weighted average common shares outstanding on a fully diluted basis were 66.7 million and 62.0 million for September 30, 2003 and September 30, 2002, respectively. Revenues in the third quarter of 2003 increased 49.8 percent, to $645.3 million, compared to the corresponding period in 2002. The growth in revenues is due to increased activity in the Marine Construction Services segment, partially offset by the loss of revenues from the Power Generation Systems segment due to the sale of Babcock & Wilcox Volund ApS in October 2002. Third quarter 2003 operating income was $8.4 million, which included a $19.9 million increase in the Company's estimate of the costs necessary to complete the EPIC Spar projects by J. Ray, primarily the Front Runner spar, and a $20.7 million non-cash qualified pension plan expense in the Corporate segment. The 2002 third quarter operating loss of $367.2 million included a $313.0 million impairment of goodwill, a $3.9 million impairment of an international joint venture and a $65.2 million loss from the EPIC Spar projects, all at J. Ray and a $4.2 million non-cash qualified pension plan expense in the Corporate segment. "We demonstrated solid progress during the quarter," said Bruce W. Wilkinson, chairman of the board and chief executive officer of McDermott. "Our operating businesses, J. Ray and BWXT, showed marked improvement versus a year ago, with both groups contributing to our earnings this quarter. J. Ray's increased activity during this strong third quarter contributed to its operating income and although our expected costs to complete the spars increased, primarily on Front Runner, I am encouraged by the solid earnings power that J. Ray demonstrated absent these increased costs. I believe J. Ray's improved focus on financial discipline will produce results over the long-term. I am particularly pleased with the consistent, year-over-year improvements at our BWXT operations. Its improving performance is commendable." The Company's other income for the third quarter of 2003 was $6.9 million, compared to other expense of $3.4 million in the third quarter of 2002. The year-over-year improvement is primarily due to a $9.7 million pretax ($8.2 million after-tax) reduction in the estimated costs related to The Babcock & Wilcox Company Chapter 11 settlement. RESULTS OF OPERATIONS 2003 Third Quarter Compared to 2002 Third Quarter Marine Construction Services Segment Revenues from the Marine Construction Services segment, which consists of J. Ray McDermott and its subsidiaries, increased 85 percent to $512.3 million in the 2003 third quarter. The revenue growth resulted from increased activity on fabrication and marine installation projects in all geographic areas where J. Ray operates, other than the Gulf of Mexico. The operating income for the 2003 third quarter was $11.9 million. Major projects contributing to 2003 third quarter operating income were the fabrication of topsides and marine installation of topsides and pipelines for projects in the Azerbaijani sector of the Caspian Sea, topsides fabrication work in the Morgan City fabrication facility, and deck fabrication and installation projects for an offshore operator in Vietnam. Selling, general and administrative expenses were $1.8 million lower in the 2003 third quarter compared to the 2002 third quarter. The 2003 third quarter included $19.9 million of increased costs associated with the Spar projects, primarily the Front Runner spar, while the 2002 third quarter included $65.2 million of Spar-related losses and $313 million of goodwill impairment. At September 30, 2003, J. Ray's backlog of $1.5 billion included $213 million related to contracts in loss positions. Of this amount, $137 million related to uncompleted work on the Spar projects and $71 million related to the Carina Aries project in Argentina. J. Ray's backlog was $1.8 billion and $2.1 billion at June 30, 2003 and at December 31, 2002, respectively. Government Operations Segment The Government Operations segment consists primarily of BWX Technologies, Inc. ("BWXT"). Revenues in this segment decreased $3.2 million to $133.0 million in the 2003 third quarter primarily due to lower revenues from a management and operations contract in Ohio, partially offset by higher volumes from the manufacture of nuclear components for certain U.S. government programs. Operating income increased 75 percent to $21.4 million in the 2003 third quarter, primarily due to the following: -- higher volumes from the manufacture of nuclear components for certain U.S. government programs -- improved operating results from joint ventures in Idaho, Louisiana, and Tennessee -- better margins from the commercial nuclear environmental services -- reduced spending on fuel cell research and development projects These items were partially offset by lower volumes at other government manufacturing operations, and higher general and administrative expenses due to increased facility management oversight costs. At September 30, 2003, BWXT's backlog was $1.4 billion, compared to backlog of $1.5 billion and $1.7 billion at June 30, 2003 and December 31, 2002, respectively. Corporate Corporate expenses were $25.0 million in the 2003 third quarter, an increase of $18.7 million, primarily due to higher noncash qualified pension plan expense as a result of year-end 2002 changes in the discount rate and plan asset performance. Additionally, the financial performance of the Company's captive insurance companies was less favorable during the 2003 third quarter compared to the same period in 2002. Other Income and Expense Net interest expense was $3.1 million in the 2003 third quarter compared to $1.4 million in the 2002 third quarter, due to higher interest rates associated with the Company's credit facility, and lower interest income due to a decrease in the amount of investments held combined with lower average interest rates earned on the investments. During the 2003 third quarter, revaluation of certain components of the estimated settlement cost related to the Chapter 11 proceedings involving B&W resulted in a decrease in the estimated cost of the settlement to $92.0 million resulting in the recognition of other income of $9.7 million ($8.2 million after tax). The consideration to be provided in the proposed settlement includes, among other things, McDermott common stock, a share price guaranty obligation and a promissory note. The decrease in the estimated settlement cost is due primarily to a decline in the price of McDermott's common stock from $6.33 per share at June 30, 2003 to $5.71 per share at September 30, 2003. The Company is required to revalue certain components of the estimated settlement cost quarterly and at the time the securities are issued, assuming the settlement is finalized. Assuming issuance of the debt and equity securities, the Company will record such amounts as either liabilities or stockholders' equity based on the nature of the individual securities. Thereafter, only the 3-year share price guaranty will be required to be revalued on an ongoing quarterly basis. The Company reported other income of $0.3 million in the 2003 third quarter compared to other expense of $1.9 million in the 2002 third quarter due to minority interest income associated with a J. Ray joint venture and an increase in foreign currency transaction gains. Provision for income taxes during the third quarter of 2003 was $5.1 million, compared to a benefit from income taxes of $4.3 million during the same period of 2002. The $9.4 million variance was due to the increase in pretax income combined with the changing mix of income earned in various tax jurisdictions. DISCONTINUED OPERATIONS In August 2003, the Company completed the sale of Menck GmbH, formerly a component of the Marine Construction Services segment. Accordingly, for the three and nine months ended September 30, 2003 and September 30, 2002, the Company has reported the results of operations for Menck as discontinued operations. Hudson Products Corporation was sold in July 2002. Accordingly, for the three and nine months ended September 30, 2002, the Company has reported the results of operations for HPC as discontinued operations. THE BABCOCK & WILCOX COMPANY The Company wrote off its investment in B&W of $224.7 million during the second quarter of 2002 and has not consolidated B&W with McDermott's financial results since B&W's Chapter 11 bankruptcy filing on February 22, 2000. B&W's revenues increased $1.6 million to $318.5 million in the third quarter of 2003. Net income for the 2003 third quarter was $15.4 million, an increase of $5.4 million versus the corresponding period in 2002. LIQUIDITY On a consolidated basis, the Company incurred negative cash flows for the first three quarters of 2003 and expects to incur negative cash flows from operations during the remainder of 2003 and in the first three quarters of 2004, primarily due to losses on the Spar projects and the Argentina project at J. Ray. Completion of the Spar projects and the Carina Aries project in Argentina has and will continue to put a strain on J. Ray's liquidity. J. Ray intends to fund its negative cash flow through new financing arrangements and sales of non-strategic assets. For the 2003 year, the Company anticipates negative operating cash flows before capital expenditures of between $100 million to $120 million. At October 28, 2003, the Company had liquidity of $199 million, which included unrestricted cash of $139 million and borrowing capacity under its existing credit facilities of $60 million. The Company is in the process of refinancing BWXT on a stand-alone basis and has received a commitment letter from a commercial bank to underwrite a three-year $125 million revolving credit facility, which may be increased to $150 million. This commitment is subject to the successful refinancing of J. Ray on a stand-alone basis. The Company is developing new financing arrangements for J. Ray and expects to close the BWXT and J. Ray financings simultaneously during the fourth quarter of 2003. The Company's ability to obtain new financing for J. Ray will depend on numerous factors, including J. Ray's operating performance and overall market conditions. If the Company is unable to obtain new financing arrangements, J. Ray's ability to pursue additional projects, which often require letters of credit, and its liquidity will be adversely impacted. These factors continue to cause substantial doubt about J. Ray's ability to continue as a going concern. McDermott's September 30, 2003 balance sheet shows a working capital deficit of about $100 million, and a total shareholders' equity deficit of about $420 million. McDermott International, Inc. is a leading worldwide energy services company. The Company's subsidiaries provide engineering, fabrication, installation, procurement, research, manufacturing, environmental systems, project management and facility management services to a variety of customers in the energy and power industries, including the U.S. Department of Energy. MEASUREMENT SPECIALTIES: Q2 Results Enter Positive Territory ------------------------------------------------------------ Measurement Specialties, Inc. (Amex: MSS), a designer and manufacturer of sensors and sensor-based consumer products, reported financial results for its three and six month periods ended September 30, 2003. The Company reported income from continuing operations for the three months ended September 30, 2003 of $1.7 million, or $0.12 per share (diluted), as compared to a loss of $1.0 million, or a loss of $0.09 per share (diluted), for the same period last year. Pro forma income from continuing operations (which excludes non- cash equity based compensation), increased to $3.6 million in the quarter ended September 30, 2003, or $0.26 per share (diluted), as compared to a loss of $1.0 million for the same period last year, or a loss of $0.09 per share (diluted). For the six months ended September 30, 2003, the Company reported income from continuing operations of $5.4 million, or $0.39 per share (diluted), as compared to a loss of $3.2 million, or a loss of $0.27 per share (diluted) for the same period last year. Pro forma income from continuing operations increased to $7.3 million, or $0.54 per share (diluted) for the six month period ended September 30, 2003, as compared to a loss of $3.2 million, or a loss of $0.27 per share (diluted), for the same period last year. Please refer to the notes and reconciliation's relating to non-GAAP financial measures contained in this press release. "Excluding the non-cash warrant charge, the second quarter results were generally in line with our expectations and guidance provided at the annual shareholder's meeting in September," commented Frank Guidone, Company CEO. Guidone continued, "The decline in net sales over last year is largely a timing issue associated to consumer shipments. We are expecting a strong third quarter, particularly in consumer. Third quarter net sales in the Sensor Division should beat the first quarter sales of $14.8 million, and sales in the Consumer Division -- benefiting from the seasonal lift -- should exceed $17 million." Three Months Ended September 30, 2003 For the three months ended September 30, 2003, net sales decreased 11.6% to $28.6 million, as compared to $32.3 million for the three months ended September 30, 2002. For the three months ended September 30, 2003, net sales in the Sensors division increased 1.6% to $14.2 million, as compared to $14.0 million for the same period last year. Net sales in the Consumer Products division decreased 21.6% to $14.3 million for the three months ended September 30, 2003, as compared to $18.3 million for the same period last year. For the three months ended September 30, 2003, gross profit increased $1.6 million to $12.3 million, from $10.7 million for the three months ended September 30, 2002. For the three months ended September 30, 2003, the Company reported gross margin as a percent of sales of 43.1%, as compared to 33.1% for the same period last year. The improvement in gross margin as a percent of sales was largely the result of the implementation of the restructuring plan, improved production planning, and cost control efforts. Operating expenses were $10.2 million for the three months ended September 30, 2003, as compared to $11.0 million for the same period last year. Included in the operating expenses for the three months ended September 30, 2003 is a $1.8 million non-cash equity based compensation charge, as well as increased accruals associated with the employee profit sharing plan as a result of the company's improved financial performance. For the three months ended September 30, 2002, the Company had incurred approximately $2.5 million in legal and professional fees over the current year levels. In addition, the three months ended September 30, 2002 included restructuring costs of $0.5 million. Six Months Results For the six months ended September 30, 2003, net sales decreased 2.5% to $54.6 million, compared to $56.0 million for the six months ended September 30, 2002. Sensors division sales increased $2.5 million, or 9.3%, to $29.0 million for the six months ended September 30, 2003, from $26.5 million for the same period last year. Consumer Products division sales decreased $3.9 million, or 13.2%, to $25.6 million for the six months ended September 30, 2003 from $29.5 million for the same period last year. For the six months ended September 30, 2003, gross profit increased $6.3 million, or 33.9% to $24.9 million, from $18.6 million for the same period last year. For the six months ended September 30, 2003, the Company reported gross margin as a percent of sales of 45.6 %, as compared to 33.2 % for the same period last year. The improvement in gross margin as a percent of sales was also largely the result of the implementation of the restructuring plan, improved production planning, and cost control efforts. Operating expenses for the six months ended September 30, 2003 were $18.7 million, as compared to $20.4 million for the same period last year. Included in the operating expenses for the six months period ended September 30, 2003, is a $1.9 million non-cash equity based compensation charge, as well as increased accruals associated with the employee profit sharing plan as a result of the company's improved financial performance. For the six months ended September 30, 2002, the Company had incurred approximately $3.0 million in legal and professional fees over the current year levels. In addition, the three months ended September 30, 2002 included restructuring costs of $1.1 million. The fully diluted share count includes the effect of all vested and unvested option shares granted last November under the 1995/1998 MSI Incentive Stock Option Plan, as well as all vested and unvested warrant shares granted under the current CEO's stock compensation plan. Measurement Specialties is a designer and manufacturer of sensors, and sensor-based consumer products. Measurement Specialties produces a wide variety of sensors that use advanced technologies to measure precise ranges of physical characteristics, including pressure, motion, force, displacement, angle, flow, and distance. Measurement Specialties uses multiple advanced technologies, including piezoresistive, application specific integrated circuits (ASICs), micro-electromechanical systems (MEMS), piezopolymers, and strain gages to allow their sensors to operate precisely and cost effectively. * * * Going Concern Uncertainty As previously reported, Measurement Specialties' independent accountants Grant Thornton LLP, in its Auditors' Report dated May 20, 2003, stated: "The accompanying [sic] consolidated financial statements have been prepared assuming that the Company will continue as a going concern...[T]he Company incurred net losses of $9,097,000 and $29,047,000 for the fiscal years ended March 31, 2003 and 2002, respectively. Additionally, the Company is a defendant in a class action lawsuit and is also the subject of investigations being conducted by the Division of Enforcement of the United States Securities and Exchange Commission and the United States Attorney for the District of New Jersey. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty." MERCURY AIR: Will File Form 10-K for FY 2003 by November 12 ----------------------------------------------------------- Mercury Air Group, Inc. (Amex: MAX; PCX) has informed the American Stock Exchange that the Company intends on filing its Annual Report on Form 10-K for its fiscal year ended June 30, 2003 no later than November 12, 2003. On October 15, 2003, the Company notified the American Stock Exchange it was delaying the filing of its annual report to allow additional time for the completion of the audit of its financial statements. Since then, the Company has provided its auditors with the information required and expects to complete the preparation and audit of its financial statements within the next week. The Company does not believe that the continuing audit indicates any underlying weaknesses in the Company's financial condition or prospects. Los Angeles-based Mercury Air Group (Amex: MAX; PCX) provides aviation petroleum products, air cargo services and transportation, and support services for international and domestic commercial airlines, general and government aircraft and specialized contract services for the United States government. Mercury Air Group operates four business segments worldwide: Mercury Air Centers, Inc., MercFuel, Inc., Maytag Aircraft Corporation and Mercury Air Cargo, Inc. For more information, please visit http://www.mercuryairgroup.com * * * As reported in Troubled Company Reporter's October 30, 2003 edition, Allied Capital Corporation (NYSE: ALD) acquired Mercury Air's $24.0 million Senior Subordinated 12% Note Due December 31, 2005 from J.H. Whitney Co. Mezzanine Fund and has also entered into a definitive agreement, subject to Mercury's stockholders' approval, the completion of due diligence and regulatory agency consents, for Allied to purchase 100% of the stock of Mercury Air Centers, Inc., the wholly-owned subsidiary of Mercury Air Group which provides fixed base operations at 19 locations throughout the United States. The Mercury FBO Sale provides for a purchase price of $70 million, including an escrow relating to a lease extension, adjustments related to certain capital investments made by Mercury, working capital and other customary terms and conditions. Upon completion of the sale transaction, which is planned to occur by December 31, 2003, the new promissory note issued to Allied in replacement of the Whitney Note, and other debt will be retired with the proceeds from the Mercury FBO Sale. As previously disclosed, Mercury was required to seek opportunities for asset sales or refinancings to prepay all or part of the $24.0 million Senior Subordinated 12% Note by December 31, 2003. Failure to make certain prepayments to Whitney by such date would have required the issuance of up to 10% of the Company's stock pursuant to warrants with a nominal exercise price, as well as issuance of an additional note in the amount of $5.0 million. Under the provisions of the Allied Note these penalty provisions were waived. Allied, upon the acquisition of the Whitney Note, also acquired detachable warrants to purchase 226,407 shares of Mercury's common stock from Whitney with Whitney retaining the right to purchase 25,156 shares of Mercury's common stock. Mercury agreed to reduce the exercise price of these warrants to $6.10 per share. MIRANT CORP: MAGI Committee Signs-Up Cox & Smith as Co-Counsel -------------------------------------------------------------- The Official Committee of Unsecured Creditors of Mirant Americas Generation, LLC seeks the Court's authority to retain Cox & Smith Inc. as its co-counsel, nunc pro tunc to July 25, 2003. Charles Greer, Co-Chair of the MAGI Committee, informs the Court that the MAGI Committee selected Cox & Smith because of its extensive experience in bankruptcy and reorganization matters. As co-counsel, Cox & Smith is expected to: a. consult with the Debtors and their counsel, Cadwalader, Wickersham & Taft, concerning the administration of the case; b. investigate the acts, conduct, assets, liabilities and financial condition of the Debtors, the operation of the Debtors' business and the desirability to continue in this business, and any other matters relevant to the cases or to the formulation of a plan; c. participate in the formulation of a plan and advise those represented by the MAGI Committee of the MAGI Committee's determination as to any plan of reorganization; d. potentially request the appointment of a trustee or examiner under Section 1104 of the Bankruptcy Code, in the event that the MAGI Committee believes that the circumstances of the case require that action; and e. perform all other legal services on behalf of the MAGI Committee in connection with these Chapter 11 cases. Cox & Smith will seek compensation for the services rendered on an hourly basis plus reimbursement of actual, necessary expenses incurred. The primary attorneys and paralegals who will represent the MAGI Committee and their current hourly rates are: a. Deborah D. Williamson, Shareholder $450 b. Carol E. Jendrzey, Shareholder 275 c. Thomas Rice, Associate 240 d. Michelle Latham, Paralegal 90 Ms. Williamson relates that as part of the internal due diligence regarding potential conflicts, Cox & Smith discovered that one of its shareholders, Gardner Kendrick, currently holds 23 shares of stock in Mirant Corporation. Mr. Kendrick has made arrangements to donate these shares to Trinity Baptist Church of San Antonio. Once the transfer is complete, Mr. Kendrick will have no control over any disposition of the shares. In the interim, Cox & Smith is taking appropriate measures to ensure that Mr. Kendrick is screened from receiving any confidential or non-public information until the transfer of the shares is complete. Ms. Williamson assures Judge Lynn that no other attorney with Cox & Smith has any other connection with or any interest adverse to the Debtors, their creditors or any other party-in-interest, or their attorneys and consultants. According to Ms. Williamson, prior to the appointment of the MAGI Committee, Cox & Smith did represent certain MAGI bondholders in connection with these bankruptcy cases. As a condition to acceptance of the employment as counsel to the MAGI Committee, Cox & Smith will not continue to represent the interests of any individual bondholder or creditor of any of the Debtors. Thus, Ms. Williamson assures the Court that Cox & Smith is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. * * * On an interim basis, the Court authorizes the MAGI Committee to retain Cox & Smith effective as of July 25, 2003. (Mirant Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) NORTHWOODS CAPITAL: Fitch Affirms BB $7MM Class VI Notes Rating --------------------------------------------------------------- Fitch Ratings affirms seven classes of notes issued by Northwoods Capital II, Ltd. These affirmations are the result of Fitch's annual review process. The following rating actions are effective immediately: - $229,000,000 class I senior notes 'AAA'; - $76,000,000 class II senior notes 'AA'; - $36,000,000 class III mezzanine notes 'A'; - $35,000,000 class IV mezzanine notes 'BBB+'; - $12,000,000 class V mezzanine notes 'BBB'; - $7,000,000 class VI mezzanine notes 'BB'; - $10,000,000 combination notes 'BBB'. Northwoods II is a collateralized loan obligation managed by Angelo, Gordon & Co. The CLO was issued March 23, 2000 and is primarily comprised of high yield senior secured loans. Fitch has reviewed in detail the portfolio performance of Northwoods II. In conjunction with this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. Angelo Gordon is a private investment firm based in New York City that is focused on alternative investments. The firm currently manages over $10 billion in assets. Angelo Gordon has historically invested in distressed assets. While Northwoods II has a 20% bucket for discounted senior secured loans, Angelo Gordon is currently focusing on the par senior secured loans for the portfolio. The Northwoods II portfolio has experienced some deterioration since its inception, with a reduction in its overcollateralization levels of approximately 4%. The target par amount of the portfolio at inception was $423 million. The overcollateralization test balance, which discounts defaulted assets at the lower of market price or recovery and values discounted asset purchases at par, was as high as $429 million in September 2000 and as low as $405 million in April 2003. As of the latest available trustee report, the OC test balance is currently approximately $411 million, which is available to cover $395 million of rated liabilities. The $6 million improvement in the OC test balance from April 2003, is partially attributed to realized gains on previously defaulted securities. The current portfolio has $22 million of defaulted securities which represents 5.8% of the total collateral balance (excluding cash). Approximately half of the defaulted assets are currently trading above the assumed recovery rate for the OC test balance calculation. Angelo, Gordon has been successfully managing this portfolio and as a result, the portfolio is currently passing all of its performance tests under Fitch guidelines. Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. As a result of this analysis, Fitch has determined that the original ratings assigned to the notes still reflect the current risk to noteholders. Fitch will continue to monitor and review this transaction for future rating adjustments. NRG ENERGY: Wants Approval of Beijing Guohua Sale Agreement ----------------------------------------------------------- Xcel Enterprises, Inc. acquired certain Sale Assets from General Electric International, Inc. under a purchase agreement, dated October 3, 2000. The Sale Assets consist of two combustion turbines, one steam turbine generator and certain related equipment. Pursuant to an assignment and assumption agreement, Xcel transferred all of its rights and interests under the purchase agreement to the NRG Energy Debtors. Subsequently, the Debtors renegotiated the terms of the purchase agreement and entered into a new purchase agreement dated April 12, 2001 with General Electric Energy Products France SNC and General Electric Power Systems Inc. Pursuant to the renegotiated terms, NRG remitted certain payments to GE and delivered the Sale Assets into storage in three separate locations. The monthly storage charges are $97,000 per month. In September 2002, the Debtors engaged the services of various marketing brokers in an effort to obtain the best possible price for the Sale Assets and curb the unnecessary storage costs. The Debtors and its various brokers implemented several measures to locate a buyer for the Sale Assets, including advertising in industry publications and websites, and distributing informational fliers at various equipment shows held in Brussels, Helsinki, Singapore and Nigeria. Michael A. Cohen, Esq., at Kirkland & Ellis, in New York, relates that the Marketing Campaign generated communications of interest from 11 different buyers. In May 2003, the Debtors received a formal offer to purchase the Sale Assets from Beijing Guohua Electric Power Corporation for $80,422,700. The only other bidder presented a written proposal for a significantly lower purchase price of $50,000,000, followed by a second bid of $58,000,000. Subsequently, the Debtors and Beijing Guohua entered into the Purchase Agreement for the sale of the Sale Assets. Concurrently, the Debtors intend to assign to Beijing Guohua its rights under the GE Agreement through a consent, assignment and assumption agreement. Furthermore: (a) GE has reviewed all of the documentation related to the sale, and has executed the Consent Agreement; (b) the advisors for the Official Committee of Unsecured Creditors agreed to support the Sale; and (c) the Debtors' Board of Directors unanimously approved the Sale. At the Debtors' request, the Court approved the Purchase Agreement for the sale of the Sale Assets to Beijing Guohua and authorized the Debtors to take all necessary action to further the consummation of the sale. Mr. Cohen relates that the Sale will liquidate unwanted assets and free-up additional cash for the benefit of the Debtors' estates and creditors, result an actual pre-tax gain for the Debtors, and eliminate the Debtors' ongoing obligations related to the Sale Assets. Mr. Cohen also points out that purchase price is significantly higher than the high end of the valuation range for the Sale Assets. On consummation of the Sale, Beijing Guohua will pay: (a) $7,493,259 to GE, representing the balance due to GE by the Debtors under the GE Agreement; (b) $2,124,158 to PennEnergy, representing the broker's fee for the Sale and Marketing Campaign, and (c) the remaining $70,805,283 to the Debtors. (NRG Energy Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) OAKWOOD HOMES: S&P Hatchets Related Ratings on 3 Note Classes ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the subordinate B-1 classes of Oakwood Mortgage Investors Inc. 1998-B, OMI Trust 1999-D, and OMI Trust 2000-B. The lowered ratings reflect the unlikelihood that investors will receive timely interest and the ultimate repayment of their original principal investments. Oakwood Mortgage Investors Inc. 1998-B and OMI Trust 1999-D each reported an outstanding liquidation loss interest shortfall for their B-1 classes on the October 2003 payment date. Standard & Poor's believes that B-1 interest shortfalls for these deals will continue to be prevalent in the future, given the adverse performance trends displayed by the underlying pool of manufactured housing retail installment contracts originated by Oakwood Homes Corp., and the location of B-1 write-down interest at the bottom of the transaction payment priorities (after distributions of senior principal). High losses during the past year have reduced the OMI 2000-B overcollateralization ratio to zero, resulting in the complete principal write-down of the B-2 class, and the partial principal write-down of the B-1 class. Standard & Poor's will continue to monitor the ratings associated with these transactions in anticipation of future defaults. RATINGS LOWERED Oakwood Mortgage Investors Inc. 1998-B Rating Class To From B-1 D CC OMI Trust 1999-D Rating Class To From B-1 D CC OMI Trust 2000-B Rating Class To From B-1 CC CCC OWENS CORNING: Balks At Ohio Workers' Bureau's $9.2-Mill. Claim --------------------------------------------------------------- The Ohio Bureau of Workers' Compensation filed Claim No. 2087 for $9,247,789 based on what the Bureau describes as the "[Owens Corning] debtor's statutory obligation to pay the costs of Workers Compensation Claims pursuant to Ohio Revised Code Section 4123.75 which became due [October 15, 2000]." Based on the attachment to the Bureau's Claim, the Claim appears to have been calculated by using the asserted average of workers compensation payments made by the Debtors in the years from 1996 through 1999 amounting to $1,712,554, and then multiplying the average by seven, presumably to reflect seven years of potential exposure. The result obtained is then apparently discounted to a present value of $9,247,789, using a stated 7% discount rate. However, Norman L. Pernick of Saul Ewing LLP, in Wilmington, Delaware, informs the Court that the Bureau's Claim does not state or suggest that the Bureau paid any amounts on account of any workers' compensation obligation of the Debtors. Rather, the Claim appears to assert amounts that the Bureau may have to pay in the future in the event the Debtors fail to fulfill their workers' compensation obligation under applicable Ohio law. Indeed, the Debtors fulfilled all these obligations since the Petition Date. Pursuant to an October 6, 2000 Court order, the Debtors were authorized to make all workers compensation payments. The Debtors have done so and intend to continue doing so, Mr. Pernick says. The Debtors ask the Court to disallow and expunge the Claim in its entirety. Among other things, the Bureau's Claim is a claim: (1) of an entity liable with the Debtor to a creditor; (2) for reimbursement or contribution; and (3) that is contingent. The Bureau's claim, accordingly, is wholly disallowable under Section 502(e)(1) of the Bankruptcy Code, Mr. Pernick asserts. Separate and apart from Section 502(e)(1), the Debtors contest the asserted amount of the Bureau's Claim for at least two reasons. First, pursuant to the October 6, 2000 Court Order, the Debtors were given authority to pay, and paid, all workers' compensation claims. The Bureau's Claim does not reflect these payments. Second, whether or not the Claim reflects payments made by the Debtors pursuant to the Court's order, the Debtors disagree with the manner in which the Claim was calculated, and demand strict proof of the amount asserted. (Owens Corning Bankruptcy News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 609/392-0900) PG&E NATIONAL: Noteholder Committee Taps Chadbourne & Parke LLP --------------------------------------------------------------- The Official Noteholders' Committee, appointed in the PG&E National Energy Group Debtors' bankruptcy cases, needs attorneys to handle tax related matters. In this regard, Committee chairperson Marlene Deleon relates that the Noteholders' Committee selected Chadbourne & Parke LLP as its Special Tax, Regulatory and Corporate Counsel because the firm's attorneys have extensive knowledge and expertise in the areas of tax, regulatory and corporate law and other areas of law relevant to the NEG Debtors' Chapter 11 cases. Chadbourne & Parke is also familiar with the NEG Debtors' financial condition and businesses as a result of its previous co-representation of an ad hoc group of certain holders of 10-3/8% Senior Note due 2011. Chadbourne & Parke was engaged by the Ad Hoc Group to handle all matters not being handled by Klee, Tuchin, Bogdanoff & Stern LLP, the Noteholders' Committee's bankruptcy counsel. Chadbourne & Parke also advised the Ad Hoc Group in connection with negotiations with the NEG Debtors and their major creditors regarding the global restructuring of the NEG Debtors' debts. The Ad Hoc Group dissolved on August 6, 2003. The Noteholders' Committee wants to continue Chadbourne & Parke's engagement. As special counsel, Chadbourne & Parke will: (a) advise the Noteholders' Committee regarding matters of tax, regulatory and corporate law as they relate to the NEG Debtors' cases; and (b) advise the Noteholders' Committee in the negotiation of the tax, regulatory and corporate aspects of a reorganization plan. The Noteholders' Committee may, from time to time, ask Chadbourne & Parke to undertake specific matters beyond their limited scope of the responsibilities, as permitted by the Court. However, Chadbourne & Parke will not be responsible for advising the Noteholders' Committee with respect to bankruptcy, insolvency or any other matters that will be handled by other retained counsels. Rather, Chadbourne & Parke will supplement the representation to be provided by Klee, Tuchin, Bogdanoff & Stern LLP and Shapiro Sher Guinot & Sandler, when needed and as directed by Klee Tuchin, in matters involving tax, regulatory and corporate issues. Chadbourne & Parke will be compensated according to its current hourly rates, plus reimbursement of actual, necessary expenses and other incurred charges. The firm's current hourly rates are: Partners $425 - 720 Counsel 450 - 530 Associates 250 - 425 Paralegals 125 - 195 Chadbourne & Parke's hourly rates with respect to the individuals involved in representing the Noteholders' Committee' are: Richard M. Leder $695 Douglas M. Fried 595 Robert F. Shapiro 595 David Danon 345 Chadbourne & Parke partner, Douglas M. Fried, attests that the firm: (a) does not hold or represent any interest adverse to the NEG Debtors' estates; (b) does not represent any entity other than the Noteholders' Committee in connection with the NEG Debtors' Chapter 11 cases; and (c) is a "disinterested person" as such term is defined in Section 101(14) of the Bankruptcy Code. Mr. Fried discloses that, on account of Chadbourne & Parke's previous representation of the Ad Hoc Group, Chadbourne & Parke received a $150,000 retainer from the NEG Debtors plus $2,594,055 as payment for services rendered and reimbursement of expenses. An additional $650,000 retainer in connection with the current engagement was also received on July 7, 2003, resulting in the net retainer aggregating $800,000. Mr. Fried states that Chadbourne & Parke will return the balance of the $650,000 retainer to the NEG Debtors after subtracting any unpaid fees and disbursements for services before the actual date the Noteholders' Committee will retain Chadbourne & Parke. Consequently, the Court authorizes the Committee to retain Chadbourne & Parke. (PG&E National Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) PHILIP MORRIS: Will Appeal Jury Verdict for Missouri Smoker ----------------------------------------------------------- Philip Morris USA will appeal Tuesday's verdict by a Missouri jury to award nearly $1.6 million in compensatory damages to a sick smoker and $500,000 in damages to his wife. However, the jury also concluded that Michael Thompson was 50 percent responsible for his illness and, under Missouri law, the court must reduce the damage award by half. The Jackson County Circuit Court jury found that Mr. Thompson, 53, was not entitled to any punitive damages. "Philip Morris USA will first ask the court to set aside the verdict as inconsistent with the law and the facts of this case. If the verdict is not set aside, the company will appeal this decision to the Missouri Court of Appeals," said William S. Ohlemeyer, Philip Morris USA vice president and associate general counsel. After a full day of deliberation, the jury found for Philip Morris USA and Brown and Williamson Tobacco Corp. on claims of concealment, conspiracy and failure to warn; it found for the plaintiff on claims of design defect and negligence. The jury further determined that Philip Morris USA was 40 percent at fault, Brown and Williamson 10 percent at fault and Mr. Thompson 50 percent at fault for his illness, which under Missouri law reduces the verdict by half. PILLOWTEX CORP: Closes Sale of Assets to GGST LLC for $121 Mill. ---------------------------------------------------------------- On November 3, 2003, Pillowtex Corporation successfully closed the previously announced sale of substantially all of its remaining assets to GGST LLC. In accordance with the terms of the court approved sale agreement, GGST elected to exclude from the transaction the Pillowtex facilities located in Eden, North Carolina; Kannapolis, North Carolina (except for the IT building); Dallas, Texas; Hanover, Pennsylvania; and Tunica, Mississippi. GGST's election to exclude these facilities resulted in a $7 million reduction in the previously announced purchase price, bringing the total purchase price received by Pillowtex to $121 million. GGST retains its rights to the equipment located at all of Pillowtex's facilities, including the excluded facilities. Pillowtex intends to market the excluded facilities for sale. Pillowtex Corporation, headquartered in Kannapolis, N.C., was a leading designer, marketer and producer of home fashion products including towels, sheets, rugs, blankets, pillows, mattress pads, feather beds, comforters and decorative bedroom and bath accessories. On July 30, 2003, the Company closed substantially all of its operations and filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. GGST LLC is a company formed by SB Capital Group, Gibbs International, Gordon Brothers Retail Partners and Tiger Capital Group. Inquiries regarding the disposition of assets may be directed to Steve Luquire and John Deem at Luquire, George, Andrews, Inc. (704) 552 - 6565. Group 3 Design, a leading brand management firm, has been retained to manage the branded licensing activities of the acquired brands. Inquiries regarding the brands may be directed to mgleason@groupthreedesign.com PMA CAPITAL: Counterparty Rating Cut to Speculative-Grade Level --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its counterparty credit and senior debt ratings on PMA Capital Corp. to 'BB-' from 'BBB-'. Standard & Poor's also said that it lowered its counterparty credit and financial strength ratings on reinsurer PMA Capital Insurance Co. to 'BBB-' from 'A-'. In addition, Standard & Poor's lowered its counterparty credit and financial strength ratings on primary writers Pennsylvania Manufacturers Assoc. Insurance Co., Pennsylvania Manufacturers Indemnity Co., and Manufacturers Alliance Insurance Co., to 'BBB' from 'A-'. Standard & Poor's also placed the ratings on all of these entities on CreditWatch with negative implications. "These rating actions follow PMACC's recent announcement that it will record an unexpected pretax charge of about $150 million to strengthen loss reserves at PMACIC," explained Standard & Poor's credit analyst Laline Carvalho. In addition, PMACC announced its intention to suspend common stock dividends and explore strategic alternatives with respect to its reinsurance operations. "As a result of these events, Standard & Poor's no longer considers PMACIC to be strategically important to PMACC," Ms. Carvalho added. In addition, PMACIC's stand-alone capital adequacy is expected to fall below the adequate range following the charge. Standard & Poor's also believes PMAIG's capital adequacy, which has traditionally been extremely strong, could potentially be reduced to support capital at PMACIC, its immediate parent. Following the charge, PMACC is expected to report a net loss for 2003, which will make four consecutive years of poor operating results. Although Standard & Poor's expects the holding company to have adequate liquidity to support interest payments over the next 12 months, the group's liquidity position is expected to be constrained over the medium term. In addition, given continuous reserve development reported by the group in recent years (particularly relating to PMACIC and run-off excess and surplus line subsidiary Caliber One Indemnity Co.), Standard & Poor's believes PMACC continues to be exposed to further reserve development at its operating subsidiaries. Standard & Poor's expects to meet with PMACC's management shortly to evaluate management's expectations for operating performance, liquidity, and capitalization over the short and medium terms. At that time Standard & Poor's expects to resolve the CreditWatch status of the ratings. PRIME RETAIL: Shareholders' Meeting Adjourned Until November 18 --------------------------------------------------------------- Prime Retail, Inc., (OTC Bulletin Board: PMRE, PMREP, PMREO) announced that its special meeting of stockholders held on Thursday, October 30, 2003, in Baltimore, Maryland, which had been adjourned to November 4, 2003, had been adjourned again until Tuesday, November 18, 2003, 4:00 p.m., at 100 East Pratt Street, Baltimore, Maryland, to provide stockholders with additional time to cast their vote on the proposal to sell the Company. Before the last adjournment of the Special Meeting, the common stockholders approved an amendment to the Company's charter to reduce the required vote of the common stockholders to approve a merger from two-thirds to a majority. The record date for the Special Meeting remains September 23, 2003. Commenting on Tuesday's announcement, Prime Retail's Chief Executive Officer and Chairman of the Board Glenn D. Reschke said, "I urge every shareholder, regardless of the number of shares they own, to vote as soon as possible on this important proposal." Mr. Reschke added that shareholders should contact Prime Retail at (410) 234-1750 or (410) 234-8333 with any questions or assistance in voting their shares. The proposal to approve the sale of the Company to an affiliate of The Lightstone Group, LLC by means of a merger must be approved by the affirmative vote of the holders of at least two-thirds of the outstanding shares of our series A preferred stock and series B preferred stock, each voting separately as a class, and a majority of the outstanding shares of our common stock, voting separately as a class. As of November 4, 2003, the percentage of outstanding shares which had been voted by proxy or otherwise unvoted with respect to the proposal to sell the Company was as follows: For Against Abstain Unvoted Series A Preferred Stock 63.49% 29.05% 0.26% 7.20% Series B Preferred Stock 78.76% 0.97% 0.20% 20.07% Common Stock 57.55% 10.45% 0.44% 31.56% The foregoing percentages are subject to change because, among other things, proxies may be revoked at, or before, the Special Meeting when reconvened. Prime Retail is a self-administered, self-managed real estate investment trust engaged in the ownership, leasing, marketing and management of outlet centers throughout the United States. Prime Retail currently owns and/or manages 36 outlet centers totaling approximately 10.2 million square feet of GLA. Prime Retail also owns 154,000 square feet of office space. Prime Retail has been an owner, operator and a developer of outlet centers since 1988. For additional information, visit Prime Retail's Web site at http://www.primeretail.com * * * As reported in the Troubled Company Reporter's August 18, 2003 edition, the Company's liquidity depends on cash provided by operations and potential capital raising activities such as funds obtained through borrowings, particularly refinancing of existing debt, and cash generated through asset sales. Although the Company believes that estimated cash flows from operations and potential capital raising activities will be sufficient to satisfy its scheduled debt service and other obligations and sustain its operations for the next year, there can be no assurance that it will be successful in obtaining the required amount of funds for these items or that the terms of the potential capital raising activities, if they should occur, will be as favorable as the Company has experienced in prior periods. During 2003, the Company's first mortgage and expansion loan (the "Mega Deal Loan") is anticipated to mature with an optional prepayment date on November 11, 2003. The Mega Deal Loan, which is secured by a 13 property collateral pool, had an outstanding principal balance of approximately $262.1 million as of June 30, 2003 and will require a balloon payment of $260.7 million at the anticipated maturity date. If the Mega Deal Loan is not satisfied on the optional prepayment date, its interest rate will increase by 5.0% to 12.782% and all excess cash flow from the 13 property collateral pool will be retained by the lender and applied to principal after payment of interest. Certain restrictions have been placed upon the Company with respect to refinancing the Mega Deal Loan in the short term. If the Mega Deal Loan is not refinanced, the loss of cash flow from the 13 property collateral pool would eventually have severe consequences on the Company's ability to fund its operations. Based on the Company's discussions with various prospective lenders, it believes a potential shortfall will likely occur with respect to refinancing the Mega Deal Loan as the Company does not currently intend to refinance all of the 13 assets. Nevertheless, the Company believes this shortfall can be alleviated through potential asset sales and/or other capital raising activities, including the placement of mezzanine level debt and mortgage debt on at least one of the assets the Company does not currently plan on refinancing. The Company cautions that its assumptions are based on current market conditions and, therefore, are subject to various risks and uncertainties, including changes in economic conditions which may adversely impact its ability to refinance the Mega Deal Loan at favorable rates or in a timely and orderly fashion and which may adversely impact the Company's ability to consummate various asset sales or other capital raising activities. As previously announced, on July 8, 2003 an affiliate of The Lightstone Group, LLC, a New Jersey-based real estate company, and the Company entered into a merger agreement. In connection with the execution of the Merger Agreement, certain restrictions were placed on the Company with respect to the refinancing of the Mega Deal Loan. Specifically, the Company is restricted from negotiating or discussing the refinancing of the properties securing the Mega Deal Loan with any lenders until September 15, 2003, at which time the Company is only able to enter into refinancing discussions with certain enumerated lenders. After November 11, 2003, the Company may seek refinancing from other lenders. In addition, the Company is precluded from closing any loans relating to the Mega Deal Loan until November 11, 2003. This November 11, 2003 date may be extended until January 11, 2004, at the election of Lightstone, if Lightstone elects prior to September 15, 2003 to (i) pay (A) one-half of the additional interest incurred by the Company between November 11, 2003 and December 31, 2003, and (B) all of the additional interest incurred by the Company between January 1, 2004 and January 11, 2004, if so extended, in respect of the Mega Deal Loan and (ii) loan the Company any shortfall in cash flow that results from the excess cash flow restrictions (all excess cash flow from the 13 property collateral pool will be retained by the lender and applied to principal after payment of interest) under the Mega Deal Loan that become effective on November 11, 2003 and thereafter until the Mega Deal Loan is paid in full. In addition to the restrictions with respect to the refinancing of the Mega Deal Loan, pursuant to the terms of the Merger Agreement, the Company has also agreed to certain conditions pending the closing of the proposed transaction. These conditions provide for certain restrictions with respect to the Company's operating and refinancing activities. These restrictions could adversely affect the Company's liquidity in addition to its ability to refinance the Mega Deal Loan in a timely and orderly fashion. If the Merger Agreement is terminated under certain circumstances, the Company would be required to make payments to Lightstone ranging from $3.5 million to $6.0 million which could adversely affect the Company's liquidity. In connection with the completion of the sale of six outlet centers in July 2002, the Company guaranteed to FRIT PRT Bridge Acquisition LLC (i) a 13% return on its $17.2 million of invested capital, and (ii) the full return of its invested capital by December 31, 2003. As of June 30, 2003, the Mandatory Redemption Obligation was approximately $14.9 million. The Company continues to seek to generate additional liquidity to repay the Mandatory Redemption Obligation through (i) the sale of FRIT's ownership interest in the Bridge Properties and/or (ii) the placement of additional indebtedness on the Bridge Properties. There can be no assurance that the Company will be able to complete such capital raising activities by December 31, 2003 or that such capital raising activities, if they should occur, will generate sufficient proceeds to repay the Mandatory Redemption Obligation in full. Failure to repay the Mandatory Redemption Obligation by December 31, 2003 would constitute a default, which would enable FRIT to exercise its rights with respect to the collateral pledged as security to the guarantee, including some of the Company's partnership interests in the 13 property collateral pool under the aforementioned Mega Deal Loan. Because the Mandatory Redemption Obligation is secured by some of the Company's partnership interests in the 13 property collateral pool under the Mega Deal Loan, the Company may be required to repay the Mandatory Redemption Obligation before, or in connection with, the refinancing of the Mega Deal Loan. Additionally, any change in control with respect to the Company accelerates the Mandatory Redemption Obligation. In connection with the execution of the Merger Agreement, Lightstone has agreed to provide sufficient financing, if necessary, to repay the Mandatory Redemption Obligation in full at its maturity. The new financing would be at substantially similar economic terms and conditions as those currently in place for the Mandatory Redemption Obligation and would have a one-year term. The Company has fixed rate tax-exempt revenue bonds collateralized by properties located in Chattanooga, Tennessee which contain (i) certain covenants, including a minimum debt-service coverage ratio financial covenant and (ii) cross-default provisions with respect to certain of its other credit agreements. Based on the operations of the collateral properties, the Company was not in compliance with the Financial Covenant for the quarters ended June 30, September 30 and December 31, 2002. In the event of non-compliance with the Financial Covenant or default, the holders of the Chattanooga Bonds had the ability to put such obligations to the Company at a price equal to par plus accrued interest. On January 31, 2003, the Company entered into an agreement with the Bondholders. The Forbearance Agreement provides amendments to the underlying loan and other agreements that enable the Company to be in compliance with various financial covenants, including the Financial Covenant. So long as the Company continues to comply with the provisions of the Forbearance Agreement and is not otherwise in default of the underlying loan and other documents through December 31, 2004, the revised financial covenants will govern. Additionally, certain quarterly tested financial covenants and other covenants become effective June 30, 2004. Pursuant to the terms of the Forbearance Agreement, the Company was required to fund $1.0 million into an escrow account to be used for conversion of certain of the retail space in the collateral properties to office space and agreed that an event of default with respect to the other debt obligations related to the property would also constitute a default under the Chattanooga Bonds. The Company funded this required escrow in February 2003. The outstanding balance of the Chattanooga Bonds was approximately $17.9 million as of June 30, 2003. With respect to the Chattanooga Bonds, based on the Company's current projections, it believes it will not be compliance with certain quarterly tested financial covenants when they become effective on June 30, 2004 which would enable the Bondholders to elect to put the Chattanooga Bonds to the Company at their par amount plus accrued interest. The Company continues to explore opportunities to (i) obtain alternative financing from other financial institutions, (ii) sell the properties securing the Chattanooga Bonds and (iii) explore other possible capital transactions in order to generate cash to repay the Chattanooga Bonds. There can be no assurance that the Company will be able to complete any such activity sufficient to repay the amount outstanding under the Chattanooga Bonds in the event the Bondholders are able and elect to exercise their put rights. These conditions raise substantial doubt about the Company's ability to continue as a going concern. PRIMEDEX HEALTH: Confirmation Order is Final & Plan Takes Effect ---------------------------------------------------------------- Primedex Health Systems, Inc.'s Chapter 11 Plan of Reorganization filed with the Bankruptcy Court in Los Angeles, California in connection with the Company's default in its obligation to redeem the $16.3 million in its outstanding 10% convertible subordinated debentures due June 30, 2003, was confirmed by order of the Court on October 8, 2003, and became final on October 20, 2003. Primedex Health qualified its amended indenture with the Securities and Exchange Commission pursuant to the Trust Indenture Act of 1939, which qualification is effective October 30, 2003. The qualification implements the Court order approving the extension of the debentures for an additional five years through June 30, 2008, in return for which the Company agreed to (I) increase the annual interest rate to 11.5%; (ii) reduce the conversion rate to $2.50; and (iii) agreed not to redeem the debentures prior to July 1, 2005. Primedex Health Systems, Inc., Los Angeles, California (OTCBB:PMDX), owner and operator of 57 California medical diagnostic imaging facilities. PRIMUS TELECOMMS: Sept. 30 Balance Sheet Upside-Down by $118MM -------------------------------------------------------------- PRIMUS Telecommunications Group, Incorporated (Nasdaq:PRTL), a global telecommunications services provider offering an integrated portfolio of voice, Internet, data and hosting services, announced record results for the third quarter 2003. "I am delighted to report that, in the third quarter 2003, PRIMUS recorded net income of $6 million which did not include any significant benefit from currency transaction gains or debt reduction activities," stated K. Paul Singh, Chairman and Chief Executive Officer. "Our record $328 million of revenue in the third quarter - which represents our sixth consecutive quarter of revenue growth - places us on a trajectory to exceed our