========================================================================== HARNISCHFEGER BANKRUPTCY NEWS Issue Number 1 -------------------------------------------------------------------------- Copyright 1999 (ISSN XXXX-XXXX) June 14, 1999 -------------------------------------------------------------------------- Bankruptcy Creditors' Service, Inc., Phone 609-392-0900 FAX 609-392-0040 -------------------------------------------------------------------------- HARNISCHFEGER BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. Each issue is prepared by Peter A. Chapman, Editor. Subscription rate is US$45 per issue; newsletters are delivered by e-mail. Reproduction of HARNISCHFEGER BANKRUPTCY NEWS by any means is prohibited without the permission of the publisher. ========================================================================== IN THIS ISSUE ------------- [00000] HOW TO ORDER A SUBSCRIPTION TO HARNISCHFEGER BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF HARNISCHFEGER INDUSTRIES, INC. [00002] COMPANY'S CONSOLIDATED BALANCE SHEET AS OF APRIL 30, 1999 [00003] HARNISCHFEGER REPORTS FISCAL SECOND-QUARTER 1999 RESULTS [00004] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILINGS [00005] CHAPTER 11 DATABASE [00006] LIST OF THE DEBTORS' 25 LARGEST UNSECURED CREDITORS [00007] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES [00008] DEBTORS' MOTION FOR APPROVAL OF $750,000,000 DIP FACILITY [00009] WHAT HAPPENS TO HARNISCHFEGER COMMON STOCK & PUBLIC BONDS? KEY DATE CALENDAR ----------------- 06/07/99 Petition Date 06/22/99 Deadline for filing Schedules of Assets and Liabilities 06/22/99 Deadline for filing Statement of Financial Affairs 06/28/99 Deadline to provide Utility Companies with adequate assurance 08/06/99 Deadline to assume or reject leases and executory contracts 09/06/99 Deadline for removal of actions pursuant to F.R.B.P. 9027 09/06/99 Deadline for Debtors to provide Chase with their 2-Year Business Plan 10/05/99 Expiration of Debtors' Exclusive Period to propose a Plan 12/04/99 Expiration of Debtors' Exclusive Solicitation Period 06/06/01 Deadline for Debtors' Commencement of Avoidance Actions 06/06/01 Expiration of DIP Financing Facility Organizational Meeting with UST to form Official Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 U.S.C. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- -------------------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF HARNISCHFEGER INDUSTRIES, INC. -------------------------------------------------------------------------- HARNISCHFEGER INDUSTRIES, INC. 3600 South Lake Drive St. Francis, Wisconsin 53201 Telephone 414/486-6400 Fax 414/486-6747 http://www.harnischfeger.com Harnischfeger Industries, Inc., is a global holding company. Founded in 1884 and based in Milwaukee, it now has plants around the world, manufactures and markets products that can classified into two categories (i) pulp and papermaking machinery and (ii) mining equipment. Harnischfeger Industries, Inc., has 200 direct and indirect subsidiaries and employs approximately 13,000 people around the world, half of which work in the United States. The subsidiaries are fully integrated into the parent company. About 105 of those subsidiaries are foreign subsidiaries that receive credit and support from Harnischfeger Industries and provide it with products and services for Harnischfeger's large manufacturing projects. These foreign subsidiaries are often the sole-source or low- cost suppliers of critical components for Harnischfeger's machinery and equipment and frequently act in a capacity similar to subcontractors. Mining & Paper Businesses Harnischfeger Industries, Inc. has three primary subsidiaries: Beloit Corporation, Harnischfeger Corporation, also known as Harnco or P&H Mining Equipment, and Joy Technologies. These three subsidiaries own most of the Harnischfeger's subsidiaries. BELOIT CORPORATION. Beloit is the pulp and papermaking machinery component of Harnischfeger Industries. Beloit is only one of three major paper machine builders serving the industry worldwide and the only manufacturer based in the United States. Beloit designs, manufactures, installs and services pulp and papermaking machinery, mills and related products used globally in the pulp and paper industries. Beloit has the industry's largest installed equipment base with over 1,200 machines, which produce an estimated 40% of the worlds newsprint. Beloit experienced serious trouble in 1998. Several factors prompted these difficulties. First, the economic collapse across the Pacific Rim resulted in significantly reduced spending among pulp and paper producers worldwide. This reduced spending contributed to over-capacity