/raid1/www/Hosts/bankrupt/TCR_Public/031201.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Monday, December 01, 2003, Vol. 7, No. 237
Headlines
ABITIBI-CONSOLIDATED: Partners WWF-Canada in Conservation Pact
ADAIR INT'L: Ability to Continue as Going Concern Uncertain
ADELPHIA COMMS: US Trustee Amends Unsecured Creditors' Panel
AIR CANADA: Seeks Court Clearance for Trinity Investment Pact
AJ CONTRACTING: Committee Sues to Recover $3.3 Million Fine
AMERCO: U.S. Trustee Amends Equity Committee Membership
AMF BOWLING: Inks Definitive Pact to Sell Co. to Code Hennessy
ANC RENTAL: Court Expands Donlin Recano's Engagement Scope
ARVINMERITOR: Selects Montgomery, Alabama, for LVS Customer Center
ASPECT COMMS: Calls Remaining Zero Coupon Conv. Sub. Debentures
AVAYA INC: Closes Expanets Purchase from Northwestern Corporation
B/E AEROSPACE: Will Present at Jefferies Conference on Wednesday
BIOCATALYST RESOURCES: Case Summary & Largest Unsecured Creditors
BOOT TOWN: Neligan Tarpley Serves as Bankruptcy Attorneys
BUDGET: Proposes Stipulation Modifying Stay Re Nicolas' Action
CALPINE: Closes Sale of Interest in Gordonsville, VA Power Plant
C-CONNECT PROD.: Considering Selling Company as Alternative
CELL-LOC INC: September Working Capital Deficit Tops $1.5-Mill.
CHANNEL MASTER: Traub Bonacquist Serves as Committee's Counsel
CHC INDUSTRIES: Re/Max Realtex Chosen as Palm Harbor Broker
CHI-CHI'S: US Trustee Appoints 5-Member Creditors' Committee
CHIPPAC INC: Will Present at CSFB Tech. Conference on Thursday
CIRCUIT RESEARCH: Needs Capital Infusion to Continue Operations
COMC INC: Wooing Lender Pacific Credit for Additional Financing
COVENTRY HEALTH: Settles Claim over Federal Employees Premiums
DELTA GAS CORP: Case Summary & Largest Unsecured Creditors
DESTINY RESOURCE: Sept. 30 Working Capital Deficit Tops $4.5MM
DOMAN INDUSTRIES: Court Further Extends CCAA Stay Until Dec. 18
ENRON CORP: Selling East Coast Power Interests to Arctas-Paragon
EXIDE TECH: Asks Court to Clear 9th Amendment to DIP Agreement
FERRELLGAS PARTNERS: Prices 2-Mill. Common Unit Public Offering
FRANKLIN CAP.: Seeks New Financing to Ease Going Concern Doubts
FREEPORT-MCMORAN: Updates Activities at its Grasberg Mining Ops.
FRONTLINE COMMS: Closes on $500K Financing with Scarborough Ltd.
GAUNTLET ENERGY: Creditors to Consider Proposed Plan on Dec. 4
GENUITY: Wants Court to Revise Amounts of Eleven Verizon Claims
GILAT SATELLITE: Spacenet Launches Connexstar Marketing Program
GLOBAL CROSSING: Wants Plan Exclusivity Extended to December 19
INSPEX INC: Case Summary & 20 Largest Unsecured Creditors
INTEGRATED HEALTH: IHS Liquidating Gets More Time to File Report
JACOBSON STORES: Tomorrow is the Administrative Claims Bar Date
KAISER: Selling Parcel 2 Surplus Property to Hanson for $1.6MM
KB HOMES: Fitch Affirms BB+ Senior Unsecured Debt Rating
KEVN INC: Section 341(a) Meeting to Convene on December 22
KMART: Court Expunges $10 Million of Debit-Balance Vendor Claims
MIRANT: Committee Turns to Huron Consulting for Forensic Advice
NORTEL: Declares Dividends for Class A Series 5 & 7 Preferreds
ON SEMICONDUCTOR: Refinances $369 Million of Credit Facilities
PG&E NATIONAL: NEG Files First Amended Plan & Discl. Statement
PILLOWTEX: Court Okays Sale of Columbia & Phenix City Facilities
PHOTRONICS: Promotes Zafar Ahmad to Vice President-North America
PLANVISTA CORP: Amended Financial Reports Show Deeper Insolvency
PROMAX ENERGY: Sept. 30 Working Capital Deficit Widens to $90MM
PROMAX: Inks Formal Sale Pact of Hydrocarbon Assets to EOG
PROVECTUS: Badly Needs Funds to Maintain Short-Term Operations
RELIANT RESOURCES: Will Get Clearance to Sell European Business
RURAL/METRO: Continues Nasdaq SmallCap Trading Under RURL Symbol
SHEFFIELD PHARMA: Auctioning-Off Assets on December 18, 2003
SPECTRX INC: Receives $1 Million Payment from Respironics
STOLT OFFSHORE: Lenders Extend Loan Covenant Default Waiver
TENET: Appeals Court Reduces Damages Award to Former Executive
TENET: Presenting at Institutional Investor Conference Tomorrow
UNIFORET INC: Red Ink Continued to Flow in Third-Quarter 2003
UNIGENE: Says Fin'l Resources Adequate to Meet Short-Term Needs
UNITED AIRLINES: US Bank Wants Court to Vacate Sec. 1110 Order
US AIRWAYS: Proposes Stipulation Resolving Key Equipment Claims
VENTAS INC: Will Present at Merrill Lynch Conference Wednesday
WORLDCOM: Court Okays Gibson Dunn's Retention as Special Counsel
* BOND PRICING: For the week of December 1 - 5, 2003
*********
ABITIBI-CONSOLIDATED: Partners WWF-Canada in Conservation Pact
--------------------------------------------------------------
Abitibi-Consolidated Inc. (NYSE: ABY, TSX: A) and World Wildlife
Fund Canada (WWF-Canada) are joining forces on a new forestry
conservation project.
Abitibi-Consolidated and WWF-Canada will work in partnership to
identify High Conservation Value Forests within specific Abitibi-
Consolidated woodlands in Canada. This project was initiated in
order to identify appropriate areas for the management and
protection of HCVFs. Successful completion of this project will
lead to the use of new forest management processes over the entire
18 million hectares of Abitibi-Consolidated-licensed forests, an
achievement that would ensure native plant and animal species,
such as the now-threatened woodland caribou, have healthy boreal
habitat in which to thrive.
HCVFs can range in size from a small stand of trees that are
critical local breeding grounds for endangered species, to whole
forest tracts necessary for the survival of wide-ranging species.
According to a set of agreed-upon standards, HCVFs are defined as
critically important environmental and social forests.
"Abitibi-Consolidated is committed to the sustainability of the
natural resources in its care," said President and CEO, John W.
Weaver. "We're very pleased to be working with WWF-Canada to
integrate environmental, social and economic considerations in
this project, identifying HCVFs and candidate areas for protection
within our operations. Ultimately, the objective will be to lead
to our organizations to submit a joint proposals for protected
areas to the provincial governments".
Monte Hummel, President of World Wildlife Fund Canada, notes that,
"These efforts will help WWF meet our goal of establishing a
network of protected areas, especially in Quebec and Ontario. I'm
very pleased to see the initiative and commitment to this process
from Abitibi-Consolidated, and I'm happy to bring the expertise
WWF-Canada has developed to make this assessment possible. In the
end, what we learn from this project can be applied to forestry
operations across Canada using a standardized and tested HCVF
toolkit".
The partnership agreement, signed by Abitibi-Consolidated and WWF-
Canada, sets out a timeline and process for the completion of
projects on Abitibi-Consolidated's forest management units in the
Saguenay region of Quebec. WWF-Canada will provide its
biodiversity and HCVF technical expertise; Abitibi-Consolidated
will coordinate logistics, perform a forest and territorial
analysis, and draft detailed reports on findings.
Abitibi-Consolidated Inc. (Moody's, Ba1 Outstanding Debentures
Rating), is the world's leading producer of newsprint and value-
added paper as well as a major producer of wood products,
generating sales of $5.1 billion in 2002. With 16,000 employees,
the Company does business in more than 70 countries. Responsible
for the forest management of 18 million hectares, Abitibi-
Consolidated is committed to the sustainability of the natural
resources in its care. The Company is also the world's largest
recycler of newspapers and magazines, serving 17 metropolitan
areas with more than 10,000 Paper Retriever(R) collection points.
Abitibi-Consolidated operates 27 paper mills, 21 sawmills, three
remanufacturing facilities and one engineered wood facility in
Canada, the US, the UK, South Korea, China and Thailand.
World Wildlife Fund Canada is part of WWF International, one of
the world's largest and most experienced independent conservation
groups. Founded 40 years ago, this global network now works in
over 100 countries, investing nearly 400 million dollars annually
in some 700 projects and conservation programs running at any one
time around the world. All WWF offices are united by the common
goal to stop the degradation of the planet's natural environment
and build a future in which humans live in harmony with nature,
by: conserving the world's biological diversity; ensuring that the
use of renewable natural resources is sustainable; and promoting
the reduction of pollution and wasteful consumption.
HIGH CONSERVATION VALUE FORESTS BACKGROUNDER
High Conservation Value Forests (HCVFs) are defined as forests of
outstanding and critical importance because of their high
environmental, socio-economic, biodiversity or landscape values.
Properly identifying, managing and monitoring areas of high
conservation value is critical to ensuring healthy biodiversity
and maintaining the overall health of ecosystems.
In Canada, WWF uses the HCVF concept as part of its Protect,
Manage and Restore program. HCVFs comprise the crucial forest
areas and values that need to be maintained or enhanced in a
landscape.
HCVFs are found across broad forest biomes (from tropical to
boreal), within a wide range of forest conditions (from largely
intact forests to largely fragmented), and in ecoregions with
complete or under-represented protected area networks.
The identification of HCVFs requires a multi-scale approach.
First, a rapid assessment and mapping of potential HCVF areas is
made on a broad scale, based on indicators of biologically or
environmentally important forest values that can be mapped on this
broad scale. HCVFs can be small forest stands that are critical
for breeding habitat for endangered species, or they can be as
large as whole forest tracts necessary for the survival of wide-
ranging species.
Next, these broad areas are further refined within ecoregions, and
a more detailed investigation within a given landscape delineates
actual HCVFs. This includes local stakeholder consultation to
identify forests that meet community needs and maintain cultural
identity, and scientific research to identify biologically
important forest stands, as well as those that are crucial for
maintaining healthy ecosystems and populations of endangered
species.
HCVFs must be adequately represented in protected area systems. In
practice, many HCVFs will continue to be managed outside protected
areas through a variety of approaches - from standard management
practices to long-term "no-cut" reserves.
ADAIR INT'L: Ability to Continue as Going Concern Uncertain
-----------------------------------------------------------
Adair International Oil & Gas, Inc.'s financial statements are
prepared using generally accepted accounting principles applicable
to a going concern, which contemplates the realization of assets
and liquidation of liabilities in the normal course of business.
However, the Company does not have significant cash or other
material assets, and is in default of its office leases, which
raises substantial doubt about its ability to continue as a going
concern.
The Company is currently in default on a note payable in the
amount of $281,458 as of September 30, 2003. The Company has
negotiated a settlement agreement with the debtor.
The Board of Directors has passed a unaminous resolution to change
the name of the Corporation to become EnDevCo, Inc. The
shareholders approved the name change at the Annual Meeting held
on September 12, 2003. The new ticker symbol is "ENDE". EnDevCo,
Inc., a shortened version of the Energy and Development Company,
establishes an identity that is consistent with the business
development activities currently underway to revitalize the
Corporation. The Company is involved in several energy related
development projects that transcend the traditional business scope
of oil and gas exploration and production. These activities
include the possible development of an industrial free trade zone
in the Republic of Congo that includes aspects of traditional
offshore natural gas drilling and production, natural gas storage,
oil and condensate production for export, LPG production and
bottling, large scale electrical power generation and development
and administration of an industrial park that includes a wide
variety of possible industrial plants and services. Additionally,
the Company is investigating investment in the development of new
technologies for the enhancement of oil and gas production,
utilizing that technology to gain leverage in the purchase of
domestic natural gas production. The Company intends to pursue the
development of natural gas fired power plants both in domestic and
international venues. This new corporate identity and its wide
variety of activities is better described to new investors as the
Energy and Development Company, EnDevCo, Inc.
The Company currently has nominal cash reserves and no cash flow
from operations. Until such time as the financial condition of the
Company improves, the Company's Directors and Officers have agreed
to manage the Company by receiving payment in "Series A" Preferred
stock in lieu of cash consideration.
In recognition of the status of current financial resources
available to the Company, executive management is committed to
identifying and implementing projects that can be primarily
project financed. This strategy reduces financial risk to the
Company, but necessarily adds additional lead time before projects
can be secured and announced to the shareholders. There are no
assurances, however, that the Company will be able to identify and
implement financing to develop its projects or that it will be
able to generate sufficient revenue growth and improvements in
working capital. As no revenue is currently generated from
operations, the Company will have to raise additional working
capital through the sale of its common stock. No assurance can be
given that funds will be available from any source when needed by
the Company or, if available upon terms and conditions reasonably
acceptable to the Company.
ADELPHIA COMMS: US Trustee Amends Unsecured Creditors' Panel
------------------------------------------------------------
Pursuant to Section 1102 of the Bankruptcy Code, Carolyn S.
Schwartz, the United States Trustee for Region II, amends her
appointment of the Official Committee of Unsecured Creditors of
Adelphia Communications. C-COR.net left the Committee effective
November 14, 2003. The Committee is now composed of:
1. Appaloosa Management, LP
26 Main Street, Chatham, NJ 07928
Attn: James Bolin
Phone: (973) 701-7000 Fax: (973) 701-7309
Counsel: Akin Gump Strauss Hower & Feld, L.L.P.
590 Madison Avenue, New York, New York 10022
Attn: Daniel Golden, Esq.
Phone: (212) 872-8010
2. W. R. Huff Asset Management Co., L.L.C.
67 Park Place, Morristown, NJ 07960
Attn: Edwin M. Banks, Senior Portfolio Manager
Phone: (973) 984-1233 Fax: (973) 984-5818
Counsel: Kasowitz, Benson, Torres & Friedman LLP
1633 Broadway, New York, New York 10019-6799
Phone: (212) 506-1700 Fax: (212) 506-1800
Klee Tuchin & Bogdanoff & Stern LLP
1880 Century Park East, Los Angeles, CA 90067-1698
Phone: (310) 407-4000 Fax: (310) 407-9090
3. MacKay Shields LLC
9 West 57TH Street, New York, New York 10019
Attn: Ben Renshaw, Associate Director
Phone: (212) 230-3836 Fax: (212) 754-9187
4. Law Debenture Trust Company of New York
767 Third Avenue, 31st Floor, New York, New York 10017
Attn: Daniel R. Fisher, Senior Vice President
Phone: (212) 750-6474 Fax: (212) 750-1361
Counsel: Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
Attn: Ronald L. Cohen, Esq.
Phone: (212) 575-1515
5. U.S. Bank National Association, as Indenture Trustee
1420 Fifth Avenue, 7th Floor, Seattle, WA 98101
Attn: Diana Jacobs, Vice President
Phone: (206) 344-4680 Fax: (206) 344-4632
Counsel: Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, Los Angeles, CA 90071-1448
Attn: David J. McCarty, Esq.
T. William Opdyke, Esq.
Phone: (213) 617-1780 Fax: (213) 620-1398
6. Home Box Office
1100 Avenue of the Americas, New York, New York 10036
Attn: Stephen L. Sapienza
Phone: (212) 512-1680 Fax: (212) 512-1986
Counsel: Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas, New York 10019
Attn: Steve Shimshak, Esq.
Phone: (212) 373-3133 Fax: (212) 373-2136
7. Viacom
1515 Broadway, New York, New York 10036
Attn: J. Kenneth Hill, Vice President, Ass't. Treasurer
Phone: (212) 258-6000
Counsel: Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas, New York 10019
Attn: Brendan D. O'Neill, Esq.
Phone: (212) 373-3125
8. Franklin Advisers, Inc.
One Franklin Parkway, San Mateo, CA 94403
Attn: Richard L. Kuersteiner, Associate General Counsel
Phone: (650) 312-4525 Fax: (650) 312-7141
9. Fidelity Management & Research Company
82 Devonshire Street, Mail Zone, E20E Boston, MA 02109
Attn: Nate Van Duzer
Phone: (617) 392-8129 Fax: (617) 476-5174
10. The Blackstone Group, L.P.
345 Park Avenue, New York, New York 10154
Attn: Mark T. Gallogly
Phone: (212) 583-5000 Fax: (283) 583-5913
(Adelphia Bankruptcy News, Issue No. 45; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
AIR CANADA: Seeks Court Clearance for Trinity Investment Pact
-------------------------------------------------------------
On November 8, 2003, the Air Canada Applicants announced that they
selected Victor T.K. Li's Trinity Time Investments, over Cerberus
Capital Management LP, as their equity plan sponsor. Air Canada's
Board of Directors chose Trinity since its offer contained a
similar valuation to the Cerberus offer but has lower closing
risk. Trinity's proposal has several attributes that can serve as
a building block for the plan of compromise or arrangement the
Applicants will ultimately present to their creditors.
Specifically:
-- the Trinity proposal permits up to 60% of the total
outstanding equity of a new company, Air Canada Enterprise,
to be distributed to the Applicants' unsecured creditors
-- assuming the rights are fully subscribed;
-- the Board viewed Mr. Li as a strategic long-term equity
investor resulting in a greater deal of stability to the
Applicants' equity structure going forward. In addition,
Mr. Li and the entities he controlled have interests in
a myriad of premium transportation enterprises all over the
world from which Air Canada may be able to realize
synergies. By contrast, Cerberus is an investment fund
specializing in hedge fund and distressed debt investments
with an uncertain investment time horizon and is subject to
regulatory impediments preventing it from exerting the same
level of control and supervision of its investment that a
qualifying strategic investor is able to apply;
-- Trinity's proposal presented economics which were
substantially similar to those embodied in the Cerberus
proposal and had the potential to be superior;
-- Trinity is Canadian controlled and its investment proposal
is accordingly subject to a much lower level of completion
risk due to regulatory compliance issues and in particular
compliance with the Canadian control requirement of the
Canada Transportation Act which governs ownership of
airlines like Air Canada; and
-- Trinity's proposal was judged to present lower overall
completion risk having regard to the Board's judgment of
Trinity's ability to assist in reaching closure on
outstanding issues with major creditors, including GE
Capital Aviation Services, who provides or manages
financing for one-third of Air Canada's fleet and whose
commitment to exit financing and future fleet financing is
an absolutely critical building block of Air Canada's
restructuring plan. The Board noted that Cerberus had been
unable to reach agreement on the terms of a confidentiality
agreement with GECAS, while Trinity had been able to do so.
Under Canada law, foreign investors cannot own more than 25% of
voting shares in a Canadian Airline. The "effective control"
must also be in Canadian hands. Canada's bilateral aviation
agreements specify that airlines using Canada's international
route rights must be owned and effectively controlled by
Canadians.
Cerberus is a New York-based asset management firm that
specializes in hedge fund and distressed debt investments. In
Canada, Cerberus holds a controlling interest in Teleglobe
Canada, having been part of a purchasing group that bought
certain assets from Teleglobe Inc. in the course of its
restructuring proceedings.
Mr. Li is a Canadian Citizen and is the Deputy Chairman of Cheung
Kong (Holdings) Limited. Mr. Li and his family hold controlling
interests in Cheung Kong, Hutchison Whampoa Limited, HongKong
Electric Holdings Limited and Husky Energy Inc. of Calgary. The
Cheung Kong Group combined ranks among the top 100 corporations
in the world, with businesses in close to 49 countries and over
165,000 employees.
CND650,000,000 Investment Agreement
On the same day, the Applicants and Trinity signed an investment
agreement which contemplates a CND650,000,000 investment in
exchange for 31.23% of the fully diluted common equity of Air
Canada Enterprise. The Applicants' plan of compromise or
arrangement will include a corporate reorganization which will
place Air Canada Enterprises as the holding company for the
assets of Air Canada and shares of its subsidiaries after the
restructuring.
Capital Structure
Pursuant to the Investment Agreement, Air Canada Enterprise's
share capital will be made up of three classes of shares:
Class C shares To be issued to Trinity providing
49% of the votes of all common
equity of Air Canada Enterprise
Class B shares Voting shares to be issued to the
Applicants' Canadian creditors
Class A shares Non-voting shares to be issued to
the Applicants' non-Canadian
creditors
Distressed Preferred Shares in Air Canada will also be issued to
Air Canada's financial creditors for tax purposes. The
Distressed Preferred Shares are convertible into Class B and
Class A of shares of ACE in accordance with the tax
restructuring.
Class A and B shares as well as the Distressed Preferred Shares
will be listed and publicly traded securities. The Class A Non-
Voting shares will have features to enable their conversion into
voting Class B shares by Canadians so as to ensure that, as far
as reasonably possible, all three classes of public securities
will have the same economic attributes.
Rights Offering
The Investment Agreement contemplates Air Canada receiving the
full CND450,000,000 which Deutsche Bank has made available under
its Standby Purchase Agreement. Trinity's investment plus the
proceeds of the Rights Offering would bring the total new equity
investment under the combined Trinity-Deutsche Bank transactions
to $1,100,000,000.
GECAS Global Restructuring Agreement
Ernst & Young Inc. reported on September 24, 2003 that the Global
Restructuring Agreement the Applicants reached with GECAS and
certain of its affiliates provides for the restructuring of
payment obligations in respect of 94 owned and 12 managed
aircraft and provides for CND600,000,000 in exit financing as
well as $950,000,000 in future financing towards the acquisition
of some of the new aircraft required by the Applicants'
restructuring business plan. The Global Restructuring Agreement
provides for the issuance to GECAS of a convertible note --
principal amount $106,000,000 convertible to equity at 125% of
the price paid by the equity plan sponsor -- together with
warrants to acquire 4% of the equity of Air Canada Enterprise at
the equity plan sponsor's price.
Based on the Investment Agreement and certain assumptions
regarding timing and exchange rates, these two features would
provide potentially 9.56% of the fully diluted equity of Air
Canada Enterprise to GECAS following the restructuring. The
Investment Agreement, however, allows the Applicants to use part
of the proceeds of the investment to buy out all or a significant
portion of the GECAS $106,000,000 note thereby increasing the
amount of equity available to the unsecured creditors. GECAS has
indicated that it will consider such a proposal and have
commenced discussions with Trinity toward retiring the GECAS
note. To date, no formal commitment has been made.
Air Canada Enterprise Equity Ownership
Assuming the closing of the rights offering plus the Investment
Agreement, the fully diluted equity ownership of restructured Air
Canada Enterprise following plan implementation is:
________________________________________________________
| | |
| Stakeholder | Equity |
|_____________________________________________|__________|
| | |
| Unsecured Creditors' equity from Claims | 35.97% |
|_____________________________________________|__________|
| | |
| Unsecured Creditors' equity from | 20.23% |
| rights offering | |
|_____________________________________________|__________|
| | |
| Total Unsecured Creditors' equity | 56.2% |
|_____________________________________________|__________|
| | |
| Trinity percentage ownership | |
| (prior to deducting 2% restricted | 31.23% |
| stock grant) | |
|_____________________________________________|__________|
| | |
| Total GECAS percentage ownership | 9.56% |
|_____________________________________________|__________|
| | |
| Management Stock Options | 2.99% |
|_____________________________________________|__________|
| | |
| Existing common shareholders | 0.01% |
|_____________________________________________|__________|
Air Canada Enterprise's Board of Directors will consist of 11
members:
* five members nominated by Trinity;
* two members nominated by Deutsche Bank, related to
Standby Agreement;
* two members of the Management; and
* two others selected by a committee comprised of
three members representing the Unsecured Creditors'
Committee, the Chief Executive Officer and Trinity.
Management Compensation
The Investment Agreement contemplates this management
compensation scheme:
(a) No increase to salary and bonus program for executives.
(b) Stock options available to management:
* No more than 5% of fully diluted equity, of which no
more than 3% will be issued on Closing;
* Strike price set at Trinity's equity purchase price;
* Vesting on terms to be determined.
(c) Robert Milton and Calin Rovinescu will each be granted
1 % of fully diluted equity from Trinity's equity
holdings, vesting on Closing and over the 4 years
following Closing.
Payment of Fees
The Investment Agreement provides for the Applicants to pay:
(i) CND2,000,000 for Trinity's expenses as contemplated in a
letter of intent;
(ii) Transaction Fees equal to 1% of the financial commitment
-- CND6,500,000 -- plus $500,000 per month beginning
November 14, 2003 until closing; and
(iii) a Break Fee equal to 3% of the financial commitment
-- CND19,500,000 -- payable upon a breach of the
non-solicitation agreement or other breaches resulting
in a failure to close.
Investment Conditions
Completion of the Investment Agreement is conditional on
resolution, to the satisfaction of Trinity, of three critical
issues by January 31, 2004:
(a) Completion of design and funding arrangements of pension
and benefit plans and an agreement with the Office of the
Superintendent of Financial Institutions;
(b) Receipt of certain government assurances, including
satisfactory resolution of Competition Bureau decisions
that might materially affect Air Canada's competitive
position; and
(c) Completion of required new aircraft orders on commercial
and financing terms acceptable to Trinity, including
satisfactory resolution of the scope/allocation between
Air Canada Pilots Association and Air Line Pilots
Association.
Should these conditions not be satisfied or waived by Trinity by
January 31, 2004, Trinity would gain the opportunity to terminate
the Investment Agreement. However, the Applicants would be
released from their exclusivity obligations.
Trinity may terminate the Investment Agreement if and when:
(1) the transactions contemplated by the Agreement have not
been completed by April 30, 2004;
(2) there is a breach of representations with a Material
Adverse Effect;
(3) an alternative proposal is accepted by the Applicants; and
(4) the three critical issues are not met by January 31, 2004.
The Applicants may terminate the Investment Agreement to pursue
alternative offers.
The Investment Agreement, however, contains a strict "non-
solicitation" clause in Trinity's favor. The Applicants cannot
solicit another investment proposal unless ordered by the CCAA
Court. The Applicants may consider an alternative investment
proposal if:
-- ordered by the Court; and
-- their Board, after consulting their financial advisors,
determines that the alternative proposal is superior to
Trinity's offer.
Otherwise, the Investment Agreement terminates by April 30, 2004
if Closing has not occurred, unless further extended by the
Applicants and Trinity.
Cerberus' Unsolicited Revised Proposal
On November 20, 2003, Cerberus tendered an unsolicited revised
investment proposal. Cerberus believed that it had not been
given the opportunity to put forward its best investment
proposal.
The Unsolicited Offer was essentially a supplemental proposal
which changed some of the conditions and certain financial terms
contained in the final investment proposal submitted by Cerberus
on November 7, 2003:
-- CND650,000,000 equity investment for 26.9% of the fully
diluted equity of restructured Air Canada, subject to
certain assumptions that could potentially reduce the
ultimate recovery to certain stakeholders;
-- The CND450,000,000 creditor Rights Offering and Deutsche
Bank Standby Agreement are facilitated, subject to an
increase of CND100,000,000 to CND550,000,000 and a
corresponding reduction in the equity investment from
Cerberus, at Deutsche Bank's option; and
-- At the discretion of the Board, a cash bonus payment to be
made to Messrs. Milton and Rovinescu in lieu of a grant of
restricted stock to assure their continued employment and
execution of the Business Plan.
The Unsolicited Offer is presented as an alternative capital
structure, to be selected at the Applicants' option, and has
these features:
(a) Cerberus to acquire directly 11.9% of the fully diluted
equity of Air Canada Enterprise for CND250,000,000;
(b) Cerberus to provide an irrevocable and unconditional
backstop to an CND850,000,000 rights offering to the
Applicants' creditors;
(c) Deutsche Bank can participate in CND450,000,000 of the
CND850,000,000 rights offering; and
(d) Any portion of the CND850,000,000 rights offering not
subscribed by the creditors, will be taken up by Cerberus
at a 20% premium.
Notwithstanding, the Applicants and their legal and financial
advisors believe there would be a substantial risk if Cerberus
could not meet the regulatory ownership and control tests with
the consequence that all of the contemplated financing and equity
transactions could not proceed as proposed. To the extent
Cerberus was not successful in obtaining the necessary regulatory
requirements there could be a delay in the Applicants' emergence
from CCAA. The effect could materially prejudice the ultimate
recovery for their stakeholders considering the further delays in
their ability to obtain the necessary exit financing.
"The equity process was designed to produce a sponsor who could
work with Air Canada to assemble the remaining pieces of the
restructuring puzzle to enable a successful proposal to be made
to Air Canada's creditors," M. Robert Peterson, Air Canada
Executive Vice President and Chief Financial Officer, says.
Mr. Peterson says that the Trinity Agreement provides a fair and
reasonable balancing of interests in that it provides Air Canada
with the security of having a committed transaction.
By this motion, the Applicants ask Mr. Justice Farley to approve
the Trinity Investment Agreement. (Air Canada Bankruptcy News,
Issue No. 19; Bankruptcy Creditors' Service, Inc., 215/945-7000)
AJ CONTRACTING: Committee Sues to Recover $3.3 Million Fine
-----------------------------------------------------------
The Official Committee of Unsecured Creditors appointed in AJ
Contracting Company Inc.'s chapter 11 case is engaged in an
adversary proceeding against the City of New York and the County
of New York District Attorney, trying to recover more than $3
million paid by the Debtor to District Attorney Robert M.
Morgenthau. Brought in the United States Bankruptcy Court for the
Southern District of New York, the Committee's lawsuit says the
payment was "a fraudulent conveyance and misappropriation of
statutory trust funds." The payment was made under a plea bargain
after the indictment of AJ Contracting and its principal, Charles
Uribe, for commercial bribery. DA Morgenthau has moved to dismiss
the action arguing the Bankruptcy Court lacks subject matter
jurisdiction.
