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/raid1/www/Hosts/bankrupt/TCR_Public/000209.MBX T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, February 9, 2000, Vol. 4, No. 28 Headlines AMAZON.COM, INC.: Moody's Assigns Caa3 To Notes AMERICAN BANKNOTE: Further Support to Retain Special Accountants BANK PLUS: Reports 1999 Fourth Quarter Results And Strategy BIG SMITH: Committee Taps Greenberg Traurig, PA BMJ MEDICAL: Second Motion To Extend DIP Financing BREED TECHNOLOGIES: Seeks Extension To Assume/Reject Leases CHASTAIN CAPITAL: HBK Finance No Longer Holds Stock COLORADO GREENHOUSE: Announces Chapter 11 Filing COMMERCIAL FINANCIAL SERVICES: Motion To Disqualify Law Firm COVENTRY HEALTH CARE: Crabbe Huson Ceases To Own Shares DEVLIEG BULLARD: Final Order Authorizes Loan Amendment FRANK'S NURSERY: Moody's Downgrades Debt Ratings GALEY & LORD: Moody's Downgrades Ratings HUMPTY DUMPTY: Small Fry Makes Winning $2.3M Bid INTEGRATED HEALTH SERVICES: Reports Filing Bankruptcy To SEC JUST FOR FEET: Committee Seeks To Convert Cases to Chapter 7 KENETECH: Two Actions Filed Against Kenetech LAMONTS APPAREL: Seeks Bar Date LEASING SOLUTIONS: Dimensional Fund Reports Holdings LEVEL 3 COMMUNICATIONS: Moody's Ratings Reflect Risks LODESTAR HOLDINGS: Moody's Downgrades Sr. Notes; Negative Outlook LONDON FOG: Seeks Extension to Assume/Reject Leases ML CLO: Moody's Places Two Classes Of Notes On Review PAYLESS CASHWAYS: Dimensional Fund Advisors Reports Holdings PENNCORP FINANCIAL: Files Voluntary Chapter 11 Petition PENNCORP FINANCIAL GROUP, INC.: S&P Cuts Ratings PREMIER GRAPHICS: Moody's Lowers Ratings RCG LIQUIDATION: Order Extends Exclusivity STYLESITE: Meeting of Creditors SYBASE: Reports Fourth Quarter Earnings THERMATRIX: Authorized To Continue Operations THERMATRIX: Senior Management Changes TRANSTEXAS: Court Confirms Plan of Reorganization TULTEX CORP: Seeks To Implement Employee Programs WORLDCORP INC: Hearing on Approval of Disclosure Statement XATA: Stock Holders Report 24% Ownership ********* AMAZON.COM, INC.: Moody's Assigns Caa3 To Notes ----------------------------------------------- Approximately $2.4 Billion of Debt Securities Affected. Moody's Investors Service has assigned a Caa3 to Amazon.com, Inc.'s proposed euro 600 million convertible subordinated notes due 2010. Moody's has also confirmed the ratings of Amazon.com, Inc.'s existing debt issues, and assigned prospective ratings to the company's $2 billion universal shelf registration. The following ratings were confirmed: Senior unsecured discount notes due 2008 at Caa1 Senior implied and senior unsecured issuer ratings at Caa1 4.75% convertible subordinated notes due 2009 at Caa3 The following ratings were assigned: Prospective senior debt rating of (P) Caa1 Prospective subordinated debt rating of (P) Caa3 Prospective preferred stock rating of (P) "caa" The rating outlook on all debt is stable. The ratings continue to reflect the uncertain financial success of Amazon.com's changing business strategy, the equity-like risk assumed by debtholders as the company's horizon to achieving positive earnings, and cash flow continues to be pushed out. Moody's believes the company's recent announcement of 1999 results are difficult to interpret. Revenues and cumulative customers both grew by about 170% during 1999. The year-over-year rate of growth was not significantly different during the fourth quarter than in the first nine months of the year, despite the expectation that the rollout of four new "stores" at Amazon and holiday shopping activity would have boosted the growth rate in the last quarter. Amazon's productivity measures, including gross margin, sales and gross profit per customer, current operating expenses to revenues, and marketing expense to new customers acquired, appeared to fall for both the full year 1999 and the fourth quarter of 1999 relative to prior year periods. However, Amazon.com is still in the development stage in which current expenses may relate to gains that will be realized in future periods. The ratings continue to be supported by Amazon.com's strong name recognition, which could aid its continued product diversification, and by its very good reputation for fulfillment among consumers. However, Amazon is facing increasing competition from other e-tailers as well as from traditional retailers which can leverage their existing franchise to attract and keep customers through a "bricks and clicks" strategy. As Internet- based retailing matures, Moody's expects that Amazon's share of that market will