among the worldwide pulp and papermaking companies and led to sever price competition and cost realignment programs. As a result, Beloit sales declined from $1,260,000,000 in 1997 to $829,800,000 in 1998. This also resulted in a significant decline in margins. Next, there were cost overruns on certain contracts in Indonesia and Beloit settled contract disputes costing approximately $164,400,000 in losses. Third, Beloit underwent significant cost reductions resulting in restructuring charges totaling $65,000,000,000 in 1998. These three factors contributed to a decline in operating profit from $76,500,000 in 1997 to a loss of $368,700,000 in 1998. HARNCO. Harnco, also known as P&H Mining Equipment, is Harnischfeger's surface mining equipment entity. Harnco and its subsidiaries are the world's largest producers of electric mining shovels and significant producers of walking draglines, large rotary blasthole drills and dredge and dragline bucket products. Harnco's products are used in surface mines, quarries and earth moving operations in the digging and loading of minerals and ores, such as coal copper, gold, iron ore, lead, zinc, clay and others. Harnco has the world's most extensive installed base of excavating equipment for the surface mining of these minerals with more than 1,500 shovels, drills and draglines in service. Harnco also supplies equipment, parts, repair services, and other support to its customers; and Harnco is a large global distributor of mining- related parts and equipment manufactured by other companies based in the United States. JOY TECHNOLOGIES. Joy and its subsidiaries are leaders in the manufacture of underground mining equipment including continuous miners, haulage equipment, roof bolting equipment, longwall shearers, roof supports, armored face conveyors, and continuous haulage systems. This equipment is used for the underground extraction of coal, which comprises 90% of sales, and other bedded materials, the remaining 10% of sales. Joy's products are not sold to the general construction industry, thus the cycles affecting the construction industry does not affect the demand for Joy's products line. Joy and its subsidiaries have operations in Australia, South Africa, the United Kingdom and the United States. Joy and its subsidiaries maintain a network of sales, service and parts distribution centers strategically located in major underground mining regions throughout the world. The mining industry has not been prosperous in today's strong economy. In fact, the economic environment today has caused lower prices and demand for copper, coal, and other minerals. As a result, mining companies are closing mines and downsizing operations in an effort to make production consistent with the expected demand reduced spending to minimize cash needs. Consolidated net sales for the mining equipment segment for fiscal year 1998 were $1,210,000,000, down 17% from the previous fiscal year while operating income slid to $82,000,000, down 59% from 1997. In 1998, Harnischfeger attempted to counteract the market weaknesses that were affecting their businesses by employing cost-cutting programs that would have reduced costs by approximately $110,000,000 and terminated 3,100 employees. Recent Difficulties Harnischfeger's first problem was a failed attempt at a hostile takeover of the old Giddings & Lewis Corp. That fight diverted management's attention just when the markets in Harnischfeger's core businesses, mining and papermaking equipment, were turning down. Then the Asian financial crisis struck. Harnischfeger Industries Inc. began struggling with a severe shortfall in working capital after being particularly hard hit by the Asian financial crisis. The Asian financial crisis depressed commodity prices and hammered demand for the company's mining equipment. "When Indonesia went up in flames, they (Harnischfeger) went up in flames," Thomas Burns Jr., an analyst at Dresdner Kleinwort Benson commented in recent press reports. Harnischfeger booked $1 billion worth of orders for four machines for Singapore-based Asia Pulp & Paper before financial problems in Thailand, Malaysia and Indonesia dragged down economies in the entire region, an analyst said. Asia Pulp & Paper took delivery of two machines but could not finance the other two. In late 1998, APP defaulted on $300 million it owed for the machines. This cash drain caused the price of Harnishfeger's stock, traded on the New York Stock Exchange under the HPH symbol, to fall rapidly. As the price of Harnischfeger stock declined, an aggressive investment group associated with the Bass Brothers of Texas began to accumulate a position. The Trinity Group ultimately accumulated an 