Bankruptcy Judge Robert E. Gerber, in his Decision on DA
Morgenthau's motion to dismiss, observes that the District
Attorney is invoking sovereign immunity and the protection of the
Eleventh Amendment with respect to the Creditors' Committee
claims. If Mr. Morgenthau's contentions apply, says Judge Gerber,
"they would deprive this Court of subject matter jurisdiction to
hear [the Committee's claims]."
Background
The facts are not in dispute, Judge Gerber sees. In June 1998,
the Debtor and its principal, Charles Uribe, were charged with
allegations of commercial bribery, and pursuant to a Plea
Agreement dated June 17, 1998, they both pleaded guilty. Under
the Plea Agreement, Mr. Uribe avoided jail time and instead
received probation.
As part of the Plea Agreement, Mr. Uribe and Debtor AJ Contracting
each undertook financial obligations, with the Debtor undertaking
the brunt of the obligations by agreeing to pay to the New York
County District Attorney's Office $3,333,333 "in lieu of fine
forfeiture, cost of investigation and prosecution." Mr. Uribe
guarantied AJ Contracting's payment obligation. Although this
payment was not, strictly speaking, a fine, it was the economic
equivalent of one, writes Judge Gerber . . . and he refers to it
as a fine in the course of his Decision.
The fine was not to be paid as an immediate lump sum. Rather, the
Plea Agreement required the Debtor to pay $1 million on the date
the plea became effective, and to pay the balance in equal
installments on each of the four successive anniversaries of the
plea. But, nevertheless, Mr. Uribe caused AJ Contracting to pay
$3 million within just a few months after execution of the Plea
Agreement, on October 27, 1998.
One of the terms of the Plea Agreement is that Mr. Uribe was
required to resign any position and title with AJ Contracting and
to sever any further association with the company within one year
of the plea. The Creditors' Committee alleges (and for purposes
of this motion to dismiss the Court accepts as true) that Mr.
Uribe -- during the time before which he would have to leave AJ
Contracting and during which he still could exercise control over
it -- ordered 13 accelerated payments to the District Attorney's
office "to reduce his exposure on the guaranty," knowing he was in
"poor health" and that AJ Contracting "did not have the financial
wherewithal to make the payments without misappropriating" money
that AJ Contracting, as a general contractor, held "in a statutory
trust for the benefit of subcontractors retained by the [Debtor]
on numerous construction jobs."
The Creditors' Committee alleges that AJ Contracting's payment of
those Funds rendered it insolvent, leaving the company with "an
unreasonably small amount of capital to operate its business," and
that AJ Contracting incurred debts beyond its "ability to pay such
debts as they matured."
The Creditors' Committee alleges that "at least $2,000,000 of the
monies utilized by AJ Contracting" to meet its obligations under
the Plea Agreement were monies held in trust for its
subcontractors.
Mr. Uribe died before his sentence was formally imposed, and the
criminal proceeding against him was abated by death. By no later
than October 2000, AJ Contracting did indeed lack the monies to
pay its debts to its creditors and to account to subcontractors
for whom it was deemed, under law, to hold monies in trust. On
October 17, 2000, AJ Contracting filed a chapter 11 petition.
In November 2000, sentence was formally imposed on AJ Contracting
in accordance with the terms of the Plea Agreement. By this time,
all but $300,000 of the $3.3 million fine was paid.
DA Morgenthau did not file a proof of claim for the remaining
$300,000. Therefore, the Court has no reason to consider the
Eleventh Amendment implications that might have resulted from his
having filed a proof of claim in the bankruptcy court.
Classic Fraudulent Conveyance
On behalf of the Debtor, and with the Debtor joining as a co-
plaintiff, the Creditors' Committee brings this action against DA
Morgenthau in his official capacity, under Bankruptcy Code
sections 510, 544(b) and 550, which in turn support relief under
applicable state law (New York's fraudulent conveyance statute, NY
Debtor and Creditor Law sections 270-276 and New York Lien Law
sections 70-78).
In particular, the Creditors' Committee alleges:
(1) AJ Contracting's payment to DA Morgenthau constitute a
constructive fraudulent conveyance recoverable under
New York Debtor and Creditor Law as noted above;
(2) AJ Contracting's payments to DA Morgenthau were made
with the actual intent to defraud AJ Contracting's
creditors, recoverable under New York Debtor and
Creditor Law cited above; and
(3) at least $2 million of those payments were made with
funds that AJ Contracting held in trust for its
subcontractors, recoverable under New York's Lien Law.
No Sovereign Immunity
District Attorney Morgenthau asserts sovereign immunity and the
protections of the Eleventh Amendment. And because the Second
Circuit has stated that such an assertion "implicates
jurisdictional concerns," Hale v. Mann, 219 F.3d 61, 67 (2d Cir.
2000), Mr. Morgenthau argues that the Bankruptcy Court lacks
subject matter jurisdiction to adjudicate the Committee's claims.
Judge Gerber says Mr. Morgenthau's claim to sovereign immunity
depends additionally on the correctness of his contention that he
should be recognized as a state official; that is, that claims
against him should be deemed to be claims against a state, which
is entitled, in turn, to sovereign immunity and Eleventh Amendment
protection.
Mr. Morgenthau's assertions, if applied, writes Judge Gerber,
would deprive the Court of subject matter jurisdiction to hear the
the Creditors' Committee's claims. The Creditors' Committee and
DA Morgenthau agree to present a threshold issue to the Court -
whether in acting as he did to take the Debtor's Funds, Mr.
Morgenthau was acting on behalf of the State (in which case the
Eleventh Amendment would be applicable); or whether he was acting
on behalf of New York County (in which case the Amendment would
not be applicable).
The Lawsuit Survives
Judge Gerber concludes that in accepting the Plea Bargain and
structuring it in the manner he did, DA Morgenthau was acting in a
classic prosecutorial capacity, on behalf of the People of the
State of New York, and that any Creditors' Committee's claims with
respect to actions of this character would be barred by the
Eleventh Amendment. But the Court further concludes, writes Judge
Gerber, that with respect to actions after the Plea Bargain was
structured -- as to which Mr. Morgenthau was acting essentially as
a creditor and in a manner that did not involve his judgment as a
prosecutor (or even as a lawyer) -- he is not entitled to Eleventh
Amendment immunity. The Creditor's Committee's claims in the
latter context, after the Plea Bargain (which are not its
strongest claims), survive the Eleventh Amendment challenge.
The Creditors' Committee disclaims any intention to assert claims
relating to Mr. Morgenthau's actions taken in accepting the Plea
Bargain and in the structuring of it, and expressses, instead, an
intent to rely solely on claims relating to actions taken by the
DA after the Plea Bargain was structured. Given, therefore,
Judge Gerber's conclusion as to when Mr. Morgenthau acted as a
state entity and the fact that the Creditors' Committee drops all
claims in such context, leaving only the claims relating to the
period after the Plea Bargain was structured, Judge Gerber states
that DA Morgenthau's motion to dismiss is denied.
Judge Gerber's Reasoning
(1) Sovereign Immunity
The Eleventh Amendment provides that "The Judicial Power of the
United States shall not be construed to extend to any suit in law
or equity, commenced or prosecuted against one of the United
States by Citizens of another State, or by Citizens or Subjects of
any foreign state." Judge Gerber writes that the text of the
Amendment appears to restrict only the Article III diversity
jurisdiction of the federal courts. However, the Supreme Court
has construed the Eleventh Amendment in a manner going well beyond
the Amendment's express language. In a 1996 decision the Supreme
Court stated that we have understood the Eleventh Amendment to
stand for a two-pronged presupposition: first, that each State is
a sovereign entity in our federal system; and second, that it is
inherent in the nature of sovereignty not to be amenable to the
suit of an individual without its consent. For over a century,
writes Judge Gerber, we have reaffirmed that federal jurisdiction
over suits against unconsenting States was not contemplated by the
Constitution when establishing the judicial power of the United
States. Seminole Tribe of Florida v. Florida, 517 U.S. 44, 54
(1966).
Following this line of reasoning, "Judicial Power" has been
construed to extend beyond Article III courts. Nelson v. La Cross
County District Attorney, 301 F.3d 820, 827 n.5 (7th Cir.2002)
(holding, among other things, that the term 'suit' includes an
adversary proceeding in the bankruptcy context). Further, the
Supreme Court has upheld States' assertions of sovereign immunity,
in various contexts falling outside the literal text of the
Eleventh Amendment, to bar federal courts from entertaining suits
against a state by its own citizens. Alden v. Maine, 527 U.S.
706. 727 (1999).
Judge Gerber points the way for determining when the DA is acting
as an advocate for the state. He notes that the courts apply a
function approach to determine whether the prosecutor is acting
"as advocate for the state." See, for example, Forrester v.
White, 484 U.S. 219, 229 (1988), in which the court said the
courts must look to the nature of the function performed, not the
identity of the actor who performed it. The court said further
that "[T]he appropriate question is: Into what role has the
prosecutor's responsibilities cast him -- that of administrator,
investigator or advocate?" See also East Coast Novelty Co. v.
City of New York, 809 F. Supp. 285, 291 (S.D.N.Y. 1992).
DA Morgenthau argues that he was also acting in his prosecutorial
capacity when receiving the Funds from AJ Contracting. On this
point, Judge Gerber disagrees.
The cases noted above, says Judge Gerber, and many others
collectively standing for the same proposition, state the Mr.
Morgenthau may assert prosecutorial capacity immunity for his
actions taken in support of the adversarial process in a judicial-
type proceeding. The teaching of those cases is that in deciding
to prosecute Mr. Uribe and AJ Contracting, in deciding to accept
their plea and in structuring the plea agreement in the manner in
which he did, DA Morgenthau was acting in a classic prosecutorial
capacity.
But with respect to events after DA Morgenthau achieved what he
set out to do as a prosecutor - to charge violations of the law;
to secure guilty pleas; and to put into place obligations as a
consequence of those guilty pleas - the operations of the District
Attorney's office changed into administrative matters. See Gan
v. City of New York, 996 F.2d 522, 536 (2d Cir.1993). After the
plea was structured, and the role of the District Attorney's
Office was no more than to take the money for AJ Contracting, Mr.
Morgenthau was acting essentially as a creditor; he was acting in
a manner that did not involve his judgment as a prosecutor (or
even as a lawyer). Any government employee, not necessarily a
lawyer, could have handled the collection of the Funds. Such a
function did not require the skill of an experienced prosecutor,
exercising the prosecutorial judgment and supervisory skills for
which the citizens of New York elect their district attorneys.
Mr. Morgenthau further contends that "even after a conviction is
obtained, whenever a District Attorney's actions are linked to
upholding the integrity of the criminal judgment, those actions
are considered prosecutorial in nature." But Judge Gerber finds
this argument too broad a characterization of the law. He
responds that if AJ Contracting had changed its mind and tried to
vacate or upset the plea after it was entered, or otherwise sought
some kind of post conviction relief, such that Mr. Morgenthau had
to litigate in opposition to uphold the criminal judgment, that
would have been a different matter. But his office had no more to
do than deposit AJ Contracting's payments, a matter wholly
divorced from what prosecutors do to uphold the integrity of the
criminal judgments they obtain.
DA Morgenthau also argues that he was acting in his prosecutorial
capacity by ensuring that the obligations of its Plea Agreement
with Mr. Uribe and AJ Contracting were met. Again, in response to
this contention, Judge Gerber says that the Court once more
disagrees. Since Mr. Morgenthau fails sufficiently to parse what
the District Attorney's office did and did not do, the Court does
not need to decide and does not decide, whether its view would be
different if payments had not been made and if the DA had
commenced post-plea bargaining proceedings to secure payment or
consequences of non-payment. The DA had no occasion to take any
such actions, says Judge Gerber. The Court, he continues, has
difficulty seeing how the passive reciept of funds by the District
Attorney's Office, collecting on an obligation already in place,
can in any way be regarded as acting as an advocate for the state.
(2) Arm-Of-The-State Doctrine
Mr. Morgenthau also seeks Eleventh Amendment protection from legal
action based on a doctrine unrelated to prosecutorial activities.
The arm-of-the-state doctrine is based on principles broadly
applicable to many different types of governmental or quasi-
governmental entities. This doctrine provides that while the
Eleventh Amendment does not ordinarily apply to suits against a
county, municipal corporation or other such political
subdivisions, such a governmental subdivision is entitled to
immunity if it can demonstrate that it is acting "more like an arm
of the state," rather than like "a municipal corporation or other
political subdivision." Mancuso v. N.Y. State Thruway Authority,
86 F.3d 289, 292-293 (2d Cir.1996.) DA Morgenthau asserts that
if he is not entitled to sovereign immunity by reason of the
Eleventh Amendment because of his prosecutorial capacity, he is
entitled to it because the District Attorney's Office was acting
as an "arm of the State" when it received payments of AJ
Contracting Funds.
Some of the cases articulate the standard as acting "as an arm of
the state" or "more like 'an arm of the state.'" See Mancuso, 86
F.3d at 292, holding the "the Thruway Authority is entitled to
immunity if it can demonstrate that it is more like an arm of the
State, such as a state agency, than like a municipal corporation
or other political subdivision." Judge Gerber says the Court does
not need to determine whether there is any distinction between the
two standards, because it has concluded that the District
Attorney's Office does not meet either of them.
Judge Gerber writes that standards for determination of when a
governmental subdivision is an arm of the state entitled to
Eleventh Amendment protection have been set forth more recently in
the Second Circuit's 2001 decision in McGinty v. New York, 251
F.3d 84 (2d Cir.2001). The Second Circuit held that in
determining whether an entity is an arm of the state, six factors
are initially considered. They are:
(a) how the entity is referred to in its documents of
origin;
(b) how the governing members of the entity are
appointed;
(c) how the entity is funded;
(d) whether the entity's function is traditionally one
of local or state government;
(e) whether the state has a veto power over the
entity's actions; and
(f) whether the entity's financial obligations are
binding upon the state.
Judge Gerber reviews the six factors and their application to DA
Morgenthau's contention that his county office is entitled to
Eleventh Amendment protection under the arm-of-the-state doctrine,
and then says that while the litigants here do not differ with
respect to the applicable factors to be considered, they differ
substantially with respect to the factors' application. The
Court, writes Judge Gerber in his Decision, does not subscribe
fully to either side's application of those factors. Its
analysis, as set forth in the Decision, leads the Court to the
conclusion that the District Attorney's Office was not acting as
an arm of the state and is not entitled to Eleventh Amendment
immunity based on such a contention. The Court finds that under
the McGinty six-part test, the District Attorney's office is a
local, not a state, entity.
The claims made by the Creditors' Committee devolved themselves
into a strictly local matter, where DA Morgenthau's law
enforcement function has been completed, concludes Judge Gerber;
the satisfactory performance of his prosecutorial duties are
undisputed, the judge adds. At this point, this matter involves no
more than a controversy that is frequent in disputes in bankruptcy
court: the allocation of loss between two innocent sides -- the
District Attorney's Office, on the one hand, and AJ Contracting's
subcontractors and other creditors, on the other hand -- where the
available assets are insufficient to satisfy both sides' needs and
concerns.
Having dealt with the threshold issue of sovereign immunity
stipulated by both parties, as described above, the matter as to
which party has a more legitimate claim to the Funds, is not yet
before the Court. However, for all the foregoing reasons, DA
Morgenthau's motion to dismiss the Plaintiffs' Complaint for lack
of subject matter jurisdiction is denied.
AJ Contracting Company, Inc., filed for chapter 11 protection on
October 17, 2000 (Bankr. S.D.N.Y. Case No. 00-14842). Sherri D.
Lydell, Esq., at Platzer, Swergold, Karlin, Levine, Goldberg &
Jaslow, LLP, represents the Debtor. When the company filed for
protection, it reported $6.4 million in assets and debts totaling
$11.9 million.
AMERCO: U.S. Trustee Amends Equity Committee Membership
-------------------------------------------------------
Pursuant to Section 1102 of the Bankruptcy Code, William T.
Neary, U.S. Trustee for Region 17, informs Judge Zive that
Heartland Advisors, Inc., and Summit Capital Management LLC
resigned as members of the Equity Committee in the Chapter 11
cases of AMERCO and its debtor-affiliates. Bentel Capital LLC
is appointed as a new member of the Equity Committee. Thus, the
Equity Committee is now composed of:
1. Bentel Capital LLC
450 Park Ave., 11th Floor
New York, New York 10022
Tel: 212-610-1188
Fax: 212-610-1168
Represented by: Bernard Joei
2. AMERCO Employee Savings, Profit Sharing and Employee Stock
Ownership Plan
c/o Kenneth B. Segel
9 Washington Square
Albany, NY 12205
Tel: 518-452-0941
Fax: 518-452-0417
Represented by: Peter Landis
(AMERCO Bankruptcy News, Issue No. 13; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
AMF BOWLING: Inks Definitive Pact to Sell Co. to Code Hennessy
--------------------------------------------------------------
AMF Bowling Worldwide, Inc., and Code Hennessy & Simmons LLC, a
Chicago-based private equity firm, have entered into a definitive
agreement for AMF to be acquired by an affiliate of CHS in a
merger transaction.
Under the terms of the merger agreement, AMF shareholders will
receive $25.00 in cash for each common share.
Thomas J. Formolo, a partner at CHS, said: "We are excited about
working with the AMF team to build upon the company's strong brand
name and market presence. Importantly, our strategy will be
centered on investing in both people and facilities to position
AMF as the world's premier operator of bowling centers and
manufacturer of bowling products."
"This marks the beginning of a new era for AMF," said George W.
Vieth, Jr., interim President and Chief Executive Officer of AMF.
"CHS has a proven track record of helping its portfolio companies
grow and realize their business potential. The CHS team is clearly
enthusiastic about AMF and its prospects for the future. This is a
very exciting, positive development for our business and AMF's
15,000 employees worldwide."
Under the terms of the merger agreement, the cash consideration
paid to AMF shareholders may be increased by $0.01 per share per
day under certain circumstances if the merger has not closed by a
date to be determined. In addition, following the consummation of
the merger, the holders of any unexercised AMF Series A warrants
will be entitled to receive the difference between the merger
consideration and the exercise price.
The transaction is subject to approval by the shareholders of AMF
at a special meeting, expiration of the Hart-Scott-Rodino Act
waiting period, and other customary conditions. In addition, the
closing of the transaction is subject to CHS' ability to obtain
requisite financing to consummate the transaction.
In connection with the execution of the merger agreement, certain
shareholders owning in the aggregate approximately 76% of AMF's
outstanding common stock have agreed with CHS to vote their shares
in favor of the merger. The transaction is expected to close in
the first quarter of calendar 2004.
AMF's financial advisor for this transaction was Greenhill & Co.,
LLC.
Founded in 1988, CHS is a private equity firm that manages
approximately $1.5 billion of capital in four funds. CHS focuses
on building shareholder value in companies through strong
relationships with management teams and sound investment
strategies. Additional information on CHS is available at
http://www.chsonline.com
AMF Bowling Worldwide Inc. is the world's largest owner and
operator of bowling centers and is also a leader in the
manufacturing and marketing of bowling and billiards products.
Additional information about AMF is available on the Internet at
http://www.amf.com
ANC RENTAL: Court Expands Donlin Recano's Engagement Scope
----------------------------------------------------------
The ANC Rental Debtors want Donlin, Recano & Company, Inc. to
inspect, monitor and supervise the post-mailing solicitation
process, serve as the tabulator of the ballots and certify to the
Court the balloting results. Donlin Recano is the Court-appointed
notice and claims agent. The Debtors understand that Donlin
performed substantially identical services for debtors in other
large Chapter 11 cases. Accordingly, the Debtors sought and
obtained the Court's authority to expand Donlin Recano's services
(ANC Rental Bankruptcy News, Issue No. 43; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
ARVINMERITOR: Selects Montgomery, Alabama, for LVS Customer Center
------------------------------------------------------------------
ArvinMeritor, Inc. (NYSE: ARM) will locate a Light Vehicle Systems
Customer Value Center in Montgomery, Ala. The 44,000-square-foot
CVC, which will serve Hyundai Motor Company with finished door
module assemblies, is scheduled to open in February 2004. The
facility will employ approximately 100 people at full capacity.
"After a comprehensive search of the greater Montgomery area,
ArvinMeritor decided to locate its door module CVC at this site,
because it is only three miles from the Hyundai facility," said
Russell Carter, ArvinMeritor's LVS general manager of Door Systems
Americas. "We are also working with the local officials to
coordinate our hiring and training requirements, with an initial
search to begin summer 2004."
On Oct. 1, ArvinMeritor announced the new business award of one
million door modules per year for Hyundai Motor Company's North
American production of Sonata and Santa Fe models beginning in
2005.
ArvinMeritor's Light Vehicle Systems business group is a global
supplier of integrated systems and modules to the world's leading
passenger car and light truck OEMs. With advanced technology and
systems design expertise in apertures, undercarriage and emissions
control, LVS integrates high-quality components into cost-
effective, performance-based solutions available for virtually
every car and light truck on the road today.
ArvinMeritor, Inc. (S&P, BB+ Corporate Credit & Senior Unsecured
Debt Ratings, Negative) is a premier $7-billion global supplier of
a broad range of integrated systems, modules and components to the
motor vehicle industry. The company serves light vehicle,
commercial truck, trailer and specialty original equipment
manufacturers and related aftermarkets. In addition, ArvinMeritor
is a leader in coil coating applications. The company is
headquartered in Troy, Mich., and employs 32,000 people at more
than 150 manufacturing facilities in 27 countries. ArvinMeritor
common stock is traded on the New York Stock Exchange under the
ticker symbol ARM. For more information, visit the company's Web
site at: http://www.arvinmeritor.com
ASPECT COMMS: Calls Remaining Zero Coupon Conv. Sub. Debentures
---------------------------------------------------------------
Aspect Communications Corporation (Nasdaq: ASPT), a leading
provider of enterprise customer contact solutions, has called the
remainder of its currently outstanding zero coupon convertible
subordinated debentures due in 2018 for redemption on Dec. 29,
2003. The aggregated redemption price of the debentures is $421.61
per $1,000 principal amount at maturity of the debentures. As of
Nov. 25, 2003, $2.3 million in principal amount at maturity of the
debentures remained outstanding.
The call of the remaining debentures follows the previously
concluded mandatory repurchase effected in August 2003. Under the
terms of the debentures, the company could redeem the debentures
in whole or in part at its option at any time on or after Aug. 12,
2003, at a price equal to the issue price plus the accrued
original issue discount up to the redemption date.
Aspect is calling the remaining debentures in order to eliminate
the remaining outstanding portion of the debentures and related
interest expense and to remove the debt from its capital
structure.
Aspect Communications Corporation (S&P, B Corporate Credit Rating,
Positive) is the world's largest company focused exclusively on
contact center solutions, and the only one that unifies workforce,
information and communications to deliver exceptional customer
service. The Aspect brand is trusted by more than 75 percent of
the Fortune 50, and more than 3 million customer sales and service
professionals worldwide rely on Aspect's mission-critical business
communications solutions. The company's leadership is based on 18
years of expertise gained from more than 8,000 successful
implementations worldwide. Aspect is headquartered in San Jose,
California, with 24 offices in 11 countries around the world. For
more information, visit Aspect's Web site at http://www.aspect.com
AVAYA INC: Closes Expanets Purchase from Northwestern Corporation
-----------------------------------------------------------------
Avaya Inc. (NYSE: AV) a leading global provider of communications
solutions and services for businesses, completed the acquisition
of substantially all of the assets of Expanets, the nation's
largest provider of converged communications for mid-sized
businesses, from NorthWestern Corporation. Expanets is also one
of the largest resellers of Avaya's products in the United States.
The acquisition will allow Avaya to continue providing quality
sales and service support for Expanets' customers' and grow its
small and mid-sized business.
Avaya purchased the Expanets assets at an auction on
October 29, 2003, conducted on behalf of NorthWestern Corporation,
Expanets' parent.
Avaya Inc. (S&P, B+ Corporate Credit Rating) designs, builds and
manages communications networks for more than 1 million businesses
worldwide, including 90 percent of the FORTUNE 500(R). Focused on
businesses large to small, Avaya is a world leader in secure and
reliable Internet Protocol (IP) telephony systems and
communications software applications and services. Driving the
convergence of voice and data communications with business
applications -- and distinguished by comprehensive worldwide
services -- Avaya helps customers leverage existing and new
networks to achieve superior business results. For more
information visit the Avaya website: http://www.avaya.com.
NorthWestern Corporation is one of the largest providers of
electricity and natural gas in the Upper Midwest and Northwest,
serving more than 598,000 customers in Montana, South Dakota and
Nebraska. NorthWestern also has investments in Expanets, Inc., a
nationwide provider of networked communications and data services
to small and mid-sized businesses, and Blue Dot Services Inc., a
provider of heating, ventilation and air conditioning services to
residential and commercial customers. More information can be
found on the company's Web site at http://www.northwestern.com/
Expanets is a nationwide provider of networked communications and
data services to small and mid-sized businesses. While national
in scope, Expanets delivers local service and solutions through
its team of more than 3,000 associates based in more than 100
offices throughout the U.S. Its broad portfolio is based on its
strategic relationships with industry-leading manufacturers,
service providers, carriers and application developers. More
information can be found on the Company's Web site at
http://www.expanets.com.
B/E AEROSPACE: Will Present at Jefferies Conference on Wednesday
----------------------------------------------------------------
B/E Aerospace, Inc. (Nasdaq:BEAV) will make a presentation to
institutional portfolio managers and security analysts at the
Jefferies Quarterdeck Aerospace, Defense and IT Services
Conference in New York on Wednesday, December 3, 2003.
The presentation will begin at 2:55 p.m. Eastern time.
To listen to a live broadcast via the Internet, visit the
Investors section of B/E's Web site at http://www.beaerospace.com
and follow the link to Webcasts.
B/E Aerospace, Inc. (S&P, B+ Corporate Credit Rating, Negative
Outlook) is the world's leading manufacturer of aircraft cabin
interior products, and a leading aftermarket distributor of
aerospace fasteners. With a global organization selling directly
to the world's airlines B/E designs, develops and manufactures a
broad product line for both commercial aircraft and business jets
and provides cabin interior design, reconfiguration and conversion
services. Products for the existing aircraft fleet--the
aftermarket--provide about 60 percent of sales. For more
information, visit B/E's Web site at http://www.beaerospace.com
BIOCATALYST RESOURCES: Case Summary & Largest Unsecured Creditors
-----------------------------------------------------------------
Debtor: BioCatalyst Resources Inc.
6444 N. Ridgeway Ave.
Lincolnwood, Illinois 60712
Bankruptcy Case No.: 03-47427
Type of Business: The Debtor develops economical and efficient
routes to both fine chemicals and
pharmaceuticals.
Chapter 11 Petition Date: November 20, 2003
Court: Northern District of Illinois (Chicago)
Judge: Susan Pierson Sonderby
Debtor's Counsel: Scott R. Clar, Esq.
Dannen Crane Heyman & Simon
135 South Lasalle Suite 1540
Chicago, IL 60603
Tel: 312-641-6777
Estimated Assets: $100,000 to $500,000
Estimated Debts: $1 Million to $10 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Marvin Silverman Royalty Agreement $515,818
325 Wilshire Dr. West
Wilmette, IL 60091
Frank Lunding Royalty Agreement and $346,632
4 Oak Tree Lane Arbitration Agreement
Irvine, CA 92619-0400
David Schoenfeld Royalty Agreement $165,818
Schoenberg, Fisher Newman Attorney's fees $105,037
Rosenberg, Ltd.
Mitch Schoenfeld Royalty Agreement $52,209
Frank Lardino Royalty Agreement $52,209
Christopher H. Lunding Note payable $50,000
c/o Cleary, Gottlieb,
Steen & Hamilton
Mrs. Virginia L. Coulter Note payable $50,000
Frank Lunding Unpaid Accumulated $40,800
Dividends
Rock Fusco & Garvey Ltd. Attorney's fees of $25,703
Frank Lunding, Jr.
Warren Rylko Royalty Agreement $24,573
American Arbitration Fees for Lunding $18,100
Association arbitration
Edward J. Willard Note payable $16,000
James W.H. Neil Note payable $16,000
Eileen Sam Morris Note payable $16,000
Frank Lunding Accumulated dividends $11,550
Kevin R. Sheehan Note payable $10,000
Norman Silverstein Note payable $5,000
Prozyme Products Ltd. Unsecured loans Unknown
BOOT TOWN: Neligan Tarpley Serves as Bankruptcy Attorneys
---------------------------------------------------------
Boot Town, Inc., asks for authority from the U.S. Bankruptcy Court
for the Northern District of Texas to retain and employ Neligan
Tarpley Andrews & Foley LLP, as its Counsel.
The Debtor turns to Neligan Tarpley as its counsel because of the
firm's extensive experience, and knowledge in the field of
debtors' and creditors' rights and business reorganizations under
chapter 11 of the Bankruptcy Code, and its expertise, experience,
and knowledge practicing before this Court. In preparing to place
the company under chapter 11 protection, Neligan Tarpley has
become generally familiar with the Debtor's businesses and
affairs.
The Debtor points out that Neligan Tarpley's services, are
necessary to enable it to execute faithfully its duties as debtor-
in-possession and to develop, propose and consummate a plan of
reorganization.