fall. Amazon.com is highly levered. Debt, whose balance sheet value was about $1.4 billion as of year end, represents about 85% of the company's capital structure. Much of the equity on Amazon's balance sheet represents stock issued in payment for acquisitions. Goodwill has grown to $534 million at year end 1999, from $174 million in 1998. The non-cash impact of rapid goodwill amortization will be reflected in retained earnings. Amazon had a net loss $720 million in 1999, of which about $330 million represented amortization of intangibles, and other charges related to merger activities, equity investments, and stock-based compensation. Amazon spent heavily in 1999 on infrastructure and working capital. Moody's has held that these investments were both expected and necessary for Amazon to achieve its growth objectives and service its growing customer base. The company has made some small acquisitions for a combination of cash and stock, and has also invested about $250 million of cash in other companies, including Pets.com, HomeGrocer.com, Drugstore.com, Gear.com, and Ashford.com. Recently, some of these companies have entered into "partnership" agreements, whereby Amazon will invest in and advertise the companies on its site. In return, the partners have agreed to make substantial cash payments to Amazon over a period of years. The partners have generally been in operation for a short period of time, have little track record, and are facing the same uncertain environment as Amazon. As a result, Moody's cannot ascertain the likelihood that these payments will be made. Amazon.com has also entered into arrangements with third parties such as Sotheby's and its z-shop partners which may bring in income over time to offset the cost of site development. Amazon.com, Inc., headquartered in Seattle, Washington, is an Internet-based retailer of books, entertainment and computer software, and toys, home improvement products. Revenues were $1.6 billion in 1999. AMERICAN BANKNOTE: Further Support to Retain Special Accountants ---------------------------------------------------------------- American Banknote, in response to the objections of the US Trustee, asserts that it needs the services of PricewaterhouseCoopers LLP ("PwC") as special purpose forensic accountants. The debtor states that it does not intend to provide general services to ABN during its Chapter 11 case. Instead, PwC proposes to perform the limited role it has had since January, 1999 when Morgan Lewis, ABN's special litigation counsel, retained PwC to provide specialized forensic accounting services essential to Morgan Lewis' defense of ABN in certain purported Class Actions and governmental and regulatory investigations. BANK PLUS: Reports 1999 Fourth Quarter Results And Strategy ----------------------------------------------------------- Bank Plus Corporation (Nasdaq: BPLS) and its subsidiaries (the "Company"), which include Fidelity Federal Bank, FSB ("Fidelity" or the "Bank"), report that for the fourth quarter of 1999 the Company incurred a net loss of $8.9 million, or $0.45 per diluted share, compared to a net loss of $2.4 million, or $0.12 per diluted share, for the 1999 third quarter, which included a $5.9 million gain from sale of deposits, and net income of $1.1 million, or $0.06 per share for the 1998 fourth quarter. For the year ended December 31, 1999 the Company incurred a net loss of $ 24.9 million, or $1.28 per diluted share, compared to a net loss of $56.3 million, or $2.90 per diluted share, for the year ended December 31, 1998. The net losses for 1998 and 1999 were related to the Bank's credit card operations. Mark K. Mason, President and Chief Executive Officer, said: "While we continue to make progress in reducing the losses from our credit card operations, the net earnings from the core bank operations, which increased by more than 75% over the prior year, remain insufficient to absorb all of the losses in the credit card operations. Accordingly, to accelerate our return to overall profitability, the Board of Directors has adopted a business plan which provides for selling approximately one fourth of our deposit base and utilizing the capital raised from these deposit sales to mitigate the impact of credit card operating losses on the Company's future results of operations. In this regard, management and the Board of Directors are exploring transactions involving the disposition of the credit card portfolio and servicing operations. While we regret the adverse impact that deposit sales have on the value of our retail