8.0% equity stake. Thomas Taylor, representing the Trinity, requested a meeting with Harnischfeger's non- management directors after learning that a company in a "related business field" had made numerous advances to Harnischfeger regarding a strategic combination, and had extended a "premium offer" to purchase the company subject to due diligence. In a letter to the Board, Taylor asserted that the company did not move forward, nor take any action, with respect to the proposal and suggested that directors violated their fiduciary duty to shareholders. The Taylor group pressured management to make fundamental changes in the corporate structure, leading to the resignation of Harnischfeger Chairman and Chief Executive Officer Jeffery T. Grade last month. Robert B. Hoffman and John Nils Hanson, are Grade's successors as chairman and CEO, respectively. Following the shakeup, Taylor and Trinity announced that it would terminate its proxy solicitation, which sought to place tighter controls on the board and separate the office of chairman and CEO through amendments to the company's by-laws. The Taylor group reported selling 692,200 shares of Harnischfeger common stock between May 26 and June 8 at prices ranging from $8.06 to $1.13 a share. Notably, the shareholder group sold 166,000 shares on June 8 for $1.13 apiece. The Taylor group continues to hold 3,204,950 shares after the recent spate of stock sales. -------------------------------------------------------------------------- [00002] COMPANY'S CONSOLIDATED BALANCE SHEET AS OF APRIL 30, 1999 -------------------------------------------------------------------------- HARNISCHFEGER INDUSTRIES, INC. CONDENSED BALANCE SHEET at April 30, 1999 Assets Current assets: Cash and cash equivalents $36,716,000 Accounts receivable - net 684,932,000 Inventories 611,434,000 Other current assets 199,463,000 -------------- $1,532,545,000 Property, plant and equipment - net 582,142,000 Intangible assets 535,886,000 Other assets 225,056,000 -------------- Total Assets $2,875,629,000 ============== Liabilities and Shareholders' Equity Current Liabilities: Short-term notes payable, including current portion of long-term obligations $203,928,000 Trade accounts payable 318,377,000 Employee compensation and benefits 72,917,000 Advance payments and progress billings 106,999,000 Accrued warranties 48,980,000 Other current liabilities 328,148,000 -------------- $1,079,349,000 Long-term obligations 1,080,679,000 Liability for postretirement benefits 29,369,000 Other liabilities 86,662,000 Minority interest 35,322,000 Shareholders' equity 564,248,000 -------------- Total Liabilities and Shareholders' Equity $2,875,629,000 ============== -------------------------------------------------------------------------- [00003] HARNISCHFEGER REPORTS FISCAL SECOND-QUARTER 1999 RESULTS -------------------------------------------------------------------------- * The second-quarter net loss per diluted share of $1.60 compares to a net loss of $1.57 per diluted share from continuing operations in the year-earlier quarter. The loss reflects continued severe weak global original equipment market demand and a writedown at Beloit. * Excluding unusual charges from both quarters, the 1999 second quarter net loss would have been $0.36 vs. $0.07 loss in the equivalent 1998 quarter. * The company took an $87 million charge in the quarter for undelivered paper machines ordered by Asian customers. The charge is reflected in the income statement in cost of sales. The company also adjusted Beloit's backlog downward by $247.5 million to reflect both APP and other inactive orders. * Bookings for the quarter of $412 million were off 18 percent from the second quarter last year due to continued low levels of original equipment orders. * Cost reductions have continued with more than 3,400 employee positions eliminated since early 1998. * The company continues to seek needed liquidity and is exploring all options with respect to its businesses. No assurances can be given that appropriate financing can be arranged. MILWAUKEE, Wisconsin -- June 1, 1999 -- Harnischfeger Industries, Inc. (NYSE: HPH) incurred a net loss of $74.3 million or $1.60 per diluted share in the fiscal second quarter ended April 30. Before a charge establishing a reserve for undelivered paper machines, the net loss was $16.9 million or $0.36 per diluted share primarily reflecting continued difficult economic conditions in its principal markets. Second-quarter net sales were $488.1 million, compared to $477.8 million in the equivalent year-earlier period. Bookings were $412 million, compared to $505 million in the second quarter of 1998. Harnischfeger's first-half net sales totaled $944.4 million, compared to $1,035.7 million in the first half last year. The net loss in the first half of fiscal 1999 amounted to $90.7 million, or $1.96 per diluted share compared to a net loss of $97.8 million, or $2.10 per diluted share before the gain from the sale of the Material Handling business last year. First-half bookings of $837 million compared to $1,112 million in the same half last year. All three businesses are being impacted by selected vendors holding shipments resulting from the company's "stretching" of payables over the past several months. The impact has been most severe for Beloit which missed shipments in excess of $10 million during the quarter as a result of lack of material. Harnischfeger Chief Executive Officer John Nils Hanson said, "The board and management are aggressively addressing the financial and performance issues facing our company. Our strongly positioned, global businesses operate in markets that have been experiencing extremely depressed customer demand during the past four to six quarters. Moreover, these customers -- miners and pulp and papermakers -- show few signs of driving a meaningful upturn in new equipment purchases in the very near term. While the company is implementing substantial cost-saving initiatives, the current market conditions have adversely impacted both Harnischfeger's bottom line and increasingly its liquidity. Accordingly, we do not foresee significant financial improvement in the performance of the business units by year-end." Chairman Robert B. Hoffman said, "Harnischfeger continues to explore strategic alternatives for the company and its businesses. In addition, we have been pursuing efforts with our lenders and others to obtain needed liquidity. To date, the company has not received any offer at or above current market levels or identified any other alternative that would fully satisfy its liquidity needs and preserve or enhance shareholder value." Financing Update Hoffman said, "Although the company is in compliance with its loan covenants, Harnischfeger's current funding requirements to operate its businesses and implement cost-saving initiatives exceed its currently available resources. The amount of the proposed bank term loan has been reduced from $225 million to $95 million in large part due to the decision of the Supreme Court of Idaho to award a new trial in the Potlatch litigation. "The board and management recognize that the proposed $95 million term loan would not be adequate in and of itself to meet the company's liquidity needs for the next year. Accordingly, management is concentrating its immediate efforts on determining the best actions to protect the assets and businesses of the company. In this regard, among other things, the company continues to work with its lenders, along with additional potential sources of debt and equity, to determine the availability of the needed financing. However, there can be no assurances that needed financing can be arranged in a timely manner." Pulp and Paper Charge and Backlog Adjustment Harnischfeger recorded an $87 million writedown in the quarter to reflect a decrease in possible realizable value primarily of the third and fourth paper machines ordered by APP (designated as #811 and #812 by Beloit). This reserve reflects the offering of one or both of these machines at significant discounts to improve short-term liquidity. Beloit's order backlog has been reduced by $247.5 million to reflect the removal of the remaining portion of the backlog related to the APP equipment ($72 million), as well as the removal of other inactive orders, primarily in Brazil and Russia due to those countries' weakened financial conditions. Cost Reduction Efforts The company has exceeded its goal of reducing 3,100 positions globally by the end of 1999, having achieved reductions in excess of 3,400 by the end of the second quarter. These cuts, coupled with additional cost-reduction efforts, are delivering more than $110 million in annualized savings at fiscal 1998 sales levels. As discussed below, further cost-reduction efforts occurred in the quarter although some additional cost-reduction plans have been postponed due to current liquidity constraints. Liquidity constraints negatively impact our ability to absorb one-time cash costs associated with desired cost-reduction efforts. Mining Group Joy Mining Machinery Joy's repair and rebuild work increased slightly during the second quarter and business levels and performance were generally consistent with expectations except for the postponement of a longwall system order for the U.K. This last-minute postponement resulted in reductions of approximately 150 people, at a cost of $1.6 