Specifically, Neligan Tarpley will:
(a) advise the Debtor of its rights, powers, and duties as
debtor and debtor-in-possession;
(b) take all necessary action to protect and preserve the
estate of the Debtor, including the prosecution of
actions on the Debtor's behalf, the defense of actions
commenced against the Debtor, the negotiation of
disputes in which the Debtor are involved and the
preparation of objections to claims filed against the
estate;
(c) prepare on behalf of the Debtor, as debtor-in-
possession, all necessary motions, applications,
answers, orders, reports, and papers in connection with
the administration of the estate;
(d) propose on behalf of the Debtor the plan of
reorganization, related disclosure statement, and any
revisions, amendments, etc., relating to the foregoing
documents, and all related materials; and
(e) perform all other necessary legal services in
connection with this chapter 11 case and any other
bankruptcy related representation that the Debtor
requires.
The professionals expected to have primary responsibility for
providing services to the Debtor are:
Mark E. Andrews Partner $350 per hour
Cynthia Williams Cole Associate $175 per hour
Adam J. Loewy Associate $135 per hour
Kathy Gradick Paralegal $115 per hour
Headquartered in Farmers Branch, Texas, Boot Town, Inc., is a
retailer of brand name boots and western wear: hats, belts,
buckles, and jeans. The Company filed for chapter 11 protection
on November 17, 2003 (Bankr. N.D. Tex. Case No.: 03-81845).
Cynthia Cole, Esq., Esq. Neligan Tarpley Andrews & Foley, L.L.P.
represent the Debtor in its restructuring efforts. When the
Company filed for protection from its creditors, it listed more
than $10 million in both estimated assets and debts.
BUDGET: Proposes Stipulation Modifying Stay Re Nicolas' Action
--------------------------------------------------------------
Since the transfer of substantially all of their assets and a
significant number of their liabilities pursuant to the North
American Sale and the EMEA Sale, the Budget Group Inc. Debtors
began to implement their cooperative plan with the Official
Committee of Unsecured Creditors for the reconciliation and
resolution of the $5,000,000,000 in claims made against the
Debtors' estates. As part of that process, certain parties,
including Veronica Nicolas, negotiated with the Debtors for
limited relief from the stay to seek recovery only against third
party insurance in return for a waiver of their claims against the
estates.
On January 25, 2001, Ms. Nicolas filed a civil action in the
Circuit Court of the Eleventh Judicial Circuit in and for Miami-
Dade County, Florida against Budget Rent-A-Car Systems, Inc. Ms.
Nicolas seeks to recover damages allegedly resulting from an
automobile accident on February 6, 1997. She claims that she was
a passenger in a car driven by Marcelle E. Brown and allegedly
rented from the Debtors that collided with and struck another
vehicle.
Although Ms. Nicolas originally asked the Court to modify the
automatic stay on October 29, 2002, subsequent negotiations with
the Debtors resulted in a stipulation.
The parties agree that:
(1) The automatic stay pursuant to Section 362 of the
Bankruptcy Code, is modified for the sole and limited
purpose of allowing Ms. Nicolas to pursue the Civil Action
in the Florida State Court only to the extent that any
damage claims are covered by third party insurance
policies;
(2) Ms. Nicolas will have no further claim against the
Debtors, their estates, officers, directors, agents,
employees, successors and assigns and Ms. Nicolas'
recovery, if any, in the Civil Action will be limited to
funds available from third party insurance policies;
(3) Ms. Nicolas expressly waives any and all claims, demands,
causes of action or other rights of payment against the
Debtors, their estates, officers, directors, agents,
employees, successors and assigns, including, but not
limited to, any applicable insurance deductibles or self-
insured retentions; and
(4) The stipulation fully and finally resolves and Ms. Nicolas
otherwise releases the Debtors from any other claim, now
known or unknown, filed or unfiled, that Ms. Nicolas may
have against the Debtors' estates. Any and all claims
Ms. Nicolas filed will be deemed withdrawn. (Budget Group
Bankruptcy News, Issue No. 29; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
CALPINE: Closes Sale of Interest in Gordonsville, VA Power Plant
----------------------------------------------------------------
Calpine Corporation (NYSE: CPN) completed the sale of its
unconsolidated, 50 percent interest in the 240-megawatt
Gordonsville Power Plant to Dominion Virginia Power, an affiliate
of Dominion. Under the terms of the transaction, Calpine received
a $34.6 million cash payment, which included a $29.1 million
payment from Dominion and a separate $5.5 million payment for the
return of a debt service reserve. Calpine's 50 percent share of
the project's non-recourse debt at closing was approximately $43.9
million. The company has received all regulatory and other third-
party approvals.
The Gordonsville plant sale is part of Calpine's $2.3 billion
liquidity-enhancing program for 2003 and represents the fourth
capital-raising event involving Calpine's Qualifying Facilities.
In addition to this transaction, the company completed the Newark
and Parlin financing, and sold equity interests in the King City
and Auburndale power plants. To date, Calpine has completed
nearly $2.2 billion of liquidity transactions and expects to
complete an additional $260 million by year-end.
Calpine acquired its interest in the Gordonsville Power Plant in
1997. Located in Gordonsville, Virginia, the natural gas-fired
facility was commissioned in 1993 and provides electricity to
Dominion under power sales agreements ending in 2024. As a
cogenerator, the Gordonsville facility also supplies steam to
Rapidan Services, the local water authority, under a long-term
steam sales agreement.
Calpine Corporation (S&P, CCC+ Senior Unsecured Convertible Note
and B Second Priority Senior Secured Note Ratings, Negative
Outlook) is a leading North American power company dedicated to
providing electric power to wholesale and industrial customers
from clean, efficient, natural gas-fired and geothermal power
facilities. The company generates power at plants it owns or
leases in 21 states in the United States, three provinces in
Canada and in the United Kingdom. Calpine is also the world's
largest producer of renewable geothermal energy, and it owns
approximately 900 billion cubic feet equivalent of proved natural
gas reserves in Canada and the United States. The company was
founded in 1984 and is publicly traded on the New York Stock
Exchange under the symbol CPN. For more information about
Calpine, visit http://www.calpine.com.
C-CONNECT PROD.: Considering Selling Company as Alternative
-----------------------------------------------------------
Northlinks Limited reports on business developments and announces
financial results for the nine months and quarter ended
September 30, 2003. The financial results include the operations
of C-Connect Productions Ltd.
C-Connect provides satellite uplink services to various television
networks and corporate clients, and over the past 4 years has
provided satellite uplink services for Heartland Livestock
Services for cattle auctions in Saskatchewan, Alberta and
Manitoba. As a result of the impact of the BSE "mad cow" issues
facing the cattle industry, and the inability of Heartland to
provide any guaranteed minimum revenue levels, the company's
cattle auction contract was not renewed. As a result the C-Connect
business is no longer viable and the Company is exploring
alternatives with respect to the future operations and assets of
C-Connect.
During the first quarter the company determined that Northlinks
should be reorganized, refinanced and will change its business.
Efforts continued during the quarter regarding this strategy. A
key element of the restructuring will be the disposal of C-
Connect.
Revenue for the quarter of $27,946 decreased compared to $39,808
in the similar quarter of 2002. The summer period is typically a
slow period for the company as there are no cattle auctions.
Operating expenses reduced significantly as a result of the
satellite truck being contracted to a customer who as part of the
contract was responsible for operating expenses. General and admin
expenses increased during the quarter as a result of an increase
in accrued employee costs. The net loss for the quarter was
$52,323.
The complete financial statements, together with the management
discussion and analysis of the results for both the year ended
December 31, 2002 and the nine months ended September 30, 2003
have been filed and are available on the Sedar web site at
http://www.sedar.com
Northlinks is a public company whose shares are listed for trading
on the TSX Venture Exchange under the symbol: "NLX". The Company
has approximately 8.2 million shares outstanding.
CELL-LOC INC: September Working Capital Deficit Tops $1.5-Mill.
---------------------------------------------------------------
Cell-Loc Inc. (TSX: CLQ) reported its financial results for the
first quarter of fiscal year 2004 ended September 30, 2003. The
net loss for the first quarter was $721,000, or $0.02 per share,
compared to $15.97 million, or $0.55 per share, for the same
period last year.
Sheldon Reid, President and CEO also announced today that
following the completion of the Plan of Arrangement as described
in the Company's recently distributed Notice of Petition and
Information Circular, Newco will use the technology assets to
carry out the wireless location intellectual property business,
substantially as carried on by Cell-Loc Inc. prior to the
completion of the Arrangement. Accordingly, 1073691 Alberta Ltd.
("Newco") has been renamed to Cell-Loc Location Technologies Inc.
("CLTI").
INTERIM MANAGEMENT DISCUSSION AND ANALYSIS
During the quarter ended September 30, 2003 Cell-Loc incurred a
net loss of $0.7 million. The loss is attributed costs incurred
by the Company to maintain ongoing operations and prepare for the
Annual and Special meeting on December 1, 2003.
Revenue
License revenue of $50,000 was realized from granting a 27.5
percent interest in the right to sell and distribute Cell-Loc
technology products in Saskatchewan.
Operations
Operations expenses were $75,000 for the first quarter compared
to $2.4 million for the previous year. The reduction in operating
expenses reflects the continued cost savings realized through
consolidation of operations and inventory facilities.
General and Administration
Expenses for general and administration costs for the quarter
ended September 30, 2003 were $453,000 which continues to reflect
reduced staff levels as well as a focus on core projects and
essential activities.
Liquidity and Capital Resources
The Company has depleted its cash reserves to $51,000 at
September 30, 2003 from $417,000 at June 30, 2003. The working
capital deficiency increased by $0.4 million to $1.5 million from
the June 30, 2003 level of $1.1 million. The increase in working
capital deficiency for the period ended September 30, 2003
resulted from operating activities. The operating cash
requirements were partially offset by the issue of common shares
under the Company's stock option program and the receipt of a
licensing fee.
The Company has negotiated a settlement with many suppliers that
in the future will reduce the cash payment necessary to relieve
these obligations by $346,000.
Subsequent to September 30, 2003 the Company generated $420,060
from the exercise of options ($278,620) and warrants ($141,440).
The Company's monthly use of cash continues to be scrutinized to
ensure optimal use of cash resources.
The company's September 30, 2003, balance sheet reports a working
capital deficit of about $1.5 million.
Business Risks and Prospects
The Company is actively negotiating commercial contracts. The
joint venture agreements currently being negotiated are examples
of the focused business strategy that Cell-Loc has now
undertaken. Joint venture arrangements, such as those negotiated
with iQ2 and Cell-Loc Chongqing will enable the Company to
introduce Cell-Loc's technology to the global market.
The Company's ability to source products and continue operations
is contingent on the working relationships with vendors and
creditors who supply goods and services to Cell-Loc.
The Company's ability to continue to generate revenue and achieve
positive cash flow in the future is dependent upon various
factors, including the level of market acceptance of its
services, the degree of competition encountered by the Company,
the cost of acquiring new customers, technology risks, the
ability to fund continued network deployment and operations,
general economic conditions and regulatory requirements.
Subsequent Event
On November 17, 2003, the Company entered into an agreement with
The Roseworth Group Ltd. to terminate their respective
obligations under an Equity Facility Purchase Agreement entered
into on May 16, 2002. The Corporation and Roseworth have also
agreed that 350,000 warrants previously issued to and held by
Roseworth will survive and will be included in the Corporation's
previously announced "Plan of Arrangement" transaction on the
same terms as other issued and outstanding warrants of the
Corporation. Each warrant held by Roseworth entitles it to
acquire a corresponding number of common shares at an exercise
price of $2.05 on or before May 15, 2005.
Cell-Loc Inc. ( http://www.cell-loc.com), a leader in the
wireless location industry, is the developer of Cellocate(TM), a
family of network-based wireless location products that enable
location-based services. Located in Calgary, Alberta, Cell-Loc
currently develops, markets and supports its patented wireless
location technology in Asia as well as North and South America,
with a view to expanding globally. Cell-Loc is listed on the
Toronto Stock Exchange under the trading symbol: "CLQ."
CHANNEL MASTER: Traub Bonacquist Serves as Committee's Counsel
--------------------------------------------------------------
The Official Committee of Unsecured Creditors appointed in Channel
Master LLC's chapter 11 cases seeks to retain Traub, Bonacquist &
Fox LLP as its general counsel, effective October 10, 2003.
The Committee has selected Traub Bonacquist because the Firm has a
great deal of experience in matters of this character. The
Committee will look to Traub Bonacquist to:
i) provide legal advice to the Committee with respect to
its duties and powers in this case;
ii) assist the Committee in its investigation of the acts,
conduct, assets, liabilities, and financial condition of
the Debtor, the operation of the Debtors business, the
disposition of the Debtors assets, and any other matter
relevant to the case or to the formulation of a plan;
iii) participate in the formulation of a plan of
reorganization liquidation;
iv) assist the Committee in requesting the appointment of a
trustee or examiner, should such action become
necessary;
v) review and analyze all applications, orders, statements
of operations and schedules filed with the Court by the
Debtors or other third parties and advise the Committee
as to their propriety, and, after approval by the
Committee, object or consent thereto on its behalf; and
vi) perform such other legal services as may be required and
in the interest of the creditors, including, but not
limited to, the commencement and pursuit of such
adversary proceedings as may be authorized.
The Committee believes that the retention of Traub Bonacquist is
necessary for this proceeding and that it will provide benefits to
the Committee. Such services will be rendered in conjunction with
Monzack and Monaco, P.A., whom the Committee is simultaneously
retaining as local Delaware Counsel. Traub Bonacquist will use its
best efforts not to duplicate any work undertaken by Monzack and
Monaco.
Michael S. Fox, Esq., a Traub Bonacquist partner, reports the
firm's current standard hourly rates are:
partners $400 - $595 per hour
of counsel $385 per hour
associates $225 - $365 per hour
paraprofessionals $100 - $140 per hour
Headquartered in Smithfield, North Carolina, Channel Master
Holdings, Inc., with the Debtor-affiliates, are leading designer
and manufacturer of high-volume, superior quality antenna products
for the satellite communications industry both in the U.S. and
internationally. The Company filed for chapter 11 protection on
October 2, 2003 (Bankr. Del. Case No. 03-13004). David B.
Stratton, Esq., at Pepper Hamilton LLP represents the Debtors in
their restructuring efforts. When the Company filed for
protection from its creditors, it listed estimated debts and
assets of over $50 million each.
CHC INDUSTRIES: Re/Max Realtex Chosen as Palm Harbor Broker
-----------------------------------------------------------
CHC Industries, Inc., asks the U.S. Bankruptcy Court for the
Middle District of Florida for permission to employ Re/Max Realtec
Group, Inc., as its Real Estate Broker. The Debtor wants Re/Max
to market and sell certain real estate property located in Palm
Harbor, Florida.
The Debtor reports that it currently requires the services of a
real estates firm to locate qualified purchasers and to negotiate
a sale with such purchasers with respect to a parcel of improved
real property in Palm Harbor.
For its services as a real estate broker, the Debtor agree to pay
Re/Max Realtec a reduced sales commission equal to 6% of the gross
consideration. The Debtor points out that this commission
arrangement is standard for sales of this type of property.
Jim Highberger assures the Court that his firm is disinterested as
defined in the Bankruptcy Code.
Headquartered in Palm Harbor, Florida and formerly known as
Cleaners Hanger Company, CHC Industries, Inc., manufactures and
distributes steel wire coat hangers. The Company filed for
chapter 11 protection on October 6, 2003 (Bankr. M.D. Fla. Case
No. 03-20775). Scott A. Stichter, Esq., at Stichter, Riedel,
Blain & Prosser, PA represent the Debtor in its restructuring
efforts. When the Company filed for protection from its
creditors, it listed $25,000,000 in total assets and $20,000,000
in total debts.
CHI-CHI'S: US Trustee Appoints 5-Member Creditors' Committee
------------------------------------------------------------
The United States Trustee for Region 3 appointed 5 creditors to
serve on an Official Committee of Unsecured Creditors in
Chi-Chi's, Inc.'s Chapter 11 cases:
1. Coca-Cola Food Service and Hospitality,
a division of the Coca-Cola Co.
c/o William Kaye
JLL Consultants
31 Rose Lane
East Rockaway, NY 11518
Phone: (516) 374-3705, Fax: (516) 569-6531;
2. Frank O. Fox
4201 Wilshire Blvd, Suite 411
Los Angeles, CA 90010
Phone: (323) 937-4422, Fax: (323) 937-0282;
3. Center Management
Attn: Thomas Guastello
16000 Hall Road
Clinton Township MI 48038
Phone (586) 412-9000, Fax: (586) 412-9090;
4. Evans Hardy & Young, Inc.
Attn: Sue Andrews, Senior Vice President/CFO
829 De La Vina Street, Suite 100
Santa Barbara, CA 93101
Phone: (805) 963-5841, Ext. 205,
Fax: (805) 564-4279; and
5. U.S. Foodservice, Inc.
Attn: Linda Fitzgerald
80 International Drive
Greenville, SC 29615
Phone: (864) 676-8654, Fax: (864) 676-8912.
Official creditors' committees have the right to employ legal and
accounting professionals and financial advisors, at the Debtors'
expense. They may investigate the Debtors' business and financial
affairs. Importantly, official committees serve as fiduciaries to
the general population of creditors they represent. Those
committees will also attempt to negotiate the terms of a
consensual chapter 11 plan -- almost always subject to the terms
of strict confidentiality agreements with the Debtors and other
core parties-in-interest. If negotiations break down, the
Committee may ask the Bankruptcy Court to replace management with
an independent trustee. If the Committee concludes reorganization
of the Debtors is impossible, the Committee will urge the
Bankruptcy Court to convert the Chapter 11 cases to a liquidation
proceeding.
Headquartered in Irvine, California, Chi-Chi's Inc., and its
debtor-affiliates are all direct or indirect operating subsidiary
of Prandium and FRI-MRD Corporation and each engages in the
restaurant business. The Company filed for chapter 11 protection
on October 8, 2003 (Bank. Del. Case No. 03-13063). Bruce Grohsgal,
Esq., and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl,
Young, Jones & Weintraub represent the Debtors in their
restructuring efforts.
CHIPPAC INC: Will Present at CSFB Tech. Conference on Thursday
--------------------------------------------------------------
ChipPAC, Inc. (Nasdaq: CHPC), one of the world's largest and most
diversified providers of semiconductor packaging, test and
distribution services, is scheduled to present at the Credit
Suisse First Boston Annual Technology Conference in Scottsdale,
Arizona on Thursday, December 4, 2003. Dennis McKenna, Chairman
and CEO, will be presenting.
Date: Thursday, December 4, 2003
Time: 11:00AM MST
Place: The Phoenician Hotel, Scottsdale, Arizona
Webcast: http://investor.chippac.com/calendar.cfm
ChipPAC (S&P, BB- Bank Loan Rating, Negative) is a full-portfolio
provider of semiconductor packaging design, assembly, test and
distribution services. The company combines a history of
innovation and service with more than a decade of experience
satisfying some of the largest customers in the industry. With
advanced process technology capabilities and a global
manufacturing presence spanning Korea, China, Malaysia and the
United States, ChipPAC has a reputation for providing dependable,
high quality packaging solutions. For more information, visit the
company's Web site at http://www.chippac.com
CIRCUIT RESEARCH: Needs Capital Infusion to Continue Operations
---------------------------------------------------------------
Circuit Research Labs Inc. develops, manufactures and markets
high-quality electronic audio processing, transmission encoding
and noise reduction equipment for the worldwide radio, television,
cable, Internet and professional audio markets. In recent periods,
it has acquired the assets of other companies within the industry
or in related industries into which Circuit Research desires to
expand. On May 31, 2000, the Company acquired the assets of
Orban, Inc., a producer of audio editing and processing equipment.
On May 31, 2001, it acquired the assets of Avocet Instruments,
Inc., a supplier of quality audio receivers and coders for the
television and post-production industry. On January 18, 2002, the
Company acquired the assets of Dialog4 System Engineering GmbH, a
producer of ISO/MPEG, audio, ISDN, satellite transmission,
networking and storage.
Circuit Research incurred losses of $2,135,039 and $2,046,640
during the years ended December 31, 2002 and 2001, respectively.
The Company's deteriorating financial results and reduced
liquidity caused it to renegotiate its $8.5 million loan agreement
with Harman in 2002. Under the terms of the debt restructure
agreement; Harman can demand at any time that Circuit Research
immediately pay in full the outstanding balance. Should this
happen, the Company would immediately be forced to file for
protection under Chapter 11 of the United States Bankruptcy Code.
The Company's inability to pay the $8.5 million debt to Harman
should payment be demanded, its difficulties in meeting its
financing needs and its negative working capital position have
resulted in the Company's independent public accountants adding a
going concern emphasis paragraph to their report by including a
statement that such factors raise substantial doubt about Circuit
Research's ability to continue as a going concern. In addition to
Company efforts to reduce costs and increase sales, it is
currently seeking sources of long-term financing. However, the
inclusion of a going concern emphasis paragraph generally makes it
more difficult to obtain trade credit or additional capital
through public or private debt or equity financings. The Company
has currently engaged HD Brous & Co., Inc. to advise and assist it
in capital raising efforts. The Company offers no assurances that
it will be able to attract additional capital or that additional
financing, if obtained, will be sufficient to meet its current
obligations. If the Company cannot meet its current obligations,
its ability to continue as a going concern will be jeopardized.
Circuit Research had negative net working capital of approximately
$9.0 million at September 30, 2003, and the ratio of current
assets to current liabilities was .29 to 1. At September 30,
2002, it had net negative working capital of approximately $7.9
million and a current ratio of .34 to 1. The decrease in working
capital is due to an increase of approximately $726,000 in accrued
interest.
COMC INC: Wooing Lender Pacific Credit for Additional Financing
---------------------------------------------------------------
COMC, Inc. and Subsidiary is a technology service company in the
telecommunications industry with a regional service coverage area.
The Company designs, implements, supports, and manages LAN/WAN
computer network systems, voice communication network systems, and
premise wiring for both data and voice. In addition, the Company
provides customers with permanent and temporary technical
professional recruitment and placement services. The Company is
redirecting its business focus away from the recruitment and
placement services in 2003 and is not seeking new customers in
this area.
The Company has incurred operating and net losses in the first
nine months 2003 as well as during the years 2002 and 2001. The
Company has limited additional financing available under its
current accounts receivable financing facility in order to fund
any additional cash required for its operations or otherwise.
These matters raise substantial doubt about the Company's ability
to continue as a going concern. Management has taken steps as of
and subsequent to December 31, 2002 to improve the situation,
including the $500,000 conversion of a shareholder note to equity,
treated as a capital contribution, the replacement of the Comerica
line of credit with a new financing arrangement with Greater Bay
Bancorp, the moving of the Company's corporate offices from
Martinez, California to a smaller facility in Concord, California
in November 2002, the reduction of the Company's direct sales
force, a reduction in the Company's work force and further cuts in
overhead costs, the closing of the Company's Birmingham facility,
the downsizing of the Company's Houston and Phoenix operations,
and changes in the Company's management. Management is currently
discussing with Pacific Business Funding an additional increase in
the line of credit to a maximum commitment of $2,000,000 and a
reduction of the interest rate. There are no assurances that the
Company will be successful.
Any temporary lack of available financing could have a materially
unfavorable effect on the Company's financial statements. The
Company's long-term prospects are dependent upon a return to
profitability and/or the ability to raise additional capital as
necessary to finance operations.
Cash and cash equivalents decreased to $1,000 at September 30,
2003 compared to $29,400 at December 31, 2002. The decrease was
mainly attributable to increased working capital requirements to
fund operating activities offset by the sale of Series A
convertible redeemable preferred stock for cash proceeds of
$312,500 during the three months ended March 31, 2003 and the sale
of Series B convertible redeemable preferred stock of $215,000
during the three months ended June 30, 2003. In addition, in June
2003, the Company received a federal income tax refund of
$410,400.
The Company's net working capital at September 30, 2003 was a
positive $14,300, a decrease of $408,200 from December 31, 2002.
COMC has been dependent on two large customers for the majority of
its revenue to date. A loss of either one could have a material
effect on Company liquidity.
COVENTRY HEALTH: Settles Claim over Federal Employees Premiums
--------------------------------------------------------------
Coventry Health Care, Inc. (NYSE:CVH) announced that its
subsidiary, Health America Pennsylvania, Inc., has settled a
previously disclosed dispute with the Office of Personnel
Management and U.S. Department of Justice.
The dispute arose from audits that questioned $31.1 million of
subscription charges for the years 1993 through 1997. The final
settlement of $29 million was fully reserved by HealthAmerica and
therefore has no impact on earnings, the regulated capital of
Health America, or the consolidated capital of Coventry.
"We are glad to finally put this old issue behind us", said Dale
B. Wolf, Coventry's Chief Financial Officer, "The Office of
Personnel Management, our customer with respect to the Federal
employees program, represents an important relationship for us.
Coventry has successfully participated in that program, both with
respect to our members and shareholders, for many years. The
strict underwriting controls we put in place upon our arrival have
worked effectively to prevent a recurrence of these issues, and we
expect will continue to do so."
Coventry Health Care (A.M. Best, bb+ Senior Unsecured Debt Rating)
is a managed health care company based in Bethesda, Maryland
operating health plans and insurance companies under the names
Altius Health Plans, Coventry Health Care, Coventry Health and
Life, Carelink Health Plans, Group Health Plan, HealthAmerica,
HealthAssurance, HealthCare USA, PersonalCare, SouthCare, Southern
Health and WellPath. The Company provides a full range of managed
care products and services, including HMO, PPO, POS,
Medicare+Choice, Medicaid, and Network Rental to 3.1 million
members in a broad cross section of employer and government-funded
groups in 14 markets throughout the Midwest, Mid-Atlantic and
Southeast United States. More information is available on the
Internet at http://www.cvty.com
DELTA GAS CORP: Case Summary & Largest Unsecured Creditors
----------------------------------------------------------
Lead Debtor: Delta Gas Corporation
504B Washington Street
Elizabethtown, Kentucky 42701
Bankruptcy Case No.: 03-11041
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Delstar Resources, Inc. 03-11042
Bluegrass Drilling Corporation, Inc. 03-11043
Type of Business: The debtor produces oil and gas properties,
operates an underground gas storage field
and provides transportation services.
Chapter 11 Petition Date: November 26, 2003
Court: Eastern District of Kentucky (Ashland)
Judge: William S. Howard
Debtors' Counsel: John Harlan Callis, III, Esq.
PO Box 339
Paintsville, KY 41240-0700
Tel: 606-297-5888
Estimated Assets: $500,000 to $1 Million
Estimated Debts: $1 Million to $10 Million
Debtors' Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Est./AndrewMessing Failure to close the $1,535,000
Erin Messing, Ex. Loan/Option purchase
4 Indigo Terrace agreement and failure
Lake Worth, FL 33460 to cancel the election
made pursuant to the
terms of the agreement
The Cadle Co., II Judgment in Lawrence $225,000
Circuit Court
The Cadle Co., II Judgment in Lawrence $134,000
Circuit Court
DESTINY RESOURCE: Sept. 30 Working Capital Deficit Tops $4.5MM
--------------------------------------------------------------
Destiny Resource Services Corp. reported its results for third
quarter ended September 30, 2003.
The Company reported revenues of about $10 million, a 29% increase
from about $8 million in the year-ago period. Net income was
pegged at $777,000, a 79% increase from about $435,000 in the same
period in 2002.
Meanwhile, cash flow from continuing operations dropped by 50% to
about $736,000 from about $1.5 million recorded a year ago. EBITDA
fell 14% to about $1.03 million from about $1.2 million in the
same period a year ago.
At September 30, 2003, the Company's balance sheet shows that its
total current liabilities exceeded its total current assets by
about $4.5 million, while net capitalization entered positive zone
at $278,000 from a deficit of about $574,000.
Letter to Shareholders
STRATEGIC AND OPERATIONAL MATTERS
Facing pressures with pending debt maturities and capital
expenditure requirements, Destiny undertook a thorough review of
strategic alternatives during the first half of this year. As a
part of this process, Destiny engaged Peters & Co. as financial
advisors to the Board of Directors. The unanimous conclusion
reached by the Board, supported by the advice of Peters & Co., was
that the best interests of shareholders were served by selling and
disposing of businesses not related to our Front-End Seismic
Services and using the proceeds to retire debt, fund working
capital and fund capital expenditures.
Given the nature of the businesses to be discontinued, including
their respective capital expenditure requirements, cash flow
generating ability and associated liabilities, given the
information learned through the strategic alternatives review
process and given Destiny's commitment to its people, we chose to
work first, in each case, with the management of these businesses.
In three cases, transactions were negotiated that led to a sale to
the management, with the continuing service to customers and
continuing employment of the employees of those businesses. In the
fourth case, the auction route was chosen. Each decision was made
on the basis of the best result for shareholders in the context of
the pressures upon Destiny.
We are satisfied in every case with the transactions negotiated
and are comfortable that the best results have been achieved. The
highlights of the 2003 operational developments to date include:
- on September 9, 2003 we closed the sale of the Big Foot Metal
Systems division to Bonnie Neigum, the manager of that business
for proceeds of just over $500,000 plus working capital
adjustments plus the assumption of certain obligations of
Destiny. The sale was effective June 1, 2003.
- on September 29, 2003 we closed the sale of the McConnell
Welding & Construction division to a group of investors led by
Stan Buscholl, the general manager of the business. At the same
time we closed the sale of the land and buildings of that
operation. Proceeds to Destiny were approximately $2.1 million
plus working capital adjustments plus the assumption of certain
obligations of Destiny.
- on October 8, 2003 we announced the appointment of Joe Pilieci
as General Manager, Wolf Survey & Mapping and of Murray Leier as
General Manager of Destiny Resources, the Company's line
clearing division. These appointments reflect the continued
focus and emphasis on day-to-day management of each of the
businesses in our Front-End Seismic Services as well as the
integration of sales efforts for these businesses.
- on November 11, 2003 we signed an agreement to take all of the
assets of our Team Pipeline division to the Ritchie Bros.