franchise and future earnings, these potential transactions would have obvious benefits and the deposit premiums we expect to receive are strong evidence of the value the market places on our retail branch franchise." BIG SMITH: Committee Taps Greenberg Traurig, PA ----------------------------------------------- The Official Committee of Unsecured Creditors of Big Smith Brands, Inc. applies tot he court for entry of an order authorizing the employment of Brian K. Gart, Esq. and the law firm of Greenberg Traurig as counsel to the Committee. The firm will render the following professional services: Advise the Committee with respect to its powers and duties under the Bankruptcy Code; To prepare all necessary motions, pleadings, orders, applications, adversary proceedings, notices and other legal documents necessary in the representation of the Committee in this Chapter 11 case; To protect the interests of the Committee in all matters pending before the court' To assist the committee in selecting any other professionals that the Committee deems necessary to assist the Committee in this Chapter 11 case; and To represent the Committee in negotiations with the debtor and other interested parties in connection with any plan of reorganization. BMJ MEDICAL: Second Motion To Extend DIP Financing -------------------------------------------------- BMJ Medical Management, Inc. seeks an order further extending the post-petition debtor in possession financing under which the debtors currently operate their business and manage their properties. The debtors seek an extension of the DIP Financing to May 15, 2000 in order to allow the debtors sufficient time to complete the process of securing creditor consent to their plan, file an amended plan reflecting such agreement, and ultimately confirming such amended plan. Until such time as the plan is consummated, however, the debtors must continue to manage their properties in order to maximize their going-concern value. The debtors are without sufficient cash collateral, as such term is defined to meet the peak monthly cash needs. Today, there are en remaining affiliated Medical Groups. BMJ provides ongoing management services to eight Medical Groups and is in litigation with two other medical Groups regarding termination of the management relationship. The debtors other than BMJ have no active business operations. BMJ's operations are concentrated in the South Florida marketplace where it maintains its sole corporate offices. BREED TECHNOLOGIES: Seeks Extension To Assume/Reject Leases ----------------------------------------------------------- BREED Technologies, Inc., debtors, seeks a further extension of time to assume or reject nonresidential real property leases. A hearing on the motion ahas been scheduled for 11:30 AM on February 16, 2000 before the Honorable Mary F. Walrath. The debtors request that the court extend the date by which the debtors must assume or reject the leases for an additional ninety days, to May 15, 2000. The debtors state that it is too early in the cases for the debtors to fully evaluate whether it would be a proper exercise of their business judgment to assume or reject the leases. The debtors ultimately may determine that it is in the best interest of creditors to sell some or all of their assets, and thus, ultimately may need to assume and assign certain leases in order to maximize the value of the debtors' estates. Until a plan of reorganization is formulated or the debtors consummate sales of their assets, it is unclear which real properties the debtors will need to retain. CHASTAIN CAPITAL: HBK Finance No Longer Holds Stock --------------------------------------------------- HBK Finance L.P. and HBK Investments L.P. report they no longer hold common stock in Chastain Capital Corporation. The report came with a dateline of December 31, 1999. COLORADO GREENHOUSE: Announces Chapter 11 Filing ------------------------------------------------ Colorado Greenhouse, a leading producer and marketer of hydroponic tomatoes, announced it has filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Code. This includes Colorado Greenhouse Holdings and its related subsidiaries. Under the terms of the plan, Colorado Greenhouse will continue to produce hydroponic tomatoes in greenhouses throughout Colorado. Colorado Greenhouse tomatoes will continue to be available at a number of premium major grocery retailers throughout Colorado and North America. The company does not anticipate any significant impact to its employment or production levels as a