million and a loss in absorption of more than $1.0 million. The company's underground mining machinery business experienced weak bookings for original equipment as the slowdown in demand for new units continued. Joy's overall market position remains at historical levels and margins are stable by product line. P&H Mining Equipment The surface mining equipment business continues to improve its aftermarket sales despite low levels of demand for original equipment. Two model 4100 shovels were booked in the quarter, the same as in the equivalent year-earlier quarter. P&H MinePro(r) aftermarket volume reached record levels during the quarter as parts and service for alliance partner and competitors' equipment grew at double-digit rates. As with Joy, P&H has maintained its percent of industry shipments in new equipment and its product-by-product price realization. Pulp and Paper Machinery Beloit Corporation Beloit continues to suffer from a prolonged global depression in demand for pulp and paper machinery. While proposal activity strengthened, the conversion rate of proposals into confirmed bookings has not accelerated as projects continue to be pushed out in time. Aftermarket activity in Beloit's MillPro (SM) initiative continues to grow in key markets, but at low, single- digit rates. Cost-reduction efforts also continue as worldwide operations headcount was reduced by about 500 with the announced closing of one of two major Wisconsin plants and the foundry in Poland and the conversion of the largest European facility into a MillPro service center. Selected reductions in the workforce included a combination of layoffs and shortened workweeks in a wide variety of facilities in North America. These temporary measures allow the flexibility to quickly respond to changing customer needs and to retain key resources for the cyclical upturn. Market Outlook Mining -- Commodity prices for basic metals and minerals remain weak compared to historical levels. While copper prices improved somewhat recently, global supplies remain at high levels and production curtailments and mine downtime remain pervasive for all mined commodities. Pulp and Paper -- Pulp prices increased slightly in the quarter from their persistently low levels, representing the first upturn of significance in the past year. Paper producers generally are reporting improved operating earnings and the increasing mill requirements for improved operating efficiencies are starting to drive higher levels of Beloit MillPro repair and service activity. While these signs are encouraging, industry overcapacity and ongoing weak demand across multiple paper grades preclude any near-term expectations for recovery in original equipment demand. -------------------------------------------------------------------------- [00004] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILINGS -------------------------------------------------------------------------- MILWAUKEE, Wisconsin -- June 7, 1999 -- Harnischfeger Industries, Inc. (NYSE: HPH) today filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in Delaware Federal Court in an action that covers the parent company and its U.S.-based operating subsidiaries. Chief Executive Officer John Nils Hanson said, "In light of the adverse impact of the continuing difficult global economic environment on the company's businesses, and the attendant impairment of our capital structure, we concluded that prompt and decisive action was required to preserve the company's assets and reverse its deteriorating financial condition." In connection with its Chapter 11 filing, Harnischfeger has received commitments for debtor-in-possession financing of $750 million. "It is our goal that our businesses meet the needs of our customers and further develop our globally competitive market leadership," Hanson said. "Through the hard work and commitment of our employees and the support of our other constituencies, we will emerge from this process a stronger company." The filing provides the company with the opportunity to better position itself for a viable future. Harnischfeger will continue to implement initiatives to streamline its cost structures in line with market requirements. "Under Chapter 11, employee payrolls will be met, the company expects to continue its benefit programs and with the debtor-in- possession financing we will have the financial strength to serve our customers and build stronger relationships with our suppliers going forward," Hanson said. Harnischfeger will cease interest payments on its debt, including its publicly traded debentures. At the time of the Chapter 11 filing, Harnischfeger's debt totaled approximately $1.3 billion. Losses for the first