December 4, 2003 auction at Nisku, Alberta. Destiny has a
guaranteed minimum of proceeds from the auction.
- on November 14, 2003 we closed the first portion of the sale of
the Battle River Oilfield Construction division to Bill May, the
general manager of that business. This sale encompassed the land
and buildings of that operation plus all assets other than heavy
equipment. Proceeds to Destiny were approximately $360,000 plus
working capital adjustments plus the assumption by the buyer of
environmental, reclamation, warranty, operating lease and
employee obligations. The second portion of this sale is to
close on January 31, 2004 at which time Destiny will receive
$3.8 million for the sale of the heavy equipment.
- we have taken and are taking steps to reduce our general and
administrative expenses to better reflect the smaller size of
the Company going forward.
FINANCIAL AND STRUCTURAL MATTERS
- on August 22, 2003, the 4 members of the Destiny Board of
Directors who were nominees of First Reserve Fund VIII, L.P.
resigned. On August 28, 2003 and October 1, 2003, respectively,
Nathan Feldman and David McGoey were appointed to the Board.
- on September 4, 2003, Destiny Resource Investments L.P. bought
the interests of First Reserve in Destiny. In this arm's length
transaction, First Reserve sold the $10,000,000 8% secured
subordinated debenture due July 2, 2004, deferred accrued
interest, accrued interest to the date of sale and 29,631,331
common shares of Destiny (approximately 56%) to DRILP for
$5,950,000 plus the assumption of obligations with respect to
the debenture. Bruce Libin, the Executive Chairman and CEO of
Destiny, is a minority investor in DRILP.
- on October 10, 2003, Destiny paid $1,000,000 to DRILP from the
proceeds of the sale of McConnell Welding & Construction to pay
deferred accrued interest of $834,000 (interest otherwise due
and agreed to be postponed from December 31, 2002 and June 30,
2003 and interest accruing thereon) and principal of $166,000.
- on October 1, 2003, Glen Roane was appointed by the Board of
Directors as Lead Director.
- subsequent to the end of the third quarter the Company has been
working with operating and term lenders to put into place a debt
structure appropriate to the go forward operations of Destiny.
We expect to use proceeds of the anticipated term debt to
refinance existing obligations, to supplement working capital
and to pay down a portion of the 8% subordinated debenture. We
expect to use proceeds from the sale of the heavy equipment of
the Battle River division to further reduce the principal of
that debenture. The Company is negotiating to have the remainder
of that debenture deferred to 2008, with provision for pre-
payments from available cash according to an agreed formula. The
Company is working with a potential operating lender to have
appropriate credit facilities in place when the present
operating lending arrangement expires in February, 2004. Destiny
anticipates paying the interest on the 8% debenture, and on all
its obligations, as they become due.
BUSINESS ACTIVITY AND OUTLOOK
- our level of activity in the third quarter in our Front-End
Seismic Services was acceptable but not great. It appears many
exploration and production companies have deferred exploration
activity for 2003; this has been reflected in the demand for
seismic services being reduced below what one might expect with
the level of capital expenditures in the oil and gas industry in
the Western Canadian Sedimentary Basin. This deferral has
impacted the level of work for both levels of our customers: E&P
companies and seismic acquisition companies which undertake work
for their own libraries for resale. We believe our market share
has been generally up this year, reflecting the quality and
value Destiny provides to our customers; yet we are disappointed
with the overall level of activity.
- we are now well into the fourth quarter and we are generally
encouraged by the level of activity we see for the winter and
the early indications for 2004 overall. Initial signs suggest a
growth in seismic related expenditures in 2004. We believe
Destiny is well poised to capture a meaningful portion of this
work.
- the steps taken to sell businesses and those being taken to
restructure and refinance our debt will, we believe, put the
balance sheet issues of Destiny behind us and let us focus on
operations, on providing safe, high quality, valued added
services to our customers.
Times of change can be stressful on employees and it is especially
appropriate to recognize the men and women who work in the field
for our Front-End Services businesses and in our offices in Grande
Prairie and Calgary for their dedication, focus and commitment.
The interface with our customers, both in the field and from the
offices, creates for Destiny, every day, the opportunity to work
again for those customers. On behalf of the Board of Directors and
Shareholders, I thank our employees.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW OFDISCONTINUED OPERATIONS
AND ASSETS HELD FOR SALE
With the Company burdened by high debt levels and with the $10.0
million 8% subordinated debenture maturing on July 2, 2004 Destiny
determined that the best economic course of action for the Company
was to reduce debt through the use of proceeds from the sale of
non-core businesses and to then restructure the remaining debt.
For greater detail of these activities please refer to the Letter
to Shareholders.
As at September 30, 2003 the Company was about half way through
this restructuring process. During the third quarter of 2003
Destiny closed sales for two of the Company's three Post Drilling
Construction businesses, McConnell Welding & Construction and Big
Foot Metal Systems. In October 2003 the Company entered into an
agreement to sell its Surface Preparation business, Battle River
Oilfield Construction. In November 2003 the Company entered into
an agreement to sell at auction in December 2003 the assets of the
third Post Drilling Construction business, Team Pipeline.
The effects of these transactions are as follows:
- The Company's continuing operations will consist of one business
segment, being Seismic Front-End Services, which is comprised of
seismic survey and mapping, seismic line clearing and shot-hole
drilling.
- For financial statement reporting, the results of operations and
the financial position of Big Foot Metal Systems and McConnell
Welding & Construction, for which the sale process was complete
as at September 30, 2003, have been presented as discontinued
operations.
- For financial statement reporting, the results of operations of
Battle River Oilfield Construction and Team Pipeline, for which
the sale closing process was still ongoing as at September 30,
2003, have been presented as discontinued operations and their
respective assets and liabilities have been presented as assets
and liabilities held for sale.
- The Company will report gains on the sale of three out the four
businesses being disposed of.
- Total gross proceeds of the sales are approximately $8.1
million.
The proceeds will be utilized as follows:
- $1.9 million will be used to retire the term loans.
- $1.0 million will be used to retire total equipment purchase
contracts.
- $4.0 million will be paid on the $10.0 million 8%
subordinated debenture
- the balance, after deducting costs and other adjustments,
will be used for capital expenditures and to supplement
working capital.
- On a combined basis the businesses that have been sold or
are in the process of being sold had revenue for the nine
months ended September 30, 2003 of $24,233 (2002 - $19,799)
or 52% (2002 - 50%) of the Company's total revenue.
RESULTS OF OPERATIONS
The following analysis compares results for the 3-month quarter
end and 9-month year to date periods ended September 30, 2003 and
September 30, 2002.
REVENUE
Total revenue for Q3'03 was $10.2 million, a 29% increase from the
Q3'02 total of $7.9 million. YTD revenues totaled $22.2 million,
which is a $2.6 million or 14% increase over the $19.6 million for
2002. Both Q3 and YTD increases are largely attributable to both
our survey and our drilling operations increasing their market
share in 2003. The increases in revenue of our survey and drilling
operations were partially offset by a decrease in the Company's
line clearing revenue due to a shift in the industry away from
hand-cutting to the use of brush cutters, and to much of the line
clearing work being performed in northeastern British Columbia
where our clients often support line clearing work being
contracted to First Nations companies
GROSS MARGIN
For the Q3'03 period, gross margins were $1.2 million compared to
$1.4 million for Q3'02. Gross margin increased 35% to $2.7 million
YTD from $2.0 million in 2002. As a percentage of revenue, gross
margins YTD were 12.0% for 2003 and 10.4% for 2002. The
improvement in gross margins is a result of:
- A marginal improvement in survey pricing in 2003 compared to
2002
- Increased field productivity in both survey and drilling
- A reorganization of the shop and the wage structure in drilling
The increase in YTD gross margin was partially offset by a
decrease in the Company's line clearing gross margins as a result
of pricing pressure.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses YTD were 25% lower in 2003, at
$0.57 million compared to $0.76 million for 2002. For the Q3
period, G&A expense was $0.21 million for Q3'03 compared to $0.24
million for Q3'02. The Company is very aware that corporate costs
must decrease with the decrease in the number of the Company's
revenue generating operations. Accordingly steps will continue to
be taken at the corporate office to do more with less.
AMORTIZATION OF CAPITAL ASSETS
Amortization of capital assets decreased 44% to $0.9 million
versus $1.6 million YTD in 2002, and was $0.3 million for Q3'03 vs
$0.6 million for Q3'02. The decrease in YTD amortization expense
is due to a much lower net book value subject to amortization in
2003, following the significant write-downs in carrying value of
capital assets that was recorded as at December 31, 2002.
INTEREST
Interest expense YTD was $1.6 million in 2003 and 2002, and
similarly was $0.5 million for each of Q3'03 and Q3'02. Due to a
decrease in the level of outstanding term debt in 2003, interest
expense on long-term debt decreased slightly from the 2002 level,
but this was offset by an increase in short-term interest expense.
As there were higher levels of operating activity in 2003, the
short-term bank operating loan had a higher average outstanding
balance in 2003 YTD than 2002.
OTHER (INCOME) AND EXPENSE
Other (income) expense of $(0.2) million for 2003 YTD consists of
provisions established in 2002 for reorganization costs being
reversed as anticipated costs did not materialize. Other (income)
expense of $0.5 million for 2002 YTD was primarily for non-
recurring costs associated with merging our line clearing and
shot-hole drilling operations into one combined new facility in
Grande Prairie.
INCOME TAXES
Total income tax expense reflected a net recovery $1.1 million in
2002 compared to nil in 2003. As the Company had substantial
unrecorded future tax assets at December 31, 2002 from unutilized
non-capital tax losses carried-forward, no income tax expense
(other than capital tax) was required to be recognized in 2003
YTD.
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
Destiny's capital requirements consist primarily of working
capital necessary to fund ongoing operations and capital
expenditures related to the purchase of operating equipment.
Sources of funds to satisfy these capital requirements include
cash flow from operations, external lines of credit, equipment
financing, term loans and equity markets.
With the Company's operating results expectations for the balance
of 2003 and for 2004, and with the sale of businesses and further
financing initiatives as discussed in detail in the Letter to
Shareholders, the Company is confident that it has the capital
resources to meet both its ongoing working capital and maintenance
capital expenditure requirements for the next 12 months.
LONG-TERM DEBT
Total long-term debt has decreased by $3.0 million for 2003 YTD
from $5.1 million to $2.1 million as a result of the proceeds from
three asset sales being used to pay down debt. Long-term debt of
$1.6 million was repaid following the sale of excess equipment in
July 2003 and an additional $1.4 million of long-term debt was
repaid in October 2003 following the sale of McConnell Welding &
Construction and Big Foot Metal Systems.
DEBENTURE
As at September 30, 2003 the $10 million 8% subordinated debenture
has been classified as a current liability as it currently is
scheduled to mature on July 2, 2004. Through the use of asset sale
proceeds and the proceeds of new term debt the Company expects to
repay approximately $5.0 million of principal on the debenture by
January 31, 2004. The Company is negotiating to have the remainder
of the debenture deferred to 2008, with provision for pre-payments
from available cash according to an agreed formula.
On October 10, 2003 the Company paid $1.0 million to the debenture
holder, being $834 of interest in arrears and $166 of principal.
With this payment the Company is in compliance with all terms and
conditions of the debenture.
SHAREHOLDERS' EQUITY
Shareholders' equity improved by $0.9 million, due to the YTD net
income. There have been no changes in share capital in 2003, as
compared to 2002 YTD, when net proceeds of $1.3 million were
raised in June.
3. Discontinued operations and assets held for sale
i. On August 20, 2003 the Company signed an agreement, effective
June 1, 2003, for the sale of the assets and certain
liabilities of Big Foot Metal Systems, a division of its Post
Drilling Construction business segment (note 9), to the manager
of the business. Closing of the transaction was completed on
September 9, 2003.
On August 20, 2003 the Company signed an agreement for the sale
of the land and building of McConnell Welding & Construction.
Also on August 20, 2003 the Company signed an agreement,
effective June 1, 2003, for the sale of the remaining assets
and certain liabilities of McConnell Welding & Construction to
a group of investors led by the general manager of the
business. McConnell Welding & Construction was a division of
the Company's Post Drilling Construction business segment.
Closing of these transactions was completed on September 29,
2003.
For reporting purposes, the results of operations (including
the related net loss on disposal of $122) and the financial
position of Big Foot Metal Systems and McConnell Welding &
Construction have been presented as discontinued operations.
Accordingly, prior period financial statements have been
reclassified to reflect this change.
ii. On October 10, 2003 the Company signed an agreement for the
sale of the assets of its Surface Preparation business segment,
which operates as Battle River Oilfield Construction, to the
general manager of the business. The sale is comprised of two
transactions. The first transaction, for the sale of the assets
of the business, excluding heavy equipment, and the assumption
of certain obligations closed on November 14, 2003 with an
effective date of June 1, 2003. The second transaction, for the
sale of the heavy equipment, closes on January 31, 2004.
On November 11, 2003 the Company signed an agreement, with a
guaranteed minimum price, to sell at auction the assets of Team
Pipeline, a division of its Post Drilling Construction business
segment. The assets will be offered for sale on December 4,
2003 at an unreserved public auction.
For reporting purposes, the results of operations of Battle
River Oilfield Construction and Team Pipeline have been
presented as discontinued operations and their respective
assets and liabilities have been presented as assets and
liabilities held for sale. Accordingly, prior period financial
statements have been reclassified to reflect this change.
DOMAN INDUSTRIES: Court Further Extends CCAA Stay Until Dec. 18
---------------------------------------------------------------
Doman Industries Limited announced that the Supreme Court of
British Columbia issued an unopposed order in connection with
Doman's proceedings under the Companies' Creditors Arrangement
Act, extending the stay of proceedings to Thursday,
December 18, 2003. A copy of the order may be obtained by
accessing the Company's Web site at http://www.domans.com. The
extension of the stay of proceedings was sought and granted to
allow the restructuring process contemplated by the October 30,
2003 order of the Court to continue.
During today's hearing at which the extension of the stay of
proceedings was ordered, Doman also raised two additional issues
with the Court. Firstly, Doman requested that the Court schedule a
date, or dates, on which to hear an application for an order that
Doman be relieved of all obligations that it may have to Forest
Industrial Relations Limited and the members thereof and be
permitted to negotiate and independently conclude a collective
agreement with the Industrial, Wood and Allied Workers Union of
Canada. The Court, after hearing submissions from FIR and the
Province of British Columbia as to the complexity of the issues
raised by such an argument and the need for time to properly
consider these issues, directed that counsel meet to coordinate a
procedure by which to bring this matter before the Court in an
orderly manner as soon as possible.
In addition, Doman advised the Court that, in its view, the
proposed Timber Licenses Settlement Act, which purports to
extinguish retroactively the right of Doman and other companies to
claim damages from the Province, and which passed third reading in
the British Columbia Legislature on November 26, 2003, may, if it
receives royal assent, constitute a proceeding in violation
of the ongoing stay of proceedings imposed by order of the Court.
Doman is an integrated Canadian forest products company and the
second largest coastal woodland operator in British Columbia.
Principal activities include timber harvesting, reforestation,
sawmilling logs into lumber and wood chips, value-added
remanufacturing and producing dissolving sulphite pulp and NBSK
pulp. All the Company's operations, employees and corporate
facilities are located in the coastal region of British Columbia
and its products are sold in 30 countries worldwide.
ENRON CORP: Selling East Coast Power Interests to Arctas-Paragon
----------------------------------------------------------------
Enron Corporation and Enron North America Corporation seek the
Court's authority, pursuant to Sections 105 and 363(b), (f), (m)
and (n) of the Bankruptcy Code and Rules 2002, 6004, 9013 and
9014 of the Federal Rules of Bankruptcy Procedure, to sell to
Arctas-Paragon Investments LLC, free and clear of lines, claims,
interests, encumbrances, rights of setoff, recoupment, netting
and deduction, including the dissolution of ENA CLO I Holding
Company I LP, the Senior Participation Interest in the
subordinated debt of East Coast Power LLC and certain related
assets, subject to higher bid at auction.
Martin A. Sosland, Esq., at Weil, Gotshal & Manges LLP, in New
York, relates that East Coast Power indirectly owns an equity
interest in a 947 MW combined cycle natural gas cogeneration
power plant located in Linden, New Jersey. The Linden plant
started commercial operation in May 1992 and presently sells its
electricity capacity and energy output to the Consolidated Edison
Company of New York, Inc. under a power purchase agreement
scheduled to expire in 2017. The facility also provides steam to
Bayway Refining Company and Infineum USA LP under agreements that
are also scheduled to expire in 2017.
In April 1999, Enron and ECP entered into a Credit and
Subordination Agreement in the principal amount of $250,000,000.
Enron assigned its interest in the Subordination Agreement to
Ponderosa Assets, L.P. and Ponderosa subsequently assigned its
interests in the Subordination Agreement to Sundance Assets L.P.
On April 20, 1999, ECP issued $850,000,000 in principal amount of
certain Senior Secured Notes and applied $62,000,000 of the
proceeds to partially prepay the principal under the
Subordination Agreement. As a result, the principal balance of
the Subordinated Indebtedness was reduced to $187,900,000. In
connection therewith, ECP and Sundance entered into that certain
First Amended and Restated Credit and Subordination Agreement,
dated as of April 20, 1999, as amended, which amended the
Subordination Agreement. A portion of the Subordinated
Indebtedness was evidenced by a $30,000,000 promissory note,
dated December 17, 1999, issued by ECP and made payable to
Sundance. Sundance subsequently assigned its interests in the
Subordinated Indebtedness, including the $30,000,000 Note, to
ENA.
On December 22, 1999, ENA granted ENA CLO a 100% participation
interest in the $30,000,000 Note pursuant to the terms of a Sale
and Assignment of Senior Participation Interest. On December 15,
2000, ENA assigned all of its remaining rights, obligations and
liabilities in the Subordinated Indebtedness, subject to the
Senior Interest -- the Remaining Rights and Obligations -- to ECT
Merchant Investments Corp.
On December 15, 2000, ECTMI assigned the Remaining Rights and
Obligations to ECTMI Trutta Holdings LP, a Delaware limited
partnership and, on February 23, 2001, Trutta assigned the
Remaining Rights and Obligations to Mesquite Investors,
L.L.C. ENA CLO assigned its right, title and interest in the
Senior Interest back to ENA pursuant to that certain Assignment
Agreement executed on August 1, 2002, to be effective as of
August 20, 2001.
After it filed its Chapter 11 case, ENA began to explore a sale
of its interests in the Assets. In this regard, Mr. Sosland
tells the Court that ENA contacted or responded to inquiries from
more than 20 energy and private equity companies. From these,
seven companies signed confidentiality agreements are were given
access to documentation related to the Assets.
Of the seven prospective purchasers, three submitted indicative
offers that included a purchase price. After negotiation over
several months, Arctas emerged as the leading candidate and moved
forward with the negotiation of a definitive agreement.
Mr. Sosland reports that on November 14, 2003, ENA and Arctas
executed the Purchase Agreement with respect to the Assets, which
provides these salient terms:
A. Purchase Price
Arctas agrees to pay $25,700,000 for the Assets, plus
interest accrued and unpaid under the Senior Interest from
and after November 15, 2003 until the Closing, less any
amounts calculated pursuant to Section 3.1(b) of the Purchase
Agreement. Arctas has placed in escrow an Earnest Money
Deposit equal to $2,570,000 and will pay the remainder of the
Purchase Price at Closing.
B. Assets
The Assets consist of ENA's and its Affiliates' rights under
the Senior Interest, any and all Claims of ENA or its
Affiliates against any Party arising from or directly related
to the Assets, and certain documents related thereto.
C. Transfer Taxes
Arctas will pay any Transfer Taxes resulting from the
transactions contemplated by the Purchase Agreement.
D. Bankruptcy Court Approvals
ENA and Arctas will use commercially reasonable efforts to
cooperate, assist and consult with each other to secure the
entry of the Bidding Procedures Order and the Sale Order.
E. Closing Conditions
The principal conditions to closing include:
(i) The Bankruptcy Court issues the Sale Order;
(ii) The Federal Energy Regulatory Commission approves the
Settlement Agreement that was filed with FERC on
October 1, 2003 among FERC Trial Staff, respondents
Cogen Technologies Linden Venture, L.P., Camden Cogen,
L.P. and Cogen Technologies NJ Venture, and intervenors
Enron, ENA, Joint Energy Development Investments II
Limited Partnership, and GS Linden Power Holdings LLC
in connection with certain proceedings and dismissing
certain related proceedings; and
(iii) ENA has delivered a document from the State of Delaware
confirming that ENA CLO has been dissolved.
F. Termination of Agreement
The Purchase Agreement and the transactions contemplated
therein may be terminated prior to the Closing by, inter
alia:
(i) the mutual written agreement of the parties;
(ii) either party, if the Sale Order has not been entered by
the Bankruptcy Court by January 31, 2004;
(iii) either party, if ENA submitted for approval of the
Bankruptcy Court, or the Bankruptcy Court approves an
Alternative Transaction or other bid to purchase all or
any part of the Assets; or
(iv) either party, if the Closing does not take place on or
before 30 days after the entry of the Sale Order,
unless the reason for delay if the failure to satisfy
the Closing conditions in Section 8.2(f) pertaining to
QF determination, in which case the parties cannot
terminate until April 30, 2004.
According to Mr. Sosland, the contemplated transaction should be
authorized because:
(a) ENA CLO's dissolution, which has no ongoing business
operations, is a condition precedent to the closing of
the Sale Transaction;
(b) other than the DIP Financing liens, there are no liens,
claims or encumbrances relating to the Assets;
(c) the terms of the Purchase Agreement between ENA and
Arctas were negotiated at arm's length and in good faith;
and
(d) selling the Assets will result in maximization of its
value for the benefit of ENA's estate and will
potentially result in a greater return to creditors.
(Enron Bankruptcy News, Issue No. 88; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
EXIDE TECH: Asks Court to Clear 9th Amendment to DIP Agreement
--------------------------------------------------------------
To recall, on the Petition Date, the Exide Debtors, their foreign
non-debtor affiliates and their prepetition secured lenders
executed the Standstill Agreement and Fifth Amendment to the
Credit Agreement, wherein the Prepetition Lenders agreed to
forbear from exercising any of their rights or remedies relating
to defaults under the prepetition credit agreement against the
Debtors' non-debtor affiliates until no later than December 18,
2003.
Also on the Petition Date, the Debtors and their DIP Lenders
entered into a Secured Super Priority DIP Credit Agreement.
Under the DIP Agreement, the loan will mature on November 18,
2003, which is 30 days before the expiration of the Standstill
Agreement. Therefore, if the Debtors do not pay the amounts owed
under the DIP Agreement -- which the Debtors will not be able to
do until they emerge from Chapter 11 and receive their exit
financing -- they will default under the loan. Furthermore, the
Standstill Agreement contains a cross-default provision, which
provides that a default under the DIP Agreement also constitutes
a default under the Standstill Agreement.
The hearing to confirm the Debtors' Reorganization Plan was
originally scheduled for October 21, 22 and 25, 2003. Given
these dates, the Debtors believe that they could confirm the Plan
before the deadline under the DIP Agreement. However, the
Confirmation Hearing was extended several more days and did not
conclude until November 12, 2003.
Due to the confirmation hearing extensions, James E. O'Neill,
Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub PC, in
Wilmington, Delaware, tells Judge Carey that it became unlikely
that the Plan would be confirmed before November 18, 2003. As a
result, the Debtors approached the DIP Lenders regarding
extending the deadline. As a result of their negotiations, the
Debtors and the DIP Lenders executed a Ninth Amendment to the DIP
Agreement that extends the Debtors' deadline to exit Chapter 11
to the earliest of:
(a) February 15, 2004;
(b) the date the Commitments are terminated pursuant to
the Reduction and Termination of Commitments provision of
the DIP Agreement;
(c) the date on which the Obligations become due and payable
pursuant to the Remedies provision of the DIP Agreement;
(d) the effective date of a Plan entered by the Court; and
(e) December 12, 2003, which is four Business Days before the
final maturity of any principal obligations under the
Prepetition Facility.
The Debtors expect that the earliest to occur among these dates
is December 12, 2003.
In exchange for the extension, the Debtors agree to pay fees
under two separate documents. Under the Ninth Amendment, each
participating DIP Lender will share pro rata in $250,000 based on
the sum of the participating DIP Lender's Revolving Credit
Commitments and Term Loans Outstanding as of the effective date
of the Ninth Amendment divided by the sum of the aggregate
Revolving Credit Commitments and Term Loan Outstanding of all DIP
Lenders as of the Ninth Amendment Effective Date. Additionally,
the Debtors agree to pay all costs and expenses of the DIP
Lenders' administrative agent in connection with the preparation,
reproduction, execution and delivery of the Ninth Amendment and
related documents, including the reasonable fees and out-of-
pocket expenses of the administrative agent's counsel. The
parties also executed the Ninth Amendment Fee Letter wherein the
Debtors will pay $250,000 to the administrative agent for the DIP
Lenders.
Mr. O'Neill states that the DIP Agreement authorizes the Debtors
to execute amendments without further Court order, as long as the
Debtors provide reasonable notice of the amendment to the
Official Committee of Unsecured Creditors, the Official Committee
of Equity Security Holders and the Prepetition Lenders. However,
in an abundance of caution, the Debtors ask the Court to approve
the Ninth Amendment and the Fee Letter. The Debtors also seek
Judge Carey's permission to pay the Amendment Fees.
Mr. O'Neill explains that if the Debtors default under the DIP
Agreement and the Standstill Agreement, their obligations would
immediately become due and payable. Without access to the DIP
Agreement, the Debtors will not have sufficient liquidity to fund
their operations or to pay the amounts owed under either
agreement. Therefore, a default under the DIP Agreement and the
Standstill Agreement would allow the DIP Lenders and Prepetition
Lenders to not only foreclose against both the Debtors and their
foreign non-debtor entities but would also ultimately trigger an
acceleration of the Deutsche Mark indenture and the European
asset securitization facility. The end result would likely be
the wholesale liquidation of the Debtors' estates, including
domestic and foreign operations, erasing all restructuring
progress achieved over the last 18 months and substantially
reducing the expected recoveries of all the Debtors' creditor
constituencies.
Mr. O'Neill maintains that extending the deadline under the DIP
is critical to the success of the Debtors' overall restructuring
efforts. Without the extension, the Debtors would be unable to
continue to operate their business and would have to cease
operations to the detriment of all parties. Furthermore, the
Debtors believe that they have succeeded in obtaining the best
terms possible for the necessary extension. The Ninth Amendment
and the Fee Letter is the product of good faith, arm's-length
negotiations.
Creditors' Committee Objects
The Official Committee of Unsecured Creditors cringe at the idea
of paying the DIP Lenders over $500,000 in estate money for an
mere 18-day extension -- 12 business days -- of the Debtors' DIP
Credit Facility. The Debtors, the Committee asserts, fail to
cite any justifiable reason for such excessive Fees to be
approved, particularly in light of the fact that they have not
addressed the real issue -- the allegedly looming deadline of the
standstill agreement on December 18, 2003. Without an extension
of the Standstill Agreement, the Committee points out that the
extension of the DIP Facility and the Fees paid for it are not
truly beneficial for the Debtors' estates and creditors. If the
Standstill Agreement is extended to February 2004, the Debtors
will have the breathing room under the DIP Facility and the
Standstill Agreement to properly administer their estates --
without facing constant fire drills.
To the extent that the Debtors are authorized to enter into the
Ninth Amendment and the Fee Letter, the Committee suggests that
the Court must also direct the Debtors to immediately pursue an
extension of the Standstill Agreement. The Debtors must take
affirmative steps now to timely pursue a real resolution of these
supposed deadlines and to avoid being held hostage for additional
fees every few weeks. (Exide Bankruptcy News, Issue No. 35;
Bankruptcy Creditors' Service, Inc., 215/945-7000)
FERRELLGAS PARTNERS: Prices 2-Mill. Common Unit Public Offering
---------------------------------------------------------------
Ferrellgas Partners, L.P. (NYSE: FGP) announced the pricing of a
public offering of 2.0 million common units at a public offering
price of $24.75 per common unit. The offering is scheduled to
close on December 1, 2003.
Ferrellgas also has granted to the underwriters of this offering a
30-day option to purchase up to an additional 300,000 common units
to cover any over-allotments. Ferrellgas intends to use the net
proceeds from the offering to reduce borrowings outstanding under
its bank credit facility and for other general partnership
purposes.
UBS Securities LLC and Citigroup Global Markets Inc. acted as
joint book-running managers on the offering. When available,
copies of the final prospectus supplement and the accompanying
base prospectus may be obtained from: UBS Securities LLC, 1285
Avenue of the Americas, New York, NY 10019, Telephone 212-713-
8802.
Ferrellgas Partners, L.P. (Fitch, BB+ Senior Debt), through its
operating partnership, Ferrellgas, L.P., currently serves more
than one million customers in 45 states. Ferrellgas employees
indirectly own more than 17 million common units of the
partnership through an employee stock ownership plan.
At July 31, 2003, Ferrellgas Partners' balance sheet shows that
its total current liabilities outweighed its total current assets
by about $4 million.
FRANKLIN CAP.: Seeks New Financing to Ease Going Concern Doubts
---------------------------------------------------------------
Franklin Capital Corporation, is a Delaware corporation operating
as a Business Development Company under the Investment Company Act
of 1940. A BDC is a specialized type of investment company under
the Act. A BDC must be primarily engaged in the business of
furnishing capital and making available managerial expertise to
companies that do not have ready access to capital through
conventional financial channels. Such companies are termed
"eligible portfolio companies". The Corporation, as a BDC,
generally may invest in other securities; however, such
investments may not exceed 30% of the Corporation's total asset
value at the time of any such investment.