earlier- announced goal of between 20% to 25% revenue growth in 2003 over the prior year. Foreign currency exchange rates were more stable as compared to the prior quarter, thus our sequential revenue growth in the third quarter was primarily organic," Singh noted. "It was also significant that we posted a record $24 million of income from operations in the third quarter - 90% greater than the previous record which was set only in the prior quarter. With this momentum, assuming stable currency exchange rates for the remainder of this year, we have raised our 2003 goal for income from operations to the $65 million to $70 million range from the $50 million to $60 million range. Our earnings goal, assuming stable currency exchange rates and no adjustments relating to financing or other activities, has also been increased from the $0.38 to $0.42 range to in excess of $0.46 of diluted income per common share for the full year 2003. "On September 15, 2003, PRIMUS successfully completed an offering of $132 million of 3.75% Convertible Senior Notes. The net proceeds from that offering have been earmarked and used to reduce existing debt with higher interest rates. As a result, we expect to save approximately $7 million per year in interest expense, and because we have retired earlier maturing debt, we have improved the Company's liquidity," Singh added. "With these improvements to our balance sheet, combined with our strengthening operating performance, our key financial ratios continue to improve which should enable PRIMUS, at the appropriate time, to refinance remaining debt - particularly our high yield debt which has a blended interest rate of approximately 11.65% - at more favorable interest rates and further improve cash flow. We also plan to continue our efforts to reduce further the leverage on the balance sheet in order to position the Company to take advantage of opportunities for growth. "Our existing business model, is qualitatively differentiated from other players," Singh stated. "PRIMUS is geographically diversified in four major markets, with approximately 75% of our revenues derived from outside the United States. We have a retail customer focus targeting consumers and small to medium-sized enterprises. We concentrate on international services, where our global infrastructure, which we own and operate, provides us a competitive advantage. With our global fixed line, data and VoIP networks deployed, our capital expenditures are primarily dedicated to support revenue initiatives. In our core markets, there is abundant opportunity to grow just from increasing market share. As the results attest, our business model is working." Third Quarter Financial Results PRIMUS's net revenue for the third quarter 2003 was $328 million, compared with $261 million for the third quarter 2002 and $320 million in the second quarter 2003. "The 2.5% sequential revenue increase in the third quarter is primarily organic and is attributable to growth in our retail business. The 26% year-over- year growth in net revenue reflects both retail business growth, and favorable foreign currency exchange rates," stated Neil L. Hazard, Chief Operating Officer. Net revenue for the third quarter on a geographic basis was derived as follows: 40% from North America, 32% from Europe, and 28% from Asia-Pacific. The mix of revenues by customer type in the third quarter was 82% retail (27% business and 55% residential) and 18% carrier, which declined from 20% of revenues in the second quarter 2003. Data/Internet and VoIP revenues were $50 million in the third quarter, representing 15% of net revenue. Gross margin for the third quarter 2003 was a record $132 million, reflecting the higher level of revenue, a greater percentage of retail revenue, and effective management of cost of revenue, compared with $90 million of gross margin in the third quarter 2002 and $124 million in the second quarter of 2003. Gross margin for the third quarter 2003 as a percentage of net revenue was a record 40.4%, an increase of 600 basis points over 34.4% in the third quarter 2002, and 170 basis points over 38.7% in the second quarter 2003. Selling, general and administrative (SG&A) expenses for the third quarter 2003 were $87 million, or 26.6% of net revenue, as compared to $64 million, or 24.4% of net revenue, for the third quarter 2002, and $89 million, or 27.9% of net revenue, for the second quarter 2003. Income from operations was a record $24 million in the third quarter of 2003, a 310% increase from $6 million in the third quarter of 2002, and a 90% increase from $13 million recorded in the second quarter 2003. PRIMUS's net income in the third quarter 2003 was $6 million, compared with a loss of $14 million in the third quarter of 2002. The third quarter 2003 net income included a $1.4 million loss on early extinguishment of debt, a $2 million cost related to debt retirements, and an unrealized foreign currency transaction gain of $0.4 million. Basic and diluted income per common share was $0.07 and $0.06, respectively, for the third quarter 2003, compared to a basic and diluted loss of $0.22 per common share in the third quarter 2002. Basic and diluted weighted average common shares outstanding for the third quarter 2003 were 88 million and 92 million, respectively. Liquidity and Capital Resources At September 30, 2003, PRIMUS' balance sheet shows a working capital deficit of about $40 million, and a total shareholders' equity deficit of about $118 million. PRIMUS generated year-to-date cumulative cash from operating activities of $50 million through the end of the third quarter 2003, compared to $26 million from operating activities through the end of the third quarter 2002. Cash, cash equivalents and restricted cash as of September 30, 2003 was $135 million as compared to $78 million at June 30, 2003, due in part to the September 15, 2003 issuance of $132 million of 3.75% Convertible Senior Notes due 2010. During the third quarter 2003, the Company spent $5 million on capital expenditures, $18 million to reduce accounts payable and accrued expenses, and $77 million to reduce vendor and senior debt. Year-to-date capital expenditures through the end of the third quarter 2003 were $14 million as compared to our previously stated annual target of between $25 million and $30 million. At the end of the third quarter 2003, PRIMUS had total long-term debt of $599 million. This was comprised of $132 million of Convertible Senior Notes, $306 million of senior notes, $71 million of convertible debentures, and $90 million of vendor and other debt. Subsequent to the end of the third quarter 2003, the Company spent $34 million to retire the remaining principal amount of senior notes due in 2004. The Company intends to continue to pursue opportunities to raise additional debt, convertible and equity financing on favorable terms in order to take advantage of opportunities further to improve its liquidity, improve its profitability, strengthen its balance sheet, and accelerate its growth. To this end and to provide the Company with flexibility to respond timely to market opportunities, the Company today filed a Form S-3 shelf registration with the Securities and Exchange Commission for the issuance of up to an aggregate $200 million in common stock, preferred stock, debt securities, and/or warrants. The Company and/or its subsidiaries will evaluate and determine on a continuing basis, depending upon market conditions and the outcome of events described as "forward-looking statements" in this release and its SEC filings, and future negotiations the Company may pursue with the holders of certain of its outstanding debt securities and instruments, the most efficient use of the Company's capital, including investment in the Company's network and systems, lines of business, potential acquisitions, purchasing, refinancing, exchanging or retiring certain of the Company's outstanding debt securities in privately negotiated transactions, open market transactions or by other direct or indirect means to the extent permitted by its existing covenants. Conversion of Series C Preferred Stock and Registration of Common Stock The Company received notice of the irrevocable election by certain affiliates of AIG Capital Partners, Inc., and an additional investor who hold all the outstanding shares of the Series C Convertible Preferred Stock to convert their Preferred Stock into 22,616,990 shares of PRIMUS common stock. Pursuant to the terms of the Certificate of Designation governing the Preferred Stock, the conversion was effective immediately prior to the close of business today. As a consequence, the liquidation preference and certain other rights associated with the Preferred Stock have been eliminated. Also, as a result of the conversion, based upon the closing price of the Company's common stock on November 3, 2003, the Company's equity market capitalization increased by approximately $200 million. The 22,616,990 shares of common stock are already included in the Company's computation of basic and diluted income per common share. In consideration for this voluntary conversion, the Company has agreed, subject to fiduciary duties, to permit the former holders of the Preferred Stock to nominate a candidate for election by stockholders to the Company's board of directors and to nominate a board observer and to require that certain matters be determined by the board of directors by a majority vote of the non-management directors, in each case subject to maintaining specific ownership levels. In addition, and to satisfy certain of its obligations under a registration rights agreement that the Company entered into in connection with the sale of the Preferred Stock, the Company today filed with the SEC a Form S-3 resale registration statement covering the 22,616,990 shares of common stock issued upon conversion of the Preferred Stock. In connection with such filing, certain security holders entered into a lock-up agreement with the Company which will generally prohibit the resale of 13.5 million of such shares during the 270-day period commencing November 4, 2003. The Shelf Registration and the Resale Registration filed with the SEC have not yet become effective. The securities relating to these registration statements may not be sold, nor may offers to buy be accepted, prior to the time the applicable registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities, in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state. PRIMUS Telecommunications Group, Incorporated (NASDAQ: PRTL) is a global facilities-based telecommunications services provider offering international and domestic voice, Internet, data and hosting services to business and residential retail customers and other carriers located primarily in the United States, Canada, Australia, the United Kingdom and western Europe. PRIMUS provides services over its global network of owned and leased transmission facilities, including approximately 250 points-of-presence throughout the world, ownership interests in over 23 undersea fiber optic cable systems, 19 carrier-grade international gateway and domestic switches, and a variety of operating relationships that allow it to deliver traffic worldwide. PRIMUS also has deployed a global state-of-the-art broadband fiber optic ATM+IP network and data centers to offer customers Internet, data, hosting and e-commerce services. Founded in 1994, PRIMUS is based in McLean, Virginia. PW EAGLE: Will Host Third-Quarter Conference Call on Tuesday ------------------------------------------------------------ PW Eagle, Inc. (Nasdaq:PWEI) will host a conference call and webcast of its Fiscal Third Quarter 2003 Results on Tuesday, November 11, 2003 at 2:00 p.m. Central Time. Results for the third quarter will be released after the market closes on Monday, November 10, 2003. The conference call webcast will be available live on the Internet at http://www.pweagleinc.com The call will also be archived at that location for one week following its original webcast. The conference call telephone number is 1-888-857-6929. Use confirmation code 533380 to access the call, and please call five to ten minutes before the beginning of the conference call. PW Eagle, Inc. is a leading producer of PVC pipe and also produces polyethylene pipe through its PW Poly subsidiary. The Company operates eleven manufacturing facilities in the United States. PW Eagle's common stock is traded on the Nasdaq National Market under the symbol "PWEI." * * * Liquidity and Capital Resources In its recent Form 10-Q filed with the Securities and Exchange Commission, the Company reported: "We had negative working capital of $2.8 million and excess borrowing capacity under our Revolving Credit Facilities of $12.5 million at June 30, 2003. "Cash provided by operating activities was $1.6 million in the first 6 months of 2003 compared to $16.1 million in the first six months of 2002. The primary use of cash was funding the increase in inventory. "Investing activities utilized $28.4 million primarily for the purchase of Uponor ETI Company in the first quarter of 2003. "Financing activities provided $28.0 million during the first six of 2003. The primary source of cash in the first and second quarter of 2003 was borrowings under the Senior Credit Facility of ETI and the Revolving Credit Facility of PW Eagle. The Company made a final payment of $0.6 million to the original owners of our previously owned Hillsboro, Oregon manufacturing facility. Debt issuance and financing costs of $0.5 million were incurred in connection with the establishment of ETI's Senior Credit Facility. Financing activities used $17.1 million in 2002. In 2002, we entered into a sale-leaseback transaction, generating $13.4 million in proceeds. We used the proceeds to reduce term debt by $8.8 million. The remaining sale-leaseback proceeds were applied to the Revolving Credit Facility. Debt issuance and financing costs of $0.9 million were incurred to complete these transactions. These costs will be amortized and expensed as interest expense over the life of the respective loans. "We had commitments for capital expenditures of $0.6 million at June 30, 2003, which we intend to fund from operating profits. Additional sources of liquidity, if needed, include our revolving credit line. We believe we have the financial resources needed to meet our current and future business requirements, including working capital requirements. "As of June 30, 2003, the Company was in violation of certain financial institution loan covenants on its PW Eagle senior debt, including the funded debt to EBITDA and the net worth covenants. The financial institutions have since waived the condition of non- compliance with these covenants at June 30, 2003. Under current industry conditions and debt structure, it is likely that the Company will be in violation of these same covenants in future periods. Therefore, the Company has reclassified a portion of its long term debt from long term to current as of June 30, 2003, in accordance with Emerging Issues Task Force No. 86-30, 'Classification of Obligations When a Violation is Waived by the Creditor.' It is also likely under current industry conditions and debt structure that the Company will be in violation of financial covenants related to its subordinated debt and ETI senior debt in future periods. As the Company was in compliance with the covenants related to its subordinated debt and ETI senior debt at June 30, 2003, the long term portion of these debts are not reclassified to current in accordance with EITF 86-30. There is no assurance that our lenders, note holders and lessors will waive any future default or agree to any future amendments of our credit facilities and leases. If we fail to obtain a waiver or amendment, we would be required to obtain new financing from alternative financial sources. There is no assurance that we could obtain new financing, and if we did, there is no assurance that we could obtain terms as favorable as our current credit facilities." QWEST COMMS: Creates Systems Integrator Alliances Division ---------------------------------------------------------- Qwest Communications International Inc. (NYSE: Q) announced the creation of a systems integrator alliances division, a division formed specifically to work for and with integrators and outsourcers. The new division focuses on collaborating with systems integrators to provide a full range of communications solutions to enterprise customers -- local, state and federal governments, and enterprise business customers. Under this new division, Qwest works with systems integrators to pursue outsourcing deals throughout the entire sales cycle of pursuing, bidding, winning and delivering services. By teaming, Qwest is better positioned to respond to systems integrators and their business customers' growing requirements for fully integrated enterprise-wide solutions. Howard Seeger has been named regional vice president of the new division, and he will report directly to Clifford S. Holtz, Qwest's executive vice president of business markets. According to Carrie Lewis, senior analyst at The Yankee Group, "Developing relationships to work on an integrated basis with system integrators is the direction that carriers, including Qwest, should be taking in today's IT services market. Aligning the managed networking capabilities of Qwest with the integration, business process, and vertical expertise of systems integrators enables both providers to focus on their core capabilities while bringing to market seamlessly delivered business solutions that customers are seeking." "We are pleased that companies such as Qwest are focusing on the integrator model. Likewise, we understand how crucial our partnerships with telecom companies are to offering our customers the solutions they need for particular enterprise-wide infrastructure requirements," said Wood Parker, vice president and general manager of the Global Information Technology Division at Northrop Grumman Mission Systems. "Businesses increasingly seek straightforward, cost-effective answers to their architecture needs; providing those answers is a role tailor made for a systems integrator like Northrop Grumman." The systems integrator alliances division allows Qwest and its integrator partners to jointly collaborate on efforts to maximize resources, skills, knowledge and relationship-building opportunities. As part of the arrangement, Qwest will assume accountability for end-to-end delivery of the entire spectrum of voice and data services to their systems integrator partners. "The market for communications services continues to grow and a rising percentage of that business is going to systems integrators, so we have designed our new division around the integrators' business models," said Holtz. "Reflecting Qwest's Spirit of Service, we are putting additional focus on our existing relationships with systems integrators because they provide an ideal one-point-of-contact for customers that require a range of information technology solutions -- and want to get it from one source." Qwest Communications International Inc. (NYSE: Q) -- whose December 31, 2002 balance sheet shows a total shareholders' equity deficit of about $1 billion -- is a leading provider of voice, video and data services to more than 25 million customers. The company's 47,000 employees are committed to the "Spirit of Service" and providing world-class services that exceed customers' expectations for quality, value and reliability. For more information, visit the Qwest Web site at http://www.qwest.com RADIO UNICA: Wants to Continue Employing Ordinary Course Profs. --------------------------------------------------------------- Radio Unica Communications Corp., and its debtor-affiliates are asking permission from the U.S. Bankruptcy Court for the Southern District of New York to continue employing the professionals they utilize in the ordinary course of their businesses. The Debtors tell the Court that they need the Ordinary Course Professionals to render services relating to the conduct of their ordinary business affairs. At this time, the Debtors have identified approximately 6 Ordinary Course Professionals. Additional Ordinary Course Professionals may be retained from time to time, which the Debtors will supplement a list with the Court. Specifically, the Debtors are seeking to retain the Ordinary Course Professionals for the postpetition period without the necessity of complying with the retention approval process otherwise applicable to professionals in these cases. The Debtors expect that, to enable them to continue normal business activities during their reorganization efforts, they will need the services of the Ordinary Course Professionals. The work of the Ordinary Course Professionals is directly related to the preservation of the value of the Debtors' estates. The Debtors believe that it might unduly hinder the administration of the Debtors' estates if the Debtors were required to: a) submit to the Court a Motion, affidavit, and proposed retention order for each Ordinary Course Professional, b) wait until such order were approved before the Ordinary Course Professionals continued to render services, and c) withhold payment of the normal fees and expenses of the Ordinary Course Professionals until they complied with the compensation and reimbursement procedures applicable to other professionals. Under such conditions, some Ordinary Course Professionals might be unwilling to provide services, and others might suspend services pending a specific court order authorizing their retention. Because the matters handled by the Ordinary Course Professionals may be active on a day-to-day basis, any delay, or the need to replace these professionals, could have adverse consequences for the Debtors. In this regard, the Debtors seek authority to pay, without formal application to the Court, all of the fees and expenses of each Ordinary Course Professional upon submission to the Debtors an appropriate invoice setting forth in reasonable detail the nature of the postpetition services rendered and expenses incurred only up to $20,000 in any one month. Headquartered in Miami, Florida, Radio Unica Communications Corp., the only national Spanish-language AM radio network in the U.S., broadcasting 24-hours a day, 7-days a week, filed for chapter 11 protection on October 31, 2003 (Bankr. S.D. N.Y. Case No. 03- 16837). Bennett Scott Silverberg, Esq., and J. Gregory Milmoe, Esq., at Skadden Arps Slate Meagher & Flom, LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $152,731,759 in total assets and $183,254,159 in total debts. RESTRUCTURE PETROLEUM: Section 341(a) Meeting on December 5 ----------------------------------------------------------- The United States Trustee will convene a meeting of Restructure Petroleum Marketing Services, Inc., and its debtor-affiliate's creditors on December 5, 2003, at 1:30 p.m., at 501 East Polk St., (Timberlake Annex), Room 100-B, Tampa, Florida 33602. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Tampa, Florida, Restructure Petroleum Marketing Services, Inc., a motor fuel franchiser, files for chapter 11 protection on October 29, 2003 (Bankr. M.D. Fla. Case No. 03- 22395). Harley E. Riedel, Esq., at Stichter, Riedel, Blain & Prosser, P.A., represents the Debtors in their restructuring efforts. SAN REMO: Buddy Ford Serving as Chapter 11 Bankruptcy Attorney -------------------------------------------------------------- San Remo 718 Corporation is asking for authority from the U.S. Bankruptcy Court for the Middle District of Florida to employ Buddy D. Ford, P.A. as its attorneys in its chapter 11 proceeding. Buddy D. Ford, Esq., assures the Court that he is a "disinterested person" as that phrase is defined in the Bankruptcy Court. As attorney to the Debtors, Mr. Ford is expected to: a) give the Debtors legal advice with respect to its powers and duties as Debtors and as Debtors-in-Possession in the continued operation of its business and management of its property, if appropriate; b) prepare, on the Debtors' behalf, necessary applications answers, orders, reports, complaints, and other legal papers and appear at hearings; and c) perform all other legal services for the Debtors as Debtors-in-Possession, as necessary. Mr. Ford will bill the Debtors his current hourly charge of $200 per hour and his paralegal will be compensated $50 per hour. Headquartered in Ft. Lauderdale, Florida, San Remo 7128 Corporation filed for chapter 11 protection on October 27, 2003 (Bankr. M.D. Fla. Case No. 03-22273). Buddy D. Ford, Esq., represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed debts of over $10 million. SATURN (SOLUTIONS): Delays Filing of Fin'l Statements in Canada --------------------------------------------------------------- Saturn (Solutions) Inc., said that there has been no material change in the information nor any failure on Saturn's part to fulfill its stated intentions contained in the notice of default filed by Saturn on October 21, 2003 with the provincial securities commissions. Saturn has not filed its financial statements for the first quarter ended August 31, 2003 within the prescribed time limit nor has the Company mailed such statements to its shareholders. All other material information concerning the affairs of Saturn has been generally disclosed. As reported in Troubled Company Reporter's October 24, 2003 edition, Saturn (Solutions) Inc., did not file its financial statements for the fiscal year ended May 31, 2003 within the prescribed time limit or mailed such statements to its shareholders. Saturn's previously-announced assessment of strategic alternatives available to the Company is continuing. These alternatives may include an equity investment in Saturn, merger, partnership, joint venture, sale, or a combination thereof. An announcement on the outcome of the strategic review process will be made in due course. However, Saturn undertakes no obligation to make any announcement regarding its consideration of strategic alternatives until an agreement, if any, has been signed or a decision not to proceed with strategic alternatives is made. Saturn further said that following Saturn's application, the Irish courts have appointed a liquidator for Saturn Fulfilment Services Limited, the Company's wholly-owned Irish subsidiary. Saturn applied for the appointment of a liquidator in light of the insolvency of its Irish subsidiary. Among the factors which led to this development were: the departure from Ireland of several of Saturn's major customers; a general decline in the Irish market; a gain in strength of the Euro against the pound in late 2002 and the first half of 2003, which undermined Saturn's efforts to generate profitable new business in the United Kingdom; Saturn's inability in July 2003 to resell inventory of a customer in default to the Company; the loss of a major customer in August 2003; and an increase in rent at Saturn's main facilities in Dublin. The financial impact on Saturn of the appointment of a liquidator for Saturn Fulfilment Services cannot be determined at this time. SHOLODGE INC: Completes Tender Offer for Sr. Subordinated Notes --------------------------------------------------------------- ShoLodge, Inc. (Nasdaq: LODG), has completed its tender offer to purchase Senior Subordinated Notes at a purchase price of $850 per $1,000 principal amount. The Company received and accepted tenders for $5,293,000 in principal amount of the notes, consisting of $2,753,000 Series A, $2,088,000 Series B, $251,000 Series A-1, and $201,000 Series B-1. ShoLodge (S&P, CCC Corporate Credit Rating) is primarily an owner, franchisor, and operator of Shoney's Inns. The Shoney's Inn brand consists of around 70 hotels operating in the limited service, economy price segment. ShoLodge also constructs lodging facilities for third parties and offers reservation system services to third parties. At the end of 2001, ShoLodge's owned hotel portfolio, consisting of 14 hotels in eight states. SILICON GRAPHICS: Proposes Exchange Offer for Convertible Notes --------------------------------------------------------------- Silicon Graphics, Inc., (NYSE: SGI) intends to make an exchange offer for its 5.25% Senior Convertible Notes due September 2004. SGI also said that it has filed definitive proxy materials with the Securities and Exchange Commission soliciting shareholder approval for the issuance of common stock required for the convertible notes planned to be issued in connection with the exchange offer. SGI intends to file a registration statement and a tender offer statement with other related documents with the Securities and Exchange Commission relating to its proposed offer to exchange approximately $230 million principal amount of its existing 5.25% Senior Convertible Notes due 2004 for a like principal amount of either (a) new 11.75% Senior Secured Notes due June 2009 or (b) new 6.50% Senior Secured Convertible Notes due June 2009. The new notes will be issued in principal amounts equal to the principal amounts of notes tendered. The 6.50% Senior Secured Convertible Notes will be convertible into SGI common stock at a fixed price of $1.25 per share. The 11.75% Senior Secured Notes are not convertible. The new notes will be secured by a junior lien on substantially all of the Company's domestic tangible and intangible assets. The existing notes are general unsecured obligations of SGI. The purpose of the exchange offer is to offer holders of the existing notes an increase in yield, the benefits of a security interest and (in the case of the 6.50% Senior Secured Convertible Notes) a decrease in the conversion price in return for a significant extension of the maturity