fiscal six months ended April 30 were $90.7 million. Chairman Robert B. Hoffman said, "In the company's view, staying out of Chapter 11, given the current conditions affecting the company and its highly leveraged capital structure, could well have led to a far worse situation and potentially a greater loss of value for creditors as well as equity holders. We believe this action will give us the ability to preserve the value of the company and begin the rebuilding process for the benefit of all of our constituencies. "We are confident that with the support of employees, suppliers, creditors and customers a successful reorganization can be achieved enabling Harnischfeger Industries, Inc., to emerge from this process as a financially healthy organization." In addition to Harnischfeger Industries, Inc., among the U.S. operating subsidiaries included under the filing are: Joy Mining Machinery, P&H Mining Equipment and Beloit Corporation. The company's non-U.S. subsidiaries are excluded from these filings, are not expected to file and are operating with their normal business practices and financial obligations. -------------------------------------------------------------------------- [00005] CHAPTER 11 DATABASE -------------------------------------------------------------------------- Debtors: Harnischfeger Industries, Inc. American Alloy Company American Longwall Face Conveyors, Inc. American Longwall, Inc. American Longwall Rebuild, Inc. American Longwall Roof Supports, Inc. Beloit Corporation Beloit Pulping Group, Inc. Beloit Tecnologies, Inc. Benefit, Inc. BWRC Dutch Holdings, Inc. BWRC, Inc. Dobson Park Industries, Inc. Field Repair Services, LLC Fitchburg Corporation Harnischfeger Corporation a/k/a P&H Mining a/k/a Harnco Harnischfeger Technologies, Inc. Harnischfeger World Services Corporation HCHC, Inc. HCHC UK Holdings, Inc. HIHC, Inc. The Horsburgh & Scott Company Joy MM Delaware, Inc. Joy Technologies, Inc. Joy Technologies, Delaware, Inc. JTI UK Holdings, Inc. Optical Alignment Systems and Inspection Services, Inc. Princeton Paper Company, LLC RCHH, Inc. South Shore Corporation South Shore Development LLC Consolidated Bankruptcy Case No.: 99-2171 Petition Date: June 7, 1999 Court: United States Bankruptcy Court District of Delaware Marine Midland Plaza Building 824 Market Street Wilmington, Delaware 19801 Judge: The Honorable Peter J. Walsh Circuit: Third Debtors' Lead Counsel: James H.M. Sprayregen, Esq. Anne Marrs Huber, Esq. James A. Stempel, Esq. Matthew N. Kleiman, Esq. Knight Elsberry, Esq. Chris L. Dickerson, Esq. Anup Sathy, Esq. Geoffrey A. Richards, Esq. Stephanie D. Simon, Esq. Kirkland & Ellis 200 East Randolph Drive Chicago, IL 60601 Telephone 312/861-2000 Fax 312/861-2200 Theodore L. Freedman, Esq. John W. Kibler, Esq. Kirkland & Ellis Citicorp Center 153 East 53rd Street New York, New York 10022-4675 Telephone 212/446-4800 Fax 212/446-4900 Debtors' Local Counsel: Laura Davis Jones, Esq. Young, Conaway, Stargatt & Taylor Rodney Square North Wilmington, DE 19899-1347 Telephone 302/571-6600 U.S. Trustee: John D. "Jack" McLaughlin, Esq. Office of the United States Trustee Curtis Center, 9th Floor West 901 Walnut Street Philadelphia, PA 19106 (215) 597-4411 Debtor's Reported Financial Condition as of April 30, 1999: Total Consolidated Assets: $2,875,629,000 Total Consolidated Liabilities: $2,276,059,000 Public Securities held by more than 500 holders: a. 6.875% Notes, due 2/15/27, issued under Indenture dated 3/1/92, as supplemented 6/12/92 $150,000,000 b. 7.25% Notes, due 12/15/25, issued under Indenture dated 3/1/92, as Supplemented 6/12/92 $150,000,000 c. 8.9% Debenture, due 3/1/22, issued under Indenture dated 3/1/92, as supplemented 6/12/92 $ 75,000,000 d. 8.7% Debenture, due 6/15/22, issued under Indenture dated 3/1/92, as Supplemented 6/12/92 $ 75,000,000 e. Number of shares common stock 51,668,939 -------------------------------------------------------------------------- [00006] LIST OF THE DEBTORS' 25 LARGEST UNSECURED CREDITORS -------------------------------------------------------------------------- Nature Amount Creditor of Claim of Claim -------- --------- ------------ Chase Manhattan Bank Revolver $500,000,000 U.S. Bank Trust Indenture 450,000,000 Nationwide Life Insurance Co. Series A & C 33,500,000 AG Capital Funding Partners Series A & B 10,000,000 Northwood Capital Funding Partners Series A & B 10,000,000 Trilinks Investment Trust Series D 7,563,636 Blue Ridge Investments Put Option 5,450,000 Life Insurance Co. of the Southwest Series D 2,909,090 Blazeman & Company Series D 1,800,000 Hare & Company Series A & B 1,500,000 Federal Life Insurance Company Series A & B 727,272 King & Spaulding Series D 