The Company's financial statements have been prepared assuming
that the Corporation will continue as a going concern. The
Corporation has a working capital deficiency of approximately
$1,400,000 at September 30, 2003. (Working capital is defined as
total liabilities less liquid assets.) These conditions raise
substantial doubt about the Corporation's ability to continue as a
going concern. In order to alleviate the substantial doubt about
the Corporation's ability to continue as a going concern, the
Corporation will seek to sell assets, or find an alternative
financing source. There can be no assurance that the Corporation
would be able to obtain financing.
On October 8, 2003, Franklin sold to Sunshine Wireless, LLC
375,000 shares of the common stock of Excelsior at $2.00 per
share for an aggregate of $750,000, realizing a gain of $375,000.
This asset sale reduced Franklin's working capital deficiency to
approximately $700,000. Franklin continues to have a working
capital deficiency primarily due to a note payable of $940,609 to
Winstar Communications, Inc. in connection with the acquisition of
assets from Winstar. This note is taken into account in
calculating the working capital deficit as it is assumed to be
payable within the next year. Due to an action in which Franklin
is a named party, the due date of this note has been extended
indefinitely and it is uncertain as to when this note will come
due. Franklin continues to seek adequate alternative financing
rather than additional asset sales in order to alleviate the going
concern issue.
FREEPORT-MCMORAN: Updates Activities at its Grasberg Mining Ops.
----------------------------------------------------------------
Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) (S&P, B Corporate
Credit Rating) announced that its mining affiliate, PT Freeport
Indonesia, has completed recovery efforts related to the
previously reported October 9, 2003 pit wall slippage at its
Grasberg mining operations in Papua, Indonesia. Eight victims
perished in the incident. All material involved in the affected
mining areas has been removed.
PT-FI has submitted documentation to the Department of Energy and
Mineral Resources and plans to resume normal operations on receipt
of governmental approval expected imminently. PT-FI is on track to
achieve its previously reported estimated 2003 adjusted annual
sales of 1.33 billion pounds of copper and 2.45 million ounces of
gold.
In an event unrelated to the pit wall slippage, on November 22,
2003, regrettably two workers were asphyxiated in an underground
tunnel conveying ore from the Grasberg mine to mill facilities. A
number of other workers reported symptoms. None were injured
seriously and all have been released from the company's medical
facilities.
The incident occurred when ore from the Grasberg surface mine
containing previously unencountered concentrations of elemental
sulphur released fumes in the tunnel. The sulphur was located in a
four-by-five meter area, in a low grade section in the outer
margins of the Grasberg open pit that normally would have been
mined as waste. The event did not involve PT FI's DOZ underground
mine. After completion of assessments by PT-FI and the DEMR
inspectors, PT-FI has resumed operations in conjunction with
taking appropriate preventive actions designed to ensure similar
events do not occur in the future.
FCX explores for, develops, mines and processes ore containing
copper, gold and silver in Indonesia, and smelts and refines
copper concentrates in Spain and Indonesia.
FRONTLINE COMMS: Closes on $500K Financing with Scarborough Ltd.
----------------------------------------------------------------
Frontline Communications Corp. (AMEX: FNT) -- http://www.fcc.net
-- has closed on the first $500,000 of an equity financing of up
to $1 million with Scarborough, Ltd., and granted Scarborough an
option to finance an additional $500,000 within the next 45 days.
The company also restructured the balance of a $550,000 bridge
loan with IIG Equity Opportunities Fund, Ltd.
$100,000 of the proceeds of the financing with Scarborough was
used to partially repay the IIG bridge loan, leaving $325,000
outstanding under the restructured agreement. The balance of the
proceeds will be used for the purchase of inventory by the
company's Provo division, and for operating expenses.
Commenting on the transaction, Frontline CEO Stephen J. Cole-
Hatchard stated, "The completion of this piece of our overall
financing plan allowed us to restructure and extend the IIG bridge
loan in anticipation of our next round of funding, which we hope
to conclude before year end. This money will also assist us in
continuing the execution of our business plan, including the
growth of our calling card distribution division, and the launch
of our new payroll and cash card product lines. We are continuing
our efforts to restructure most of our remaining debt, and hope to
announce similar successful results soon."
Founded in 1995, Frontline Communications Corporation, traded on
the American Stock Exchange under the symbol FNT, has two
operating divisions, Provo and Frontline.
The Provo division -- http://www.provo.com.mx-- acquired by
Frontline Communications Corp. in April, 2003, is a Mexican
corporation which maintains a dominant position within the prepaid
calling card and cellular phone airtime markets in Mexico. Provo
and its affiliates have been in operation for over seven years,
and had combined audited revenue in 2002 of approximately $100
million, with operating profits of over $800,000. The company
currently anticipates expanding existing Provo services to the
continental United States, and intends to begin marketing cash
cards, payroll cards and other forms of payroll and money transfer
services, through both the Frontline and Provo divisions, in the
near future.
The Frontline division provides high-quality Internet access and
Web hosting services to homes and businesses nationwide, and
offers Ecommerce, programming, and Web development services
through its PlanetMedia group, www.pnetmedia.com. Frontline plans
on expanding its current services and offerings beyond the
traditional internet sector in the near future. The Frontline
division had revenue of approximately $5 million in 2002.
* * *
Seeking Additional Financing
In its Form 10-QSB for the quarter ended September 30, 2003, the
Company reported:
"We plan to raise additional financing. The availability of
capital resources is dependent upon prevailing market conditions,
interest rates and our financial condition. In July 2003, we
entered into a common stock purchase agreement with Fusion Capital
Fund II, LLC, whereby, Fusion Capital has agreed to purchase up to
$13 million of our common stock over a 40-month period. The
transaction is subject to satisfaction of several conditions and
there can be no assurance that we will in fact complete the
transaction.
"We believe that our acquisition of Provo will improve our
financial situation in two ways. Our annual expense related to our
status as a public reporting company total approximately $350,000.
With our acquisition of Provo, these costs will be spread over a
considerably larger revenue base, and Provo, as a profitable stand
alone entity, will help to offset these costs. In addition, Provo
will be able to increase its revenue in the near term if
additional working capital is available for inventory procurement.
We also anticipate that our status as a combined entity will
enhance our ability to secure additional debt and/or equity
financing so that we may satisfy our short-term debt obligations
and fund the launch of new product lines, such as the Provo
payroll card, thereby increasing the combined company's revenue
both in the U.S. and Mexico.
"We currently plan to continue both Frontline and Provo
operations, and hope to grow our long distance voice, dedicated
Internet bandwidth and Web site development product lines. Our
board of directors is currently evaluating the possibility of
divesting one or more of its low profit margin product lines in
order to raise cash. Based on current plans, management
anticipates that the cash on hand and cash flow from operations
will satisfy our capital requirements through at least the end of
2003. However, the agreement with Telmex requires Provo to repay
Telmex $3.8 million in November 2003. In addition, we were
required to repay $425,000 due under a bridge financing to IIG
Equity Opportunities Fund, Ltd. on October 3, 2003.
"We are presently attempting to negotiate a further extension with
the noteholder and Telmex. We currently lack the funds to pay
these obligations when they become due. Therefore, in order to
satisfy our debt obligations, we are currently pursuing additional
sources of financing, including potential sources for debt and
equity financing (or a combination of the two), and are exploring
the possibility of selling some of our assets so that we will have
sufficient funds to pay our debts as they become due. There can be
no assurance, however, that such financing will be available on
terms that are acceptable to us, or on any terms."
GAUNTLET ENERGY: Creditors to Consider Proposed Plan on Dec. 4
--------------------------------------------------------------
On June 17, 2003, Gauntlet Energy Corporation obtained an order
from the Court of Queen's Bench of Alberta providing creditor
protection under the Companies' Creditors Arrangement Act. The
Court order provided for the appointment by the Court of a Monitor
and an interim stay of proceedings and restraint of certain rights
and remedies against the Company. The Court has subsequently
granted multiple extensions of the stay period, the most recent of
which is effective to December 5, 2003. The most recent extension
will allow the Company to present a plan of compromise and
arrangement to its creditors on December 4, 2003, and to the Court
on December 5, 2003. The Company's principal secured lender and
the Court appointed Monitor supported the application to the Court
for the extension and presentation of the Plan to the creditors.
The Plan will be funded by the sale of the Company and the
proceeds of certain asset sales. During October and November 2003
the Company closed a disposition of certain petroleum and natural
gas interests as well as the sale of certain seismic rights, which
provided cash proceeds of approximately $7.9 million. The Company
also entered into a Subscription Agreement with Ketch Resources
Ltd. dated October 31, 2003 whereby, upon implementation of the
Plan, Ketch will subscribe for newly issued preferred shares of
the Company for $44.6 million, exclusive of working capital, and
the Company (assets, liabilities and legal entity) will become a
wholly owned subsidiary of Ketch. The Subscription Agreement
contains multiple conditions and requires approval of creditors at
the December 4, 2003 meeting of creditors and the Court on
December 5, 2003.
The meetings of creditors are set for December 4, 2003 to vote on
the proposed Plan that contemplates:
- Full payment to the principal secured lender
- Payment of $3,100,000 to secured creditors, included in
current liabilities, in complete satisfaction of their
claims
- Payment of approximately $4,600,000, subject to working
capital adjustments, to unsecured creditors, included in
current liabilities, in complete satisfaction of their
claims
- No payment to holders of common shares
The Plan and the above payments would result in a compromise of
recorded liabilities of approximately $37 million. The common
shares will thereafter be retracted and all common share purchase
warrants and stock options will be terminated.
The Company also announces that it has conditionally settled, with
no material impact to the Plan, the previously reported claim
relating to its operatorship of two wells in the Brazeau area that
had been scheduled for trial on November 24, 2003. The settlement
is conditional upon the Plan being implemented.
As part of the process to develop a financial restructuring plan
under CCAA, the Company completed independent reserve evaluations
effective August 1, 2003. As a result of the downward reserve
revisions recognized in these evaluations during Q2 2003 and lower
commodity pricing at September 30, 2003, the application of the
ceiling test resulted in a write-down of $98.2 million to property
and equipment for the nine months ended September 30, 2003.
There is no assurance that the Company will be able to complete
any plan of compromise and arrangement and restructure its
financial affairs or that such efforts will improve the financial
condition of the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Under Creditor Protection as of June 17, 2003 under
the Companies' Creditors Arrangement Act)
OVERVIEW
On June 17, 2003, Gauntlet Energy Corporation obtained an order
from the Court of Queen's Bench of Alberta providing creditor
protection under the Companies' Creditors Arrangement Act. The
Court order provided for the appointment by the Court of a Monitor
and an interim stay of proceedings and restraint of certain rights
and remedies against the Company. The Court has subsequently
granted multiple extensions of the stay period, the most recent of
which is effective to December 5, 2003. The most recent extension
will allow the Company to present a plan of compromise and
arrangement to its creditors on December 4, 2003 and to the Court
on December 5, 2003. The Company's principal secured lender and
the Court appointed Monitor supported the application to the Court
for the extension and presentation of the Plan to the creditors.
The Plan will be funded by the sale of the Company and the
proceeds of certain asset sales. During October and November 2003
the Company closed a disposition of certain petroleum and natural
gas interests as well as the sale of certain seismic rights, which
provided cash proceeds of approximately $7.9 million. The Company
also entered into a Subscription Agreement with Ketch Resources
Ltd. dated October 31, 2003 whereby, upon implementation of the
Plan, Ketch will subscribe for newly issued preferred shares of
the Company for $44.6 million, exclusive of working capital, and
the Company (assets, liabilities and legal entity) will become a
wholly owned subsidiary of Ketch. The Subscription Agreement
contains multiple conditions and requires approval of creditors at
the December 4, 2003 meeting of creditors and the Court on
December 5, 2003.
The meetings of creditors are set for December 4, 2003 to vote on
the proposed Plan that contemplates:
- Full payment to the principal secured lender
- Payment of $3,100,000 to secured creditors, included in
current liabilities, in complete satisfaction of their
claims
- Payment of approximately $4,600,000, subject to working
capital adjustments, to unsecured creditors, included in
current liabilities, in complete satisfaction of their
claims
- No payment to holders of common shares
The Plan and the above payments would result in a compromise of
recorded liabilities of approximately $37 million. The common
shares will thereafter be retracted and all common share purchase
warrants and stock options will be terminated.
The Company's ability to continue as a going concern is dependent
on the ability of the Company to restructure its financial
affairs, obtain creditor approval of the Plan at the December 4,
2003 creditors meeting, obtain Court approval on December 5, 2003,
receive the continuing support of its lender and continue
operations. There is no assurance that the Company will obtain
creditor approval of the Plan at the December 4, 2003 creditors
meeting and be able to restructure its financial affairs or that
such efforts will improve the financial condition of the Company.
During Q3 2003 the Company experienced a cash outflow from
operations due to the significant corporate restructuring costs
incurred. The Company's cash flow from operations for the first
nine months of 2003 was positive but significantly lower than the
corresponding period of 2002 due to the significant restructuring
costs incurred. The Company reported a loss during Q3 2003 as
opposed to the net income recorded during Q3 2002 on a quarter and
year-to-date basis due to the write-down of property and equipment
during Q2 and Q3 2003.
Natural gas production volumes for Q3 2003 were significantly
lower than Q3 2002 on a quarter and year-to-date basis primarily
due to lower Northern area production as well as declines at the
Three Hills Creek and Brazeau areas. The Company's August 1, 2003
independent reserve report indicated a downward revision since the
April 1, 2003 reserve evaluation to proven reserves primarily
related to our Three Hills Creek property.
As at September 30, 2003, the Company's debt and working capital
deficiency totaled $85.2 million which includes obligations
subject to builders' liens and $43.5 million of secured bank debt.
The terms of the current Loan Extension Agreement are subject to
the Company complying with all provisions of the CCAA order and
the interim stay of proceedings remaining in force. The terms of
the current Loan Extension Agreement do not constitute a waiver of
the Company's defaults under the original Loan Extension Agreement
dated April 10, 2003, and the lender has reserved all rights and
remedies arising from such defaults.
RESULTS OF OPERATIONS
Petroleum and Natural Gas Sales
Petroleum and natural gas sales for Q3 2003 were 17% lower than Q3
2002 as the 55% decrease in natural gas sales volumes was
partially offset by an 89% increase in the natural gas price.
Natural gas production decreased as Northern area production
declined significantly in addition to production declines in the
Three Hills Creek and Brazeau areas.
Petroleum and natural gas sales for the first nine months of 2003
were 7% higher than the comparable period of 2002 as the 96%
increase in natural gas sales prices more than offset the 44%
decrease in natural gas production volumes. Production volume
changes were attributable to the properties previously discussed.
Royalties and the Alberta Royalty Tax Credit (ARTC)
Royalty expense for Q3 2003 decreased 54% from Q3 2002 due to
significant gas cost allowance and custom processing credits
received from the Crown and a lower revenue base. The average
royalty rate declined from 26% in Q3 2002 to 14% during Q3 2003
due to the previously mentioned credits from the Crown. The
ARTC in Q3 2003 was lower than Q3 2002 due to a reassessment of
prior years ARTC.
Royalty expense for the first nine months of 2003 decreased 26%
from the comparable 2002 level due to the previously mentioned
credits from the Crown. The average royalty rate declined to 17%
for the first nine months of 2003 from 24% during the comparable
period of 2002 due to the previously mentioned factors. ARTC on a
year-to-date basis during 2003 was also lower than the comparable
2002 due to the previously mentioned reassessment.
Operating Expenses
Operating expense in Q3 2003 decreased 20% from Q3 2002 levels
primarily due to the 55% decrease in boe production volumes.
Operating costs on a unit of production basis increased to
$9.98/boe in Q3 2003 from $5.64/boe in Q3 2002. The increase to
unit operating costs was due to higher fixed costs and lower
production volumes in the Northern area and Central Alberta
facilities.
Operating expense for the first nine months of 2003 decreased 6%
from the comparable period of 2002 primarily due to lower
production volumes. Operating costs on a unit of production basis
increased to $9.08/boe for the first nine months of 2003 from
$5.43/boe during the first nine months of 2002 due to higher fixed
costs and lower production volumes in the Northern area and
Central Alberta facilities.
General and Administrative Expenses
General and administrative expenses increased 301% to $2,289,000
in Q3 2003 as compared to $571,000 during Q3 2002 primarily due to
a provision for a corporate indemnity related to the November 28,
2002 prospectus litigation, which will be subject to compromise
under the Plan. General and administrative expenses increased
substantially on a unit of production basis to $12.75/boe in Q3
2003 from $1.44/boe in Q3 2002 as the impact of lower
production volumes and much higher costs increased the rate. The
Company capitalized no general and administrative costs during Q3
2003 versus $325,000 which was capitalized during Q3 2002.
General and administrative expenses for the first nine months of
2003 were 102% higher than the corresponding period of 2002 and
increased on a unit of production basis to $6.96/boe in 2003 from
$1.94/boe during 2002 due to the previously mentioned provision
and the provision for severance of the former CEO during Q2 2003.
The Company capitalized $311,000 of general and administrative
costs directly attributable to exploration and development
activities during the first nine months of 2003 versus $1,357,000
during the corresponding period of 2002.
Corporate Restructuring Costs
During Q3 2003 the Company continued its process to pursue
strategic alternatives and develop a plan of compromise and
arrangement to present to its Creditors. Costs specifically
related to these processes are recognized as corporate
restructuring costs and include the cost of repudiating executory
contracts (gas gathering, processing and transmission contracts
which will be subject to compromise under the Plan), professional
fees, additional credit facility costs and consulting and advisory
services.
Interest Expense
Interest expense during Q3 2003 and for the first nine months of
2003 was 83% and 90% higher than the corresponding periods of 2002
due to higher debt levels and higher interest rates.
Depletion and Depreciation Expense
Depletion and depreciation expense increased significantly during
Q3 2003 to $2,941,000 ($16.38/boe) from $1,969,000 ($4.97/boe) in
Q3 2002. The increase is due to significant downward reserve
revisions based on independent engineers reserve evaluations at
the Snowfall area recognized at year-end 2002 based on our 2003
winter drilling results as well as negative reserve revisions
based on independent engineers reserve evaluations at our Three
Hills Creek property recognized during 2003.
Overall depletion and depreciation expense increased significantly
to $14,239,000 ($22.96/boe) for the first nine months of 2003 as
compared to $5,245,000 ($4.74/boe) for the corresponding period of
2002. The increase is due to the previously mentioned negative
reserve revisions.
Write-down of Property and Equipment
The Company received updated reserve evaluations from its
independent engineers effective August 1, 2003. Negative reserve
revisions were recognized in comparing these reports to the
previously completed independent engineers reserves effective
April 1, 2003. As a result of the negative reserve revisions
recognized during Q2 2003 which were based on the Company's
recently completed independent reserve evaluations effective
August 1, 2003 and lower commodity pricing a write-down of
property and equipment was recognized during Q2 and Q3 2003. Based
on reserves and natural gas price at June 30, 2003 ($6.60/mcf) and
September 30, 2003 ($5.52/mcf) versus March 31, 2003 ($7.88/mcf),
the ceiling test resulted in a write-down to property and
equipment of $58.5 million for Q2 2003 and $39.7 million for Q3
2003 for a year-to-date write-down of $98.2 million.
Income Taxes
Future income taxes were nil in Q3 2003 versus an expense of
$220,000 during Q3 2002 due to the significant decrease to income
(loss) before taxes. The Company was not able to recognize a
future income tax recovery during Q3 2003 due to the uncertainty
of future profitable operations. A capital tax expense of $21,000
was recognized during Q3 2003 versus an expense of $54,000 during
Q3 2002 due to the write-down of property and equipment resulting
in a significantly smaller capital base for the Company. Capital
taxes were the only cash taxes payable in the periods.
The Company recognized a recovery in future income taxes for the
first nine months of 2003 of $18,675,000 versus an expense of
$1,593,000 for the corresponding period of 2002 due to the
previously mentioned write-downs. Capital taxes for the nine
months ended September 30, 2003 were lower than the corresponding
2002 period due to the write-down of property and equipment
resulting in a significantly smaller capital base for the Company.
Capital taxes were the only cash taxes payable in the periods.
As at September 30, 2003, after fully renouncing all flow-through
obligations, the Company has tax pools available in excess of
recorded assets, which may generate a benefit to the Company. This
benefit is not recognized on the financial statements as an asset
since there is not sufficient assurance that the Company will be
able to realize this benefit. All flow-through obligations related
to the November 28, 2002 short-form prospectus have been satisfied
and fully renounced to investors and are recorded in the financial
statements.
Cash Flow and Netback
Cash flow from operations, which is determined before changes in
non-cash working capital, is used by the Company as a performance
measure. Cash flow from operations does not have a standardized
meaning prescribed by Canadian Generally Accepted Accounting
Principles and therefore may not be comparable with the
calculation of similar measures for other companies. Cash flow
from operations per share is calculated using the same share bases
which are used in the determination of earnings per share.
The Company recognized a cash outflow from operations of $3.6
million in Q3 2003 versus a cash inflow of $2.4 million in Q3 2002
and decreased on a per share basis to an outflow of $0.17 ($0.17 -
diluted) during Q3 2003 versus an inflow of $0.14 ($0.12 -
diluted) during Q3 2002. Cash flow from operations decreased to
$4.0 million for the first nine months of 2003 from $8.5 million
during the corresponding period of 2002 and decreased on a per
share basis to $0.19 ($0.19 - diluted) for 2003 versus $0.51
($0.45 - diluted) for 2002. The decrease in both time periods is
due to considerably higher natural gas prices realized during 2003
versus 2002 being more than offset by the impact of the
significantly lower production volumes and higher costs.
Net Income (Loss)
The Company experienced a loss of $46,242,000 in Q3 2003 versus
income of $234,000 in Q3 2002 and on a per share basis a loss of
$2.21 ($2.21 - diluted) was recognized in Q3 2003 versus income of
$0.01 ($0.01 - diluted) during Q3 2002. A loss of $89,779,000 was
recognized during the first nine months of 2003 versus income of
$1,702,000 during the corresponding period of 2002 and on a per
share basis a loss of $4.29 ($4.29 - diluted) was recognized in
the 2003 period versus income of $0.10 ($0.09 - diluted) during
the 2002 period. The loss recognized during both periods is
primarily attributable to the write-down of property and equipment
with corporate restructuring costs and general and administrative
expense provisions also contributing to the loss.
LIQUIDITY AND CAPITAL RESOURCES
The combined debt and working capital deficiency at September 30,
2003 was $85.2 million as compared to $32.7 million at December
31, 2002. This increase is a result of the Company's $56.5 million
2003 capital expenditure program and its lack of success.
At November 27, 2003, the Company had the following securities
outstanding: 20,950,215 common shares; 1,420,847 common share
purchase warrants exercisable at a price of $1.00 per share and
1,144,377 options which are exercisable at an average price of
$3.60 per share.
On June 17, 2003, the Company obtained an order from the Court
providing creditor protection under the CCAA. The Court order
provided for the appointment by the Court of a Monitor and an
interim stay of proceedings and restraint of certain rights and
remedies against the Company. The Court has subsequently granted
multiple extensions of the stay period, the most recent of which
is effective to December 5, 2003. The most recent extension will
allow the Company to present the Plan to its creditors on December
4, 2003 and to the Court on December 5, 2003. The Company's
principal secured lender and the Court appointed Monitor supported
the application to the Court for the extension and presentation of
the Plan to the creditors.
The Plan will be funded by the sale of the Company and the
proceeds of certain asset sales. During October and November 2003
the Company closed a disposition of certain petroleum and natural
gas interests as well as the sale of certain seismic rights, which
provided cash proceeds of approximately $7.9 million. The Company
also entered into a Subscription Agreement with Ketch dated
October 31, 2003 whereby, upon implementation of the Plan, Ketch
will subscribe for newly issued preferred shares of the Company
for $44.6 million, exclusive of working capital, and the Company
(assets, liabilities and legal entity) will become a wholly owned
subsidiary of Ketch. The Subscription Agreement contains multiple
conditions and requires approval of creditors at the December 4,
2003 meeting of creditors and the Court on December 5, 2003.
The meetings of creditors are set for December 4, 2003 to vote on
the proposed Plan that contemplates:
- Full payment to the principal secured lender
- Payment of $3,100,000 to secured creditors, included in
current liabilities, in complete satisfaction of their
claims
- Payment of approximately $4,600,000, subject to working
capital adjustments, to unsecured creditors, included in
current liabilities, in complete satisfaction of their
claims
- No payment to holders of common shares
The Plan and the above payments would result in a compromise of
recorded liabilities of approximately $37 million. The common
shares will thereafter be retracted and all common share purchase
warrants and stock options will be terminated.
A Loan Extension Agreement dated April 10, 2003 was entered into
by the Company and the lender as a result of material downward
reserve revisions indicated in the Company's April 1, 2003
independent reserve evaluation of its Northern area reserves, and
the minimal success of the Company's 2002/2003 winter drilling
program which caused the Company's debt levels to increase
substantially. These events further resulted in a reduction of the
Company's maximum borrowing base below the aggregate of the
amounts drawn under the facility and the Company's working capital
deficiency, and the Company being in default of the required loan
covenants. Under the Loan Extension Agreement, the amount
available under the facility was reduced to $49.5 million and the
terms under which these funds were available were amended. The
lender also retained the right to further review the facility at
any time up to June 30, 2003 when the facility was to be repaid in
full, and also retained the right to demand repayment of the
facility at any time.
As a result of the Company failing to repay the amounts
outstanding under its revolving production loan facility in full
on June 30, 2003 the Company and the lender entered into
Subsequent Loan Extension Agreements which reduced the amount
available under the facility to $40.0 million, effective November
4, 2003, and extended the date for repayment of the facility,
including outstanding accrued interest, to December 5, 2003. The
terms of the Subsequent Loan Extension Agreements are subject to
the Company complying with all provisions of the CCAA order and
the interim stay of proceedings remaining in force. The terms of
the Subsequent Loan Extension Agreement do not constitute a waiver
of the Company's defaults under the Loan Extension Agreement dated
April 10, 2003, and the lender has reserved all rights and
remedies arising from such defaults.
As at September 30, 2003, the Company's debt plus working capital
deficiency totaled $85.2 million, and for the nine month period
ended September 30, 2003, the Company experienced a net loss of
$89.8 million. The aggregate of the amounts drawn under the credit
facility plus the Company's working capital deficiency at
September 30, 2003 exceeded the maximum borrowing limit available
under the Company's revolving production loan facility.
The Company's ability to continue as a going concern is dependent
on the ability of the Company to restructure its financial
affairs, obtain creditor approval of the Plan at the
December 4, 2003 creditors meeting, obtain Court approval on
December 5, 2003, receive the continuing support of its lender and
continue operations. There is no assurance that the Company will
obtain creditor approval of the Plan at the December 4, 2003
creditors meeting and be able to restructure its financial affairs
or that such efforts will improve the financial condition of the
Company. The ultimate outcome of the Company's financial
restructuring plan and an estimate of contingent losses cannot be
reasonably determined at this time, however, if the going concern
assumption were not appropriate, significant adjustments would be
necessary to the reported carrying values of the Company's assets
and liabilities, revenues and expenses. In such circumstances the
carrying value of the Company's property and equipment in the
amount of $55.4 million may not reflect fair market value of these
assets and the recorded liabilities will be subject to compromise.
The Company's September 30, 2003, balance sheet discloses a
working capital deficit of about $85.2 million while total
shareholders' equity deficit tops $30.4 million.
GENUITY: Wants Court to Revise Amounts of Eleven Verizon Claims
---------------------------------------------------------------
Genuity Inc., and its debtor-affiliates object to the Verizon's
Claims Nos. 4178, 4179, 4180, 5466, 5467, 5469, 5513, 5514, 5516,
5535 & 5747 on a number of grounds. Don S. DeAmicis, Esq., at
Ropes & Gray LLP, in Boston, Massachusetts, relates that the
Debtors disapprove of the amounts asserted in the 11 claims.
Accordingly, the Debtors ask the Court to revise the claim amounts
to the proposed amounts:
Claim Claim Proposed
Description Number Amount Amount
----------- ------ ------ --------
Verizon 4178 $1,169,116,458 $1,169,116,458
Investments 4179
Loan Claim 4180
Verizon 4178 86,233,527 61,496,037
Wholesale, 4179
Enterprise 4180
Solutions &
Retail
Services
Claims for 4178 527,857 207,154
Voice System 4179
Maintenance 4180
Claims for 4178 275,616 122,090
Patent 4179
Prosecution 4180
Expenses
Verizon 4178 666,148 231,983
Landlord 4179
Claims 4180
Electronic 4178 14,588 7,098
Repair 4179
Services 4180
Claims for 4178 7,296,397 7,296,397
Shipment of 4179
Modems 4180
Utility 4178 11,876 -
Charges 4179
4180
Claims for 4178 852,230 852,230
Collocation 4179
Services 4180
Claims for Voice 4178 572,012 572,012
Termination & 4179
International 4180
Private Line
Services
Claims for 4178 1,047 1,047
Installation of 4179
RG6 cable & 4180
Connectors in
Elmsford, NY
Claims for Fees 4178 440,152 440,152
due under 4179
Financial Support 4180
Agreements
Tax Audit Fees 4178 500,000 -
4179
4180
K-Force Contract 4178 3,230,916 3,163,469
Claims 4179
4180
Circuit Rejection Damages Claims
In addition to these claims, Verizon also asserts an aggregate of
$4,106,669 with respect to certain rejected contracts under which
it provided telecommunications services, primarily lines or
"circuits" to the Debtors, bearing Claim Nos. 5466, 5467, 5469,
5513, 5514, 5516, 5535 and 5747. The Debtors object to
$3,070,114 of the $4,106,669 Circuit Rejection Damages Claim.