result of this financial rehabilitation plan. Colorado Greenhouse, with headquarters in Westminster and greenhouse operations in Colorado, employs approximately 350. Colorado Greenhouse grows hydroponic tomatoes in climate- controlled, state-of-the-art greenhouses which affords year- around production and consistent quality levels. For more information please contact Martin C. Wehr, president and CEO, Colorado Greenhouse at (303) 457-7600. COMMERCIAL FINANCIAL SERVICES: Motion To Disqualify Law Firm ------------------------------------------------------------ The debtor, Commercial Financial Services, Inc. seeks entry of an order disqualifying its former counsel, Crowe & Dunleby from representing CFS's adversary, Chase Securities, inc. in this case and related litigation. CFS believes that the conflict is real and that Crowe & Dunlevy's representation of an adverse party is unacceptable. The debtor alleges that the matters in which Crowe & Dunlevy currently represents Chase are the same, or at a minimum substantially related to many of the matters on which Crowe & Dunlevy worked for CFS. The debtor states that Crowe & Dunleby obtained confidential information from CFS regarding certain securitizations and many other matters. However, according to the debtor, disqualification of Crowe & Dunlevy does not depend on a finding that such privileged information was in fact communicated. Once a substantial relationship has been found to exist between the prior representation and an adverse current representation, the debtor states that there is an irrebuttable presumption that the client revealed facts to the attorney that require the attorney's disqualification. COVENTRY HEALTH CARE: Crabbe Huson Ceases To Own Shares ------------------------------------------------------- Crabbe Huson Group, Inc. does not directly own any shares of Coventry Health Care Inc. but does have shared power to vote or direct the vote over 2,254,904 shares and shared power to dispose or direct the disposition of 2,416,004 shares of the common stock of the company. Crabbe Huson states that as of December 31, 1999 it ceased to be the beneficial owner of more than 5% of the class of securities as the owned shares represent only 4.12% of the outstanding shares of common stock of Coventry Health Care Inc. DEVLIEG BULLARD: Final Order Authorizes Loan Amendment ------------------------------------------------------ The US Bankruptcy Court for the Northern District of Ohio, Eastern Division entered an order authorizing the debtor to enter into a second amendment dated as of January 11, 2000 to the post- petition loan and security agreement dated as of July 15, 1999. The second amendment provides an extension of the final maturity date to February 15, 2000 and a decrease in the amount of the line of credit available under the agreement from $30 million to $20.3 Million. FRANK'S NURSERY: Moody's Downgrades Debt Ratings ------------------------------------------------ Moody's Investors Service downgraded the debt ratings of Frank's Nursery & Crafts, Inc., and changed the rating outlook to negative from stable. The following ratings were affected by this action: $130 million secured bank credit facilities to B2 from B1 Senior unsecured issuer rating to B3 from B2 $115 million 10.25% senior subordinated notes due 2008 to Caa1 from B3 Frank's senior implied rating was also lowered to B2 from B1. The downgrades were prompted by disappointing year-to-date results in 1999, which weakened Frank's financial condition and increased its vulnerability to unseasonable weather conditions in the near term. Weather patterns significantly decreased demand for outdoor gardening products for much of the season over a large portion of Frank's territory in 1999. Moody's expects holiday sales to be lower than expectations. As a result, Moody's believes the company will end its fiscal year with higher debt than anticipated, and could be challenged to cover debt service costs if the weather is uncooperative again. At best, Moody's expects that Frank's will be modestly cash flow positive for the coming year. Moody's anticipates that EBITDAR to interest and rents could be at 1.3 times, an uncomfortably thin level for a seasonal company that is highly dependent on uncontrollable weather patterns. Currently, liquidity appears to be sufficient to support the company through its busy selling season. The ratings are supported by Frank's long history and well- established franchise. Since the buyout sponsored by Cypress Group in 1998, management has followed through