385,274 Minnesota Mutual Life Insurance Put Option 363,636 Mutual Life Insurance Company Series A & B 363,636 National Travelers Life Insurance Series A & B 363,636 Texas Life Insurance Company Series D 363,636 Arthur Andersen Trade 206,190 Towers Perrin Trade 203,149 American Appraisal Associates Trade 119,745 Michael Best & Friedrich Trade 116,426 Cigna Trade 105,759 Wausau Insurance Companies Trade 104,858 MIMLIC Funding, Inc. Series D 72,727 Gulfstream Trade 72,484 Moody's Investors Service Trade 38,000 -------------------------------------------------------------------------- [00007] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES -------------------------------------------------------------------------- The Debtors requested, pursuant to F.R.B.P. 1015(b)(4), that the Court order its chapter 11 cases jointly administrated to reduce costs and facilitate a more efficient administrative process, unencumbered by the procedural problems otherwise attendant to the administration of multiple chapter 11 cases. The Debtors note that their foreign subsidiaries are excluded from these filings and are not expected to file; they continue operating with their normal business practices and financial obligations. Judge Walsh directs that the Debtors' chapter 11 cases be consolidated, solely for administrative purposes, and that all pleadings and papers be captioned: UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE In re: : : Chapter 11 HARNISCHFEGER INDUSTRIES, : INC., et al., : Case No. 99-2171 (PJW) : (Jointly Administered) Debtors. : At the First Day Hearing, Judge Walsh made it clear that his order neither contemplates a substantive consolidation of the Debtors' estates nor prejudices the right of any party-in-interest to seek a substantive consolidation of the Debtors' estates. -------------------------------------------------------------------------- [00008] DEBTORS' MOTION FOR APPROVAL OF $750,000,000 DIP FACILITY -------------------------------------------------------------------------- Prior to their chapter 11 filings, the Debtors and their non-debtor subsidiaries funded their day-to-day working capital needs from a $500,000,000 Revolving Credit Facility arranged by The Chase Manhattan Bank. That pre- petition credit facility is unsecured and was fully drawn at the Petition Date. Chase Manhattan Bank, as Administrative Agent, and Chase Securities, Inc., as Book Manager and Lead Arranger, will provide up to $750,000,000 of superpriority debtor-in-possession revolving credit, a term loan, and letter of credit support to be made available to Harnischfeger Industries, Inc. Each of Harnischfeger's debtor-subsidiaries will guarantee Harnischfeger's obligations. The Debtors say their "liquidity crisis is so acute, their operations and corporate structure so complex, that is was not possible to negotiate alternative financing with any other lender than Chase, which was already intimately familiar with the Debtors' operations, corporate structure and financial arrangements. The DIP Facility, with Judge Walsh's interim approval at the First Day Hearing, provides Harnischfeger, on an interim basis through the time of a Final Hearing, with access to up to $231,835,000 to be used in accordance with a 30-day budget agreed to by the Debtors and Chase: HARNISCHFEGER INDUSTRIES, INC. and AFFILIATES INTERIM DIP FINANCING UTILIZATION BUDGET 30 Day Interim Period Operating cash flow per forecast ($38,141,000) Foreign intercompany funding Beloit ($41,000,000) Joy (10,000,000) Harnco (3,200,000) ------------ Total foreign intercompany funding (54,200,000) Foreign intercompany credit support (20,000,000) Critical creditor payments by Debtors (34,394,000) DIP Fees (5,100,000) Letters of credit (80,000,000) ------------- Total facility requirements ($231,835,000) ============= The DIP Facility has three tranches: 1. Tranche A is a revolving credit facility of $350,000,000 with a sublimit for import documentary letters of credit in an amount up to $20,000,000 and standby letters of credit in an amount up to $300,000,000. 2. Tranche B is a term loan in the amount of $200,000,000, to be drawn in full upon entry of a Final Order. 