Mr. DeAmicis says with respect to $1,787,971 of the Circuit
Rejection Damages Claim, Verizon has not indicated which circuits
it is claiming rejection damages for. Thus, the Debtors strongly
believe that Verizon may be claiming amounts not due. Mr.
DeAmicis points out that:
-- $149,217 of the aggregate amount is duplicative of amounts
claimed under Verizon's MOU claim;
-- Certain of the amounts claimed for $115,841 are for month-
to-month circuits that do not have any termination
liability;
-- Another $107,942 relates to circuits that the Debtors did
not reject; and
-- $470,094 is in excess of the amount of damages calculated
by the Debtors.
Mr. DeAmicis adds that Claim No. 5747 for $439,048 has only
recently been filed and is being reviewed.
Objections Common to All Claims
The Debtors' objections that are common to one or more of
Verizon's Claims are:
A. Section 502(b)(4) of the Bankruptcy Code
Section 502(b)(4) caps the claims of insiders for services
rendered. At all relevant times, Verizon had the right to
appoint a member of the Debtors' board of directors. Under
Genuity's Certificate of Incorporation, no major corporate
decision could be taken without Verizon's approval. Verizon
was the Debtors' second largest customer, and the Debtors
purchased a large amount of services and products from
Verizon. For these reasons, at all relevant times
prepetition, Verizon was an insider of the Debtors.
Numerous of Verizon's claims made are for services rendered,
including telecommunications services. Accordingly, Mr.
DeAmicis asserts that to the extent that:
-- the rates Verizon charged the Debtors were unreasonable,
the claims should be disallowed; and
-- tariffs or other contractual provisions impose a penalty
or liquidate damages that are unreasonable even in
hindsight, the Court should review the insider claim for
reasonableness.
B. Present Value of Claims
Mr. DeAmicis tells the Court that certain of Verizon's Claims
do not compute damages for many of their components on a
present-value basis as of the Petition Date, as required by
Section 502. The Verizon Claims should be disallowed to the
extent that they seek amounts in excess of the net present
value, at a reasonable discount rate, of the damages
allowable.
C. Penalty Claims
To the extent that Verizon's Claims include penalties, these
amounts are disallowable pursuant to Section 105.
D. Setoff and Recoupment
To the extent that Verizon asserts claims for recoupment or
set-off, the Debtors likewise object to the claims.
E. Claims Already Paid
The Debtors already paid various of Verizon's asserted amounts
as administrative expenses or cure of defaults, necessary to
assume and assign executory contracts. Hence, the amounts are
no longer allowable.
F. Failure to Identify Claimant
Some of Verizon's Claims are generally improper in that they
fail to identify what creditor is asserting what claim.
G. Failure to Identify Debtor
Some of Verizon's Claims fails to identify, as required by the
Bankruptcy Code, Bankruptcy Rules and the Bar Order relating
to prepetition claims, the Debtor against which particular
claims are asserted.
H. Insufficient Detail
Certain of Verizon's Claims provide no detail or supporting
documentation. Verizon has been unwilling or unable to
provide documentation with respect to certain portions of its
claim. Hence, these amounts should be disallowed. (Genuity
Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
GILAT SATELLITE: Spacenet Launches Connexstar Marketing Program
---------------------------------------------------------------
Gilat Satellite Networks Ltd. (Nasdaq:GILTF) announced the
introduction of the Connexstar Franchise Co-Marketing Program, a
unique collection of resources for Spacenet VSAT network customers
to help provide their franchisees or members with broadband
connectivity easily and quickly.
The program is designed to offer franchisers or retail
cooperatives the tools they need to facilitate broadband adoption
and implementation by their affiliates. As large franchise and
cooperative organizations become more and more dependant on
enterprise automation and rapid response time for POS
applications, broadband connectivity is becoming essential to the
successful deployment of these new applications. By bringing these
affiliates online with Connexstar, franchise-based businesses can
deploy new IT applications and infrastructures, simplify
technology processes, providing value to franchisees and
increasing their own revenue. The Connexstar Franchise program,
specially tailored to the unique needs of franchise and
cooperative organizations, offers options for both generic
broadband connectivity for Internet access, and total customized
enterprise-wide broadband solutions.
The Franchise Co-Marketing Program also offers economic benefits
through reduced pricing for franchisees and available direct
incentives to the franchiser. Besides favorable economics, the
program provides a broad range of additional benefits to
franchisers, including a dedicated Franchise Program Manager,
optional custom-developed collateral and web/intranet content,
support for direct mail campaigns to franchisees, press release
and media support, content and support for educational "webinars,"
intra-company tradeshow support and online tools for sales order
management.
Spacenet announced that its inaugural franchisee marketing program
partner will be leading hardware retail cooperative Do it Best
Corp. "We have been very pleased with our experience with
Connexstar, and we are excited about the opportunity to accelerate
our members' adoption of this technology," said Kay Williams, Do
it Best Corp. vice president of Information Technology. "When Do
it Best Corp. members get online with Connexstar broadband
service, it's a win-win situation for us, and we are looking
forward to improving our information and resources for educating
our members about the benefits that Connexstar can offer them."
Spacenet Vice President of Sales and Marketing David Shiff said,
"Broadband connectivity is becoming a critical necessity for these
types of businesses -- but because of their organizational
structure, it is frequently impossible for the parent
organizations to mandate adoption of a uniform connectivity
platform across their affiliates. This program has been developed
expressly to address that challenge and we believe the value it
brings corporate management and the franchisee community will make
it rewarding for all concerned."
Spacenet has already extended the Franchise Co-Marketing Program
to a number of other leading national Franchise and Cooperative
organizations who have contracted with Spacenet for Connexstar
service, and has already made this program a key component of its
overall solution for these types of organizations going forward.
Connexstar provides commercial-grade, always-on broadband
connectivity to multi-site enterprises of any size, anywhere in
the continental United States. The service supports a wide range
of business applications, including high-speed credit
authorization, in-store licensed music, distance learning, content
multicasting and secure private networking services all through a
single, compact, remote access device incorporating advanced
networking and routing functionality.
Spacenet Inc. provides two-way satellite-based broadband
networking solutions throughout North America under the Connexstar
brand. Spacenet offers connectivity, provisioning, operations and
maintenance services to enterprise and government customers,
including some of the largest satellite-based networks in the
world. Spacenet is based in McLean, Virginia, and is a wholly
owned subsidiary of Gilat Satellite Networks, Ltd. Visit Spacenet
at http://www.spacenet.com
Gilat Satellite Networks Ltd., with its global subsidiaries
Spacenet Inc., Gilat Latin America and rStar Corporation, is a
leading provider of telecommunications solutions based on Very
Small Aperture Terminal satellite network technology -- with
nearly 400,000 VSATs shipped worldwide. Gilat, headquartered in
Petah Tikva, Israel, markets the Skystar Advantage(R), DialAw@y
IP(TM), FaraWay(TM), Skystar 360E(TM) and SkyBlaster(a) 360 VSAT
products in more than 70 countries around the world. Gilat
provides satellite-based, end-to-end enterprise networking and
rural telephony solutions to customers across six continents, and
markets interactive broadband data services. Gilat is a joint
venture partner with SES GLOBAL, and Alcatel Space and SkyBridge
LP, subsidiaries of Alcatel, in SATLYNX, a provider of two-way
satellite broadband services in Europe. Skystar Advantage, Skystar
360E, DialAw@y IP and FaraWay are trademarks or registered
trademarks of Gilat Satellite Networks Ltd. or its subsidiaries.
Visit Gilat at http://www.gilat.com.
At September 30, 2003, Gilat Satellite's balance sheet shows a
total shareholders' equity deficit of about $7 million.
GLOBAL CROSSING: Wants Plan Exclusivity Extended to December 19
---------------------------------------------------------------
The Global Crossing Debtors ask the Court to extend their
exclusive periods to:
(a) file a Chapter 11 plan to the earlier of:
-- December 19, 2003; or
-- in the event the Purchase Agreement is terminated in
accordance with its terms by any of the concerned
parties, two weeks from the termination date; and
(b) solicit acceptances of that plan until 60 days after the
extended Exclusive Filing Period.
The Debtors believe that extending their Exclusive Filing Period
and Exclusive Solicitation Period will allow them, in the
unlikely situation that the Transaction cannot close, to propose
and solicit a new reorganization plan without the distractions of
competing plans.
Although the Debtors have received all the necessary regulatory
approvals for the Transaction, the Parties to the Purchase
Agreement need additional time to prepare for the Closing.
Although they stand on the brink of emerging from Chapter
11, due to the complexity of the Transaction and the unforeseen
complications relating to the Collateral Package, the Debtors
maintain that they need an additional extension to finalize all
the documents needed for the Closing.
The Exclusivity Periods have permitted the Debtors to negotiate
and reach reasonable agreement with the Creditors Committee and
the Agent. If the Debtors do not maintain the exclusive right to
present and file a plan of reorganization and solicit
acceptances, the Debtors will lose the benefit derived from
these negotiations that have permitted the parties-in-interest to
amicably work together in the absence of competing plans to form
reasonable terms of reorganization. (Global Crossing Bankruptcy
News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 215/945-
7000)
INSPEX INC: Case Summary & 20 Largest Unsecured Creditors
---------------------------------------------------------
Debtor: Inspex, Inc.
47 Manning Road
Billerica, Massachusetts 01821
Bankruptcy Case No.: 03-46714
Type of Business: The debtor is an innovative developer of
data management and wafer inspection systems
for the semiconductor industry. See
http://www.inspex.com/
Chapter 11 Petition Date: November 21, 2003
Court: District of Massachusetts (Worcester)
Judge: Henry J. Boroff
Debtor's Counsel: Melvin S. Hoffman, Esq.
Looney & Grossman
101 Arch Street
Boston, MA 02110
Tel: 617-951-2800
Total Assets: $14,441,579
Total Debts: $11,419,438
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Bank of Tokyo Mitsubishi Bank loan $4,472,732
1251 Avenue of The Americas
New York, NY 10172
Mizuho Bank Bank loan $2,526,080
Harborside Financial Center
1800 Plaza Tan
Jersey City, NJ 07311
Jeol USA Inc. Trade debt $190,000
Lelca. Inc. Trade debt $71,995
ISOA, Inc. Trade debt $30,000
Mass Mutual Trade debt $27,551
Dalsa, Inc. Trade debt $19,893
Polytech PI, Inc. Trade debt $13,585
Dover Instrument Corp. Trade debt $5,600
Oracle Corporation Trade debt $5,000
Princeton Technology Corp. Trade debt $469
Unifirst Trade debt $363
DJ Fabricators, Inc. Trade debt $315
J&C Industries, Inc. Trade debt $290
Mass Mutual Life Insurance Trade debt $233
Mesa Electronics Trade debt $142
Anco Engineering, Inc. Trade debt $127
Integra Manufacturing Corp. Trade debt $110
Hellind Electronics Inc. Trade debt $44
Mills Ind. Inc. Trade debt $42
INTEGRATED HEALTH: IHS Liquidating Gets More Time to File Report
----------------------------------------------------------------
Alfred Villoch, III, Esq., at Young, Conaway, Stargatt & Taylor,
LLP, in Wilmington, Delaware, related that Rule 5009-1(a) of the
Local Rules of Bankruptcy Practice and Procedure of the United
States Bankruptcy Court for the District of Delaware provides
that the Court will enter a final decree at the expiration of 180
days after the entry of an order confirming a Chapter 11 Plan,
unless a party-in-interest files a motion to delay the entry of a
final decree. Pursuant to Local Rule 5009-1(a), the 180-day
period is set to expire on November 10, 2003.
Local Rule 5009-1(c) provides that a debtor will file a final
report and account in the form prescribed by the United States
Trustee the earlier of 150 days after entry of the confirmation
order or 15 days before the hearing on any motion to close the
case.
Consequently, IHS Liquidating LLC sought and obtained Court Nod
to:
(a) delay the automatic entry of a final decree closing these
cases until February 9, 2004; and
(b) extend the date for filing a final report and accounting
to the earlier of January 6, 2004 or 15 days before the
hearing on any motion to close the case. (Integrated Health
Bankruptcy News, Issue No. 67; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
JACOBSON STORES: Tomorrow is the Administrative Claims Bar Date
---------------------------------------------------------------
The U.S. Bankruptcy Court for the Eastern District of Michigan
sets 5:00 p.m. Eastern Time tomorrow, Dec. 2, 2003, as the
deadline for all holders of Administrative Claims against JS
Stores, Inc. (fka Jacobson Stores Inc.), and its debtor-
affiliates, on account of claims arising between January 15, 2002,
through Oct. 31, 2003, to file written proofs of claim.
A signed original proof of claim plus one copy must be filed with
the Claims Agent. Forms must be addressed to:
If sent by mail:
Donlin, Recano & Company, Inc.
As a Agent for the United States Bankruptcy Court
Re: JS Stores, Inc., f/k/a Jacobson Stores Inc.
PO Box 2039
Murray Hill Station
New York, NY 10156
If sent by hand or overnight courier:
Donlin, Recano & Company, Inc.
As a Agent for the United States Bankruptcy Court
Re: JS Stores, Inc., f/k/a Jacobson Stores Inc.
419 Park Avenue South
New York, NY 10016
Jacobson Stores Inc., and its debtor-affiliates filed for
Chapter 11 relief on Jan. 15, 2002, (Bankr. E.D. Mich. Case No.
02-40957). Paul Traub, Esq., Steven E. Fox, Esq., Maura Russell,
Esq., at Traub, Bonacquist, & Fox LLP represent the Debtors as
they liquidate.
KAISER: Selling Parcel 2 Surplus Property to Hanson for $1.6MM
--------------------------------------------------------------
Kaiser Aluminum Corporation and its debtor-affiliates report that
their potential sale of Parcels 3, 4 and 6B -- surplus properties
located near their alumina smelter in Mead, Washington --
generated interests in Parcel 2 as well as additional parcels 2A
and 2B.
Consisting of 157.23 acres, Parcel 2 is near, but not contiguous
with, the Debtors' alumina smelter in Mead, Washington. Parcel 2
includes a coke calciner plant, which the Debtors used in
connection with the operation of the Mead Facility. The calciner
plant processes green coke -- removing volatiles -- to prepare it
for manufacturing into anodes or pot cathodes at the Mead
Facility.
In connection with the marketing efforts related to the Mead
Properties, the Debtors and Hanson Industries, Inc., which owns
property adjacent to Parcel 2, entered into discussions regarding
Hanson's potential purchase of Parcel 2. The Debtors negotiated
a purchase and sale agreement with Hanson, pursuant to which they
sell Parcel 2 to Hanson for $1,636,000. Although the sale of
Parcel 2 includes the calciner plant, pursuant to the Hanson Sale
Agreement, the Debtors maintain ownership of the coke calciner
equipment and the right to use the plant and process green coke
for a period of one year after the closing. This arrangement
enables the Debtors to transition this function elsewhere.
Hanson will obtain ownership of the coke calciner equipment if
the Debtors fail to relocate it within one year after the
closing.
Because Hanson owns adjacent real property similar to Parcel 2,
the Debtors believe that Hanson is uniquely situated to undertake
the transaction contemplated in Sale Agreement and is the logical
party to whom Parcel 2 should be sold. Moreover, the Debtors
believe that an auction is unlikely to be any benefit in the
disposition of Parcel 2 and could actually be counterproductive.
Consequently, the Debtors seek the Court's authority to sell
Parcel 2 to Hanson, without subjecting Parcel 2 to bidding
procedures and a potential auction. The Debtors will sell
Parcel 2, free and clear of liens, claims and encumbrances and
other interests. If any, such liens, claims and encumbrances and
other interests will attach to the proceeds of the sale with the
same validity and priority as they attached to Parcel 2.
The material terms of the Hanson Sale Agreement are:
(a) The Debtors will sell Parcel 2 together with:
* all buildings, fixtures, equipment and other
improvements, including all rights, titles and
interests of the Debtors in and to easements,
appurtenances, rights and privileges;
* all rights, title and interests in all permits,
certificate, approvals, and licenses -- to the extent
freely assignable -- including certificates of
occupancy and conditional use and other permits; and
* all appurtenant rights titles, and interests of the
Debtors to water rights;
(b) Parcel 2 is being sold subject to certain limitations, and
excludes certain fixtures, equipment and personal
property. Expressly excluded is the Debtors' coke
calcining equipment. The Debtors retain ownership of, and
the right to operate, the equipment for one year after
the closing. Hanson will obtain ownership of the calciner
equipment if the Debtors fail to relocate within one year
of the closing;
(c) The Debtors are not transferring any intellectual property
rights, except for potential rights of contribution,
reimbursement or receivables they may have against third
parties with respect to certain environmental
contamination matters. The Debtors have the absolute and
exclusive proprietary right to all names, marks, trade
names, trademarks and corporate symbols and logos they
use;
(d) Parcel 2 is being sold on an "as is, where is" basis with
all faults and without any warranties, representations or
guarantees, either express or implied, as to its
condition, fitness for any particular purpose,
merchantability, or any other warranty of any kind,
nature, or type from or on behalf of the Debtors;
(e) Hanson is required to deposit $50,000 in earnest money
with Spokane County Title Company -- the Parcel 2 Escrow
Company -- upon execution of the Hanson Sale Agreement.
The earnest money will be credited towards the purchase
price upon closing of the sale. Except in limited
circumstances, the earnest money cannot be refunded after
the due diligence period expires on December 4, 2003;
(f) Hanson is required to deposit the cash balance of the
purchase price, after taking into account the earnest
money deposited, with the Parcel 2 Escrow Company, 10 days
after the Court approves the Hanson Sale Agreement; and
(g) If an auction is held with respect to Parcel 2 and Hanson
is not the successful bidder at the auction, Hanson will
be entitled to receive reimbursement of the lesser of:
-- its reasonable out-of-pocket expenses incurred in
connection with the purchase of Parcel 2; or
-- 3% of the purchase price, payable upon the closing of
Parcel 2 to a purchaser other than Hanson.
The Debtors contemplate selling Parcels 2A and 2B through
competitive bidding and auction. In the event that the Court
directs that Parcel 2 be subjected to competitive bidding, the
Debtors proposed to sell Parcel 2 in accordance with the bidding
procedures proposed for Parcels 2A and 2B.
Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, in
Wilmington, Delaware, states that because the Debtors are
retaining the right to use the coke calciner plant equipment with
the right to operate the plant for one year and its is currently
more economical to purchase calcined coke than to purchase and
calcinify green coke, sale of Parcel 2 will not adversely impact
any restart of the Mead Facility.
Mr. DeFranceschi informs the Court that the Hanson Sale was
negotiated at arm's length. The Hanson Sale Agreement represents
the most favorable terms on which Parcel 2 could be sold. (Kaiser
Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service,
Inc., 215/945-7000)
KB HOMES: Fitch Affirms BB+ Senior Unsecured Debt Rating
--------------------------------------------------------
Fitch Ratings affirms KB Home's (KBH) 'BB+' senior unsecured debt
and 'BB-' senior subordinated debt ratings. The Rating Outlook has
been changed to Positive from Stable.
This change reflects KB Home's solid, consistent profit
performance in recent years and the expectation that the company's
credit profile will continue to improve as it executes its
business model and embarks on a new period of growth. The ratings
also take into account the company's primary focus on entry-level
and first-step trade-up housing (the deepest segments of the
market), its conservative building practices, and effective
utilization of return on invested capital criteria as a key
element of its operating model. Over recent years the company has
improved its capital structure and increased its geographic
diversity and has better positioned itself to withstand a
meaningful housing downturn. Fitch also has taken note of KB
Home's role as an active consolidator within the industry. Risk
factors also include the cyclical nature of the homebuilding
industry. Fitch expects leverage (excluding financial services) to
remain comfortably within KB Home's stated debt to capital target
of 45-55%.
The company has expanded EBITDA margins over the past several
years on steady price increases, volume improvements and
reductions in SG&A expenses. Also, KB Home has produced record
levels of home closings, orders and backlog as the housing cycle
extended its upward momentum. KB Home realizes a significant
portion of its revenue from California, a region that has proved
volatile in past cycles. But the company has reduced this exposure
as it has implemented its growth strategy and currently sources
20% of its deliveries from California, compared with 69% in fiscal
1995. Over recent years KB Home shifted toward a presale strategy,
producing a higher backlog/delivery ratio and reducing the risk of
excess inventory and debt accumulation in the event of a slowdown
in new orders. The strategy has also served to enhance margins.
The company maintains a 4.4 year supply of lots (based on
deliveries projected for 2003), 51% of which are owned and the
balance controlled through options. Inventory turnover has been
consistently at or above 1.7 times during the past seven years.
Balance sheet liquidity has continued to improve as a result of
efforts to reduce long-dated inventories, quicken inventory turns
and improve returns on capital. Progress in these areas has
allowed the company to accelerate deliveries without excessively
burdening the balance sheet.
As the housing cycle progresses, creditors should benefit from KB
Home's solid financial flexibility supported by $50.4 million in
cash and equivalents and $423.6 million available under its $827.0
million domestic unsecured credit facility as of 8/31/03. (At the
end of October a new $1 billion credit facility was announced.) In
addition, liquid, primarily pre-sold work-in-process inventory
totaling $2.4 billion provides comfortable coverage for
construction debt. The $175 million in senior notes mature in
2004, but the balance of debt is well laddered and the new
revolving credit facility matures in four years.
Management's share repurchase strategy has been aggressive at
times, but has not impaired the company's financial flexibility.
KB Home repurchased $81.9 million of stock in fiscal 1999, $169.2
million in 2000, $190.8 million in 2002 and $108.3 million (2
million shares) so far in fiscal 2003. At the end of August, 2
million shares remain under the board of directors' repurchase
authorization. Notwithstanding these repurchases, book equity has
increased $749.7 million since the end of 1999, while construction
debt grew $439.0 million.
KBH has lowered its dependence on the state of California, but it
is still the company's largest market in terms of investment.
Operations are dispersed within multiple markets in the north and
in the south. During the 1990s the company entered various major
Western metropolitan markets, including Phoenix, Denver, Dallas,
Austin and San Antonio, and has risen to a top 5 ranking in each
market. In an effort to further broaden and enhance its growth
prospects it has established operations (greenfield and by
acquisition) in the southeastern U.S., including various markets
in Florida, Atlanta and North Carolina. Most recently, the company
has entered the Midwest (Chicago) via acquisition. Fitch
recognizes the company as a consolidator in the industry, but
expects future acquisitions will be moderate in size and largely
funded through cash flow.
KB Home ranked as fifth largest homebuilder in the U.S. in 2001
and 2002. Its average home selling price through the first nine
months of 2003 is $206,000. It is on pace to construct more than
27,000 homes in fiscal 2003. The company operates homebuilding
operations within the U.S. and France (57% ownership of Kaufman
and Broad S.A.). Kaufman and Broad S.A. also does commercial
construction in France and KB Home operates KB Home Mortgage
Company domestically. Year-to-date the Western region (CA)
accounts for 20.9% of corporate orders, the Southwest (AZ, NV, NM)
represents 26.4% of orders, the Central region (CO, IL, TX)
accounts for 26.5% of orders, the Southeast (FL, GA, NC)
contributes 13.0% of orders and France represents 13.2% of total
net new orders.
KEVN INC: Section 341(a) Meeting to Convene on December 22
----------------------------------------------------------
The United States Trustee will convene a meeting of KEVN, Inc.'s
creditors on December 22, 2003, 1:00 p.m., at 515 9th St., Room
B10, Federal Building and US Courthouse, Rapid City, South Dakota
57702. This is the first meeting of creditors required under 11
U.S.C. Sec. 341(a) in all bankruptcy cases.
The Debtors also notify creditors that they have until March 22,
2004 to file their proofs of claims if they wish to assert a claim
against the Debtor's estate.
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 Rapid City, South Dakota, KEVN, Inc., is a parent
company of the Rapid City FOX, a broadcasting network providing
news, weather reports, sports and current events. The Company
filed for chapter 11 protection on November 20, 2003 (Bankr.
S.Dak. Case No. 03-50592). Clair R. Gerry, Esq., represents the
Debtor in its restructuring efforts. When the Company filed for
protection from its creditors, it listed $7,289,338 in total
assets and $6,655,095 in total debts.
KMART: Court Expunges $10 Million of Debit-Balance Vendor Claims
----------------------------------------------------------------
Kmart Corporation and its debtor-affiliates identified 198 proofs
of claim filed by vendors where the vendor is in a debit-balance
position. The Debtors' records indicate that the trade vendors
owe money to them. After reviewing a number of these claims, the
Debtors discovered that the Debit-Balance Claims largely result
from the claimant failing to take into account certain credits or
deductions in their claims. These credits and deductions
primarily include merchandise allowance deductions and credits for
product returns. Inclusion of these credits and deductions in the
vendors' claims would result in a debit-balance due to the
Debtors.
The Debtors also learned through certain discussions that certain
vendors are aware of the credits and deductions but have simply
opted to file only the receivables portions of their claims.
Other vendors who are aware of prepetition returns have not
included the return credits in their claim because the returns
occurred after the vendors filed their claims. Inclusion of the
credits and deductions would more accurately reflect current
balances and push certain vendors into a debit-balance position
with the Debtors.
A comparison with several Debit Balance Claims to the Debtors'
Books and Records demonstrated that some vendors were not aware
of all of the merchandise allowances on their accounts. The
Debtors relate that merchandise allowances typically accrue over
a specified period of time or season and are only periodically
booked to vendors' accounts. If a merchandise allowance was not
booked to a vendor's account until after their bankruptcy filing,
the Debtors say that the vendor may not have knowledge of the
allowance deduction. In addition, some vendors do not record
merchandise allowances until the allowance has been deducted from
their account and the details of the deduction have appeared on
the remittance advice of a check from the Debtors. The addition
of these allowances to vendors' records would create a debit
balance.
Subsequently, Judge Sonderby disallows and expunges in their
entirety 167 Debit Balance Claims, totaling $10,038,958:
Type of Claim Claim Amount
------------- ------------
Secured $1,147
Priority 557,428
Unsecured 9,480,383
Judge Sonderby will continue the hearing with respect to
30 Claims:
Type of Claim Claim Amount
------------- ------------
Secured $668,317
Administrative -
Priority 528,200
Unsecured 12,338,499
The Debtors withdraw their objection on French Fragrances'
$268,524 Claim. (Kmart Bankruptcy News, Issue No. 65; Bankruptcy
Creditors' Service, Inc., 215/945-7000)
MIRANT: Committee Turns to Huron Consulting for Forensic Advice
---------------------------------------------------------------
Pursuant to Sections 328 and 1103(a) of the Bankruptcy Code and
Rule 2014 of the Federal Rules of Bankruptcy Procedure, the
Official Committee of Unsecured Creditors of Mirant Corporation
seeks the Court's authority to retain Huron Consulting Group as
its forensic advisors, effective as of August 11, 2003.
According to Monica S. Blacker, Esq., at Andrews & Kurth LLP, in
New York, Huron possesses extensive knowledge and expertise in
the areas of energy, forensic investigations, restructuring,
valuation and financial advisory. Moreover, Huron is well
qualified to represent the Mirant Committee since it has wide
experience in representing creditors committees in large Chapter
11 cases and other debt-restructuring scenarios. Some of Huron's
clients are the Creditors Committees of PG&E National Energy
Group, Conseco, DirecTV Latin America LLC and Magnatrax
Corporation. Huron is also employed in the Chapter 11 cases of
United Airlines, Global Crossing, ACL, Eagle, Comdisco, Doctors
Community Healthcare Corporation and Moltech Power Systems.
As advisors, Huron will:
(a) provide support, analysis and advice to the Mirant
Committee, its counsel Simpson Thacher & Bartlett LLP and
Andrews & Kurth L.L.P. and other professionals that the
Mirant Committee may retain throughout these Chapter 11
cases;
(b) assist the Mirant Committee with respect to understanding
intercompany activity;
(c) assist the Mirant Committee with respect to understanding
value transfers within the corporate group and with
respect to present and former insiders;
(d) assist the Mirant Committee with respect to understanding
cash management; and
(e) perform other forensic and related services as the Mirant
Committee may request from time to time.
Stephen J. Schaefer, Managing Director of Huron Consulting Group
LLC, relates that Huron does not represent and does not hold any
interest adverse to the Debtors' estates or their creditors in
the matter it is to be engaged.
In exchange for the services to be performed, Huron will seek
compensation based on the hourly rates of its professionals.
Currently, Huron charges clients with these rates:
Managing Directors $600
Director 450
Manager 350
Associate 250
Analyst 175
Moreover, Huron will seek reimbursement of actual expenses
incurred. Mr. Schaefer assures the Court that Huron will
maintain detailed records of actual and necessary costs and
expenses incurred in connection with the services it will
provide.
* * *
Judge Lynn authorizes the Mirant Committee to retain Huron
Consulting effective August 11, 2003. (Mirant Bankruptcy News,
Issue No. 13; Bankruptcy Creditors' Service, Inc., 215/945-7000)
NORTEL: Declares Dividends for Class A Series 5 & 7 Preferreds
--------------------------------------------------------------
The board of directors of Nortel Networks Limited declared a
dividend on each of the outstanding Cumulative Redeemable Class A
Preferred Shares Series 5 (TSX:NTL.PR.F) and the outstanding Non-
cumulative Redeemable Class A Preferred Shares Series 7
(TSX:NTL.PR.G). The dividend amount for each series is calculated
in accordance with the terms and conditions applicable to each
respective series, as set out in the Company's articles. The
annual dividend rate for each series floats in relation to changes
in the average of the prime rate of Royal Bank of Canada and The
Toronto-Dominion Bank during the preceding month and is adjusted
upwards or downwards on a monthly basis by an adjustment factor
which is based on the weighted average daily trading price of each
of the series for the preceding month, respectively. The maximum
monthly adjustment for changes in the weighted average daily
trading price of each of the series will be plus or minus 4.0% of
Prime. The annual floating dividend rate applicable for a month
will in no event be less than 50% of Prime or greater than Prime.