on plans to re- furbish and re-merchandise the stores to focus on lawn and garden supplies. Part of the decline in revenues and gross margin during 1999 reflects a planned reduction in inventory and SKU's as the company cleared out entire categories of products. Moody's believes that Frank's continues to maintain its franchise among consumers, although it remains under pressure from competitors such as home improvement stores and independent nurseries. The negative outlook reflects the potential for further negative rating action if the company's business plans are adversely affected by weather, intensified competitive activity in the coming year, or working capital issues. An additional equity infusion is currently under active discussion by The Cypress Group LLC, FNC Holdings' principal shareholder. The extent and timing of such an infusion could prompt Moody's to review Frank's debt ratings in light of the positive impact it would likely have on the company's leverage and financial flexibility. Frank's Nursery & Crafts, Inc., headquartered in Troy, Michigan, has about 257 stores specializing in gardening and decor. Frank's is a wholly-owned subsidiary of FNC Holdings, Inc. GALEY & LORD: Moody's Downgrades Ratings ---------------------------------------- Moody's Investors Service downgraded to Caa2 from B3, the rating on Galey & Lord, Inc.'s $427 million guaranteed senior secured credit facility, and downgraded to Ca from Caa3 the rating of the company's $300 million issue of 9.125% guaranteed senior subordinated notes, due 2008. In addition, Moody's lowered Galey & Lord's senior implied rating to Caa2 from B3 and its senior unsecured issuer rating to Caa3 from Caa1. Moody's maintained its negative outlook for the ratings. The downgrade reflects the company's deteriorated operating performance throughout the fiscal year 1999 and the 1st quarter of fiscal year 2000, caused by weak pricing at Swift Denim and net declines in unit sales at all divisions including G&L Apparel (which is comprised of corduroy, sportswear, uniforms and garment packaging), Home Fashion Fabrics and Klopman International. The downgrade also reflects high debt leverage of Galey & Lord, substantially deteriorated coverage of interest expense as well as Moody's expectations that the company's cash generation will continue to be stressed due to global overcapacity in denim textile industry, foreign competition and slower growth for khakis. In FY1999, Galey & Lord's sales increased approximately 5.6% compared to sales in FY1998 primarily due to the impact of four additional months of sales from businesses acquired in January 1998. Excluding the effect of acquisitions, FY1999 sales decreased approximately $93.7 million, or 10.4%, largely due to decreased volume for the most of the product mix and from a significant price decline in denim. In the 1st quarter of 2000, sales decreased 18.3% compared to the 1st quarter of 1999 primarily due to a decline in unit sales of woven sportswear and some decline in selling prices. Sales declines were slightly offset by a 21% increase in unit sales of garment packages in the 1st quarter of 2000. Moody's does not believe that 1st quarter improvement in sales are a sufficient indicator of any near term return to historical sales levels. While the gross margin benefited in the first quarter 2000, from lower cotton costs since December 1999, SG&A expense during the same period increased 17.3%, resulting in a net decrease in profitability. The company's EBITA margin in the 1st quarter of 2000 decreased to 7.0% from 8.4% for the comparable period last year. Similarly, EBIT margin decreased to 6.1% in the 1st quarter of 2000 from 7.7% for the same period last year, as SG&A expense as a percent of sales increased to 4.6% in the 1st quarter of 2000 from 3.% in the 1st quarter of 1999. In addition, the company's return on assets, measured as EBIT over average total assets, decreased to 4.9% in the 1st quarter of 2000 from 9.9% in the comparable period last year, suggesting the possibility of asset write-downs in the near term. ROA for the trailing twelve months ended January 1, 2000 was very low, at 3.3%. The company's performance has been strained by high debt leverage since its acquisition of certain assets of Dominion Textile in January 1998. However, exceptionally poor results at Swift Denim, which reported an EBIT margin of 1.5% for the year (6.4% for the 1st quarter of 2000 vs. 8.5% for the 1st quarter of 1999), as well as lower growth in khakis and weak demand for corduroy, has exacerbated