3. Tranche C is a standby letter of credit facility in the amount of $200,000,000. Specifically, the DIP Facility will enable the Debtors to: 1. purchase raw materials, parts, components and services 2. compensate their employees 3. pay their post-petition creditors 4. operate their manufacturing and servicing facilities 5. maintain their essential overseas operations 6. otherwise maximize the value of their businesses and properties The DIP Facility will mature at the earliest of: a. two years after the Petition Date; b. the substantial consummation of a plan or plans of reorganization in the Debtors' chapter 11 cases, which for purposes of the Loan Agreement will be no later than the effective date of such plan; and c. the Lenders' election, in their sole discretion, upon the occurrence of an event of default. All Tranche A and Tranche C Letters of Credit must be cash collateralized at a rate of 105%. The Debtors' borrowings under the DIP Credit Agreement will be secured by (a) perfected first priority pledges of all of the stock of subsidiaries owned directly by the Harnischfeger and each of the Guarantors (limited, in the case of the stock of non-U.S. issuers, to 65% of the outstanding shares thereof or other ownership interests therein) and (b) a perfected first priority lien on all cash collateralizing the letters of credit issued by the Lenders. The DIP obligations will constitute allowed superpriority administrative expense claims in the Debtors' bankruptcy cases. The Lenders consent to a $5,000,000 Carve-Out from their liens for payment of professional fees and fees of the United States trustee. Interest will be payable, at Harnischfeger's option, either at (i) Chase's Alternate Base Rate (which is the Federal Funds Effective Rate plus 0.5%) plus 1.75% or (ii) LIBOR plus 2.75%. In the event of a default, the interest rate increases by 2% per annum above the then applicable rate. The Debtors will pay Chase a $7,500,000 Advisory Fee; a $7,500,000 Facility Fee up front. Chase's annual Administrative Agent Fee will be $200,000. The Debtors will pay 0.50% per annum Commitment Fee on account of all amounts not borrowed. Letter of Credit Fees accrue at 2.75% per annum on the outstanding face amount, and the Debtors are responsible for payment of all customary L/C fees for fronting, issuance, amendments and processing. Chase contemplates that it will syndicate the DIP Facility. The DIP Credit Agreeement provides that the Tranche A, Tranche B and Tranche C loans shall be assignable to Eligible Assignees (institutions having more than $200,000,000 in assets) in minimum amounts of $5,000,000. The Debtors agree that as soon as practicable, and in any event within 90 days of the Petition Date, they will furnish Chase with a copy of their business plan for the period through the Maturity Date. The Debtors' continued ability to draw under the DIP Facility is conditioned on that Business Plan being satisfactory in form and substance to Chase. The Debtors agree to and make their senior officers available to discuss the Business Plan with Chase if Chase so requests. The Debtors further agree that they will restrict Capital Expenditures to and achieve EBITDA targets in amounts, without further description, satisfactory to Chase. Outside of the ordinary course of their businesses, the Debtors require Chase's consent to any disposal of the company's assets. -------------------------------------------------------------------------- [00009] WHAT HAPPENS TO HARNISCHFEGER COMMON STOCK & PUBLIC BONDS? -------------------------------------------------------------------------- After a company files for bankruptcy, its debt and equity securities will continue to trade so long as there's a market (i.e., willing buyers and sellers) for those securities. The New York Stock Exchange will -- as in all bankruptcy situations -- append a Q to the Company's stock symbol. Accordingly, in a few days, the official symbol under which Harnischfeger's common stock trades will change from HPH to HPHQ. Until the Company fails to meet the NYSE's listing criteria -- see http://www.nyse.com for further details -- Harnischfeger stock will continue to trade on the NYSE, just under the new HPHQ symbol. Before the conclusion of the chapter 11 case, it would not be surprising for the NYSE to question whether the shares should be delisted. If the shares were delisted from the NYSE, the stock would then trade in the so-called pink sheets. Again, so long as there's a market, the Debtor's equity securities will continue to trade. Now that the Company has entered the chapter 11 process, it is prohibited from paying pre-petition debts except pursuant to the terms of a plan of reorganization or with the express permission of the Bankruptcy Judge. Bondholders, the pre-petition bank lenders, vendors, service providers, etc., are similarly-situated general unsecured creditors whose claims must be treated equally. With this in mind, the Company will not make further interest payments on its outstanding bonds. As with the Debtor's equity securities, so long as there are willing buyers and sellers, the Debtor's debt securities will continue to trade throughout the chapter 11 process. *** End of Issue No. 1 ***