The dividend on each series is payable on January 12, 2004 to
shareholders of record of such series at the close of business on
December 31, 2003.
Nortel Networks (S&P, B Corporate Credit Rating, Stable) is an
industry leader and innovator focused on transforming how the
world communicates and exchanges information. The company is
supplying its service provider and enterprise customers with
communications technology and infrastructure to enable value-added
IP data, voice and multimedia services spanning Wireless Networks,
Wireline Networks, Enterprise Networks and Optical Networks. As a
global company, Nortel Networks does business in more than 150
countries. More information about Nortel Networks can be found on
the Web at http://www.nortelnetworks.com.
ON SEMICONDUCTOR: Refinances $369 Million of Credit Facilities
--------------------------------------------------------------
ON Semiconductor (Nasdaq: ONNN) has successfully refinanced
approximately $369 million of term loans under its senior secured
credit facilities. As a result of the refinancing, ON
Semiconductor has reduced the interest rate that it pays from
LIBOR plus 400 basis points to LIBOR plus 325 basis points.
The reduced borrowing rate is expected to save ON Semiconductor
approximately $3 million per year in interest costs based on the
current loan balance.
"This is another step in our long-term de-leveraging strategy to
reduce debt and related financing costs," said Donald Colvin, ON
Semiconductor senior vice president and CFO. "We are appreciative
of the continued support that ON Semiconductor has received in the
investment community."
J.P. Morgan Securities Inc. and Credit Suisse First Boston acted
as joint book-runners and joint lead arrangers for this
transaction.
ON Semiconductor -- whose July 4, 2003 balance sheet shows a total
shareholders' equity deficit of about $750 million -- offers an
extensive portfolio of power- and data-management semiconductors
and standard semiconductor components that address the design
needs of today's sophisticated electronic products, appliances and
automobiles. For more information, visit ON Semiconductor's Web
site at http://www.onsemi.com
PG&E NATIONAL: NEG Files First Amended Plan & Discl. Statement
--------------------------------------------------------------
After filing a reorganization plan on the Petition Date, National
Energy Gas Transmission, Inc., formerly known as PG&E National
Energy Gas Inc., met and negotiated with certain major creditors
constituencies including the Official Committee of Unsecured
Creditors and the Official Noteholders Committee, regarding the
Plan. As a result of the discussions, NEG modified the Plan.
On November 21, 2003, NEG delivered to the Court its First
Amended Plan and Disclosure Statement.
A full-text copy of NEG's First Amended Plan and Disclosure
Statement is available for free at:
http://bankrupt.com/misc/neg_first_amended_plan.pdf
Overview & Summary of the Plan
The Amended Plan does not address the reorganization or
liquidation of NEG's debtor-affiliates, and its debtor-
affiliates' creditors will not receive distributions under the
Plan. The Debtor-affiliates intend to file separate Chapter 11
plans at a later date. Similarly, the Plan does not address the
reorganization or liquidation of USGen New England, Inc.
The Amended Plan contemplates that Reorganized NEG will retain
and continue to operate its power generation and pipeline
businesses -- although certain assets within those business lines
may be sold or otherwise disposed of -- and will complete the
wind-down of its energy trading business. Whether Reorganized
NEG will retain any interest in USGen will be driven by USGen's
restructuring and any related reorganization plan that may be
confirmed by the Court.
Upon the Effective Date, NEG will no longer be an affiliate of
PG&E Corporation or of Pacific Gas & Electric Company. Under the
Plan, PG&E Corporation will receive no distribution on account of
its equity interest in NEG and the interest will be deemed
cancelled as of the effective date of confirmation. NEG will
issue New Common Stock, which will comprise a portion of the
distributions to be made to its creditors.
Funding
The funds to be distributed pursuant to the Plan and NEG's
ongoing capital expenditure and working capital needs will come
from its cash on hand and working capital exit financing
facility. NEG expects to obtain a commitment for the exit
financing facility before the Confirmation Date. Under the Plan,
NEG will pay all Allowed Administrative Claims, Fee Claims,
Priority Tax Claims, Secured Claims, and Priority Claims, and
will fund the Distribution of Class 3 Cash, from its existing
cash reserves.
Issuance of New Securities
NEG will issue two classes of debt securities, identified in the
Plan as the New Tranche A Notes and the New Tranche B Notes. The
New Tranche A Notes will be issued in the principal amount of
$500,000,000, have a five-year term, and be secured by
substantially all of NEG's assets. The New Tranche B Notes will
be issued in the principal amount of $500,000,000, have a six-
year term, and be secured by substantially all of NEG's assets,
but subject and junior to the liens securing the New Tranche A
Notes. As a component of the Class 3 Distribution, each holder
of an Allowed Class 3 Claim will receive its pro rata share of
the New Tranche A Notes and the New Tranche B Notes.
As a component of the Class 3 Distribution, each holder of an
Allowed Class 3 Claim will receive its pro rata share of 100% of
NEG's outstanding New Common Stock as of the Effective Date. All
shares of New Common Stock will be subject to dilution based on
future issuances of additional shares of New Common Stock for
management options. All existing equity interests in NEG will be
cancelled.
Reorganized NEG will use commercially reasonable efforts to cause
the shares of the New Common Stock to be listed on a national
securities exchange or a qualifying inter-dealer quotation
system. Reorganized NEG would be a public reporting company
under the Securities Exchange Act of 1934 and would file periodic
and current reports as required.
Potential Claims Against PG&E Corp.
NEG believes that it has claims against PG&E Corp. arising in or
related to a complaint it commenced before the Court.
Reorganized NEG will pursue any Litigation Claims as well as any
Avoidance Actions against PG&E Corp. The net proceeds of the
Parent Litigation Claims, in addition to the net proceeds of
Avoidance Actions, would be distributed to holders of Contingent
Value Rights. As a component of the Class 3 Distribution, each
Allowed Class 3 Claimant will receive its pro rata share of the
Contingent Value Rights.
Retention and Enforcement of Causes of Action
On the Effective Date, all rights, claims, and causes of action
of NEG pursuant to (i) Sections 541, 542, 544, 545, 547, 548,
549, 550 and 553 of the Bankruptcy Code, and (ii) all other
claims and causes of action of NEG against any Person as of the
Effective Date -- including any Parent Litigation Claims -- will
be preserved and become property of Reorganized NEG. However,
the net proceeds of Avoidance Actions and Parent Litigation
Claims will be paid to the holders of Contingent Value Rights.
On the Effective Date, Reorganized NEG will be deemed the
representative of the estate under Section 1123(b) and will be
authorized to commence and prosecute all causes of action that
NEG could have asserted.
To the extent not already commenced, Reorganized NEG may commence
or pursue actions against other parties to recover for potential
preferences and fraudulent conveyances. NEG is in the process of
analyzing prepetition transactions that may give rise to
Avoidance Actions or other causes of action and fully expects to
pursue those actions. Reorganized NEG will retain the net
recoveries from any Avoidance Action or Parent Litigation Claim.
Post-Effective Date Management
On the Effective Date, NEG's Board of Directors and officers will
consist of the NEG Chief Executive Officer and an additional
officer, three persons to be designated by the Unsecured
Creditors Committee, and two persons to be designated by the
Noteholders Committee. A litigation subcommittee of two
directors or, alternatively -- at the option of the Board -- a
professional litigation manager, will be appointed at the initial
meeting of the Board. The litigation subcommittee or litigation
manager, as the case may be, will oversee and direct the
prosecution of the Parent Litigation Claims and the Avoidance
Actions.
New Stock Option Plan
On the Effective Date, Reorganized NEG will adopt and implement a
New Stock Option Plan, without the need for any further corporate
action in connection therewith and without the need for separate
shareholder approval, under which [__________] shares of New
Common Stock will be reserved for issuance pursuant to the grant
of stock options under the Plan. This amount represents [_____]%
of the New Common Stock, subject to increase upon the consent of
the holders of a majority of Reorganized NEG's Board. The
purpose of the New Stock Option Plan is to encourage ownership of
the New Common Stock by key employees of Reorganized NEG and to
provide additional incentive for them to promote Reorganized
NEG's success.
Committees' Post-Confirmation Role
As of the Effective Date, the duties of the Official Committees
will terminate except as to:
(a) any appeal or motion for reconsideration of the
Confirmation Order; and
(b) objections to Fee Claims.
The Official Committees' professionals will receive reasonable
compensation for their services from NEG. Post-Effective Date
fees and expenses of the Committees' professionals will be paid
by Reorganized NEG and need not be approved by the Court unless
Reorganized NEG objects.
Best Interest Test
To confirm the Plan, NEG must satisfy the "best interest" test,
which requires that the Plan provide each holder with a recovery
having a value at least equal to the distribution value if NEG
were to liquidate under Chapter 7 of the Bankruptcy Code.
Due to the numerous uncertainties and time delays associated with
liquidation under Chapter 7, it is not possible to predict with
certainty the outcome of liquidation or the timing of any
distribution to creditors. NEG, however, projects that any
liquidation under Chapter 7 would result in no greater
distributions that those provided for in the Plan. In respect of
Class 3 Claims, the Plan provides for much greater distributions
that would be available in the Chapter 7 liquidation.
Feasibility Requirement
The Court needs to determine that confirmation of the Plan is not
likely to be followed by the liquidation, or the need for further
financial reorganization of NEG or its successors, unless
proposed in the Plan. To meet this requirement, NEG analyzed its
ability to meet its obligations under the Plan and prepared
financial projections for the three fiscal years ending
[__________], 2004, [__________], 2005 and [__________], 2006.
NEG Debtors will file the projections and material assumptions at
a later date.
Reorganization Beats Liquidation
NEG believes that the Plan is the best alternative available to
its creditors. The Plan provides the creditors with the earliest
and greatest possible values that can be realized on their
Claims.
Other alternatives to the confirmation of NEG's Plan are:
(a) The confirmation of an alternative plan or plans of
reorganization; or
(b) Liquidation of NEG's assets under Chapter 7.
As NEG structured the Plan to maximize values, any alternative
plan likely would result in reduced distributions to certain
creditors. NEG has negotiated significant reductions or
modifications in certain claims, the result of which will provide
significant, additional value to general unsecured creditors, and
which would be unavailable to the proponents of an alternative
plan. In addition, due to the time required to negotiate, draft
and obtain approval of an alternative plan, the alternatives
would lead to delayed distribution to creditors.
On the other hand, NEG believes the value of distributions under
the Plan will equal or exceed the value of distributions that
would be available after liquidation under Chapter 7. A
liquidation under Chapter 7 would require the Court to appoint a
trustee to liquidate NEG's assets. The trustee would have
limited historical experience or knowledge of NEG's Chapter 11
cases or its records, assets or businesses. The fees charged by
a Chapter 7 trustee and any professionals hired by the trustee
could impose substantial administrative costs on NEG's estate
that would not be incurred under the Plan. Moreover, any
liquidation would substantially increase the magnitude of claims
against NEG for items like severance, lease rejections and
others. There is no assurance when the distributions would occur
in a Chapter 7 liquidation.
Thus, NEG concludes that the confirmation of its Plan is
preferable to the alternatives. The Plan maximizes the estate's
value, ensures an expeditious resolution of NEG's case, and
provides for equitable distributions to creditors.
NEG will file its Liquidation Analysis and a Comparison of the
Estimated Recoveries under the Chapter 11 Plan vs. a Chapter 7
Liquidation at a later date. (PG&E National Bankruptcy News, Issue
No. 10; Bankruptcy Creditors' Service, Inc., 215/945-7000)
PILLOWTEX: Court Okays Sale of Columbia & Phenix City Facilities
----------------------------------------------------------------
W. C. Bradley Co. Real Estate Division, as assignee of Eagle
Phenix Partners, LLC, exercised its option to purchase the
Columbus Facility pursuant to the terms and conditions of the
Columbus Facility Option Agreement, on modified terms to which
the Pillowtex Corporation Debtors have agreed.
Modifications to the Columbus Facility Option agreement are:
A. The Closing of the purchase of the Columbus Facility will take
place on or before 45 days after the Bankruptcy Court approves
the sale, and the Option as amended.
During the period beginning on the Date of Final Order and
ending 90 days thereafter -- the Environmental Evaluation
Period -- the Debtors and W. C. Bradley will, in consultation
and coordination with their environmental consultants,
undertake to investigate and evaluate the extent of any
environmental contamination to:
(1) determine if remediation is necessary to meet the
cleanup standards of applicable laws; and
(2) agree upon the appropriate remediation taking into
account the planned use and development of the Columbus
Property, to include reporting, remediation and
monitoring as may be required by applicable State or
Federal law -- the Action.
B. The Action and the exact amount of the cost of the Action will
be reasonably agreed upon by the Debtors and W. C. Bradley.
W. C. Bradley will pay the first $100,000 of the Action Cost,
and the Debtors will be responsible for and pay the remaining
Action Cost, not to exceed $1,200,000. In the event that W.
C. Bradley and the Debtors cannot agree on the Action or the
Action Cost on or before the Closing, the Debtors and W. C.
Bradley agree that on or before the Closing:
(1) W. C. Bradley and the Debtors will enter into an Escrow
Agreement with an escrow agent reasonably approved by
W. C. Bradley and the Debtors;
(2) W. C. Bradley will deposit with the Escrow Agent a
portion of the Purchase Price equal to $1,200,000; and
(3) The Debtors and W. C. Bradley will have a third
environmental consultant selected by their separate
environmental consultants make an evaluation and
decision as to the Action and the Action Cost. The
Debtors and W.C. Bradley agree that the decision of
the Third Consultant as to the Action and the Action
Cost will be conclusive and binding on everyone. The
Debtors and W. C. Bradley will each pay one-half of the
cost of the Third Consultant. In the event that the
Third Consultant is unable to make a decision as to the
Action and the Action Cost prior to the end of the
Environmental Evaluation Period, the Environmental
Evaluation Period will be extended for a period of 30
days during which the Third Consultant will render a
decision. The Third Consultant will render its
decision in writing to the Escrow Agent with copies to
the Debtors and W. C. Bradley and to the environmental
consultants for W. C. Bradley and the Debtors.
C. In the event that W. C. Bradley and the Debtors agree on
the Action and the Action Cost on or before the Closing, W. C.
Bradley will pay the first $100,000 of the Action Cost and the
Purchase Price will be reduced by an amount equal to the
Debtors' share of the remaining Action Cost not to exceed
$1,200,000. In the event that W. C. Bradley and the Debtors
cannot agree on the Action or the Action Cost on or before
the Closing, the Debtors and W. C. Bradley agree that on or
before the Closing, the Action Cost will be paid as:
(1) the first $100,000 will be paid by W. C. Bradley; and
(2) the remaining Action Cost will be paid by the Escrow
Agent from the Escrow Fund to W. C. Bradley, with any
remaining amount in the Escrow Fund after the payment
to W. C. Bradley to be paid by the Escrow Agent to the
Debtors. The Debtors will have no obligation with
respect to the Action or the Action Cost.
D. W. C. Bradley will be responsible for any expense associated
with the Action in excess of the Escrow Fund and will
indemnify and hold the Debtors harmless from any and all
obligations or liabilities.
Donna L. Harris, Esq., at Morris, Nichols, Arsht & Tunnel, in
Wilmington, Delaware, informs the Court that no qualified
competing bids were submitted before the bid deadline. Thus, no
auction was held.
* * *
Judge Walsh authorizes the Debtors to enter into the Phenix City
Facility Sale Agreement and the Columbus Facility Option
Agreement, as amended on September 15, 2003. (Pillowtex Bankruptcy
News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 215/945-
7000)
PHOTRONICS: Promotes Zafar Ahmad to Vice President-North America
----------------------------------------------------------------
Photronics, Inc. (Nasdaq: PLAB), the world's leading
sub-wavelength reticle solutions supplier announced that Zafar
Ahmad has been promoted to the position of Vice President-North
America.
Having recently served as Director of Operations at Photronics'
Austin facility, Mr. Ahmad has assembled an impressive list of
accomplishments, which include directing the installation and
qualification of 130nm process technology and its integration into
manufacturing at the Austin site. His leadership skills and focus
on improving manufacturing efficiencies in advanced technologies
and the cultivation of strategic customer relationships has vastly
improved the competitive position of both the Austin site and the
North American regional network. He will report to Paul J. Fego,
President and Chief Operating Officer.
As a member of the Photronics team for the last five years, Mr.
Ahmad has also served as the Site Director at Photronics'
Manchester, UK facility. His experience with advanced technology
manufacturing was crucial to successfully installing the Company's
European 130 nanometer and below tool and processes and
ascertaining customer qualifications at and below 120 nanometers.
This enabled Photronics to become the first European photomask
supplier to offer Embedded Attenuated Phase Shift Mask (EAPSM) and
process capabilities and establish Photronics as the leading edge
mask manufacturing facility in Europe.
Paul J. Fego commented, "We feel that the combination of Zafar's
leadership and broad base of advanced technology manufacturing
expertise has been an integral part of the Company's global
success. In his previous roles, he has helped pave the way for
Photronics' global success. Now as the North American
semiconductor industry gathers momentum during its transition to
smaller technology nodes, his experience directing two of the
Company's most advanced facilities will play a major part in
Photronics' ability to provide superior technology and customer
service in an increasingly competitive global marketplace."
Prior to joining Photronics, Mr. Ahmad served as Manufacturing
Manager at Samsung's start-up wafer fab in Austin. There, he was
recognized with the company's prestigious Founder's Award. In
addition, Mr. Ahmad held various manufacturing positions of
increasing responsibility at Texas Instruments for 25 years.
Mr. Ahmad commented, "Today, semiconductor designers and
manufacturers are looking to their photomask suppliers for
critical and cost effective lithography solutions. Photronics,
with its strong regional presence in North America is capable of
providing cost effective solutions for both the very advanced and
mature technology markets. More importantly, our service and
performance to schedule provides our customers with the time to
market solutions that generate success in their end markets." He
added, "We have many opportunities for success provided we remain
focused on the customers' requirements and deliver the most cost
effective solution. I am looking forward to this new role with
the Company and will continue to build upon the characteristics
that have made Photronics a success-execution and customer
service."
Mr. Ahmad holds a Bachelor of Arts degree from the University of
Houston and lives in Austin, Texas.
Photronics (S&P, BB- Corporate Credit Rating, Negative) is a
leading worldwide manufacturer of photomasks. Photomasks are high
precision quartz plates that contain microscopic images of
electronic circuits. A key element in the manufacture of
semiconductors, photomasks are used to transfer circuit patterns
onto semiconductor wafers during the fabrication of integrated
circuits. They are produced in accordance with
circuit designs provided by customers at strategically located
manufacturing facilities in Asia, Europe, and North America.
Additional information on the Company can be accessed at
http://www.photronics.com
PLANVISTA CORP: Amended Financial Reports Show Deeper Insolvency
----------------------------------------------------------------
PlanVista Corporation (OTC:PVST) filed amendments to its Form 10-K
for the year ended December 31, 2002, as well as its Forms 10-Q
for the quarters ended March 31, 2003 and June 30, 2003, for the
restatement of its balance sheets.
The amendments were made because of the determination that certain
redemption features contained in the Company's Series C
convertible preferred stock required that the Series C stock be
reclassified to the temporary equity section of the balance sheets
rather than permanent stockholders' deficit.
As a result, stockholders' deficit, which increased by a negative
$129,503,000, amounts to a deficit of $143,682,000 as of
September 30, 2003. The restatements have no effect on the
Company's operations, earnings, or cash flows.
This reclassification, which was previously reported in the
Company's quarterly earnings press release dated November 11,
2003, has been properly reflected in the Company's recently filed
Form 10-Q for the quarter ended September 30, 2003.
PlanVista Solutions provides medical cost containment and business
process outsourcing solutions to the medical insurance and managed
care industries. Specifically, we provide integrated national
preferred provider organization network access, electronic claims
repricing, and network and data management services to health care
payers, such as self-insured employers, medical insurance
carriers, third party administrators, health maintenance
organizations, and other entities that pay claims on behalf of
health plans. We also provide network and data management services
to health care providers, such as individual providers and
provider networks. Visit the Company's Web site at
http://www.planvista.com/
PROMAX ENERGY: Sept. 30 Working Capital Deficit Widens to $90MM
---------------------------------------------------------------
Promax Energy Inc. (TSX:PMY) announces its financial and operating
results for the nine months ended September 30, 2003.
Promax Energy Inc.'s September 30, 2003, balance sheet discloses a
working capital deficit of about $90 million.
On May 7, 2003, the Company was granted an order by the Court of
Queen's Bench of Alberta providing creditor protection under the
Companies' Creditors Arrangement Act. The initial order was
amended by the Court on May 27, 2003 and further amended on
October 30, 2003 to provide for a general stay period that expires
on December 11, 2003. The order may be further amended by the
Court throughout the CCAA proceedings based on motions from the
Company, its creditors and other interested parties.
OPERATIONS
Promax's efforts in the third quarter have focused primarily with
working with its financial advisor, BMO Nesbitt Burns Inc. to open
a data room, complete presentations and respond to information
requests for the value maximization process. In addition, Promax
has concentrated on retaining as much of its mineral lease rights
as possible, and making improvements and repairs to its wells and
facilities with a view to obtaining the greatest improvements in
production and revenue from the least amount of expenditures.
The Company exited the third quarter of 2003 at 1,397 BOEPD and
averaged 1,291 BOEPD (using an energy conversion factor of 6:1)
for the quarter. The average production decreased by 7% over the
same period in 2002. The 6% decline from Q2/03 is attributed to a
limited capital program, limited operating funds and the
disruption of a contract operated pipeline that shut in several of
the Company's wells until late in the month of September 2003.
Operational highlights from the third quarter include:
- Drilling two wells to the minimum depth required to preserve
leases to the top of the Mississippian formation while
retaining the shallow mineral rights above the base Medicine
Hat formation.
- Production online from a non-operated pipeline failure that
shut-in several of the Company's wells in the second
quarter.
VALUE MAXIMIZATION PROCESS
Promax received various offers for a corporate transaction
involving Promax or a purchase of certain of its assets through
the value maximization process undertaken by BMO Nesbitt Burns. As
a result of the process, Promax entered into a Letter of Intent on
October 24, 2003 with a prospective purchaser for the sale of the
core property forming the bulk of its assets in connection with
the restructuring process. The transaction contemplated by the
Letter of Intent will be effective October 1, 2003 and is subject
to the satisfaction of various conditions precedent including
completion of a formal purchase and sale agreement, the approval
of the Court, the satisfactory completion of a due diligence
review by the prospective purchaser, the receipt of all
regulatory, governmental and other consents and approvals required
to permit the transaction and continued operation of the business
of the Corporation.
With respect of the oil and gas interests and other financial
interests of Promax that are not the subject of the Letter of
Intent, the Corporation is actively soliciting value maximizing
proposals from third parties for a transaction to be completed
with Promax following the completion of the Asset Sale Agreement.
FINANCIAL
The Company generated revenue from gas sales of C$3,949,344 in the
quarter, an operating cash loss of C$486,314, and a net loss of
C$882,575 largely related to accrued interest at post petition
rates which totaled C$1,971,681 for the quarter. To date costs of
$1,324,080 have been booked as expenses related to CCAA
restructuring.
SUBSEQUENT EVENTS & OUTLOOK
Under the current circumstances, the Company's outlook will be
determined by the outcome of its re-organization under CCAA. In
the event that it becomes apparent that a financial restructuring
cannot be accomplished, or that a plan of arrangement is not
feasible in the Company's CCAA proceedings, the Company will
likely be placed in receivership or bankruptcy.
Promax Energy Inc. is a junior oil and gas company listed and
trading on the Toronto Stock Exchange under the symbol "PMY".
PROMAX: Inks Formal Sale Pact of Hydrocarbon Assets to EOG
----------------------------------------------------------
Promax Energy Inc. (TSX:PMY) entered into a formal purchase and
sale agreement with EOG Resources Canada Inc. for the sale of the
core property forming substantially all of its hydrocarbon assets
effective as of October 1, 2003. Subject to certain adjustments,
the purchase price to be paid by EOG for the Assets is $60 million
and the assumption of certain equipment lease obligations. The
completion of the Sale is subject to the satisfaction of various
conditions precedent, including the approval of the Sale by the
Court of Queen's Bench of Alberta. It is anticipated that Promax
will make application to the Court for its approval on the Sale on
or about November 28, 2003. Completion of the Sale is presently
anticipated to occur prior to the year end.
Promax and its financial advisor, BMO Nesbitt Burns Inc., are
actively soliciting value maximizing proposals from third parties
for transactions to be completed with Promax following the
completion of the sale of the Assets to EOG. Additional
information regarding the progress of the value maximization
process will be available as the process progresses.
Promax Energy Inc. is a junior oil and gas company listed and
trading on the Toronto Stock Exchange under the symbol "PMY".
As a result of confidentiality restrictions, Promax is unable to
make further information regarding the transaction with EOG
available at this time.
PROVECTUS: Badly Needs Funds to Maintain Short-Term Operations
--------------------------------------------------------------
Provectus Pharmaceuticals Inc. will continue to require additional
capital to develop its products and develop sales and distribution
channels for its products. Management believes there are a number
of potential alternatives available to meet the Company's
continuing capital requirements, including proceeding as rapidly
as possible with the development of over-the-counter products that
can be sold with a minimum of regulatory compliance and
developing revenue sources through licensing of its existing
intellectual property portfolio. In addition, the Company is
actively pursuing additional debt and/or equity capital in order
to support ongoing operations. There can be no assurance that the
Company will be able to obtain sufficient additional working
capital on commercially reasonable terms or conditions, or at all.
The Company's financial statements have been prepared assuming the
Company will continue as a going concern. Continuing as a going
concern is dependent upon successfully obtaining additional
working capital as described above.
In connection with their audit report on Provectus' consolidated
financial statements as of December 31, 2002, BDO Seidman LLP, the
Company's independent certified public accountants, expressed
substantial doubt about the Company's ability to continue as a
going concern because such continuance is dependent upon its
ability to raise capital or achieve profitable operations.
As of September 30, 2003, the Company held approximately $12,193
in cash. Provectus has reduced its cash expenditure rate by
suspending payment of salaries and most of its research programs;
in addition, it is seeking to improve cash flow by commencing
sales of OTC products. Even with these reductions, however, at
its current expenditure rate this amount will be sufficient to
meet the Company's needs only until the end of November 2003.
Moreover, even if successful in improving its current cash flow
position, the Company will nonetheless require additional funds to
meet short-term and long-term needs. Provectus anticipates
these funds will come from the proceeds of private placements or
public offerings of debt or equity securities, but cannot assure
that it will be able to obtain such funds.
As noted above, the Company's present cash flow is not sufficient
to meet its short-term operating needs for initial production and
distribution of OTC products in order to achieve meaningful sales
volumes, much less to meet its longer-term needs for investment in
its business through execution of the next phases in clinical
development of its pharmaceutical products and resumption of its
currently suspended research programs. Management anticipates
that the majority of the funds for operating and development
needs in 2003 will come from the proceeds of private placements or
public offerings of debt or equity securities. Additionally, the
Company sold a piece of equipment which was not needed for
research and development activities. Management is currently in
discussions with multiple funding sources and feels confident
adequate operating funding and development funding will result.
While management believes that the Company has reasonable basis
for the expectation that it will be able to raise additional
funds, there is no assurance that it will be able to do so on
commercially reasonable terms. In addition, any such financing may
result in significant dilution to stockholders.
RELIANT RESOURCES: Will Get Clearance to Sell European Business
---------------------------------------------------------------
Reliant Resources, Inc. (NYSE: RRI) announced that the NMa, the
Dutch competition authority that reviews acquisitions for
compliance with antitrust laws, has issued a press release stating
that it intends to clear nv Nuon's purchase of Reliant Resources'
European business following certain guarantees from Nuon.
The license from the NMa is the final regulatory approval needed,
and Reliant expects to close the transaction shortly after receipt
of the license.
Reliant Resources, Inc., based in Houston, Texas, provides
electricity and energy services to retail and wholesale customers
in the U.S., marketing those services under the Reliant Energy
brand name. The company provides a complete suite of energy
products and services to approximately 1.7 million electricity
customers in Texas ranging from residences and small businesses to
large commercial, industrial and institutional customers. Reliant
also serves large commercial and industrial clients in the PJM
(Pennsylvania, New Jersey, Maryland) Interconnection. The company
has approximately 20,000 megawatts of power generation capacity in
operation, under construction or under contract in the U.S. For
more information, visit http://www.reliantresources.com
* * *
As reported in Troubled Company Reporter's October 7, 2003
edition, Fitch anticipated no change in Reliant Resources, Inc.'s
credit ratings or Rating Outlook based on the announcement that
RRI had reached a settlement agreement with the Federal Energy
Regulatory Commission with respect to certain western energy
market investigations.
RRI's ratings are as follows:
- senior secured debt 'B+';
- senior unsecured debt 'B';
- convertible senior subordinated notes 'B-'
RURAL/METRO: Continues Nasdaq SmallCap Trading Under RURL Symbol
----------------------------------------------------------------
Rural/Metro Corporation (Nasdaq:RUREC)(Nasdaq:RURL), a leading
national provider of medical transportation and fire protection
services, announced that its listing exception on the NASDAQ
SmallCap Market was modified and its trading symbol returned to
RURL with the opening of the market on Friday, November 28, 2003.
The company was notified Tuesday that the NASDAQ Listing
Qualifications Panel will continue the company's listing under the
following terms:
-- The company must timely file all periodic reports with the
Securities and Exchange Commission and NASDAQ for all reporting
periods ending on or before June 30, 2004.
-- The company must demonstrate at least $500,000 in net income
from continuing operations on a cumulative basis for each
quarter and during fiscal 2004, or satisfy $2.5 million in
shareholders' equity or $35 million in market value of its
listed securities.