of the notes. The exchange offer will be subject to the satisfaction or waiver of several conditions, including that a minimum of 80% of the principal amount of the existing notes has been validly tendered and not withdrawn and that SGI's shareholders have approved the issuance of shares of common stock upon conversion of the 6.50% Senior Secured Convertible Notes. SGI expects that the exchange offer will be completed shortly after the annual shareholders' meeting to be held on December 16, 2003, assuming the conditions to the offer have been met. Shareholder approval is being sought under the rules of the New York Stock Exchange because the shares issuable upon conversion of the 6.50% Senior Convertible Secured Notes are likely to exceed 20% of SGI's outstanding common stock. SGI had approximately 210 million shares outstanding at September 26, 2003. If 80% of the existing notes were tendered entirely for the new convertible notes, such notes would be convertible into approximately 147 million shares of SGI common stock. The authority sought in the proxy materials will be for up to 185 million shares. Noteholders are strongly advised to read the registration statement, tender offer statement and other related documents when they are filed with the Securities and Exchange Commission because these documents contain important information. Stockholders and noteholders may obtain a free copy of these documents when available from SGI or at the SEC's Web site -- http://www.sec.gov Noteholders may obtain copies of the exchange offer materials when available from MacKenzie Partners, the information agent for the exchange offer, at 800-322-2885. At September 26, 2003, SGI's balance sheet shows a total shareholders' equity deficit of about $211 million. SK GLOBAL AMERICA: SK Corp. Director Kim Choong Hwan Resigns ------------------------------------------------------------ Kim Choong Hwan resigned as director of SK Corporation on October 24, 2003, days before the Board confirmed its decision to help SK Networks Co. Kim Choong Hwan is a professor at South Korea's Hankuk University of Foreign Studies. He cited personal reasons for his decision to leave the company. (SK Global Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) SMART & FINAL: Reports Strong Third-Quarter Operating Results ------------------------------------------------------------- Smart & Final Inc. (NYSE:SMF) reported income from continuing operations of $8.3 million, or $0.28 per diluted share, for the sixteen-week quarter ended October 5, 2003. Income from continuing operations for the prior-year third quarter was $8.1 million, or $0.27 per diluted share. Operating income in the 2003 third quarter included $1.3 million of expenses from the consolidation of the company's real estate synthetic lease facility and the accelerated vesting of restricted stock compensation. As adjusted for these items net of tax, income from continuing operations in the 2003 third quarter was $9.1 million, an increase of 13 percent over the 2002 third quarter. (This adjusted comparison to income from continuing operations for the 2002 third quarter is a non-GAAP financial measure as defined by SEC Regulation G. The GAAP financial measure most directly comparable is income from continuing operations of $8.3 million for the 2003 third quarter, an increase of 3 percent over the 2002 third quarter.) Sales from continuing operations in the third quarter of 2003 increased 8.1 percent to $538.4 million, as compared to the prior- year quarter, with comparable store sales increasing by 6.8 percent. The company also indicated that it has completed the previously announced divestitures of its broadline foodservice distribution operations in northern California and Florida, and the divestiture of its retail stores operations in the Florida market. Including the effect of discontinued operations, the company reported net income of $916,000, or $0.03 per diluted share, for the sixteen-week quarter ended October 5, 2003. Third quarter 2002 net income was $2.7 million, or $0.09 per diluted share. Ross Roeder, chairman and chief executive officer, stated: "Our third quarter sales and income performance in our continuing western U.S. stores was outstanding, led by a 6.8 percent year- over-year increase in comparable store sales. It is noteworthy that we experienced these strong sales gains prior to the southern California grocery strike that began October 11, 2003. Smart & Final sales in the southern California market have increased sharply since the strike began, as many households have turned to Smart & Final as an alternative to the affected grocery chains. "During the third quarter, we had growth in sales and income in both our Smart & Final warehouse stores and our Cash & Carry wholesale stores formats. The results further validate the strategic decision to divest our foodservice operations to better focus our energies on growth in our two strong store formats. We believe we have set the stage for excellent performance going forward," he said. Roeder added, "Our third quarter results also reflect improvement in gross margin rates, lower comparable interest expense, and very strong cash flow." Gross margin from continuing operations increased to $95.5 million for the quarter, and as a percentage of sales increased to 17.7 percent for third quarter 2003, compared to 16.5 percent for third quarter 2002. The increase in gross margin was primarily a result of lower shrink in the company's Smart & Final stores and the effects of adopting two new accounting pronouncements. In the second quarter of 2003, the company adopted the provisions of Emerging Issues Task Force Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for Cash Consideration Received from a Vendor." In accordance with the provisions of EITF No. 02- 16, the company has changed the classification of certain vendor allowances that previously were recorded as a reduction of operating and administrative expenses to classification as a reduction in cost of sales. Approximately $4.1 million of such vendor allowances were recorded as a reduction of cost of sales in the third quarter of 2003, which represented approximately 0.8 percent of sales from continuing operations. Also, effective as of the end of the 2003 second quarter, the company adopted Financial Accounting Standards Board Interpretation No. 46, "Consolidation of Variable Interest Entities," which required the consolidation by the company of a real estate synthetic lease facility not previously consolidated. In accordance with the provisions of FIN No. 46, the company has recorded approximately $2.4 million of costs as interest expense in the third quarter of 2003 that previously were recorded in cost of sales as rental expense. In addition, pursuant to FIN No. 46, the company recorded in the third quarter of 2003 approximately $0.4 million of depreciation expense in cost of sales that previously was not recorded. When compared to the prior-year third quarter, the net effect of adopting FIN No. 46 to the third quarter of 2003 was to increase the gross margin from continuing operations as a percentage of sales by 0.4 percent. Operating and administrative expenses from continuing operations increased to $77.0 million for the quarter, as compared to $65.6 million for the prior-year quarter. Operating and administrative expenses, as a percentage of sales, increased to 14.3 percent for the 2003 third quarter from 13.2 percent for the third quarter of 2002. The increase in operating and administrative expenses as a percentage of sales was primarily due to the accelerated vesting of restricted stock compensation, increased fringe benefit costs and legal expense, and the accounting impact of adopting EITF No. 02-16. The re-classification of $4.1 million of certain vendor allowances resulting from the adoption of EITF No. 02-16 contributed approximately 0.8 percent of the increase in operating and administrative expenses as a percentage of sales. Interest expense, net from continuing operations increased to $6.0 million for the quarter, as compared to $4.0 million for the prior-year quarter. This increase is primarily due to the company's adoption of FIN No. 46 and the recording of $2.4 million of interest expense costs that previously was reflected as rental expense in cost of sales. The company recorded in the third quarter the last anticipated charges associated with the divestiture transactions. The company recorded $5.2 million net of tax in special charges in the third quarter related to its discontinued operations, including $1.1 million related to the sale and divestiture of the company's Florida foodservice and stores businesses and $4.1 million in charges related to the divestiture of the northern California foodservice operation net of the gain realized on sale of certain assets. Including these special charges, the company reported a loss from discontinued operations, net of tax, of $7.4 million for the sixteen-week quarter ended October 5, 2003 ($0.25 per diluted share) and a loss from discontinued operations, net of tax, of $5.4 million for the prior-year quarter ($0.18 per diluted share). Year-to-date in 2003, the company's net cash flow from operations was $50.2 million, an 18 percent increase from the prior-year level. In October 2003, the company entered into amendments of its revolving credit facility and synthetic lease facility to amend certain financial covenants. The company is currently in compliance with all covenants of its facilities and expects to remain in full compliance with the covenants through the expiration of the respective terms of the facilities. As previously announced, the company applied $42 million of cash proceeds from the divestiture transactions to reduce the balance outstanding under its revolving credit facility and the corresponding facility commitment amount. During the quarter, an additional $4 million reduction was also made to the balance outstanding. At the end of the third quarter, the company's usage of its revolving credit facility was $75 million, and the facility commitment amount was $127.8 million. At the end of the third quarter, availability under the facility was approximately $34 million, as determined by the facility's borrowing base formula. Founded in 1871 in downtown Los Angeles, Smart & Final Inc. operates 229 non-membership warehouse stores for food and foodservice supplies in California, Oregon, Washington, Arizona, Nevada, Idaho, and northern Mexico at the end of the 2003 third quarter. For more information, visit the company's Web site at http://www.smartandfinal.com As reported in Troubled Company Reporter's July 25, 2003 edition, the Company's second quarter 2003 results from discontinued operations were a loss of $41.7 million net of tax. Of this amount, $40.2 million net of tax reflects the estimated loss on sale and divestiture. The company anticipates that charges of an additional $6 million after-tax will be recorded in the balance of 2003, associated with lease termination costs and severance costs related to the Florida stores business. The company has obligations under a revolving credit facility and the synthetic lease facility that are subject to certain financial ratio covenants. Following the recording of the special charges the company was not in compliance with certain of these covenants at the end of the second quarter 2003, and by operation of the covenants the company would not be in compliance for a 12 month period thereafter. As a result, the company's obligations under the revolving credit facility and the synthetic lease facility have been classified as current liabilities in the company's balance sheet as of June 15, 2003. The company has received waivers of default effective as of June 15, 2003 and intends to negotiate amendment of certain covenants to achieve compliance in future periods. At the end of the second quarter 2003 the company reported balance sheet cash of $39.5 million and had approximately $14 million in available liquidity under the revolving credit agreement. STARWOOD HOTELS: Launches Tender Offer for Westin Hotels Limited ---------------------------------------------------------------- Starwood Hotels & Resorts Worldwide, Inc. (NYSE:HOT) has commenced its tender offer for all of the outstanding units of limited partnership of Westin Hotels Limited Partnership, the owner of the Westin Michigan Avenue Hotel in Chicago, Illinois, at a purchase price of $625 in cash per Unit. In connection with the tender offer, Starwood is soliciting the consent of WHLP's limited partners to proposals that would facilitate Starwood's purchase of 100% of the Units. These include proposals to amend WHLP's partnership agreement to, among other things, render certain transfer restrictions inapplicable to Starwood's tender offer, to certain types of similar tender offers, and to mergers that follow those tender offers. Starwood is also seeking the consent of the limited partners to effect a merger, following its tender offer, of WHLP with or into an affiliate of Starwood for the same $625 purchase price. Subsidiaries of Starwood are the general partner of WHLP and manage the Westin Michigan Avenue Hotel. An unsolicited tender offer by Kalmia Investors, LLC for approximately 54% of the Units at a purchase price of $550 per Unit is currently pending and is scheduled to expire at 5:00 p.m., EST, on Friday, November 7, 2003. The offer price in Starwood's tender offer is $75 more per Unit than the price Kalmia is offering, which represents a 14 % premium. Starwood's offer is for 100% of the Units, while Kalmia is offering to purchase only 54% of the Units, which may mean that each Unitholder will only be able to tender 54% of its Units in the Kalmia tender offer. In addition, Kalmia is not seeking consents to render any of the transfer restrictions contained in WHLP's partnership agreement inapplicable to its offer, which may mean that Kalmia's purchase of Units pursuant to its offer may be delayed, limited or precluded entirely. Because Kalmia's tender offer is not for 100% of the Units, it would not be affected by Starwood's consent solicitation. There are currently 135,600 Units outstanding in WHLP. Unitholders who have any questions about Starwood's tender offer, need help or would like additional copies of the Offer to Purchase and Solicitation Statement, Agreement of Assignment and Transfer, Consent Form or other documents disseminated with respect to the Offer to Purchase and Solicitation Statement should contact Starwood's Information Agent, D.F. King & Co., Inc., toll-free at 888-605-1957. Starwood Hotels & Resorts Worldwide, Inc. (Fitch BB+ Convertible Debt Rating, Negative) is one of the leading hotel and leisure companies in the world with 740 properties in more than 80 countries and 105,000 employees at its owned and managed properties. With internationally renowned brands, Starwood is a fully integrated owner, operator and franchisor of hotels and resorts including: St. Regis, The Luxury Collection, Sheraton, Westin, Four Points by Sheraton, W brands, as well as Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. For more information, visit http://www.starwood.com SUNTERRA CORP: Distributes New Common Stock to Unsecured Creditors ------------------------------------------------------------------ The Third Amended and Restated Joint Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code filed by Sunterra Corporation and approved by the Bankruptcy Court on June 21, 2002, provided that the general unsecured claims class would receive a distribution of Sunterra common stock. In accordance with the Plan, the Company distributed approximately 382,000 of these shares on Friday, October 31, 2003. The distribution was completed upon settlement or resolution of certain claims. Sunterra is one of the world's largest time-share vacation companies, with about 90 resort locations in the Caribbean, Europe, and North America. About 300,000 families own interests in the company's resorts, entitling them to a one-week stay at a resort each year, as well as "vacation points," which may be redeemed at participating resorts. Sunterra also offers financing services and develops and manages resort properties. It markets properties under the Sunterra name and, through licensing agreements, the Embassy Vacation Resorts name. TELESYSTEM INT'L: 3rd-Quarter Results Swing-Up to Positive Zone --------------------------------------------------------------- Telesystem International Wireless Inc. (Nasdaq:TIWI) (TSX:TIW) reported its results for the third quarter and the first nine months ended September 30, 2003. Consolidated operating income before depreciation and amortization (EBITDA) increased 42.3% to $101.2 million compared to $71.1 million for the third quarter of 2002. Operating income increased 64.4% to $49.9 million compared to $30.4 million for the same period last year. The strong growth in operating income reflects the continued solid financial performance in Romania and improved results in the Czech Republic where the Company's operating subsidiary recorded its second quarter of positive operating income. This continued growth resulted in a $3.1 million net income compared to a loss from continuing operations of $9.0 million for the same period in 2002. "We are very pleased with our third quarter and year-to-date results, as both of our operations continue to record outstanding financial performances. During the third quarter, Cesky Mobil continued to generate strong results and reinforced its strategy of targeting postpaid subscribers," said Bruno Ducharme, President and Chief Executive Officer of TIW. "In Romania, MobiFon is continuing to generate strong EBITDA margin and higher operating income", added Mr. Ducharme. Results of Operations TIW recorded net subscriber additions for the third quarter of 343,538 to reach total subscribers from continuing operations of 4,582,295, up 23.6% compared to 3,707,337 at the end of the third quarter of 2002. Consolidated service revenues increased 39.0% to $243.5 million compared to $175.5 million for the third quarter of 2002. The strong revenue growth, lower selling, general and administrative expenses as a percent of revenues and continued cost management at the corporate level resulted in an operating income of $49.9 million compared to $30.4 million for the same period last year. Income from continuing operations was $3.1 million, or $0.03 per share basic and fully diluted compared to a loss from continuing operations of $9.0 million or $0.09 per share for the third quarter of 2002. Net income for the third quarter 2003 also amounted to $3.1 million or $0.03 per share basic and fully diluted compared to a net loss of $41.3 million or $0.41 per share for the third quarter 2002. The 2002 results include a loss from our Brazil discontinued operations of $32.3 million. For the first nine months of 2003, consolidated service revenues increased 39.0% to $654.0 million compared to $470.6 million for the same period last year. Operating income increased 86.7% to $128.8 million from $69.0 million for the same period last year. Income from continuing operations was $21.4 million or $0.22 per share basic and fully diluted compared to $70.4 million, or $0.77 per share. The 2003 results include a gain of $19.4 million on the sale of a minority interest in MobiFon, while the 2002 income from continuing operations includes a pre-tax non-cash gain of $91.1 million related to the financial restructuring of the Company completed in the first quarter of 2002 and the expiry of the Units during the second quarter of 2002 offset by $10.1 million of expenses related to the extinguishment of debt in MobiFon. Net income for the nine month period ended September 30, 2003 was $12.6 million or $0.13 per share basic and fully diluted compared to a net loss of $91.5 million or $1.07 per share basic and fully diluted for the corresponding prior year period. These results included losses from discontinued operations of $8.8 million and $161.9 million, respectively, which related to our discontinued Brazilian cellular operations which were disposed of on March 26, 2003 for gross proceeds of $70.0 million. MobiFon S.A. - Romania MobiFon S.A., the market leader in Romania with an estimated 48.4% share of the cellular market, added 215,954 net subscribers for the third quarter for a total of 2,962,081, compared to 2,462,560 subscribers at the end of the same 2002 period, an increase of 20%. Connex focused on attracting higher-end postpaid subscribers, achieving a 43/57 prepaid/postpaid mix of new subscribers for the quarter and resulting in a 63/37 prepaid/postpaid mix at the end of September 2003 compared to 65/35 a year ago. In September, MobiFon increased the validity period for its prepaid users from 12 months to 14 months. The change aligns MobiFon's policy with its main competitor's policy and accounts for an estimated reduction in churn of 32,000 subscribers for the quarter. On October 6, 2003, Connex was the first Romanian operator to reach the 3 million subscriber milestone, a direct consequence of a very strong third quarter performance. The third quarter of 2003 marked MobiFon's second largest quarterly subscriber growth, the best Q3 in MobiFon's history and is also estimated to have set record growth for the Romanian market as a whole. Management believes such growth to be reflective of an improved economic environment in Romania and increased marketing activities by all operators. During the past 12 months, management estimates cellular penetration in Romania increased to 28.2% from 20.4% at the end of the third quarter of 2002. Service revenues reached $144.1 million, a 28.0% increase over $112.6 million for the third quarter of 2002. This increase was largely attributable to an 18.9% increase in average subscribers and a 6.8% increase in monthly average revenue per user. ARPU for the third quarter reached $15.44 compared to $14.44 in the second quarter and $14.45 for the same period of last year. Cost of services increased 35.3% to $28.5 million compared to $21.0 million for the same period last year primarily due to higher interconnection, roaming and site costs as a result of the greater subscriber base and network traffic. SG&A expenses increased to 22.6% of service revenues compared to 20.8% for the 2002 corresponding period in support of higher postpaid subscriber acquisition, as well as, a required build up of customer service to support the postpaid growth and the implementation of a new billing system. During the quarter, Connex reached its largest EBITDA level ever achieved. EBITDA increased 18.7% to $76.4 million compared to $64.4 million for the same period last year. EBITDA as a percentage of service revenue decreased to 53% compared to 57% in the quarter ending September 30, 2002, as a result of costs incurred in acquiring new subscribers, particularly for the postpaid segment. Operating income rose 11.7% to $48.0 million compared to $43.0 million for the third quarter of 2002. For the first nine months, service revenues increased 23.4% to $384.4 million compared to $311.5 million for the same period last year. EBITDA increased 23.6% to $213.6 million compared to $172.8 million for the 2002 period. Operating income rose 17.8% to $129.7 million compared to $110.1 million for the first nine months of 2002. Cesky Mobil a.s. - Czech Republic Cesky Mobil a.s. added 100,650 net subscribers in the third quarter to reach 1,438,142, an increase of 26.2% compared to 1,139,567 subscribers at the end of the third quarter of 2002. The company's focus on postpaid growth continued to be successful with postpaid subscribers representing 49% of net additions during the quarter. As a result, the company's prepaid/postpaid mix as of September 30, 2003 was 59/41 compared to 71/29 at September 30, 2002. Oskar estimates it held a 15.8% share of the national cellular market as of September 30, 2003, compared to a 14.1% share at the same time last year. During the past 12 months, management estimates cellular penetration in the Czech Republic increased to 90% from 78% at the end of the third quarter of 2002. During the quarter Oskar continued to develop strong programs focusing on acquisition of business customers and postpaid consumers. As a result, postpaid subscribers now account for over 41% of Oskar's subscriber base. Furthermore, customer relationship management continued to focus on several strategic initiatives aimed at retaining Oskar's most profitable customers. Service revenues increased 58.1% to $99.4 million compared to $62.9 million for the third quarter of 2002 primarily due to a 25.5% increase in average subscribers and a 26.0% increase in ARPU. ARPU for the third quarter reached Czech Koruna 656.4 ($22.93) compared to Czech Koruna 641.5 ($23.18) in the second quarter and Czech Koruna 559.6 ($18.20) for the same period of last year. Oskar recorded EBITDA of $26.0 million compared to EBITDA of $8.4 million for the same period last year. This improvement reflects the revenue impact of solid subscriber growth, the company's focus on postpaid growth and the economies of scale realized as fixed costs are spread over the larger subscriber base. SG&A expenses declined to 27.0% of service revenues compared to 33.7% for the same period last year. Oskar recorded positive operating income of $3.1 million for the third quarter 2003, compared to an operating loss of $10.9 million for the third quarter of 2002. For the first nine months, service revenues increased 69.5% to $269.7 million compared to $159.1 million for the same period in 2002. EBITDA reached $71.7 million compared to EBITDA of $12.9 million for the first nine months of last year, an improvement of $58.8 million. Operating income reached $4.4 million compared to a loss of $34.4 million for the same period in 2002. On September 23, 2003, the lower house of the Czech Parliament passed an amendment to a bill that calls for the reclassification of the Value Added Tax from the 5% to the 22% category for telecommunication services, effective January 2004. The amendment is one in a series related to public-finance reform and part of the government's effort to combat the state's public deficit. The reforms also call for a decrease in the corporate income-tax rate, from the current 31% to 24% by 2006. Management is currently in the process of evaluating the possible impact of this new regulation on future operational results. Corporate and Other The Company's wireless operations in India and other corporate activities recorded negative operating income of $1.2 million for the third quarter ended September 30, 2003 and negative operating income of $5.3 million for the first nine months of 2003, compared to negative operating income of $1.7 million and of $6.7 million respectively for the same periods last year. Our proportionate share of Hexacom's net income which is included in the above corporate and other results was $1.1 million and $2.6 million for the three and nine months ended September 30, 2003 compared to $0.7 million and $2.2 million for the same periods last year. Liquidity and Capital Resources For the third quarter of 2003, operating activities provided cash of $52.2 million and of $172.0 million for the first nine months compared to $28.3 million and $85.9 million respectively in the corresponding 2002 periods, mainly explained by the increase in the 2003 EBITDA over the corresponding periods in 2002 offset by higher taxes paid by MobiFon in 2003. Investing activities used cash of $32.5 million for the quarter ended September 30, 2003, compared to $59.0 million in the corresponding 2002 period as a result of lower acquisitions of property, plant and equipment. For the first nine months of 2003, investing activities used cash of $90.4 million compared to $166.0 million for the first nine months of 2002. During the 2003 period, the Company received net proceeds of $41.5 million from the sale of a minority interest in MobiFon. Acquisitions of property, plant and equipment in the first nine months of this year were lower than in the corresponding period last year and were $133.3 million and $166.4 million, respectively. Financing activities used cash of $134.6 million for the third quarter and $73.7 million year to date. The cash used in financing activities in the third quarter included $148.2 million used in redeeming all of the Company's remaining 14% Senior Notes. The cash used in financing activities on a year-to-date basis consisted of $28.1 million in additions to restricted cash, $59.5 million distributed to minority shareholders, $47.4 million representing a full repayment of TIW's senior corporate bank facility, $12.9 million of deferred financing costs and $223.9 million in repayment of long-term debt offset by $18.9 million received from the issuance of subsidiaries' shares to non- controlling interests and $279.0 million proceeds from debt issuance. During the first nine months of 2002, sources of cash from financing activities included proceeds of $41.2 million from TIW's financial recapitalization, $29.9 million from the issuance of subsidiaries' shares to non-controlling interests and $52.6 million in net long-term debt borrowings. These were partially offset by $19.9 million in repayment of short-term loans, $9.8 million distributed to non-controlling interests in MobiFon, $7.8 million of deferred financing costs and resulted in $86.2 million being provided by financing activities. In October 2002, the shareholders of MobiFon approved distributions of up to $38.8 million by means of a share repurchase. Shareholders had the opportunity to tender their shares up to June 30, 2003 in order to realize their pro-rata share of this