leverage on a cash basis. Debt to EBITDA reached 8.2 times for the trailing twelve months ended January 1, 2000, while debt to book capitalization remained at approximately 81%. The company has about $70 million available under its borrowing-based revolver. The company's working capital needs grew in the first quarter in part due to seasonal inventory build-up for anticipated textile programs. For the first quarter ended January 1, 2000; inventory days were up to 99 days; accounts receivable days were 77 days; and days payables were 28. Interest coverage, measured on an EBITA basis, decreased to 0.9 times in the 1st quarter of 2000, from 1.4 times for the comparable period last year, and fixed charge coverage decreased to 0.7 times in the 1st quarter of 2000 from 1.0 times in the comparable period in FY1999. As reported earlier, Galey & Lord amended its credit facility agreement on July 3, 1999. The commitment for the revolver was reduced by $25 million and financial covenant tests were waived and significantly modified. Although the company will not be subject to leverage and fixed charge covenant tests until the quarter ending December 2000, Moody's is concerned about the company's future compliance given current industry conditions and the company's debt burden. The company reduced term debt by $25 million this summer via a repatriation of cash. However, outstandings under the revolver were up by a similar amount by the 1st quarter of current fiscal year, in part to finance higher inventory levels. The Caa2 rating on the company's bank credit facility reflects the benefits and limitations of the security package which consists of a pledge of assets of the restricted domestic subsidiaries and 65% of the stock of the foreign subsidiaries. The debt is guaranteed by all of the restricted subsidiaries including Galey & Lord Industries, Inc., G & L Service Company, North America, Inc., Swift Textiles, Inc. and Swift Denim Services, Inc. The rating recognizes that the security excludes 35% of foreign assets (for tax purposes) and that the tangible assets of the domestic subsidiaries, which represent approximately two-thirds of consolidated total assets, are poorly utilized, reporting a net loss of $21 million for fiscal year of 1999, or a loss of $15.3 million for the trailing twelve months ended January 1, 2000. The Ca rating on the $300 million issue of guaranteed subordinated notes reflects its contractual subordination to the senior creditors and its structural subordination to the trade creditors of the operating subsidiaries. Galey & Lord, Inc., based in Greensboro, NC, is a leading global manufacturer of textiles for sportswear, including denim, cotton casuals, corduroy, as well as a major international manufacturer of work-wear fabrics. The company is also a manufacturer of dyed and printed fabrics for use in home fashion and provides a limited amount of garment manufacturing. HUMPTY DUMPTY: Small Fry Makes Winning $2.3M Bid ------------------------------------------------ The US Bankruptcy Court for the District of Maine entered an order approving a sale of a substantially all of the debtor's assets to Small Fry Acquisition Co., Inc. for $2.3 million, plus the assumption of six executory contracts and/or unexpired leases identified in a definitive agreement executed by and between the debtor and Small Fry on January 24, 2000. INTEGRATED HEALTH SERVICES: Reports Filing Bankruptcy To SEC ------------------------------------------------------------ On February 2, 2000, Integrated Health Services, Inc. and several of its subsidiaries filed voluntary petitions for protection under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware. The cases have been consolidated for the purpose of joint administration and have been assigned to Judge Mary F. Walrath. The Court entered first day orders granting authority to the company and its subsidiaries to pay pre-petition and post- petition employee wages, salaries, benefits and other employee obligations. The Court also approved orders granting authority, among other things, to pay pre-petition claims on certain critical vendors and patient obligations. Until approval of its plan of reorganization, the company intends to pay post-petition claims of all other vendors and providers in the ordinary course of business. The Court also approved, on an interim basis, the company's $300 million debtor-in-possession (DIP) financing with Citibank, N.A. The final hearing on the DIP financing is scheduled for February XX, 2000. The DIP financing and existing