Jack Brucker, President and Chief Executive Officer, said, "We are
pleased by the Panel's decision and recognition of our ongoing
efforts to meet all criteria for continued listing. We are
confident we can achieve even further progress as we pursue our
operational and financial objectives for the coming year."
The Panel noted that the company appears to satisfy all
requirements for continued listing and determined to remove the
fifth character "C" from the trading symbol throughout the
exception period. Accordingly, effective with the open of trading
on Friday, November 28, 2003, the symbol of the company's
securities will return to RURL.
Rural/Metro Corporation provides emergency and non-emergency
medical transportation, fire protection, and other safety services
in 24 states and more than 400 communities throughout the United
States.
At June 30, 2003, Rural/Metro Corp.'s balance sheet shows a total
shareholders' equity deficit of about $209 million.
SHEFFIELD PHARMA: Auctioning-Off Assets on December 18, 2003
------------------------------------------------------------
By Order of the United States Bankruptcy Court for the Western
District of New York, an auction for the intellectual property and
Premier Pharmaceutical Laboratory equipment of Sheffield
Pharmaceuticals will convene on December 18, 2003, at 10 a.m.
Eastern Standard Time. The auction will be held at the Bankruptcy
Court in Rochester, New York.
The auction will include patents, certain equity interests, as
well as computers and office equipment. Assets will be offered in
bulk and by separate product lines.
Inspection is by appointment only. Contact David Fiegel at 716-
688-5955 or dfiegel@michaelfox.com for more details.
Sheffield Pharmaceuticals, Inc., is a developer of respiratory
drugs for the treatment of asthma and chronic pulmonary disease.
The Debtor filed for Chapter 7 protection on June 6, 2003, (Bankr.
W.D.N.Y. Case No. 03-22303). John R. Weider, Esq., at Harter,
Secrest & Emery LLP represents the Debtor in its liquidating
efforts. When the Debtor filed for protection from its creditors,
it listed $1,243,984 in total assets and $17,487,166 in total
debts.
SPECTRX INC: Receives $1 Million Payment from Respironics
---------------------------------------------------------
SpectRx, Inc. (OTCBB: SPRX) received a planned $1 million from
Respironics (NASDAQ: RESP) as part of the sale of the BiliChek(R)
Non-invasive Bilirubin Analyzer product line.
The payment completes the base compensation of $5 million.
There is also up to an additional $6.25 million in royalties and
earn out payments over the next five years based upon achievement
of certain operating results. The first royalty and earn out
payments are due by the end of March 2004.
Four million dollars of the base purchase price was paid in March
and the additional $1 million payment was paid on completion of
BiliChek product updates. As a result of the payment, SpectRx also
will recognize the $2 million of the original $4 million
previously recorded as deferred gain.
"This payment provides additional funding for our SimpleChoice
insulin delivery product rollout and marks a significant step
toward our strategic goal of focusing on our core diabetes
management business," said Mark A. Samuels, SpectRx, Inc. chairman
and chief executive officer. "The final steps in that process are
securing venture capital funding for our cancer detection entity,
Guided Therapeutics, which is well underway, and will result in
the separation of our diabetes and cancer businesses."
"Bill Arthur, recently named president and chief operating officer
of SpectRx, will be focusing the Company on sales and marketing of
our SimpleChoice line of insulin delivery products. We believe
that this focus will enable us to reach a near term profitable run
rate. It also provides a solid platform to grow the diabetes
business through the commercialization of our continuous glucose
monitoring product," Mr. Samuels said.
SpectRx, Inc. (OTCBB: SPRX) is a diabetes management company
developing and providing innovative solutions for insulin delivery
and glucose monitoring. SpectRx markets the SimpleChoice(R) line
of innovative diabetes management products, which include insulin
pump disposable supplies. These FDA-cleared products complement
its developmental consumer device for continuous glucose
monitoring. SpectRx also plans to commercialize its non-invasive
cancer detection technology through direct funding. For more
information, visit SpectRx's Web sites at http://www.spectrx.com/
and http://www.mysimplechoice.com/
* * *
On October 17, 2003, the Audit Committee of the Board of Directors
of SpectRx, Inc., unanimously approved the engagement of the
accounting firm of Eisner LLP as its new independent public
accountants effective immediately. Also on October 17, 2003, the
Company's Audit Committee unanimously agreed to dismiss Ernst &
Young LLP.
The report of Ernst & Young LLP on the consolidated financial
statements of the Company, for the year ended December 31, 2002
included an explanatory paragraph pertaining to an uncertainty
regarding the ability of the Company to continue as a going
concern.
In connection with the audit of the Company's financial statements
for the year ended December 31, 2002 and in the subsequent interim
period from January 1, 2003 through and including October 17,
2003, there was one disagreement between the Company and its
auditors, Ernst & Young LLP, on a matter of accounting principle
or practices, consolidated financial statement disclosure, or
auditing scope and procedures, which, if not resolved to the
satisfaction of Ernst & Young LLP would have caused Ernst & Young
LLP to make reference to the matter in its report. During the
review of the Company's unaudited financial statements for the
quarter ended March 31, 2003, the Company and Ernst & Young LLP
disagreed on the amount of gain to be recognized from the sale of
the BiliChek line of business. The Audit Committee of the Board of
Directors also discussed the subject matter of this disagreement
with Ernst & Young LLP. The issue was resolved to the satisfaction
of Ernst & Young LLP. The Company has authorized Ernst & Young LLP
to respond fully to inquiries of the successor accountant
concerning the subject matter of this disagreement.
STOLT OFFSHORE: Lenders Extend Loan Covenant Default Waiver
-----------------------------------------------------------
Stolt Offshore S.A. (NasdaqNM: SOSA; Oslo Stock Exchange: STO) has
obtained an extension from November 26, 2003 until December 15,
2003 of the waiver of covenant defaults. Stolt Offshore continues
to make progress in negotiations with its lenders towards a
longer-term agreement.
Stolt Offshore is a leading offshore contractor to the oil and gas
industry, specialising in technologically sophisticated deepwater
engineering, flowline and pipeline lay, construction, inspection
and maintenance services. The Company operates in Europe, the
Middle East, West Africa, Asia Pacific, and the Americas
TENET: Appeals Court Reduces Damages Award to Former Executive
--------------------------------------------------------------
Tenet Healthcare Corporation (NYSE: THC) announced that late
Tuesday a California Court of Appeals panel issued an order
reducing total damages due to John C. Bedrosian, a former
executive who was terminated 10 years ago, from approximately $253
million to approximately $148 million.
The modification resulted from Tenet's petition for a rehearing.
Although the appellate court denied the company's petition for a
rehearing, it did modify its previous ruling by changing the date
from which prejudgment interest is calculated, ruling that
interest should be calculated from Oct. 3, 2002, the date at which
the court assumed Bedrosian would have sold the shares. The
original appellate ruling calculated interest from April 1995, the
date of the original trial court judgment. This correction reduced
pre-judgment interest from approximately $112 million to
approximately $7 million.
"We are gratified that the court has corrected the interest
calculation," said Gary W. Robinson, Tenet's deputy general
counsel. "We continue to believe, however, that the evidence in
this case does not justify the huge award and we intend to seek
review of the appellate decision by the California State Supreme
Court."
The company had reserved the full amount of the prior $253 million
judgment in its third quarter ended Sept. 30, 2003.
In October the appeals court had awarded $253 million in contract
damages for failing to provide certain stock incentive awards to
John C. Bedrosian, a co-founder of National Medical Enterprises
Inc. That ruling followed Bedrosian's appeal of an earlier lower
court decision that had awarded Bedrosian approximately $9.2
million.
Bedrosian was one of three founders of NME. Bedrosian's employment
with NME was terminated in September 1993, following a federal
investigation into the company's psychiatric hospital subsidiary.
Under new management, NME was renamed Tenet Healthcare Corporation
in 1995, following the resolution of the investigation and a
subsequent merger of NME and American Medical International Inc.
Tenet Healthcare Corporation, through its subsidiaries, owns and
operates 105 acute care hospitals with 26,216 beds and numerous
related health care services. Tenet and its subsidiaries employ
approximately 109,700 people serving communities in 16 states.
Tenet's name reflects its core business philosophy: the importance
of shared values among partners -- including employees,
physicians, insurers and communities -- in providing a full
spectrum of health care. Tenet can be found on the World Wide Web
at http://www.tenethealth.com/
At June 30, 2003, Tenet Healthcare's balance sheet shows a total
shareholders' equity deficit of about $5.5 billion.
TENET: Presenting at Institutional Investor Conference Tomorrow
---------------------------------------------------------------
Tenet Healthcare Corporation (NYSE:THC) announced that members of
its senior executive management team will be making a presentation
at an institutional investor conference Tuesday, December 2, 2003.
All interested parties are invited to access the presentation at
the Merrill Lynch Health Services Investor Conference via webcast
at http://www.tenethealth.com/both live at 10:45 a.m. EST and on
a replay basis for 14 days.
Tenet Healthcare Corporation, through its subsidiaries, owns and
operates 105 acute care hospitals with 26,216 beds and numerous
related health care services. Tenet and its subsidiaries employ
approximately 109,700 people serving communities in 16 states.
Tenet's name reflects its core business philosophy: the importance
of shared values among partners -- including employees,
physicians, insurers and communities -- in providing a full
spectrum of health care. Tenet can be found on the World Wide Web
at http://www.tenethealth.com/
At June 30, 2003, Tenet Healthcare's balance sheet shows a total
shareholders' equity deficit of about $5.5 billion.
UNIFORET INC: Red Ink Continued to Flow in Third-Quarter 2003
-------------------------------------------------------------
Uniforet Inc. reports a loss of $6.2 million ($0.09 per share) for
its third quarter ended September 30, 2003, which compares to a
net loss of $14.0 million ($0.22 per share) for the corresponding
period in 2002.
The third quarter of 2003 is the first full quarter under which
the new financial structure resulting from the implementation of
the Company's plan of arrangement with its creditors under the
Companies' Creditors Arrangement Act is effective. August 8, 2003
had been the date determined for implementation of the Company's
plan of arrangement.
On September 26, 2003, the Company announced that a group of US
Noteholders had, on September 25, 2003, applied to the Supreme
Court of Canada to seek leave to appeal the judgment rendered by
the Court of Appeal on July 24, 2003, which judgment refused leave
to appeal the decision rendered by the Superior Court of Montreal
on May 16, 2003, sanctioning and approving the Company's plan of
arrangement. Essentially, this application on the part of a group
of US Noteholders seeks a partial modification of what has been
offered to their class of creditors, without staying the
implementation of the Company's plan of arrangement which, in
fact, has been effective as of August 8, 2003. The Company intends
to contest vigorously such application by this group of US
Noteholders.
The prices of benchmark items rose during the quarter by an
average of 20.0% owing to strong housing-start activity in both
the US and Canada and to a temporary reduction in supply. The
trade dispute with the US over Canadian lumber continues, and
countervailing duties of 27.2% were levied on all lumber shipments
to the US during the quarter. The Company paid out $4.1 million in
that regard during the third quarter of 2003, bringing cumulative
duties paid to $14.6 million since implementation of those duties.
Furthermore, the strengthening of the Canadian dollar in relation
to U.S. currency has added to the challenges of Canadian lumber
producers.
The combination of these factors compelled the Company to initiate
slowdowns in production at its Peribonka and Port-Cartier sawmills
at the end of May 2003. The operating rate at the sawmills was
approximately 80% of capacity. The favourable impact of the rise
in lumber selling prices during the quarter was eliminated by
reduced mills operating rates and by non-recurring costs stemming
from the change in management strategy of forest operations at the
Port-Cartier sawmill following the unexpected departure, provoked
by financial difficulties, of the general contractor responsible
for overall log cutting and log transportation operations. That
situation, moreover, led to the stoppage of operations at the
Port-Cartier sawmill during the week of October 6, 2003.
For the nine-month period ended September 30, 2003, net earnings
stood at $119.7 million ($1.82 per share) thanks to a pre-tax on
debt settlement of $133.2 million recorded in the second quarter
of 2003 resulting from the Company's plan of arrangement with its
creditors. The net loss for the corresponding period of 2002 was
$5.4 million dollars ($0.09 per share). Excluding non-recurring
items and the effect of foreign exchange-rate fluctuations on
long-term assets and liabilities denominated in foreign currencies
and related taxes, the net loss for the first nine months of 2003
was $18.3 million, compared to a net loss of $2.6 million for the
same period last year.
Sales
Sales for the third quarter of 2003 were $40.9 million, an
increase of 7.7% over those of the same quarter last year. Lumber
shipments increased by 7.5% to 86.4 million board feet as the
Company took advantage of a stronger market to reduce the level of
its lumber inventories. Despite the fact that lumber net selling
prices increased by 8.8% compared to those of the second quarter
of 2003, they show a sharp decrease of 10.9% from those of the
same period of fiscal 2002. Sales of woodchips, which represented
39.0% of third-quarter sales, reflected an improvement of 34.0%
compared to those of the same quarter in 2002, thanks to increases
of 17.3% in shipments and 14.2% in selling prices.
For the nine-month period ended September 30, 2003, sales amounted
to $96.2 million, down by 22.8% compared to the same period in
2002. Lumber shipments decreased 15.7% to 216.1 million board
feet, while selling prices fell 23.1% compared to those of 2002.
Those impacts, however, were partly offset by improvements in
woodchip selling prices.
Operating income (loss)
Operating loss for the third quarter of 2003 was $3.9 million,
which compares to $4.9 million for the preceding quarter.
Operating income for the third quarter of 2002 was $0.4 million.
The drop in lumber selling prices from last year's had a negative
influence on profit margin. Furthermore, the cost of goods sold
increased by 14.0% during the quarter compared to those of the
same period last year, stemming from a 15.4% reduction in sawmill
production and from non-recurring costs resulting from the change
in the management strategy of forest operations at the Port-
Cartier sawmill.
Operating loss for the nine-month period September 30, 2003 was
$13.8 million, compared to an operating income of $14.4 million
for the same period last year. The worsening of the profit margin
for 2003 stemmed from the sharp decrease in shipments and net
selling prices of lumber, and from a 19.5% increase in the cost of
goods sold resulting mainly from a 20.4% reduction in sawmill
production, the unanticipated stoppage of operations for seven
days at the Port-Cartier facility during the first quarter of
2003, and from non-recurring costs resulting from the change in
the management strategy of forest operations at the Port-Cartier
sawmill.
Cash position
Operations in the third quarter of 2003 generated $0.7 million
compared to funds used of $2.9 million for the same period in
2002. The improvement in funds generated stemmed from a
significant decrease in financial expenses and from the reduction
in the level of lumber inventories. Financing activities generated
net funds of $0.1 million, compared to a use of $0.4 million in
2002, which went towards repayment of long-term debt. Net
additions to fixed assets amounted to $0.8 million, compared to
$1.8 million for the corresponding period in 2002.
As at September 30, 2003, bank overdraft was $2.7 million and
working capital was $11.6 million for a ratio of 1.40:1, compared
to a ratio of 0.56:1 as at December 31, 2002.
Operations for the nine-month period ended September 30, 2003
required funds of $8.4 million, compared to funds generated of
$7.6 million for the corresponding period of 2002. The change
stemmed from the worsening of the profit margin in 2003, which has
been offset only partially by decreased financial expenses and by
funds generated from the reduction in working capital items.
Financing activities for the period required net funds of $2.0
million mainly for the repayment of lines of credit, whereas $1.2
million went towards debt repayment in 2002. Net additions to
fixed assets amount to $2.9 million thus far in 2003, the exact
same amount for the corresponding period of 2002.
Outlook
Historically the lumber market experiences a seasonal downturn
during the winter period, which is reflected in selling prices of
lumber. Further, the rapid strengthening of the Canadian dollar in
relation to US currency is having a considerable effect on the
earnings and profitability of Canadian lumber producers. Lastly,
as long as the trade dispute with the US over lumber remains
unsettled, the Canadian lumber industry as a whole will be faced
with one of the most tumultuous periods in its history.
Activities at the Port-Cartier sawmill were interrupted for the
week of October 6, 2003. The mill will run at a reduced rate of
two shifts per day during the fourth quarter. The Peribonka mill,
however, will continue to operate at its regular rate.
In the coming days, the Company will distribute its annual report
for the years 2001 and 2002 to its shareholders. The 2002 annual
information form and the June 30, 2003, interim financial
statements, which complement those issued on August 28, 2003, will
be available on Sedar.
The Company manufactures softwood lumber. It carries on business
through mills located in Port-Cartier and in the Peribonka area.
Uniforet Inc.'s securities are listed on the Toronto Stock
Exchange under the trading symbol UNF.A for the Class A
Subordinate Voting Shares.
Financial Condition of the Company and Going Concern
On April 17, 2001, the Company obtained the protection of the
Court under the Companies' Creditors Arrangement Act in order to
prepare and present a plan of arrangement which sets out the terms
of the restructuring of its debts and obligations.
Finally on May 16, 2003, the Company announced that the Superior
Court of Montreal had sanctioned and approved its Plan thereby
dismissing the contestation proceedings instituted by a group of
US Noteholders. August 8, 2003 has been determined as being the
effective date of implementation of the Company's Plan. The plan
was finalized on October 3, 2003.
Considering the sanctioning and approval of the Company's Plan on
May 16, 2003, the Company's interim unaudited consolidated
financial statements as at June 30, 2003 incorporated adjustments
to the capital structure resulting from the plan of arrangement
with its creditors, the whole has given rise to a pre-tax gain on
debt settlement of $133.2 million in the second quarter of 2003.
These interim consolidated financial statements are presented on
the assumption that the Company is on going concern in accordance
with Canadian generally accepted accounting principles. The going
concern basis of presentation assumes the Company will continue in
operation for the foreseeable future and be able to realize its
assets and discharge its liabilities and commitments in the normal
course of business. There is significant doubt about the
appropriateness of the use of the going concern assumption
because, although the financial reorganization was completed on
October 3, 2003 and resulted in a significant decrease in
financial expenses, this financial reorganization cannot single-
handedly ensure that the Company remains a going concern.
The imposition, since May 22, 2002, of countervailing duties and
anti-dumping penalties totaling 27.2% over all lumber shipments to
the US market has significantly impacted the competitiveness and
profitability of Canadian lumber producers and led the Canadian
industry to an unprecedented crisis in 2003. In order to survive,
the Company must generate sufficient net cash flows to meet its
financial obligations or obtain additional credit facilities or
capital from its shareholders. There is no guarantee that the
Company could generate sufficient cash flows and/or that such
capital ultimately be obtained.
These financial statements assume the realization of assets and
settlement of liabilities in the normal course of business and in
accordance with the memorandums of understanding. If the going
concern basis were not appropriate for these financial statements,
then adjustments would be necessary in the carrying value of
assets and liabilities, the reported revenues and expenses, and
the balance sheet classifications used.
UNIGENE: Says Fin'l Resources Adequate to Meet Short-Term Needs
---------------------------------------------------------------
The management of Unigene Laboratories, Inc., believes that the
Company will generate financial resources to apply toward funding
its operations through the achievement of milestones in the
GlaxoSmithKline or Upsher-Smith Laboratories agreements and
through the sale of parathyroid hormone to GSK and, if necessary,
with the funds available through its financing with Fusion.
Management, therefore, expects to have sufficient financial
resources for the next 12 months through these sources and/or
through sales and royalties on the anticipated launch of the
Company's nasal calcitonin product in 2004. If unable to achieve
these milestones and sales, or unable to achieve the milestones
and sales on a timely basis, Unigene would need additional funds
to continue operations.
The Company has incurred annual operating losses since inception
and, as a result, at September 30, 2003, had an accumulated
deficit of approximately $98,000,000 and a working capital
deficiency of approximately $17,000,000. Its cash requirements to
operate its research and peptide manufacturing facilities and
develop its products are approximately $10,000,000 to $11,000,000
per year. In addition, the Company has principal and interest
obligations under the Tail Wind note, outstanding notes payable to
the Levys, its executive officers, as well as obligations relating
to its current and former joint venture agreements in China. The
Company has stockholder demand notes in default at September 30,
2003. These factors, among others, raise substantial doubt about
the Company's ability to continue as a going concern.
On October 9, 2003, the Company entered into a new common stock
purchase agreement, as amended, with Fusion under which Fusion
agreed, if so requested by Unigene and subject to certain
conditions, to purchase on each trading day during the term of the
agreement $30,000 of the Company's common stock up to an aggregate
of $15,000,000. This agreement terminates in November 2005.
Unigene may decrease or suspend purchases or terminate the
agreement at any time. If the Company's stock price equals or
exceeds $.80 per share for five consecutive trading days, the
Company has the right to increase the daily purchase amount above
$30,000, providing that the closing sale price of its stock
remains at least $.80. Fusion is not obligated to purchase any
shares of Unigene's common stock if the purchase price is less
than $.20 per share. Under the new agreement with Fusion, Unigene
must satisfy requirements that are a condition to Fusion's
obligation including: the continued effectiveness of the
registration statement for the resale of the shares by Fusion, no
default on, or acceleration prior to maturity of, any of Unigene's
payment obligations in excess of $1,000,000, no insolvency or
bankruptcy on the Company's part, continued listing of Unigene
common stock on the OTC Bulletin Board, and Unigene must avoid
suspension of its listing on the OTC Bulletin Board for a period
of three consecutive trading days. The sales price per share to
Fusion would be equal to the lesser of: the lowest sale price of
Unigene's common stock on the day of purchase by Fusion, or the
average of the lowest three closing sale prices of its common
stock, during the twelve trading days prior to the date of
purchase by Fusion.
Fusion has agreed that neither it nor any of its affiliates will
engage in any direct or indirect short-selling or hedging of
Unigene's common stock during any time prior to the termination of
the common stock purchase agreement. As compensation for its
commitment the Company issued to Fusion, as of October 9, 2003,
1,000,000 shares of common stock and a five-year warrant, as
amended, to purchase 250,000 shares of common stock at an exercise
price of $.90 per share which was charged to additional paid-in-
capital. Fusion may not sell the shares issued as a commitment fee
or the shares issuable upon the exercise of the warrant until 25
months from the date of the common stock purchase agreement or
until the date the common stock purchase agreement is terminated.
In addition to the issuance of the commitment shares, the Board of
Directors has authorized the issuance and sale to Fusion of up to
13,500,000 shares of Unigene common stock. This new agreement
with Fusion replaces the original financing agreement Unigene
signed with Fusion.
UNITED AIRLINES: US Bank Wants Court to Vacate Sec. 1110 Order
--------------------------------------------------------------
U.S. Bank, as successor-in-interest to State Street Bank and
Trust Company, asks the Court to reconsider and amend its
September 25, 2003 order to:
(a) correct certain factual findings unsupported in the
record;
(b) set a filing schedule for determination and payment of
attorney's fees; and
(c) certify the novel and important issues in the decision
and order for immediate appeal.
The Memorandum of Decision states:
"The Bank agreed not to exercise its right to immediate
repossession of the aircraft in exchange for the [United
Airlines] debtors making periodic adequate protection
payments intended to reflect the actual market value of the
aircraft."
Jeanne P. Darcey, Esq., at Palmer & Dodge, in Boston,
Massachusetts, says that adequate protection payments were never
intended to provide market or "fair use" value for the use of the
Aircraft. If the Debtors suggest any equivalence between the
adequate protection payments and market value, they have offered
no supporting evidence. The proper amount of adequate protection
is not necessarily equal to fair market value, but the payments
are unlikely to be more than fair market value. Therefore, the
express reservation of rights to additional payments is direct
evidence that the parties did not intend to agree to fair market
value payments. Under the circumstances, the Adequate Protection
Stipulations offer no evidence of "reasonable, fair value" for
the Debtors' use of the Aircraft. Given the lack of evidence and
contrary language of the Stipulations, the Court's "finding" that
the Adequate Protection payments were intended to reflect actual
market value is unsupported and mistaken.
Without any support, the Court's Decision states "the 1110(a)
election was irrelevant to the negotiation of [the Adequate
Protection Stipulations], since the Bank was free to repossess
the collateral if the debtors failed to offer terms that the Bank
found acceptable." Ms. Darcey asserts that this finding is
unsupported and in error.
The record makes obvious that in negotiations with the Debtors,
the Aircraft Creditors and the Indenture Trustee relied upon
expectations that the Section 1110 elections would be binding
upon the Debtors. In accepting below-contract rates on an
interim basis, the Aircraft Creditors believed that the Debtors
could not avoid their obligations under Section 1110(a) simply
because they failed to cure as required upon their election. The
Debtors' obligation to cure prepetition defaults was factored
into negotiations of the Adequate Protection Stipulations.
By making the elections and promising cure and contract payment,
the Debtors induced the Aircraft Creditors to enter into the
adequate Protection Stipulations, allowing the Debtors to keep
the Aircraft to generate millions of dollars in passenger revenue
per month. This conferred substantial benefit on the estates as
obtaining replacement aircraft would have cost the Debtors tens
of millions in lost revenue and millions in reconfiguration
expenses. To obtain this benefit, the Debtors merely paid a
small portion of the contract value. Now, the Debtors admit that
they never intended to perform these elections and promises,
calling them "soft elections." The promises were illusory and
deceptive, but the Aircraft Creditors and Indenture Trustee
relied on the law to bind the Debtors to their promises.
Ms. Darcey says that the Court should amend the Order to provide
a filing schedule for determination or payment of reasonable
attorney's fees for litigating the Section 1110(a) issue. Also,
the Court should amend its Decision to reflect that the Order is
a final judgment with respect to the Aircraft Creditors' and the
Trustee's Section 1110(a) rights. (United Airlines Bankruptcy
News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 215/945-
7000)
US AIRWAYS: Proposes Stipulation Resolving Key Equipment Claims
---------------------------------------------------------------
Key Equipment Finance filed Claim No. 3362 in an unliquidated
amount, asserting tax indemnity claims relating to aircraft
bearing Registration Tail Nos. N411US and N412US. Key Equipment
Finance also filed Claim No. 4138, which is duplicative of
another claim in the US Airways Group Debtors' bankruptcy
proceedings.
Subsequently, Key Equipment Finance and the Reorganized Debtors
agree to resolve the amount of Claim No. 3362 and to withdraw
Claim No. 4138. The parties agree that Claim No. 3362 is allowed
as a general unsecured Class USAI-7 Claim for all purposes under
the Plan for $6,217,879. Any and all other claims of Key
Equipment Finance are disallowed. Claim No. 4138 is withdrawn.
(US Airways Bankruptcy News, Issue No. 42; Bankruptcy Creditors'
Service, Inc., 215/945-7000)
VENTAS INC: Will Present at Merrill Lynch Conference Wednesday
--------------------------------------------------------------
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 he Company at the Merrill Lynch Health
Services Investor Conference on Wednesday, December 3, 2003 at
8:30 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.events.ml.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
WORLDCOM: Court Okays Gibson Dunn's Retention as Special Counsel
----------------------------------------------------------------
The Worldcom Debtors sought and obtained Court permission to
employ Gibson, Dunn & Crutcher LLP as special counsel, nunc pro
tunc to July 29, 2003. Gibson Dunn will represent the Debtors in
connection with the Department of Justice's investigation and
related matters that focus on certain of the Company's alleged
practices concerning the routing of telephone calls.
The Debtors will compensate Gibson Dunn based on the firm's
customary hourly rates. The hourly billing rates for attorneys
at Gibson Dunn are:
Partners $445 - 850
Associates 210 - 485
Paralegals 85 - 260
These rates are subject to periodic adjustment for normal rate
increases and promotions. The Debtors will also reimburse Gibson
Dunn for all out-of-pocket expenses incurred. (Worldcom Bankruptcy
News, Issue No. 43; Bankruptcy Creditors' Service, Inc., 215/945-
7000)
* BOND PRICING: For the week of December 1 - 5, 2003
----------------------------------------------------
Issuer Coupon Maturity Price
------ ------ -------- -----
AK Steel Corp. 7.750% 06/15/12 68
American & Foreign Power 5.000% 03/01/30 67
AnnTaylor Stores 0.550% 06/18/19 74
Asarco Inc. 8.500% 05/01/25 49
Burlington Northern 3.200% 01/01/45 56
Calpine Corp. 8.625% 08/15/10 73
Coastal Corp. 6.950% 06/01/28 74
Comcast Corp. 2.000% 10/15/29 33
Cox Communications Inc. 2.000% 11/15/29 32
Cray Research 6.125% 02/01/11 45
Cummins Engine 5.650% 03/01/98 70
CV Therapeutics 2.000% 05/16/23 72
Delta Air Lines 8.300% 12/15/29 64
Dynex Capital 9.500% 02/28/05 1
Elwood Energy 8.159% 07/05/26 73
Finova Group 7.500% 11/15/09 56
GB Property Funding 11.000% 09/29/05 70
Gulf Mobile Ohio 5.000% 12/01/56 71
Level 3 Communications Inc. 6.000% 09/15/09 68
Level 3 Communications Inc. 6.000% 03/15/10 67
Levi Strauss 7.000% 11/01/06 69
Levi Strauss 12.250% 12/15/12 72
Liberty Media 3.750% 02/15/30 65
Liberty Media 4.000% 11/15/29 69
Mirant Corp. 2.500% 06/15/21 55
Mirant Corp. 5.750% 07/15/07 55
Northern Pacific Railway 3.000% 01/01/47 54
PMA Capital Corp. 4.250% 09/30/22 72
Polaroid Corp. 6.750% 01/15/49 21
Redback Networks 5.000% 04/01/07 52
Universal Health Services 0.426% 06/23/20 65
US Timberlands 9.625% 11/15/07 56
Worldcom Inc. 6.400% 08/15/05 34
*********
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
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related conferences are encouraged. Send announcements to
conferences@bankrupt.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
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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.
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