distribution. During 2002, ClearWave received its pro-rata share of such distributions which amounted to $24.6 million and other minority shareholders had received $0.8 million. During the second quarter of 2003 the remaining shareholders tendered their shares. A payment of $5.6 million relating to such tender was made during the second quarter and the remaining $7.8 million was paid on July 18, 2003. As a result, ClearWave's equity interest and TIW's ultimate equity interest in MobiFon increased to 57.7% and 49.4% from 56.6% and 48.4% at the end of the first quarter of 2003. In April 2003, MobiFon declared and paid a dividend of Lei 1,974 trillion ($59.1 million) of which ClearWave's share amounted to $33.5 million. In July 2003, the shareholders of MobiFon approved additional distributions of Lei 1.188 trillion ($35.7 million) by means of a par value reduction that was distributed on October 22, 2003 of which $15.1 million was paid to minority shareholders. This amount is classified within current liabilities as distribution payable to non-controlling interests as at September 30, 2003. On June 27, 2003, MobiFon Holdings B.V., a wholly-owned subsidiary which holds the Company's investment in MobiFon, closed a $225 million issue of 12.5% Senior Notes by way of private placement. The Notes were sold at 97.686% of par for gross proceeds of $219.8 million and for a yield to maturity of 13%. Net proceeds from the offering, after deducting issuance expenses, were $210.0 million of which $28.1 million was used to establish a debt service reserve account for the benefit of the noteholders which has been reflected as restricted cash on the balance sheet. ClearWave used a portion of the proceeds to fully repay the demand notes to the Company and, on June 30, 2003, declared a dividend out of share premium of $1.69 per share. On July 9, 2003, ClearWave paid these dividends to shareholders which totaled $142.1 million. The Company's share of these distributions amounted to $121.6 million, before deducting withholding taxes of $2.9 million which was included in income tax expense during the second quarter. TIW used the proceeds from these distributions and its cash on hand to redeem all of its remaining 14% Senior Notes plus accrued interest. The Notes mature on July 31, 2010. Interest on the Notes accrues at the rate at 12.5% per annum commencing on June 27, 2003 and will be payable in cash semi-annually in arrears on each January 31 and July 31 commencing on January 31, 2004. The Notes are unsecured, except to the extent of a security interest in the debt service reserve account. Before July 31, 2006, MobiFon Holdings may redeem up to 35% of the Notes with the proceeds of certain equity offerings at a redemption price of 112.50% of the principal amount. From July 31, 2007, MobiFon Holdings may redeem all or part of the Notes at declining prices ranging from 106.25% to 100.00% of the principal amount. Within 30 days after the end of the period beginning on June 27, 2003 and ending July 31, 2004 and for each 12-month period thereafter, MobiFon Holdings has an obligation to offer to purchase a portion of the Notes at par, plus accrued and unpaid interest, with 50% of its excess cash flow for that period. The indenture governing the Notes contains customary negative covenants which, among other things, limit the ability of MobiFon Holdings and that of its subsidiaries to incur additional debt, make investments, dispose of assets or make distributions not provided for by the indenture. In addition, MobiFon Holdings will not be permitted to engage in activities other than primarily holding its equity interests in MobiFon S.A. or to reduce its ownership in MobiFon S.A. to below 50.1%. On October 16, 2003, MobiFon Holdings' registration statement filed with the United States Securities and Exchange Commission was declared effective whereby substantially similar notes will be registered under the Securities Act when issued pursuant to an exchange offer launched on October 17, 2003. The exchange offer is expected to close by November 17, 2003. During the nine-month period ended September 30, 2003, financing costs in the amount of $9.8 million relating to the issuance of these Notes were deferred. Cash and cash equivalents, including restricted cash, at the end of the third quarter ended September 30, 2003 totaled $163.6 million, including $2.5 million at the TIW level, $9.4 million at ClearWave and $31.3 million at MobiFon Holdings which included $28.1 million in restricted cash. As of September 30, 2003, total consolidated indebtedness was $1.1 billion, of which $1.3 million was at the TIW level, $220 million at the MobiFon Holdings level, $296.6 million at MobiFon and $586.4 million at Cesky Mobil. On October 6, 2003, a minority shareholder of Cesky Mobil gave notice of its intention to exercise its option to sell its 3.62% share in Cesky Mobil to TIW Czech N.V at a price of approximately 600 million Czech Koruna ($21.8 million). TIW Czech N.V will finance the acquisition, which is expected to be finalized during the first quarter of 2004, via shareholders' contributions. The Company's share of this commitment is $5.3 million. On October 21, 2003, the Company entered into a private transaction to acquire 1,009,300 class A subordinate voting shares of ClearWave from an institutional investor, in exchange for the issuance of 1,374,666 common shares of the Company. The 1,009,300 ClearWave class A shares to be acquired represent a 1.2% equity interest and a 0.4% voting interest in ClearWave. The transaction, which is scheduled to close in November, will increase the Company's equity and voting interest in ClearWave from 85.6% and 94.9% respectively, to 86.8% and 95.3% respectively. With this transaction, TIW aims at increasing its economic interest in MobiFon and Cesky Mobil. In the future, TIW may seek to further increase its economic interest in its subsidiaries by proceeding with similar transactions or otherwise. The Company expects to have future capital requirements, particularly in relation to the expansion and addition of capacity of its cellular networks, the acquisition of Cesky Mobil shares pursuant to the above described option, and for servicing of its debt. The Company intends to finance such future capital requirements from cash and cash equivalents, cash flows from operating activities, drawings on MobiFon and Cesky Mobil's senior loan facilities and by equity contributions from TIW Czech N.V shareholders. In July 2003, the shareholders of TIW Czech N.V. made additional equity contributions totaling 22.0 million euros ($24.9 million) of which 16.7 million euros ($18.9 million) was made by minority shareholders. This amount was mainly used to fund Cesky Mobil's network expansion. The Company intends to service the debt in MobiFon Holdings and its general corporate expenses mainly by distributions to shareholders from MobiFon. TIW (S&P, B- Long-Term Corporate Credit Rating, Stable Outlook) is a leading cellular operator in Central and Eastern Europe with almost 4.2 million managed subscribers. TIW is the market leader in Romania through MobiFon S.A. and is active in the Czech Republic through Cesky Mobil a.s. The Company's shares are listed on the Toronto Stock Exchange ("TIW") and NASDAQ ("TIWI"). TELETECH: William S. Beans Heads Communications & Media Biz Unit ---------------------------------------------------------------- TeleTech Holdings, Inc. (Nasdaq: TTEC), a global provider of customer solutions, announced three new executive appointments. William S. Beans, Jr., has been named president of the communications and media business unit. Prior to TeleTech, he served as chairman, president and chief executive officer of SwitchPoint Networks, Inc., a leader in the development of next- generation networks for the residential and small business broadband markets. The communications and media business unit, the first to be implemented by TeleTech, includes the wireline, wireless, cable and media verticals. In this role, Beans will lead the business unit to deliver financial and customer results that promote long-term growth and increased profitability. John A. Hoholik has been appointed senior vice president of global solutions and alliances. Hoholik was most recently president of Mosaic's marketing and technology services group, where he implemented cross-channel integration strategies to improve customer loyalty. Prior to Mosaic, he served as executive vice president in charge of the customer management group at Digitas -- formerly Bronner, Slosberg, Humphrey -- a high-profile direct marketing firm. In this role, he led a group of professionals who designed, created and implemented customer relationship management (CRM), teleservices and training solutions for Fortune 500 clients in North America and Europe. Hoholik's primary responsibility at TeleTech will be developing and marketing TeleTech's next- generation solutions, as well as directing public relations and supporting new business and account development. Andrew Pearce has been named president and general manager of TeleTech's Asia-Pacific operations. He is responsible for managing the ongoing business performance and growth of TeleTech throughout the Asia-Pacific region. Pearce has held a number of positions during his six-year tenure with TeleTech, including his prior role as general manager of TeleTech's Asian business unit. In this position, Pearce was responsible for building TeleTech's Asian business from its start-up phase in late 1998 to its current status as one of the largest providers of customer solutions in the region. "I am pleased to welcome these three seasoned professionals to TeleTech's executive team," said Kenneth Tuchman, TeleTech's chairman and chief executive officer. "Their collective leadership skills, combined with their individual talent and expertise, will be integral to TeleTech's continued success in creating valuable solutions that deliver tangible benefits for our clients." TeleTech partners with clients to develop and execute relevant solutions that enable them to build and grow profitable relationships with their customers. TeleTech has built a global capability supported by 52 customer interaction environments that employ more than 27,000 professionals spanning North America, Latin America, Asia-Pacific and Europe. For additional information, visit http://www.teletech.com * * * LIQUIDITY AND CAPITAL RESOURCES At June 30, 2003, the Company had cash and cash equivalents of $105.0 million compared to $144.8 million at December 31, 2002. The decrease of $39.8 million from December 31, 2002, primarily resulted from the Company's operating loss, an increase in days sales outstanding and capital expenditures. DSOs increased from 49 days at December 31, 2002 to 62 days at June 30, 2003. The increase in DSOs primarily relate to the Company's Database Marketing and Consulting segment. As previously discussed, the majority of the Company's customers in this segment are automobile dealers of a certain OEM. While the Company's contracts are with the dealers, and the dealers are ultimately responsible for paying the Company, the Company has entered into a billing arrangement with the OEM whereby the OEM bills and collects on the Company's behalf. The Company has similar arrangements with certain other OEMs. Per the terms of the agreement, the OEM is to remit collected payments to the Company within 45 days. As of June 30, 2003, the OEM had not remitted payment for services rendered since February 2003 and owed the Company approximately $22.0 million. The delay in payment was caused by the current negotiations with the OEM to renew its marketing agreement with the Company in advance of its July 31, 2003 expiration date. As a result of this delay, the Company's DSOs increased by an incremental seven days and contributed to an operating cash flow deficit. Subsequent to June 30, 2003, the Company received payment in full for all past due invoices from the OEM. While management cannot predict DSOs on a quarter-to-quarter basis, it does consider 49 days to be unusually low and 55 days to 60 days to be in a more normal range given its domestic vs. international revenue mix and contract payment terms. Net cash used in operating activities was $9.8 million for the six months ended June 30, 2003 compared to net cash provided of $18.3 million for the six months ended June 30, 2002. Cash used in investing activities was $62.8 million for the six months ended June 30, 2003 compared to $16.9 million for the six months ended June 30, 2002. For the six months ended June 30, 2003, the Company had capital expenditures of $58.3 million compared to $16.8 million for the six months ended June 30, 2002. In February 2003, the Company purchased its corporate headquarters building for $38.2 million, which was previously under a synthetic lease using proceeds from the Revolver. Excluding the purchase of the corporate headquarters building, the amount of capital expenditures were similar between periods. During the six months ended June 30, 2003 the Percepta board of directors approved distributions of $4.0 million to the joint venture partners. As a result, $1.8 million has been distributed to Ford Motor Company as the minority shareholder of the joint venture. The Company expects the Percepta board of directors to continue these distributions through the remainder of 2003. Additional cash flow uses have primarily been for the internal development of software. Cash provided by financing activities was $36.3 million for the six months ended June 30, 2003 as compared to $0.1 million for the six months ended June 30, 2002. Excluding the $39.0 million in borrowings under the line of credit, the cash used in financing activities for 2003 and 2002 was primarily related to repayments of debt and capital leases, as well as the purchase of treasury stock. In December 2002, the Company's Board of Directors authorized the continuation of a previous repurchase program authorizing the purchase of up to an additional $25.0 million of the Company's stock. Through June 30, 2003, the Company had purchased approximately $0.7 million of its common stock under the new repurchase program. Historically, capital expenditures have been, and future capital expenditures are anticipated to be, primarily for the development of customer interaction centers, technology deployment and systems integrations. The level of capital expenditures incurred in 2003 will be dependent upon new client contracts obtained by the Company and the corresponding need for additional capacity. In addition, if the Company's future growth is generated through facilities management contracts, the anticipated level of capital expenditures could be reduced. The Company currently expects total capital expenditures in 2003 to be approximately $40.0 million to $50.0 million, excluding the purchase of its corporate headquarters building. The Company expects its capital expenditures will be used primarily to open several new non-U.S. customer interaction centers, maintenance capital for existing centers and internal technology projects. Such expenditures are expected to be financed with internally generated funds, existing cash balances and borrowings under the Revolver. The Company's Revolver is with a syndicate of five banks. Under the terms of the Revolver, the Company may borrow up to $85.0 million with the ability to increase the borrowing limit by an additional $50.0 million (subject to bank approval) within three years from the closing date of the Revolver (October 2002). The Revolver matures on December 28, 2006 at which time a balloon payment for the principal amount is due, however, there is no penalty for early prepayment. The Revolver bears interest at a variable rate based on LIBOR. The interest rate will also vary based on the Company leverage ratios (as defined in the agreement). At June 30, 2003 the interest rate was 2.5% per annum. The Revolver is unsecured but is guaranteed by all of the Company's domestic subsidiaries. At June 30, 2003, $39.0 million was drawn under the Revolver. A significant restrictive covenant under the Revolver requires the Company to maintain a minimum fixed charge coverage ratio as defined in the agreement. The Company also has $75.0 million of Senior Notes which bear interest at rates ranging from 7.0% to 7.4% per annum. Interest on the Senior Notes is payable semi-annually and principal payments commence in October 2004 with final maturity in October 2011. A significant restrictive covenant under the Senior Notes requires the Company to maintain a minimum fixed charge coverage ratio. Additionally, in the event the Senior Notes were to be repaid in full prior to maturity, the Company would have to remit a "make whole" payment to the holders of the Senior Notes. As of June 30, 2003, the make whole payment is approximately $11.9 million. During the second quarter of 2003, the Company was not in compliance with the minimum fixed charge coverage ratio and minimum consolidated net worth covenants under the Revolver and the fixed charge coverage ratio and consolidated adjusted net worth covenants under the Senior Notes. The Company has worked with the lenders to successfully amend both agreements bringing the Company back into compliance. While the Revolver and Senior Notes had subsidiary guarantees, they were not secured by the Company's assets. In connection with obtaining the amendments, the Company has agreed to securitize the Revolver and Senior Notes with a majority of the Company's domestic assets. As part of the securitization process, the two lending groups need to execute an intercreditor agreement. If an intercreditor agreement is not in place by September 30, 2003, the lenders could declare the Revolver and Senior Notes in default. The lenders and the Company believe they will be able to execute the intercreditor agreement by September 30, 2003. However, no assurance can be given that the parties will be successful in these efforts. Additionally, the interest rates that the Company pays under the Revolver and Senior Notes will increase as well under the amended agreements. The Company believes that annual interest expense will increase by approximately $2.0 million a year from current levels under the Revolver and Senior Notes as amended. The Company believes that based on the amended agreements it will be able to maintain compliance with the financial covenants. However, there is no assurance that the Company will maintain compliance with financial covenants in the future and, in the event of a default, no assurance that the Company will be successful in obtaining waivers or future amendments. From time to time, the Company engages in discussions regarding restructurings, dispositions, mergers, acquisitions and other similar transactions. Any such transaction could include, among other things, the transfer, sale or acquisition of significant assets, businesses or interests, including joint ventures, or the incurrence, assumption or refinancing of indebtedness, and could be material to the financial condition and results of operations of the Company. There is no assurance that any such discussions will result in the consummation of any such transaction. Any transaction that results in the Company entering into a sales leaseback transaction on its corporate headquarters building would result in the Company recognizing a loss on the sale of the property (as management believes that the current fair market value is less than book value) and would result in the settlement of the related interest rate swap agreement (which would require a cash payment and charge to operations of $5.4 million). TENNECO AUTOMOTIVE: Fitch Affirms Debt Ratings at Lower-B Level --------------------------------------------------------------- Fitch Ratings has affirmed Tenneco Automotive Inc.'s senior secured bank debt at 'B+', senior secured notes at 'B' and subordinated debt at 'B-'. In addition, the Rating Outlook has been revised to Stable from Negative. The rating action reflects Tenneco's stable consolidated operating performance with progress in cost reduction efforts, greater exposure to light truck platforms in the North American original equipment operations, stabilization of European original equipment operations, and good growth in the rest of world operations allowing for overall operating profit stability, overcoming general vehicle build rate weakness and continuing after market softness. Also, stable consolidated operating profitability coupled with on going working capital reduction efforts have led to some debt reduction. Looking forward, Tenneco's aggressive cost cutting posture and a generally stable original equipment volume environment going into 2004, plus continued working capital reduction should allow for the debt reduction trend to continue. The credit improvement and the resulting outlook upgrade are balanced, however, by the intensely competitive pricing environment from both original and after market customers which may limit and possibly compress margin performance, ultimate production volume uncertainty, and continued slide in after market sales. And, due to the highly levered capital structure, Tenneco stands vulnerable to these operating risks should it not be able to execute on its operating goals. For the three and nine months ended September 30, 2003, Tenneco's consolidated revenues excluding currency effects and catalytic converter pass-through sales have essentially remained flat at $0.7 billion and $2.2 billion, respectively, compared to the previous year. Despite industry volume softness in both North America and Europe original equipment markets, Tenneco has been able to outperform the slack demand environment with greater light truck exposure in North America and new program launches and favorable platform exposures in Europe. While overall North American light vehicle production rate was off by 4.2% compared to the previous year through the nine months ended September 30, 2003, light truck build rate was positive by 1.2%. Tenneco's North American original equipment operations is more than 2/3rds tilted to light trucks versus cars. Sales in Asia, South America and Australia grew at a strong 17% and 20% to $84 million and $247 million respectively for the three and nine months ended September 30, 2003 helping to mostly offset the aftermarket revenue decline seen both in North America and Europe. North American aftermarket sales decline moderated to around 5% for the quarter ended September 30, 2003, far better than double digit rate declines seen in earlier periods. While Fitch expects Tenneco's overall aftermarket sales to be under continued pressure from the secular decline related to stainless steel conversion of exhaust products, particularly in Europe, the rate of decline is expected to moderate and eventually stabilize in the intermediate term. Consolidation in the distribution channels in North America which negatively affected sales in earlier periods have played out, allowing for Tenneco's pricing and promotion programs coupled with improving vehicle demographics in North America to help stabilize revenues. Overall, Fitch expects Tenneco's sales to be stable to modestly better going into 2004, reflecting a stable North American build rate environment. Inclusive of charges, consolidated EBIT for the three and nine months ended September 30, 2003 amounted to $39 million and $137 million, respectively, about flat versus $38 million and $138 million last year. Netting out charges and a one time gain associated with a sale of facility in 2002, Tenneco's nine month EBIT performance in 2003 was slightly better at $144 million compared to $135 million in 2002. While EBIT contribution continues to be skewed towards the North American operating segment, European operations have largely addressed problems related to program launches and other operational issues on the original equipment side and is expected to show better operating results in the forthcoming periods. Recent announcement of an after market facility closure should also help to address the cost structure in light of revenue declines in the European aftermarket segment. EBIT performance from the rest of the world operations (up 33% to $20 million for the nine months ended September 30, 2003) has been a boost to consolidated results and is expected to continue to perform well. Tenneco has been parlaying its success in working capital efficiency to debt reduction. As such, Tenneco has achieved $41 million of balance sheet debt reduction bringing its total balance sheet debt to $1.404 billion at September 30, 2003 from $1.445 billion at year-end 2002. Factored receivable financing, however, increased also during the same time frame, up $35 million to $136 million. As 4th quarter has historically been a strong cash flow quarter with seasonal inflows of working capital, Fitch expects that Tenneco will be able revert back to prior levels in factored receivable financing levels and extend its debt reduction trend into the balance of the year. Beyond that, cash flow from operating profitability plus working capital reduction could result in additional debt reduction. Liquidity and debt maturity profile have been improved following the June 2003 issuance of senior secured notes to prepay the amortizing Term Loan A and some revolver balance. At September 30, 2003, in addition to the $63 million in cash on hand, Tenneco had access to a $400 million revolver for liquidity. The revolver is also the nearest significant maturity of debt, coming due in November 2005. Tenneco was well in excess of bank compliance ratios at September 30, 2003. Tenneco Automotive Inc., headquartered in Lake Forest, Illinois, is a leading global producer of ride control and emissions/exhaust components, modules and systems for both the OEM and the aftermarket. About 74% of its revenues come from the OEM market and 26% is derived from the aftermarket. Geographically, 55% of revenue is from North America, 35% in Europe, 10% from rest of the world. Major product lines on the ride control side are shock absorbers, struts, roll control systems, and on the exhaust management side are manifolds, catalytic converters, and mufflers. THE PANTRY INC: Completes Acquisition 138 Golden Gallon Stores -------------------------------------------------------------- On October 16, 2003, The Pantry, Inc. (S&P, B+ Corporate Credit Rating)1, completed the acquisition of 138 convenience stores operating under the Golden Gallon name from Ahold USA, Inc. The acquired assets include 138 operating convenience stores, 131 of which are fee-owned stores, a dairy plant and related assets, a fuel hauling operation, corporate headquarters buildings and 25 undeveloped sites. Other than the dairy plant and related assets and the fuel hauling operation, the Company intends to use the acquired assets in the convenience store retail business. Simultaneous with the closing, the Company sold the dairy plant and related assets to National Dairy Holdings, LP, a Delaware limited partnership, and the fuel hauling operation to Eagle Transport Corporation, a North Carolina corporation, each of whom are existing suppliers of the Company. The aggregate purchase price of the acquired assets, which was determined through arms-length negotiations between the Company and Ahold USA, Inc., was $187 million. The acquisition was structured as two simultaneous transactions whereby certain real estate assets (114 of the 131 fee-owned stores) were purchased and financed through a $94.5 million sale/leaseback transaction, and the Golden Gallon operations and the balance of the real estate assets were purchased for approximately $92.5 million in cash. The Company funded the second transaction with $80 million of debt through borrowings under the Company's existing senior secured credit facility and available cash. TYCO INTERNATIONAL: Red Ink Continued to Flow in Fourth Quarter --------------------------------------------------------------- Tyco International Ltd. (NYSE: TYC, BSX: TYC, LSE: TYI) reported a loss of $0.15 per share for its fourth quarter, compared to a loss of $0.72 per share in the fourth quarter of 2002. For the full fiscal year 2003, Tyco reported earnings of $0.49 per diluted share, compared to a loss of $4.62 in fiscal 2002. Tyco also initiated a divestiture and restructuring program as part of its previously discussed strategy to sharpen the focus on its core businesses, simplify operations, and improve its cost structure. This program has, along with other actions, resulted in pre-tax charges of $1.2 billion in the fourth quarter and reduced the Company's fourth quarter earnings per share by $0.49. Chairman and Chief Executive Officer Ed Breen said: "Our operating results are in line with expectations. In addition, our focus and execution on cash generation in the quarter were outstanding, providing us with increased financial flexibility as we move into 2004. Tyco's core businesses are strong, we continue to make progress in improving our operating efficiency, and I believe the restructuring and divestiture actions we are announcing today will enhance our future performance." Other results for the quarter and full year include: Revenues were $9.5 billion for the quarter, compared to $9.4 billion for the fourth quarter of last year. For the full year, revenues were $36.8 billion, compared to $35.6 billion for fiscal year 2002. Excluding the impact of foreign exchange, revenues were down slightly in the fourth quarter and essentially level in fiscal 2003 compared to fiscal 2002. Cash from operating activities was $1.8 billion in the fourth quarter and $5.4 billion for the fiscal year. Free cash flow