cash flows will be used to fund the company's ongoing operations during the restructuring and, according to the company, will be more than ample for such purposes. Integrated Health Services is a highly diversified health services provider, offering a broad spectrum of post-acute medical and rehabilitative services through its nationwide healthcare network. IHS's post-acute services include home respiratory services, subacute care, long term care and contract rehabilitation services. JUST FOR FEET: Committee Seeks To Convert Cases to Chapter 7 ------------------------------------------------------------ The Official Committee of Unsecured Creditors of Just For Feet, Inc., et al. Seek to convert he debtors' Chapter 11 cases to Chapter 7 cases. The committee states that allowing the debtors' assets to be sold outside of a plan avoiding statutory plan requirements. The Committee submits that absent any ability to promulgate a plan, it is inequitable for the court to continue to allow the debtors' cases to remain in Chapter 11. The committee argues that once the transactions contemplated by the debtor are closed, the debtors will not be operating. The Committee further states that the liquidation of the estates are proper in a Chapter 7 case, not Chapter 11. KENETECH: Two Actions Filed Against Kenetech -------------------------------------------- On February 2, 2000, plaintiffs Robert L. Kohls and Louise A. Kohls filed two actions in the Court of Chancery of the State of Delaware In and For New Castle County, against defendants Kenetech Corporation, Angus M. Duthie, Mark D. Lerdal, Gerald R. Alderson and Charles Christenson. Plaintiffs allege that they were beneficial owners of Preferred Redeemable Increased Dividend Equity Securities, 8-1/4% PRIDES, Convertible Preferred Stock, par value $0.01 per share of Kenetech Corporation, that mandatorily converted, on May 14, 1998, into common stock, par value $0.0001 per share, of the company. The first action is purportedly brought as a class action on behalf of the named plaintiffs and all other persons who owned the PRIDES as of May 13, 1998, and plaintiffs allege, among other things, that defendants breached the terms of the company's Certificate of Designations, Preferences, Rights and Limitations under which the PRIDES were issued and breached their fiduciary duty to protect the interests of the holders of the PRIDES prior to the PRIDES mandatory conversion. Plaintiffs are seeking, among other things, certification of the action as a class action and a declaration that the holders of PRIDES are entitled to be paid a liquidation preference of up to $1,012.50 per share of PRIDES or, in the alternative, a judgment in the amount that would have otherwise been attributed to the PRIDES up to $1,012.50 per share. The second action is purportedly brought as a derivative action on behalf of the company and plaintiffs generally allege that the purchase of the company's common stock by defendant Mark D. Lerdal in December 1997 was a corporate opportunity and that such common stock should have been instead purchased by the company. Plaintiffs are seeking, among other things, a declaration that the purchase of the common stock by defendant Lerdal constituted the taking of a corporate opportunity and is null and void and an order requiring Defendant Lerdal to transfer the common stock to the company for the consideration he paid or, to the extent the common stock may not be transferred to the company, damages for the fair value of the common stock. The Registrant intends to vigorously defend each of these actions. LAMONTS APPAREL: Seeks Bar Date ------------------------------- Lamonts Apparel, Inc., debtor seeks an order establishing the procedures and deadlines for filing proofs of claim and proofs of interest in its case. The debtor currently operates 38 retail stores in five states. The debtor is a publicly held company; its stock is traded on the over-the-counter market. The debtor has filed an amended list of all of its creditors, which list indicates that the debtor has well in excess of 1,000 creditors. The debtor asks that April 28, 2000 be fixed as the last date for filing proofs of claim or interest. LEASING SOLUTIONS: Dimensional Fund Reports Holdings ---------------------------------------------------- Dimensional Fund Advisors Inc. holds 305,500 shares of common stock in Leasing Solutions Inc. with sole power to vote or direct the vote of, and sole power to dispose of, or direct the disposition of the stock. 