was $1.4 billion in the fourth quarter, compared to $0.9 billion in the same period last year. Fourth quarter free cash flow included a voluntary $207 million contribution to the Company's pension plans. For the year, free cash flow was $3.2 billion, compared to $0.8 billion for fiscal year 2002. Divestiture and Restructuring Program As part of its divestiture program, Tyco intends to sell the Tyco Global Network, its undersea fiber optic telecommunications network, as well as to exit more than 50 other businesses. The businesses to be exited, the largest of which had annual sales of less than $400 million, had combined annualized revenues of $2.1 billion in fiscal year 2003, or about six percent of the Company's total revenue base. The TGN had a pre-tax operating loss of $117 million, while the remaining businesses to be exited had a combined operating profit of approximately $55 million in 2003. Excluding the TGN, Tyco expects to generate at least $400 million in proceeds from the divestiture program and further expects the program to generate a pre-tax loss of $250 million to $750 million. The businesses to be exited are in every Tyco business segment except Plastics & Adhesives. Measured on the basis of revenue, more than half of the planned divestitures are in the Fire & Security segment. Aside from the TGN, the Company is not identifying at this time which businesses will be exited. Tyco's restructuring program includes the consolidation of 219 manufacturing, sales, distribution, and other facilities. These actions are expected to reduce employment levels by about 7,200 employees. Of the facilities to be consolidated, 184 are in Fire & Security, 30 are in Plastics & Adhesives, and the remainder are in Engineered Products & Services. The charges associated with the restructuring program, most of which will be expensed in fiscal year 2004, are expected to be about $400 million, of which approximately $280 million is cash. Total annualized savings from the restructuring program are estimated at $230 million by 2005. Additional details are provided in the attached schedule. Mr. Breen said: "Our divestiture and restructuring moves will accelerate our ability to improve our profitability as we continue to make the transition from an acquisition-focused enterprise to a high-performing operating company. Although the TGN is the world's largest undersea fiber optic network, we believe consolidation is needed in this market. Since we are not prepared to invest further in this industry, we intend to exit the business. The other planned divestitures are small, non-strategic businesses that require a disproportionate amount of resources and management attention." Summary of Charges In the fourth quarter, the Company recorded pre-tax charges of $1.2 billion ($0.49 per share of earnings), which consist of the following: In anticipation of its sale, the Company reduced the carrying value of the TGN, which resulted in a non-cash charge of $664 million. The Company's decision to sell the TGN resulted in a $278 million non-cash goodwill impairment charge. As a consequence of this action, there is no longer any goodwill at the segment's Power Systems and Printed Circuit Board businesses. As previously announced, the Company adopted FASB Interpretation No. 46, "Consolidation of Variable Interest Entities," as of July 1, 2003, primarily in connection with its synthetic leases. As a result, the Company increased total debt by $562 million and recorded a non-cash, cumulative effect accounting charge of $116 million pre-tax ($75 million after-tax, and $0.04 per share impact). The Company recorded $87 million of non-cash asset impairments and other charges in the Fire & Security segment, and $47 million of charges at Tyco corporate. The Company recorded $53 million in charges in connection with the restructuring program, which was largely offset by $45 million in previous restructuring credits. The Company had cash on hand of approximately $4.2 billion at September 30, 2003, compared to $3.9 billion at June 30, 2003. Progress in 2003 Mr. Breen noted that in the first full fiscal year under Tyco's new management, the Company made significant and steady progress at both the corporate and operating levels. Among other accomplishments, Tyco: Reduced the Company's debt by $3.2 billion and restructured its debt repayment schedule, which solved the Company's short-term liquidity challenge. Substantially increased the Company's free cash flow to $3.2 billion for 2003. Implemented a series of initiatives to improve operational excellence, including Six Sigma quality programs, Strategic Sourcing and rationalization of the Company's real estate footprint. Strengthened the Fire & Security segment by changing senior management, focusing the security business on higher quality customers and capital returns, initiating the streamlining of the manufacturing organization, and improving operating costs across the segment. Expanded margins in the Healthcare segment by 140 basis points, while increasing R&D spending by 17%. Improved the cost structure of the Electronics segment, which better positions this business for margin expansion as the economy strengthens. Mr. Breen said: "Over the past year, our employees have made major progress in addressing the financial, operating and governance challenges that have faced Tyco. As a result of their hard work, the Company is in a strong competitive position and can look ahead to a bright future with many opportunities for growth in our markets around the world." Outlook In fiscal 2004, Tyco expects to achieve earnings per share of $1.42 to $1.52, excluding the impact of the divestiture and restructuring programs. This outlook anticipates a modest improvement in economic activity over the next year. Stronger economic performance in the industrial and non-residential construction markets will be an important factor in the Company's achieving the high end of this range. For the first quarter of fiscal 2004, the Company expects to achieve earnings per share of $0.30-$0.32 before any divestiture or restructuring charges. This represents 13-20% net income growth and 7-14% EPS growth from the first quarter of 2003. The Company expects cash from operating activities and free cash flow in 2004 to exceed the levels achieved in 2003, which were $5.4 billion and $3.2 billion, respectively. Tyco International Ltd. is a diversified manufacturing and service company. Tyco is the world's largest manufacturer and servicer of electrical and electronic components; the world's largest manufacturer, installer and provider of fire protection systems and electronic security services; and the world's largest manufacturer of specialty valves. Tyco also holds strong leadership positions in medical device products, and plastics and adhesives. Tyco operates in more than 100 countries and had fiscal 2003 revenues from continuing operations of approximately $37 billion. * * * As previously reported, Fitch Ratings affirmed its ratings on the senior unsecured debt and commercial paper of Tyco International Ltd., as well as the unconditionally guaranteed debt of its wholly owned direct subsidiary Tyco International Group S. A., at 'BB'/'B', respectively. The Rating Outlook has been changed to Stable from Negative. The ratings affect approximately $21 billion of debt securities. The change to Outlook Stable reflects Tyco's progress with respect to reestablishing access to capital, addressing its liability structure, implementing steps to improve operating performance, and demonstrating cash generation despite a difficult economic environment in a number of key end-markets. The impact of fundamental favorable changes in Tyco's financial policies and profile since late fiscal 2002 is constrained by economic weakness in its markets, potential legal liabilities related to shareholder lawsuits and SEC investigations, and the possibility, although reduced, of further accounting charges and adjustments. The ratings could improve over time as Tyco demonstrates more consistent results and that it has put behind it the accounting concerns that have obscured the transparency of its financial reporting in the past. UNITED AIRLINES: Wants Nod to Sell Orbitz Stock for $217 Million ---------------------------------------------------------------- James H.M. Sprayregen, Esq., at Kirkland & Ellis informs Judge Wedoff that UAL Loyalty Services, Inc., owns 26% of the combined equity interest in Orbitz, Inc., and Orbitz, LLC. Orbitz is a leading online travel company that allows users to search and purchase travel products, including airline tickets, lodging, rental cars, cruises and vacation packages. Orbitz launched of its website in June 2001 and rapidly became the third largest online travel agency in the U.S. Consumers can use Orbitz's website to search over two billion fares and flights on more than 455 airlines, rates at over 45,000 lodging properties and at 23 car rental companies. Orbitz filed a Registration Statement on Form S-1 with the Securities and Exchange Commission for a Proposed Initial Public Offering. To facilitate the transaction, Orbitz, LLC will be combined with Orbitz, Inc., and Orbitz Inc., will be the surviving entity. Pursuant to this Transaction, the Debtors intend to sell an undetermined amount of Orbitz's stock at the rate set at the IPO. The exact amount of stock sold and the price will not be determinable until immediately prior to the IPO. However, the Debtors expect their ownership interest in Orbitz to stay above 17%. The Debtors anticipate profits from the sale ranging from $26,000,000 to $52,000,000. This would value the Debtors' stock at $176,000,000 to $258,000,000. The IPO is expected to close in November or December 2003. To accomplish the IPO and minimize taxes, the Debtors will make these intercompany transfers before the sale: (1) UAL Loyalty Services will dividend the Orbitz Interest to UAL; and (2) UAL will make a capital contribution of the Orbitz Interests to United. The proceeds will be used to pay down a portion of the DIP Revolving Credit and Term Loan: (a) 60% to the Revolver; and (b) 40% to the Term Loan. The IPO will be led by Goldman Sachs & Co., Credit Suisse First Boston, Legg Mason Wood Walker and Thomas Weisel Partners. (United Airlines Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) UNITEDGLOBALCOM: Extends Exchange Offer for UGC Europe Shares ------------------------------------------------------------- UnitedGlobalCom, Inc. (Nasdaq: UCOMA) has extended the exchange offer by its wholly-owned subsidiary for all of the outstanding publicly held shares of UGC Europe, Inc. (Nasdaq: UGCE) to remain open until 5:00 p.m., New York City time, on Friday, November 7, 2003. The offer remains subject to the conditions included in the offer described in offering documents filed with the Securities and Exchange Commission and mailed to the stockholders of UGC Europe. United also reported that, as of November 4, 2003, 276,774 shares of UGC Europe common stock have been tendered and not withdrawn, representing approximately 0.553% of the outstanding UGC Europe common stock. United currently owns approximately 66.75% of the outstanding UGC Europe common stock. Special Stockholder Meeting United plans to hold a special stockholder meeting for approval of the issuance of its shares in the exchange offer and planned merger. United also announced that it will not hold the special stockholder meeting on November 10, 2003 as originally stated in filings made with the SEC. United plans to hold the special meeting as soon as practical. Notice For UGC Europe Stockholders United filed a Registration Statement on Form S-4 (File No. 333- 109496) containing a prospectus relating to the exchange offer, and Europe Acquisition, Inc., the wholly-owned subsidiary of United which offered to exchange the shares of UGC Europe, filed a Schedule TO. UGC EUROPE STOCKHOLDERS AND OTHER INTERESTED PARTIES ARE URGED TO READ THESE DOCUMENTS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS WHEN AVAILABLE) BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION. Materials filed with the SEC are available electronically without charge at an Internet site maintained by the SEC. The address of that site is http://www.sec.gov Documents filed with the SEC also may obtained from United without charge by directing a request to Richard Abbott, Vice President of Finance, UnitedGlobalCom, Inc., 4643 S. Ulster Street, Suite 1300, Denver, CO 80237. Notice for United Stockholders United and its directors and executive officers may be deemed to be participants in the solicitation of proxies from United's stockholders in connection with the special meeting of stockholders to be held to approve the issuance of the Class A Common Stock in the exchange offer and planned merger. Information concerning United's directors and executive officers and their direct and indirect interests in the transaction is set forth in United's definitive proxy statement filed with the SEC relating to the special meeting of stockholders and the prospectus contained in the Registration Statement on Form S-4 filed with the SEC relating to the exchange offer. Materials filed with the SEC are available electronically without charge at an Internet site maintained by the SEC. The address of that site is http://www.sec.gov Documents filed with the SEC also may be obtained from United without charge by directing a request to Richard Abbott, Vice President of Finance, UnitedGlobalCom, Inc., 4643 S. Ulster Street, Suite 1300, Denver, CO 80237. United is the largest international broadband communications provider of video, voice, and Internet services with operations in numerous countries. Based on the Company's operating statistics at June 30, 2003, United's networks reached approximately 12.6 million homes passed and 8.9 million RGUs, including approximately 7.4 million video subscribers, 704,200 voice subscribers, and 825,600 high speed Internet access subscribers. United's major operating subsidiaries include UGC Europe, a leading pan-European broadband communications company; VTR GlobalCom, the largest broadband communications provider in Chile; as well as several strategic ventures in video and broadband businesses around the world. Visit http://www.unitedglobal.comfor further information about the company. At June 30, 2003, UniteGlobalCom's balance sheet shows a total shareholders' equity deficit of about $2.7 billion. US AIRWAYS: Posts 8.8% Increase in Traffic for October 2003 ----------------------------------------------------------- US Airways reported its October 2003 passenger traffic. Mainline revenue passenger miles for October 2003 increased 8.8 percent on no change in capacity compared to October 2002. The passenger load factor was 72.7 percent, a 5.8 percentage point increase compared to October 2002. Year-to-date 2003 revenue passenger miles decreased 7.7 percent on 10.3 percent less capacity compared to the first 10 months of 2002. The passenger load factor for the period was 73.4 percent, a 2.0 percentage point increase compared to the first 10 months of 2002. The three wholly owned subsidiaries of US Airways Group, Inc. -- Allegheny Airlines, Inc., Piedmont Airlines, Inc., and PSA, Inc. -- reported a 12.3 percent decrease in revenue passenger miles for the month of October on 15.4 percent less capacity. The passenger load factor was 57.0 percent, a 2.0 percentage point increase compared to October 2002. Year-to-date 2003, the wholly owned US Airways Express carriers reported a 15.9 percent decrease in revenue passenger miles on 15.6 percent less capacity. The passenger load factor was 52.8 percent, a 0.2 percentage point decrease compared to the first ten months of 2002. "Our October traffic results are consistent with what we have seen all year, with modest increases in the number of passengers flying year-over-year and business travelers continuing to change their buying habits and purchasing more leisure-type fares," said B. Ben Baldanza, US Airways senior vice president of marketing and planning. "It's clear that successful airlines will be those that can thrive on less revenue and lower costs because this is what consumers are increasingly demanding." System mainline passenger unit revenue for October 2003 is expected to increase between 3 percent and 4 percent compared to October 2002. US Airways ended the month by completing 99.5 percent of its scheduled flights, which is the same percentage compared to October 2002 when US Airways completed 99.5 percent of its scheduled flights. U.S. CAN: September 28 Balance Sheet Upside-Down by $352 Million ---------------------------------------------------------------- U.S. Can reported net sales of $204.5 million for its third quarter ended September 28, 2003 compared to $205.5 million for the corresponding period of 2002. The decrease is primarily attributable to volume decreases in its domestic businesses, partially offset by a positive foreign currency impact on sales made in Europe. For the first nine months of 2003, net sales increased to $613.7 million from $595.1 million for the same period in 2002 primarily due to a positive foreign currency impact on sales made in Europe, partially offset by decreased domestic volumes. For the third quarter, U.S. Can reported gross income of $20.7 million (10.1% to sales), compared to $19.8 million (9.6% to sales) in 2002. For the nine months ended September 28, 2003 gross income increased to $66.8 million (10.9% to sales) from $61.7 million (10.4% to sales) for the first nine months of 2002. Gross profit margin was positively impacted by operating efficiencies realized from its restructuring and other cost reduction programs. These positive impacts were partially offset by domestic volume decreases and the negative impact of production inefficiencies in our International operations. The Company has continued to reduce inventory, and reported lower inventory levels than September 2002 and December 2002, both on an as-reported basis and a constant dollar basis. Inventory also declined from second quarter 2003 levels. Selling, general and administrative expenses were $0.5 million lower than the same quarter last year and $1.4 million lower for the year-to-date period primarily due to positive results from Company-wide cost savings programs. During the third quarter of 2003, the Company recorded a credit of $0.8 million of Special Charges. The credit is the result of a reassessment of a prior restructuring program net of a charge for position elimination costs at May Verpackungen. Year to date Special Charges were $0.8 million. Third quarter 2003 interest expense was $14.6 million as compared to $12.2 million for the third quarter of 2002, and $40.9 million and $38.0 million for the 2003 and 2002 year to date periods, respectively. 2003 interest expense reflects the July 22, 2003 issuance of $125 million of 10 7/8% Senior Secured Notes due 2010 and the use of the proceeds to prepay $70.0 million of term loans and the reduction of borrowings under the revolving credit facility by $55.0 million. The repayments under the revolving credit facility did not reduce the $110.0 million amount available for borrowings under the facility. The Notes are secured, on a second priority basis, by substantially all of the collateral that currently secures the Company's Senior Secured Credit Facility. Bank financing fees for the third quarter of 2003 were $2.5 million as compared to $1.0 million for the third quarter of 2002, and $4.5 million and $3.0 million for the 2003 and 2002 year to date periods, respectively. The 2003 increases are due to $1.2 million of fees incurred and expensed by the Company to amend its Senior Secured Credit Facility in connection with the above transactions. In addition, the Company has or will incur approximately $6.4 million of fees and expenses related to the offering and senior secured credit facility amendment which will be amortized over the life of the applicable borrowings. The amortization of these fees and all other deferred financing fees is included in Bank Financing Fees. Income tax benefit was $0.2 million for the third quarter of 2003 versus $2.6 million for the third quarter of 2002. For the first nine months of 2003, income tax expense was $2.7 million versus an income tax benefit of $4.5 million for the first nine months of 2002. During the fourth quarter of 2002, the Company recorded a valuation allowance as it could not conclude that it is "more likely than not" that all of the deferred tax assets of certain of its foreign operations will be realized in the foreseeable future. Accordingly, in 2003 the Company did not record an income tax benefit related to losses of those operations. The net loss before preferred stock dividends was $4.3 million for the quarter ended September 28, 2003 compared to a net loss of $5.2 million for the quarter ended September 29, 2002. The net loss before preferred stock dividends on a year-to-date basis for 2003 was $9.3 million compared to $26.8 million for the same period of 2002. The year-to-date 2002 net loss includes the Company's non-cash goodwill impairment charge of $18.3 million recorded in the fourth quarter of 2002, retroactive to the first quarter of 2002. Earnings before interest, taxes, depreciation, amortization, special charges relating to our restructurings and certain other charges and expenses, as defined under the terms of our Senior Secured Credit Facility was $20.5 million for the third quarter of 2003, an improvement of $1.2 million versus the third quarter of 2002. Year-to-date Credit Facility EBITDA was $64.6 million for 2003, an increase of $5.8 million versus the same period of 2002. The Company considers Credit Facility EBITDA to be a useful measure of its current financial performance and its ability to incur and service debt. In addition, Credit Facility EBITDA is a measure used to determine the Company's compliance with its Senior Secured Credit Facility. The most directly comparable GAAP financial measure to Credit Facility EBITDA is net loss from operations before cumulative effect of accounting change. Below is a quantitative reconciliation of the loss from operations before cumulative effect of accounting change to Credit Facility EBITDA. At September 28, 2003, $39.6 million had been borrowed under the $110.0 million revolving loan portion of the Senior Secured Credit Facility. Letters of Credit of $11.6 million were also outstanding securing the Company's obligations under various insurance programs and other contractual agreements. In addition, the Company had $10.0 million of cash and cash equivalents at quarter end. The Company is in the process of renegotiating certain credit facilities of May Verpackungen. At September 28, 2003, the Company's balance sheet shows a total shareholders' equity deficit of about $352 million. U.S. Can Corporation is a leading manufacturer of steel containers for personal care, household, automotive, paint and industrial products in the United States and Europe, as well as plastic containers in the United States and food cans in Europe. USG CORP.: L&W Wants to Pay $16 Million to Buy Unnamed Supplier --------------------------------------------------------------- U.S. Bankruptcy Court Judge Newsome denied L&W's request to file its Acquisition Motion under seal, saying there was too little evidence presented about why the transaction must be kept so secret. Without naming the acquisition target but providing lots of hints, USG refilled its Acquisition Motion with the Court on October 27, 2003. The Acquisition Motion L&W seeks the Court's authority to purchase substantially all personal property assets and goodwill of a building supply business from a building supply company located in the Midwest and that unnamed company's subsidiary. L&W also wants Judge Newsome to approve the Asset Purchase Agreement. As part of their efforts to expand and strengthen their competitive position in the building products manufacturing and distribution industries, the Debtors are receptive to, and actively search for, opportunities to acquire existing businesses within these industries. In doing so, L&W acquired five businesses in the last year pursuant to Court-established procedures. The controlled expansion of the Debtors' businesses through strategic acquisitions is not merely beneficial to, but is in fact necessary for, the maximization of value for the Debtors' estates and creditors. Failure to capitalize on growth opportunities in particular geographic areas may result in the loss of the Debtors' preeminent position in the marketplace and a corresponding decline in their prospects. Marc T. Foster, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, informs the Court that the Seller currently operates a building materials distribution business in the Midwest. The Seller delivers the building materials to homeowners, contractors, applicators, lumberyards and dealers within a 60-mile radius of the Seller's operations. The Seller is the leading building products distributor in its geographic area and serves both the residential and commercial markets in the region. Like L&W's existing locations, the Seller's specialty distribution operations include job-site delivery and room-by-room stocking of building materials using specialized equipment and specially trained personnel. Mr. Foster notes that neither the Seller, nor any of the Seller's affiliates, has any connection with L&W or any of the other Debtors, except that the Seller has distributed products that have been manufactured or sold by the Debtors or their non-debtor affiliates. The Asset Purchase Agreement The key provisions of the Asset Purchase Agreement are: (A) Parties The parties are: * L&W; * the Seller; and * the seller's Subsidiary. The Subsidiary is a wholly owned subsidiary of the Seller and owns a number of vehicles utilized in the business operations. The Subsidiary is a party to the Asset Purchase Agreement only to transfer title of the vehicles to L&W. (B) Assets (1) Equipment All the vehicles, machines, equipment, appliances and furnishings and other personal property now physically located at the Seller's business or located elsewhere but owned by the Seller and used in the business at any time after July 1, 2003. (2) Inventory All stock, finished goods, components and raw materials, and all containers, supplies and packing materials relating to the distribution of building materials and building supply products, and all building materials and building supplies, located at the Seller's business as of the closing. (3) Goodwill and Names The goodwill of the Seller's business, including any and all goodwill related to the distribution of building materials, along with all rights, if any, associated with the certain names as the same may have been utilized by the Seller, and the non-competition agreements. (4) Contracts The Seller's written contracts, open purchase or sales commitments, job quotes, materialman lien rights and other written purchase or sale arrangements relating to its operation of the Business, subject to certain limitations. L&W will assume the obligations and duties imposed by these Contracts on the Seller as of the closing, to the extent these contracts are assignable and subject to certain conditions. L&W will not be required to assume any contract or other purchase or sales commitment under specified circumstances, including instances where the transaction would require unreasonable additional credit risk. (5) Leasehold improvements All fixtures and other leasehold improvements situated on the premises of the Seller's business, which are not legally a part of the real estate or in which the Seller has assignable rights. (6) Books and records All the books, records, documents, certificates and Instruments relating to or reflecting ownership, lawful possession or control of the Assets. (7) Permits and licenses All the assignable permits or licenses issued by any governmental agency necessary or appropriate for L&W's use and quiet enjoyment of the Assets, to the extent that the permits or licenses can be transferred to an unrelated, non-successor party. (8) Accounts receivable Those accounts receivable of the Seller that are less than 60 days old as of the closing. (C) Purchase price L&W will pay the Seller a total purchase price that is currently estimated to be $16,122,000. This purchase price will fluctuate based on the actual receivables and inventory as of the closing. (D) Payment of purchase price Upon closing, L&W will pay to the Seller by wire transfer the substantial majority of the purchase price, with adjustments by check and payment of 10% of the purchased receivables to an escrow account. (E) Payment of suppliers and creditors The Seller will provide in part for the passage of free and clear title to the inventory and equipment, notwithstanding liens or other rights of the Seller's creditors or suppliers, by paying the designated creditors and suppliers out of the proceeds. (F) Liabilities Except for the Contracts, L&W will not assume any of the Seller's obligations or liabilities of any kind or nature, other than those which may be otherwise prorated or assumed by L&W under the terms of the Asset Purchase Agreement. (G) Guarantees of principals At closing, the Seller will deliver to L&W an instrument or instruments executed by the Seller's principal shareholders guaranteeing the performance of the Seller under the Asset Purchase Agreement and the accuracy and enforceability of its representations and warranties for the periods set forth the Agreement. (H) Non-competition Agreements The principal shareholders and managers are required to sign non-competition agreements. (I) Closing The transactions contemplated by the Asset Purchase Agreement will be consummated before the end of 2003. (J) Termination The Asset Purchase Agreement may be terminated by either party upon seven days written notice to the other, if: * the other party is in continuing, material breach of its obligations under the Agreement, * there is an event of casualty under the Asset Purchase Agreement, or * a timely objection is filed and is not resolved. (K) Indemnification The Asset Purchase Agreement provides for the Seller and L&W to indemnify the other party under certain circumstances and pursuant to specified procedures. With respect to the Seller's indemnification obligations to L&W: * there will be no liability for indemnification unless the aggregate amount of damages exceeds a certain threshold, with limited exceptions; and * the aggregate amount of the Seller's liability under the Asset Purchase Agreement will not exceed a set percentage of the Purchase Price, with limited exceptions. The Debtors advise the Court that a complete unredacted copy of the Asset Purchase Agreement will be provided to parties-in- interest who are not their competitors upon (a) request to their counsel and (b) execution by the party-in-interest of a confidentiality agreement in a form acceptable to them. L&W determines that the acquisition of an ongoing business would be instrumental in establishing a new market or fortifying its position in an existing market. L&W's acquisition targets are usually distribution businesses that sell products manufactured by other USG Companies. Thus, the strengthening of L&W's position in a particular geographic area not only benefits L&W, but also benefits each of the other USG Companies for which it conducts distribution activities. According to Mr. Foster, L&W's proposed acquisition of the Assets represents a strategic opportunity for not only L&W, but also the other USG Companies. L&W's entry into the market is also anticipated to benefit its affiliates. In light of these benefits, the proposed Purchase Price is economically attractive to L&W. The Debtors anticipate that the ultimate return to L&W and the other USG Companies will significantly exceed the proposed Purchase Price. In addition, the Purchase Price, while not insignificant, constitutes only 0.5% of the Debtors' total asset base. Mr. Foster also assures the Court that L&W and the Seller have negotiated the proposed acquisition at arm's length and in good faith and that the terms of the proposed transaction are fair to L&W and the other parties. (USG Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 609/392-0900) VENTAS INC: Will Present at CIBC Healthcare Conference Tuesday -------------------------------------------------------------- Ventas, Inc. (NYSE: VTR) announced that Chairman, President and Chief Executive Officer, Debra A. Cafaro and Senior Vice President and Chief Financial Officer, Richard A. Schweinhart, will make a presentation regarding the Company at the CIBC World Markets Fourteenth Annual Healthcare Conference on Tuesday, November 11, 2003 at 8:00 a.m. Eastern Time in New York. The presentation is being audio webcast and can be accessed at the Ventas Web site at http://www.ventasreit.comor at http://www.cibcwm.com Any written materials accompanying the presentation will also be available on Ventas's Web site at the time of the presentation and will be archived at http://www.ventasreit.comfor 30 days after the event. Ventas, Inc. -- whose September 30, 2003 balance sheet shows a total shareholders' equity deficit of about $24 million -- is a healthcare real estate investment trust that owns 44 hospitals, 202 nursing facilities and nine other healthcare and senior housing facilities in 37 states. The Company also has investments in 25 additional healthcare and senior housing facilities. More information about Ventas can be found on its Web site at http://www.ventasreit.com WALTER INDUSTRIES: Third-Quarter 2003 Net Loss Tops $9.3 Million ---------------------------------------------------------------- Walter Industries, Inc. (NYSE: WLT) reported results for the third quarter ended September 30, 2003. Income from continuing operations was $3.1 million, or $0.07 per diluted share, compared to $21.4 million, or $0.48 per diluted share, for the year-ago period. Income from continuing operations, excluding restructuring and impairment charges, for the third quarter of 2003 was $4.8 million, or $0.11 per diluted share, in line with the Company's most recent forecast of $0.06 to $0.11 per diluted share. The net loss of $9.3 million, or $0.22 per diluted share, in the third quarter reflects an increase in the estimated loss on disposal of the discontinued AIMCOR operations of $13.3 million, or $0.31 per diluted share, based on the transaction terms contained in the definitive agreement. This loss was partially offset by income of $0.02 per diluted share from discontinued AIMCOR operations in the quarter. JW Aluminum had a solid performance, U.S. Pipe posted improved results versus the year-ago period, despite the continued impact of higher scrap raw material costs, and the Homebuilding Group ended the quarter with a strong backlog of 2,256 homes, driven by new sales orders, up 8% over the prior year. Offsetting these positive performances, Jim Walter Resources continued to face unfavorable geologic conditions, and the Homebuilding Group's results were negatively impacted by higher costs related to organizational restructuring and the implementation of a new enterprise-wide operating system designed to drive future growth. The Company has made solid progress in realizing its long-term strategy of simplifying the Company's business mix by divesting non-core businesses. The Company previously announced agreements to sell its JW Aluminum Company subsidiary to Wellspring Capital Management for $125 million and its AIMCOR subsidiary to Oxbow Carbon & Minerals for $127.7 million. These transactions are expected to close in the fourth quarter. Also, today the Company sold the resin-coated sand business of its Southern Precision Corporation subsidiary to an investment group for $3.6 million. "These announced divestitures demonstrate our commitment to focusing on our core businesses of Homebuilding, Financing and U.S. Pipe," said Chairman and Chief Executive Officer Don DeFosset. "On the operational front, even though third-quarter earnings were consistent with our recent guidance, we were clearly not pleased with these results. We foresee improvement in the coming months in Homebuilding, U.S. Pipe and Jim Walter Resources, and expect Financing to continue its solid performance." Net sales and revenues in the third quarter were down 2% versus the year- ago period. Earnings before senior debt interest, taxes, depreciation, amortization, non-cash post-retirement health benefits and non-cash restructuring charges (EBITDA) totaled $24.4 million during the third quarter, compared with $50.5 million in the prior-year period. Net sales and revenues and EBITDA exclude the AIMCOR discontinued operations. Third-Quarter Results By Operating Segment (Pro Forma From Continuing Operations) The Homebuilding segment reported third-quarter revenues of $67.0 million, down $1.8 million or 3% from the year-ago period. Homebuilding completed 1,004 homes during the third quarter at an average net selling price of $66,000, compared with 1,082 homes at an average price of $63,000 for the same period the previous year. Excluding its modular business, the Company completed 824 homes in the quarter, compared to 917 in the year-ago period. The modular business completed 180 homes in the current quarter, 15 more than the year-ago period. The segment posted an operating loss of $1.1 million in the third quarter, compared to operating income of $4.8 million in the prior-year period, primarily due to lower volume of completed units. This decline in volume is primarily the result of a reorganization of sales and construction personnel, as well as a temporary impact from the implementation of a new enterprise system. Operating income was also negatively impacted by higher costs associated with new initiatives such as New Home Gallery expansions and a more extensive advertising campaign. The Financing segment reported quarterly revenues of $61.1 million compared with $62.0 million in the year-ago period. Operating income totaled $11.9 million, versus $15.7 million a year ago. The profit decline reflected higher losses on repossessions in a challenging economic environment, which were partially offset by higher prepayment income. Prepayment speeds were 10.2% in the third quarter, versus 6.6% in the year-ago period. Last year's third quarter also reflected higher income from the Company's insurance business. Delinquencies (the percentage of amounts outstanding over 30 days past due) were 6.3% at the end of the third quarter, compared to 6.5% at the end of the third quarter of 2002 and 6.6% at the end of the second quarter of 2003. The Industrial Products segment posted $189.5 million in revenues during the third quarter, compared to $190.9 million in the year- earlier period. Operating income for the segment was $11.2 million, compared to $9.6 million in the prior-year period. U.S. Pipe posted improved results as the first of three announced price increases took effect, countering the impact of higher scrap raw material costs. A second increase took effect in October, while a third increase was recently announced for early 2004. JW Aluminum's revenues were up and profitability was stable versus the prior-year period. In the Natural Resources segment, revenues were down versus the prior-year period, and the segment incurred an operating loss of $9.9 million in the quarter, compared to operating income of $11.3 million a year ago. This decline was due to higher costs related to continued adverse geologic conditions in Mines No. 5 and 7. Jim Walter Resources sold 1.5 million tons of coal at an average price of $34.59 per ton in the third quarter, compared to 1.6 million tons at an average price of $36.26 per ton in the prior year's quarter. The price decline was primarily due to lower contract pricing for metallurgical coal, which took effect in the third quarter. The natural gas operation sold 2.1 billion cubic feet of gas in the third quarter at an average price of $4.30 per thousand cubic feet, compared to 2.4 billion cubic feet at $3.12 per thousand cubic feet in the prior-year quarter. Outlook Excluding AIMCOR, and based on current internal business forecasts and anticipated market conditions, Walter Industries expects to generate 2003 fourth-quarter earnings from continuing operations and JW Aluminum in the range of $0.24 to $0.29 per diluted share, resulting in full-year guidance of $0.70 to $0.75. These earnings estimates are within the previous earnings guidance and exclude any special items. Walter Industries, Inc. (S&P, BB Corporate Credit Rating, Stable) is a diversified company with five principal operating businesses and annual revenues of $1.9 billion. The Company is a leader in homebuilding, home financing, water transmission products, energy services and specialty aluminum products. Based in Tampa, Florida, the Company employs approximately 6,300. WARNACO GROUP: Offers to Swap Old 8-7/8% Senior Notes Due 2013 -------------------------------------------------------------- In an October 30, 2003 filing with the Securities and Exchange Commission, Jay A. Galluzzo, Esq., Vice President, General Counsel and Secretary to The Warnaco Group, Inc., relates that Warnaco Inc. is offering to exchange $210,000,000 aggregate principal amount of 8-7/8% Senior Notes due 2013 CUSIPS 934391 AE3 and U93439 AA2, which Warnaco issued on June 12, 2003, for $210,000,000 aggregate principal amount of 8-7/8% Senior Notes Due 2013 CUSIP __________ which have been registered under the Securities Act of 1933, as amended. Warnaco Inc., a wholly owned subsidiary of Warnaco Group, will exchange the new notes to be issued for all outstanding old notes that are validly tendered and not withdrawn pursuant to the exchange offer. The exchange offer will expire at _____ p.m., New York City time, on ______________, 2003, unless Warnaco extends the exchange offer in its sole and absolute discretion. According to Mr. Galluzzo, the new notes will be fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Warnaco Group and substantially all of its domestic subsidiaries. Warnaco Group's direct and indirect foreign subsidiaries will not guarantee the new notes. As of July 5, 2003, Warnaco Group and the guarantors on a consolidated basis had $1,500,000 of senior debt, excluding unused commitments made by lenders and intercompany debt, that is pari passu with the notes or the guarantees, all of which was secured. None of Warnaco Group's or any guarantor's debt was subordinated to the notes or the guarantees. The terms of the new notes are substantially identical to those of the old notes, except that the transfer restrictions and registration rights relating to the old notes will not apply to the new notes. The exchange of old notes for new notes will not be a taxable transaction for U.S. federal income tax purposes. Neither Warnaco nor any of the guarantors will receive any cash proceeds from the exchange offer. Mr. Galluzzo says that Warnaco issued the old notes in a transaction not requiring registration under the Securities Act, and as a result, their transfer is restricted. Warnaco is making the exchange offer to satisfy the Noteholders' registration rights, as a holder of the old notes. There is no established trading market for the new notes or the old notes. The new notes are expected to be eligible for trading in the private offerings, resales and trading through Automatic Linkages Market. By tendering the Old Notes, Mr. Galluzzo says, a Noteholder represents that: (a) the Noteholder is not an "affiliate", as defined in Rule 405 under the Securities Act, or Warnaco or any of the guarantors; (b) any New Notes received in the exchange offer are being acquired in the ordinary course of business; (c) at the time of commencement of the exchange offer, neither the Noteholder nor anyone receiving the New Notes from the Noteholder, has any arrangement or understanding with any person to participate in the distribution, as defined in the Securities Act, of the Old Notes or the New Notes in violation of the Securities Act; (d) if not a participating broker-dealer, the Noteholder is not engaged in and do not intend to engage in, the distribution, as defined in the Securities Act, of the Old Notes or the New Notes; and (e) if a broker-dealer, the Noteholder will receive the New Notes in their own account in exchange for Old Notes that were acquired as a result of market-making or other trading activities and that the Noteholder will deliver a prospectus in connection with any resale of the New Notes by participating broker-dealers. On or before the expiration or termination of the Exchange Offer, to participate in the Exchange Offer, a Noteholder must: (1) tender the Old Notes by sending the certificates for the Old Notes, in proper form for transfer, a properly completed and duly executed letter of transmittal and all other documents required by the letter of transmittal, to Wells Fargo Bank Minnesota, National Association, as exchange agent; or (2) tender the Old Notes by using the book-entry transfer procedures and transmitting a properly completed and duly executed letter of transmittal, or an agent's message instead of the letter of transmittal, to the exchange agent. In order for a book-entry transfer to constitute a valid tender of the Old Notes into the exchange offer, Wells Fargo Bank Minnesota, National Association must receive a confirmation of book-entry transfer of the Old Notes into the exchange agent's account at DTC before the expiration or termination of the Exchange Offer. The exchange agent's address and contact numbers is: Wells Fargo Corporate Trust c/o The Depository Trust and Clearing Company 1st Floor -- TADS Dept. 55 Water Street New York, NY 10041 Telephone Number: (800) 344-5128 Facsimile Number: (612) 667-4927 Attention: Warnaco Administrator If a registered holder of the Old Notes wants to tender the Old Notes in the Exchange Offer, but the Old Notes are not immediately available, time will not permit the Old Notes or other required documents to reach the exchange agent before the expiration date, or the procedure for book-entry transfer cannot be completed before the expiration or termination of the Exchange Offer, a tender may be effected if: * before the expiration date, Wells Fargo received from an Eligible Institution a notice of guaranteed delivery, substantially in the form Warnaco Inc. provides -- by telegram, telex, facsimile transmission, mail or hand delivery -- setting forth the Noteholder's name and address, the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery, the certificates for all physically tendered Old Notes or a book-entry confirmation, together with a properly completed and duly executed appropriate letter of transmittal or facsimile or agent's message, with any required signature guarantees and any other documents required by the letter of transmittal will be deposited by the Eligible Institution with Wells Fargo; and * the certificates for all physically tendered Old Notes or a book-entry confirmation, together with a properly completed and duly executed appropriate letter of transmittal or facsimile or agent's message, with any required signature guarantees and all other documents required by the letter of transmittal, are received by Wells Fargo within three NYSE trading days after the date of execution of the notice of guaranteed delivery. If a beneficial owner, whose Old Notes are registered in the name of the broker, dealer, commercial bank, trust company or other nominee, wants to tender its Old Notes in the exchange offer, that beneficial owner should promptly contact the person in whose name the Old Notes are registered and instruct that person to tender on the beneficial owner's behalf. If the beneficial owner wants to tender in the exchange offer on its behalf, before completing and executing the letter of transmittal and delivering the Old Notes, appropriate arrangements must be made to either register ownership of the Old Notes in the beneficial owner's name, or obtain a properly completed bond power from the person in whose name the Old Notes are registered. A full-text copy of Warnaco's exchange offer prospectus is available for free at the Securities and Exchange Commission at: http://www.sec.gov/Archives/edgar/data/801351/000095011703004591/a36173.txt (Warnaco Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 609/392-0900) WCI STEEL: First Creditors Meeting to Convene on November 17 ------------------------------------------------------------ The United States Trustee will convene a meeting of WCI Steel, Inc., and its debtor-affiliates' creditors on November 17, 2003, at 11:00 a.m., at 10 E. Commerce St., Room 340, Youngstown, Ohio 44503. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. All creditors are invited, but not required to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Headquartered in Warren, Ohio, WCI Steel, Inc. is an integrated steelmaker producing more than 185 grades of custom and commodity flat-rolled steels. The Company filed for chapter 11 protection on September 16, 2003 (Bankr. N.D. Ohio, Case No. 03-44662). Christine M Pierpont, Esq., and G. Christopher Meyer, Esq., at Squire, Sanders & Dempsey, L.L.P. represent the Debtors in their restructuring efforts. As of April 30, 2003, the Debtors listed $356,286,000 in total assets and $620,610,000 in total debts. WEYERHAEUSER CO.: Will Padlock Sawmill at Grande Cache, Alberta --------------------------------------------------------------- Weyerhaeuser Company (NYSE: WY) will close its lumber mill at Grande Cache, Alberta on Feb. 8. The closure will result in a fourth quarter after-tax charge of US$ 8 million, or 4 cents per share. Approximately 156 hourly and salaried jobs are affected by the closure. Fred Rowson, Weyerhaeuser's vice president, Alberta, said the decision is part of the company's overall strategy to make its softwood lumber business competitive. "The forest industry faces serious challenges," said Rowson. "Our people in Grande Cache have done an excellent job under very difficult circumstances. Unfortunately, the mill's small size and high cost structure, along with a shortage of timber, make it uncompetitive for the longer term in today's global marketplace. Expansion is not an option because there is not enough good-quality fibre available to support increased production." Rowson said Weyerhaeuser was unsuccessful in its search for alternatives to a closure, including attempting to sell the mill to other forest companies in the region. "I know closure will have a tremendous impact on the community of Grande Cache," he added. "We sincerely regret the hardship this will cause. Employees at the Grande Cache mill are skilled, productive, valuable people who have been together for many years and weathered many tough times. But the industry is going through structural changes over which they have no control." Comprehensive human resources programs are in place to support employees at Grande Cache, including out-placement counseling, transition assistance, education and relocation assistance, and severance packages, as well as a process designed to help employees get a job at other company locations. Weyerhaeuser purchased the Grande Cache sawmill in 1992. The mill produces approximately 130 million board feet of lumber per year. Products include spruce-pine-fir framing lumber, premium grades for the Japanese market and Machine Stress Rated lumber used in roof trusses and other commercial applications. Weyerhaeuser Company (Fitch, BB+ Senior Unsecured Long-Term Ratings, Stable Outlook), one of the world's largest integrated forest products companies, was incorporated in 1900. In 2002, sales were Cdn$29.1 billion (US$18.5 billion). It has offices or operations in 18 countries, with customers worldwide. Weyerhaeuser is principally engaged in the growing and harvesting of timber; the manufacture, distribution and sale of forest products; and real estate construction, development and related activities. Weyerhaeuser Company Limited, a wholly owned subsidiary, has Exchangeable Shares listed on the Toronto Stock Exchange under the symbol WYL. Additional information about Weyerhaeuser's businesses, products and practices is available at http://www.weyerhaeuser.com WICKES INC: Commences Exchange Offer for 11-5/8% Sr. Sub. Notes --------------------------------------------------------------- Wickes Inc. (OTCBB:WIKS.OB), a leading distributor of building materials and manufacturer of value-added building components, has commenced an offer to exchange (i) cash and its new 10% Convertible Notes due June 15, 2007 or (ii) its new Convertible Notes, for all of its $21,123,000 aggregate principal amount of outstanding 11-5/8% Senior Subordinated Notes due December 15, 2003. Tendering noteholders may elect to receive for each $1,000 principal amount of Subordinated Notes tendered, either (i) $500 in cash and $250 principal amount of new Convertible Notes or (ii) $1,000 principal amount of new Convertible Notes. In either event, if the Exchange Offer is completed, tendering noteholders will also receive accrued and unpaid interest on the Subordinated Notes from June 16, 2003 through the closing date of the Exchange Offer. The successful implementation of the Company's debt restructuring plan, of which the Exchange Offer is an ongoing part, is expected to enable the Company to restructure a portion of its existing debt and thereby improve its balance sheet. The Company is making the Exchange Offer because it does not expect to generate sufficient cash from operations to pay the Subordinated Notes when they mature on December 15, 2003. Therefore unless all the Subordinated Notes are tendered in the Exchange Offer, the Company expects to default on its payment obligation. The Exchange Offer, which is being made to holders of the existing Subordinated Notes pursuant to an Offering Memorandum, is subject to not less than $20,066,850 principal amount of Subordinated Notes being exchanged. The closing of the Exchange Offer is also subject to the Company obtaining the consent of its senior lenders to the Exchange Offer and the funding of an additional term loan under the Company's senior credit facility or the Company entering into other financing arrangements under which it will borrow funds to be paid to holders of Subordinated Notes who elect to receive cash and new Convertible Notes in the Exchange Offer. There can be no assurance that such consent or financing will be obtained, although the Company's largest stockholder, Imagine Investments, Inc., has committed, subject to certain conditions, to loan the necessary funds. The Company recently determined that certain interest, employee benefits and manufacturing related expenses were not properly classified in its previously issued financial statements. Although these reclassifications did not affect the Company's net sales or net income (loss) as previously reported, the Company will restate its previously issued financial statements. Prior to the expiration date and as an additional condition to the closing of the Exchange Offer, the Company will file with the SEC an amendment to its 2002 Form 10-K containing restated consolidated financial statements and the opinion of its independent auditors on those restated financial statements. The Company's auditors have advised management that their report will contain an explanatory paragraph relating to the Company's ability to continue as a going concern. The Company will also file amendments to its Quarterly Reports on Form 10-Q for the quarters ended March 29, 2003 and June 28, 2003. Wickes will accept for exchange all Subordinated Notes validly tendered and not withdrawn prior to the expiration date. The expiration date of the Exchange Offer is 5:00 p.m. Eastern Standard Time, on Wednesday, December 3, 2003, unless extended. The new Convertible Notes will be the Company's general unsecured obligations and will rank equally with the Company's other unsecured indebtedness, including the Subordinated Notes. The new Convertible Notes will rank subordinate to the Company's secured indebtedness, including the senior credit facility and the Senior Secured Notes due 2005. The new Convertible Notes will bear interest at 10 percent per annum payable on March 15, June 15, September 15 and December 15 of each year, beginning on March 15, 2004. At any time after the Company's certificate of incorporation is amended to increase the number of shares of Common Stock the Company is authorized to issue, the new Convertible Notes will be convertible, in whole or in part, into Common Stock at the rate of one share of Common Stock for each $1.00 principal amount of new Convertible Notes being converted. This announcement constitutes neither an offer to sell nor a solicitation of an offer to buy the new Convertible Notes which are the subject of the Exchange Offer or the Common Stock into which the Convertible Notes are convertible. Offers are made only by the Offering Memorandum, which can be obtained by calling D. F. King & Co., Inc., Wickes' Information Agent, at (888) 869-7406 (toll-free in the U.S.) In addition, holders of the Subordinated Notes may contact HSBC Bank USA, Wickes' Exchange Agent, at (718) 488-4475 (attn: Paulette Shaw). The Exchange Agent and the Information Agent will answer all questions with respect to the Exchange Offer solely by reference to the terms of the Offering Memorandum. In addition, all questions with respect to the Exchange Offer may be directed to the Wickes Information Center at (847) 367-3414. Wickes Inc. is a leading distributor of building materials and manufacturer of value-added building components in the United States, serving primarily building and remodeling professionals. The Company distributes materials nationally and internationally, operating building centers in the Midwest, Northeast and South. The Company's building component manufacturing facilities produce value-added products such as roof trusses, floor systems, framed wall panels, pre-hung door units and window assemblies. Wickes Inc.'s Web site -- http://www.wickes.com-- offers a full range of valuable services about the building materials and construction industry. WHEELING-PITTSBURGH: WHX Director Louis Klein Buys 1,500 Shares --------------------------------------------------------------- Louis Klein, Jr., of Stamford, Connecticut, a Director of WHX Corporation, reports to the Securities and Exchange Commission that he bought 1,500 shares of the common stock of WHX for a price of $2.35 per share, bringing his holdings of WHX stock to 3,500 shares. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 48; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM INC: Pushing for Approval of Progress Settlement Pact -------------------------------------------------------------- Progress Telecommunications Corporation is a telecommunications carrier incorporated under the laws of Florida that owns or controls and operates fiber optic and digital microwave telecommunications systems. Progress is also in the business of providing dedicated digital telecommunications service like broadband transport capacity and wireless infrastructure services. Progress' network reaches from New York to Miami, Florida along the eastern seaboard of the United States. Alfredo R. Perez, Esq., at Weil, Gotshal & Manges LLP, in New York, recounts that Progress and the Worldcom Debtors entered into several agreements for the Debtors' use of capacity on Progress' system, including: 1. An MCI WorldCom Master Service Agreement for Services Ordered by MCI International; 2. A Telecommunications Services Agreement between MCIMetro Access Transmission Service LLC and Progress dated March 5, 1999; 3. A Fiber Optic Facilities Agreement between Progress and MCI Telecommunications Corporation dated June 1, 1998; 4. An Optic Fiber Construction & Use Agreement between CaroNet and MCIMetro Access Transmission Services, Inc. dated March 28, 1996; 5. A Collocation Agreement between CaroNet and Intermedia Communications Inc. dated August 14, 1996; 6. A Master Service Agreement between CaroNet and MCI Telecommunications Corp. dated October 21, 1997; 7. A Capacity Lease Agreement between CaroNet and Intermedia Communications Inc. dated August 8, 1996; 8. A Master Service Agreement between UUNET and Progress dated July 17, 2002; 9. An International Private Line/Blackhaul Swap and Service Agreement between Progress and MCI Telecommunications Corp.; 10. A Master Licensing Agreement (Conduit Occupancy) between Progress and Intermedia Communications Inc. dated March 10, 1998; 11. A Master Service Agreement for Interexchange Service between CaroNet and WorldCom, Inc. dated July 15, 1997; 12. A Collocation Agreement between CaroNet and MCI Telecommunications Corp. dated November 20, 1997; 13. A Collocation Agreement between CaroNet and Intermedia Communications dated August 14, 1996; 14. A License Agreement between CaroNet and Intermedia Communications Inc. dated March 28, 1997; 15. A Collocation Agreement between Progress and MCI WorldCom Network Services, Inc. dated November 28, 2001; 16. A Master Service Agreement between Progress and MCI WorldCom Network Services, Inc. dated November 19, 1999, the November 19, 1999 MSA; and 17. The Private Optical Network Service Schedule between Progress and UUNET dated October 13, 2000, and October 16, 2000(the UTX Peering Ring). Over the course of the Debtors' bankruptcy proceeding, Mr. Perez says, the Debtors rejected these Progress contracts: (i) A UTX Peering Ring contract by operation of its September 28, 2002 Order establishing contract rejection procedures; (ii) four UUNET Service Orders negotiated under the Debtors' November 19, 1999 MSA with Progress by its December 17, 2002 Order; and (iii) two Service Orders relating to circuits numbered OlHFGS100050219PUN and ZO1ODSGl00165194PUN negotiated under the Debtors' November 19, 1999 MSA with Progress by operation of its September 28, 2002 order establishing contract rejection procedures. Mr. Perez contends that the Debtors notified Progress of the rejection of the UTX Peering Ring contract on December 6, 2002 and of the Service Orders related to circuits numbered OlHFGS100050219PUN and ZO1ODSGl00165194PUN on February 19, 2003. No objection was filed within 10 business days of either notice. Accordingly, the contract was deemed rejected effective as of the notice date. Progress, however, disputes that it received proper notice of the either rejection and disputes the effectiveness of the rejection. The Debtors also notified Progress of the rejection of the two additional Service Orders related to circuits numbered 01HFGS017308222PUN and 01HGFSOl7306222PUN on January 17, 2003 and March 11, 2003. In these instances, Progress timely objected. The Debtors also reject all obligations with respect to the Sanford, North Carolina location included in the November 28, 2001 Collocation Agreement. The Debtors and Progress disagree as to the amounts due and owing, if any, as a result of the Debtors' rejection of the contracts, and the method to calculate any such amounts. The Debtors intend to assume certain Progress contracts but the Parties disagree as to the cure amounts that would be due and owing to Progress, if the Debtors were to assume the contracts. Progress has scheduled claims against the Debtors: Schedule Number Amount --------------- ------ 229092300 $1,644,619 229092310 308,992 212001590 100,294 229092320 220,302 To resolve their disputes the Debtors and Progress entered into a settlement agreement, which subsequently gained Judge Gonzalez' approval. Pursuant to the Settlement Agreement, the Parties agree that: A. the Debtors will assume these contracts in accordance with their Reorganization Plan and pay an aggregate amount of $915,434 as cure amount, in full and final satisfaction of Progress' claims: Contract Cure Amount -------- ----------- MCI WorldCom MSA for Services Ordered $100,294 Progress and MCIMetro Telecom Services Agreement 73,486 Fiber Optic Facilities Agreement 308,992 Optical Fiber Construction & Use Agreement 82,555 CaroNet and Intermedia Collocation Agreement 137 CaroNet and MCI Telecom Master Service Agreement 128,401 CaroNet and Intermedia Capacity Lease Agreement 2,975 UUNET and Progress Master Services Agreement 0 Private Line/Blackhaul Swap and Service Agreement 0 Master Licensing Agreement (Conduit Occupancy) 0 MSA for Interexchange Service 0 CaroNet and MCI Telecom Collocation Agreement 0 CaroNet and Intermedia License Agreement 0 Progress and MCI WorldCom Collocation Agreement 7,650 Progress and MCI WorldCom MSA 210,944 ----------- CURE TOTAL $915,434 B. in exchange for the Debtors' assumption and cure of these contracts, Progress will: (a) withdraw any and all proofs of claim filed in Debtors' bankruptcy proceeding relating to the Assumed Contracts, including, but not limited to, Claim No. 9466 for $100,653, Claim No. 9461 for $73,904, and Claim No. 9462 for $310,751; and (b) release the Debtors from any and all claims by Progress relating to the Assumed Contracts; C. in full and final satisfaction of all of Progress' claims against the Debtors related to the UTX Peering Ring Contract, the November 19, 1999 MSA, and the November 28, 2001 Collocation Agreement, the Debtors will allow Progress a $8,039,813 total general unsecured claim, to be paid in accordance with the Plan Reorganization: _______________________________________________________________ | | | | | | Contract | Claims/Damages | Amounts | Total | |__________________|______________________|___________|_________| | | | UTX Peering Ring |* prepetition claim | $393,581 | Contract | | | |* rejection damages | 3,262,120 | 3,655,700 ___________________|______________________|___________|__________ | | | Nov. 19. 1999 |(1) 4 UUNET Circuits | | Master Service | | | Agreement |* prepetition claim | 1,113,502 | | | | |* rejection damages | 3,097,935 | | (including disputed) | | 4,211,437 | invoice amount | | | $294,000) | | ___________________|______________________|___________|__________ | | | |(2) Other Rejected | | | and Disputed | | | Service Orders | | | | | |* prepetition claims | 9,358 | | | | |* rejection damages | 139,317 | |(including disputed | | | $34,212 for service | | | order | | | 02HFGS015170222CEV | | 148,675 ___________________|______________________|___________|__________ | | | Nov. 28, 2001 | Rejection of | | Collocation | Sanford, NC location | | Agreement | | 24,000 | 24,000 ___________________|______________________|___________|__________ Total Allowed General Unsecured Claim $8,039,813 _________________________________________________________________ (a) With respect to prepetition and rejection damages related to the Debtors' rejection of the UTX Peering Ring contract, Progress is allowed a general unsecured claim for $3,655,700. In exchange for the $3,655,700 Claim, Progress: -- withdraws any and all proofs of claim related to the UTX Peering Ring Contract, including but not limited to Claim No. 35163 for $3,247,704, and in part, Claim No. 9460 for $398,323; -- remits to the Debtors $294,000 in postpetition invoice overpayments, which will be collected by the Debtors by reducing the $915,434 Cure Total by the $294,000, or by another method agreed to by both Parties in writing for an amount equal to the full dollar equivalent of the $294,000 remittance; and -- releases the Debtors from any and all claims existing in the past related to the UTX Peering Ring Contract; (b) With respect to the four UUNET Service Orders negotiated under the November 19, 1999 MSA rejected by Court Order on December 17, 2003, Progress is allowed a general unsecured claim for $4,211,437. In exchange for the $4,211,437 Claim, Progress: -- withdraws any and all proofs of claims relating to the rejection of the Service Orders, including, but not limited to, Claim No. 9465 for $5,018,827, and in part, Claim No. 9460 for $1,113,502; and -- releases the Debtors from any and all claims relating to the four rejected UUNET Service Orders; (c) With respect to other rejected and disputed service orders numbered 01HFGS100050219PUN, 01HFGSOl73O8222PUN, 01HGFSOl73O6222PUN, and 02HFGSO15170222CEV, Progress is allowed an unsecured general claim for $148,675. In exchange for the $148,675 Claim, Progress will: -- withdraws its January 24,2002 and March 17, 2003 objections to the rejection of Service Orders numbered 01HFGS017308222PUN and OlHGFS017306222PUN; -- withdraws any and all proofs of claim filed in Debtors' bankruptcy proceeding relating to Service Orders under the November 19, 1999 MSA, including, but not limited to, Claim No. 9462 for $221,511; -- remits $34,212 to the Debtors for postpetition invoice overpayments, which will be collected by the Debtors by reducing the $915,434 Cure Total by the $34,212, or by another method agreed to by both Parties in writing for an amount equal to the full dollar equivalent of the $34,212 remittance; and -- releases the Debtors from any and all claims relating to the November 19, 1999 MSA, except the cure claims with respect to the Assumed Contracts; and (d) With respect to the November 28, 2001 Collocation Agreement, Progress is allowed a general unsecured claim for $24,000 for damages relating to the Sanford, North Carolina location. In exchange, Progress releases the Debtors from any and all claims relating to the Collocation Agreement; D. in full and final satisfaction of Progress' $147,000 postpetition claim under the UTX Peering Ring Contract and the $13,375 early rejection charges for UUNET Service Order ZO1ODSGl00165194PUN, the Debtors waive and withdraw their their claim for a $67,986 prepetition credit for MCI Network Services circuit numbered 01744; and E. Progress withdraws and releases any and all proofs of claim or claims scheduled by the Debtors in the Debtors' bankruptcy action, including, but not limited to, those referenced and schedule numbers 229092300 for $1,644,619, 229092310 for $308,992, 212001590 for $100,294 and 229092320 for $220,302. The Parties also agree to execute mutual releases. Alfredo R. Perez, Esq., at Weil, Gotshal & Manges LLP, tells the Court that the Settlement is important. A trial of the issues would be costly and the result may not significantly vary from the result negotiated by the Parties. The Parties are clearly in the best position to determine a reconciliation that fairly reflects, and compromises where necessary, the business relationship between them. (Worldcom Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 609/392-0900) W.R. GRACE: Urging Court to Appoint Hamlin as Future Claims Rep. ---------------------------------------------------------------- Since the commencement of these Chapter 11 cases, one of the W.R. Grace Debtors' key objectives has been formulating a plan of reorganization acceptable to all parties-in-interest. A key element of a consensual plan of reorganization will likely be a channeling injunction under which all current and future asbestos-related claims and demands against the Debtors will be channeled to a trust established to equitably distribute available assets to holders of all those allowed claims and demands. A channeling injunction is permitted by the Bankruptcy Code and may be issued if a number of specific conditions are met, including the appointment of a legal representative for the purpose of protecting the rights of persons that might subsequently assert future demands against the Debtors. Congress and the courts have recognized the need, in Chapter 11 cases involving asbestos claims, to protect and represent the interests of persons who may have claims and/or demands against a debtor arising in the future, and have directed bankruptcy courts to appoint a legal representative for Future Claimants in cases where a channeling injunction is sought. The appointment of a Future Representative will facilitate the negotiation of a consensual plan of reorganization by assuring that all parties-in-interest, including Future Claimants, will have a fair opportunity to participate in the process. Throughout the course of these cases, the Debtors have had discussions with the various creditors' committees and their legal and financial advisors with respect to the appropriate Future Representation. Following careful consideration of several potential candidates for a Future Representative, all well-known to the Court, the Debtors have determined, in their sound business judgment, that C. Judson Hamlin is well qualified to represent the interests of any and all persons who may assert demands against one or more of the Debtors. By this motion, the Grace Debtors ask Judge Fitzgerald to appoint C. Judson Hamlin as the Legal Representative for the holders of future asbestos-related claims against them. Mr. Hamlin assures the Court that he is a disinterested person, as that term is defined in the Bankruptcy Code, and holds no interest adverse to the Debtors or their estates in the matters for which he is to be employed. However, Mr. Hamlin discloses that he has acted as a consultant to the United States District Court for Delaware in connection with its consideration of asbestos-related claims in connection with six cases. He further states he is "of counsel," but does not specify the firm. Terms of Employment * Standing. The Future Representative will have standing under the Bankruptcy Code to be heard as a party-in- interest in all matters relating to the Debtors' Chapter 11 cases and will have the powers and duties of a committee, although those powers and duties may be modified by court order at any time during these cases. * Engagement of Professionals. The Future Representative may employ attorneys and other professionals, subject to court approval. * Compensation. Compensation, including professional fees and reimbursement of expenses, will be payable to the Future Representation and his professionals from the Debtors' estates, subject to Court approval. The Debtors and Mr. Hamlin agree that $500 an hour is a fair amount. * Liability Indemnity. The Future Representation will not be liable for any damages, or have any obligations other than as prescribed by court order, but may be liable for damages caused by his willful misconduct or gross negligence. However, he is not liable to any person as a result of any action or omission "taken or made by the Future Representative in good faith." The Debtors indemnify the Future Representative and his agents and professionals harmless from any claims by any party arising out of or relating to the performance of his duties unless a court finds in a final and non-appealable order that he is liable as a result of willful misconduct or gross negligence. * Right to Receive Notices. The Future Representative and his counsel will be entitled to receive all notices and pleadings, which are served on the committees. (W.R. Grace Bankruptcy News, Issue No. 48; Bankruptcy Creditors' Service, Inc., 609/392-0900) ZIFF DAVIS: Robert Lee is Publisher of New Consumer Lifestyle Mag. ------------------------------------------------------------------ Ziff Davis Media has appointed of Robert Lee as Publisher of a new consumer lifestyle magazine. He'll oversee all editorial, sales and marketing functions for the new publication and report to Tim Castelli, Senior Vice President of the Company's PC Magazine Group. The new magazine is currently under development and scheduled to debut in the early part of 2004. This publication will celebrate the growing demand and passion that consumers have for digital technology and will highlight ways in which consumer electronics are changing and enhancing people's every day lives. "Bob has a fantastic track record in publishing and the perfect blend of market experience and vision to launch this publication and make it a huge success," said Tim Castelli. "We're confident that Bob's leadership style and his deep customer relationships will be invaluable in building exactly the right brand our readers and advertisers want. We're very excited about this opportunity and Ziff Davis will bring all of its publishing assets to bear in building this new brand and making it the market leader." As Publisher of the new publication, Mr. Lee will be instrumental in shaping the magazine's unique editorial coverage, while at the same time delivering the highest qualified reader base. Mr. Lee will also be instrumental in building the brand through innovative sales and marketing initiatives that drive effective results for customers in the burgeoning consumer electronics market. A consumer-publishing veteran, Mr. Lee brings nearly 20 years of experience to Ziff Davis Media. He served most recently as the Publisher of Gear Magazine, where he initiated and implemented integrated sales and marketing strategies that grew the publication's advertising revenue by 25%. Prior to this position, Mr. Lee rose through the ranks at Discover Magazine -- starting as Western Manager and ending his tenure as Associate Publisher. While at Discover he managed sales activities and developed consumer-marketing programs for leading companies including IBM, Microsoft, Sony, Apple and Kodak. Mr. Lee has also held sales positions at Elle Magazine and US Magazine. He began his career as a media planner with NW Ayer, Inc. where he was responsible for developing media plans for such leading companies as Gillette and DeBeers. Mr. Lee holds a Bachelor of Science degree in Communications Management from Ithaca College. Ziff Davis Media Inc. (S&P, CCC Corporate Credit Rating) -- http://www.ziffdavis.com-- is a special interest media company focused on the technology and electronic video game markets. In the United States, the company publishes 10 industry leading business and consumer magazines: PC Magazine, eWEEK, Baseline, CIO Insight, Electronic Gaming Monthly, Computer Gaming World, Official U.S. PlayStation Magazine, GameNow, Xbox Nation and GMR. There are 39 foreign editions of Ziff Davis Media's publications produced and distributed in over 70 countries worldwide. In addition to producing Web sites for all of its magazines, the Company develops tech enthusiast sites such as ExtremeTech.com. Ziff Davis Media provides custom publishing and end-to-end marketing solutions through its Integrated Media Group, industry analyses through Ziff Davis Market Experts and produces eSeminars and webcasts. For more information, visit http://www.ziffdavis.com * Canadian Senate Panel Says Bankruptcy Legislation Too Harsh ------------------------------------------------------------- The Senate Committee on Banking, Trade, and Commerce report on the Bankruptcy and Insolvency Act, released Tuesday, accepted the testimony provided on the punitive effects of the ten-year prohibition on student loan bankruptcy. The Committee has recommended that the law be changed to a five year prohibition. "This recommendation will provide some hope to those affected by this unjust law," said Ian Boyko, National Chairperson, Canadian Federation of Students. "Though we feel that no prohibition is justified, it is important that the Senate has recognized the harsh nature of the law." The Senate heard from the Insolvency Task Force, composed of 23 leading academics, bankruptcy trustees and policy experts. The Insolvency Task Force strongly urged the Committee to recommend that the prohibition drop from ten to five years. "The Senate heard compelling testimony about the devastating consequences of this law and research outlining the effect of the law on the most economically marginal Canadians," said Boyko. The federal government changed the law in 1997 to create a two- year waiting period before student loans could be discharged under the Act. Less than ten months later, at the behest of HRDC and the Department of Finance, the law was changed to ten-years with no review or public consultation. At the time, the Senate was highly critical of the move. "It is satisfying to see that the Senate has rejected HRDC's position justifying the law. The stark message HRDC wants to send to low income Canadians is: don't bother attending college or university unless you can pay upfront. We applaud the Senate for rejecting that message," concluded Boyko. The Canadian Federation of Students is challenging the current provisions of the Bankruptcy and Insolvency Act under the Canadian Charter of Rights and Freedom. The case is expected to be heard in Ontario Superior court this December. The Canadian Federation of Students is composed of 71 college and university students' unions, with a combined membership of over 475,000 students. Students in Canada have been represented by the Canadian Federation of Students and its predecessor organizations since 1927. * IIC Lauds Senate Report on Insolvency Legislation in Canada ------------------------------------------------------------- The Insolvency Institute of Canada welcomed the newly released report of the Senate Banking, Trade and Commerce Committee which endorses the need for reform of Canada's business insolvency legislation. Timely reform of this key legislation represents an important opportunity for the federal government to enhance Canada's attractiveness as a forum in which to conduct business, the Insolvency Institute of Canada said. "The length and breadth of the Committee's report demonstrates the importance of legislative reform," said Jean-Yves Fortin, President of the Institute. "We are very grateful to the members of the Committee for all of their hard work". The Institute was a partner in the Joint Task Force on Business Insolvency Law Reform which provided recommendations to the Senate Banking, Trade and Commerce Committee in the course of the Committee's review of the federal insolvency statutes. In its recommendations, the Joint Task Force strongly advocated legislative reform. Insolvency laws are important economic framework legislation that affect how business is financed and conducted. Fundamental defects in insolvency law systems can impair the development of national economies. "Keeping important framework legislation up to date is a core business of good government," said Andy Kent, Chair of the Joint Task Force. "The need for action with respect to Canada's insolvency laws is clear. The legislation has not kept pace with changes in business and in restructuring practice". The Insolvency Institute of Canada plans to prepare detailed comments on the various specific recommendations in the Committee's report. In the interim the Institute expresses its support for the Senate Committee's committed efforts to improve the fairness and efficiency of Canada's insolvency system, and expresses a sincere hope that the Committee's call for reform will be given high priority. The Insolvency Institute of Canada is a non-profit organization dedicated to the recognition and promotion of excellence in the field of insolvency. The Institute provides a forum for leading members of the insolvency community to exchange ideas and share experiences with other members, senior representatives of the federal and provincial governments and members of judiciary. * Fitch Says Elec. Power Bankruptcies Shape U.S. Market Future -------------------------------------------------------------- The bankruptcies of the past two years and those still in progress in the U.S. electric utility and wholesale power markets will have long-lasting effects on the shape of the industry and its policies and practices in the next five years, according to Fitch Ratings. "In the past 60 to 70 years, the U.S. power and gas sector has had relatively few major bankruptcies affecting public bondholders, only about a dozen in total," said Richard Hunter, Managing Director U.S. Global Power, Fitch Ratings. "The bad news is that eight of these bankruptcies occurred within the last three years. We have explored some of the changes that will occur in the sector as a direct consequence of the bankruptcies of Enron, PGE National Energy Group, NRG Energy, Mirant Corp. and Northwestern Corp.," said Hunter. In Fitch's view, one consequence of those bankruptcies and defaults is a new emphasis on identifying and reducing the risks to utilities and load-serving entities of physical power and gas supply contracts. Conflict between the U.S. Bankruptcy Court and the Federal Energy Regulatory Commission regarding which agency has ultimate authority over the right to terminate power contracts is a related outgrowth of the recent bankruptcies. The current round of bankruptcies in the sector bear out the observations from the late 1980's that utility debt, and particularly utility secured debt, experience higher recoveries than those in other industries, and also take longer until reorganization than bankruptcies in other industrial sectors. Fitch released the slides and texts of presentations last week by five analysts in Fitch's Global Power Group at the 15th Annual Fitch Power Breakfast at the Edison Electric Institute financial conference on Oct. 26-29. The presentations cover the following topics: -- The credit ratings context; -- Causes and effects of high profile bankruptcies in the sector; -- Effects of defaults on contractual and trading counterparties; -- Implications for affiliated companies within corporate groups; and, -- The outlook for wholesale power markets over the next five years. Regarding the wholesale power market outlook, Fitch says that the business models that appeared attractive only a few years ago are discredited by recent insolvencies, and new models are taking shape as a consequence. One model that Fitch identifies is the reintegration and reconsolidation within electric utilities, accomplished by utilities buying, leasing, or building power plants to reduce dependence on executory contracts with generators. Another model that Fitch identifies combines physical contracts priced at index prices between producers and utilities or large consumers along with financial hedging products. However, this model can only develop in those markets such that have energy clearing markets such as those conducted by the PJM Interconnection, the New York Independent System Operator, or Independent System Operator - New England. The presentations are available on the Fitch Ratings Web site at http://www.fitchratings.comin the 'Resource Library' under 'Teleconference & Online Events'. In addition, on Oct. 31, Fitch also published, 'Back to Basics in the U.S. Utility Sector'. For those companies less severely affected by the distress that affects the wholesale market participants, Fitch says that the strategies of companies in the investor-owned electric utility industry are focused on regaining stability and enhancing their financial condition. The report reviews and comments on the top themes that emerged from Fitch analysts' meetings with utility management and investors at the 2003 EEI financial conference. * Timothy S. McCann Joins Kirkpatrick in Fan Francisco as Partner ----------------------------------------------------------------- The national law firm of Kirkpatrick & Lockhart LLP announced that Timothy S. McCann, a leading corporate, securities and international transactions lawyer, has joined K&L's growing San Francisco office as a partner. McCann has a broad general practice that includes corporate governance, securities law and domestic and international transactions, including public and private mergers, acquisitions and divestitures, management buyouts, strategic combinations and joint ventures, private equity and debt financing and licensing. His concentration includes securities brokerage and financial advisory services, wine industry clients, media companies and technology companies, including software, medical device, semiconductor and digital switching companies. Peter W. Sheats, the firm's Administrative Partner in San Francisco, noted, "We are excited about the addition of Timothy McCann to our practice. Tim combines a unique set of skills and experiences that set him apart from most providers of corporate legal services and will enable us to better serve our San Francisco and national clients." In the three years since it opened, K&L's San Francisco office has expanded to 30 attorneys practicing in a broad spectrum of legal specialties, including the areas of investment management, securities enforcement and broker-dealer regulation, corporate law, mortgage banking, consumer and commercial finance, public sector technology and government contracts, civil litigation, employee benefits including ESOPs, and project finance. The office currently has 13 partners, 2 of counsel and 15 associates. Kirkpatrick & Lockhart is a national law firm with more than 700 lawyers in Boston, Dallas, Harrisburg, Los Angeles, Miami, Newark, New York, Pittsburgh, San Francisco and Washington. K&L serves a dynamic and growing clientele in regional, national and international markets, currently representing over half of the Fortune 100. The firm's practice embraces three major areas -- litigation, corporate and regulatory -- and related fields. * 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. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***