305,500 shares represents 3.69% of the outstanding common stock of Leasing Solutions Inc. Dimensional Fund Advisors Inc. is an investment advisor to a variety of investment companies, commingled group trusts and separate accounts. These investment companies, trusts and accounts are the "Funds". In its role as investment adviser or manager, Dimensional possesses voting and/or investment power over the securities of Leasing Solutions that are owned the Funds. All securities reported here are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. LEVEL 3 COMMUNICATIONS: Moody's Ratings Reflect Risks ----------------------------------------------------- Approximately US$5.5 Billion of Debt Securities and $1.4 Billion in Credit Facilities Affected. New York, February 07, 2000 -- Moody's Investors Service has assigned a B3 rating to Level 3 Communications, Inc.'s (Level 3) proposed senior unsecured notes, including US$1 billion and euro 400 million notes in a combination of cash-pay and discounted interest and maturities of 2008 and 2010. Moody's has also assigned a Caa1 to the proposed $500 million convertible subordinated notes due 2010. Moody's has also confirmed the existing ratings, which includes the B1 rating on the operating companies' senior secured credit facility, the B3 ratings on Level 3's existing senior notes and issuer rating, and Caa1 on its existing convertible subordinated notes (see issue details below). The senior implied rating remains B2 and the outlook is stable. The ratings reflect risks including Level 3's early stage of operations and network development, the expected time period required to generate cash from recurring operations, and a degree of dependence on technological development and market acceptance. Additionally, the company is likely to continue to find opportunities that will require additional capital investment. The ratings benefit from the company's strong management and strategic plan, conservative capital structure and good access to capital. The ratings also incorporate the relative positioning of the debt in the capital structure. Structurally, the B3 senior unsecured notes and the Caa1 convertible subordinated notes are issued at the parent holding company. Proposed senior and subordinated notes are substantially similar to the existing notes. The B1 credit facility is structurally senior to the holding company notes and also benefits from guarantees and collateral. The new debt plus a concurrent 15 million common shares offering will fund all of Level 3's business plan phase five and a good portion of phase six. Together these projects require $5 billion. Phase five refers to the recently announced plan to approximately double the company's colocation space. Phase six is a further build-out of the European network. Consistent with other providers, Level 3 has found high demand for colocation space and needs to substantially increase its space to take advantage of the demand. The Level 3 strategic plan is very compelling. The company is providing communications services and transmission over an Internet Protocol (IP) network. This IP network fundamentally differs from the traditional circuit-switched network, providing two major benefits. First, cost of the network and transmission is significantly less than other networks. Second, it is an "open-network" which encourages others to build innovative services to be used over the network. This contrasts with circuit-switched networks where the products are limited to the proprietary set established within the network. However, in order for Level 3 to capitalize on these benefits, it needs to attract a large level of traffic to its new IP network. To date the customers are largely "World Wide Web" related companies, who -- by their nature -- are early adopters of IP. As the industry and Level 3 are successful minimizing possible objections to using an IP network (such as seamless interconnection with the public switched telephone network), we would expect acceptance by a broader customer base due to the distinct pricing and operational advantage. An important milestone in this regard was reached in December 1999 when Level 3 initiated its long distance voice service. Not to be confused with others' voice-over-IP, Level 3 is providing a service with seamless interconnection with the public switched telephone network through its softswitches. The company will begin beta testing local voice services in the first quarter of this year, for commercial availability in 2001. Level 3's network construction seems to be somewhat ahead of schedule, showing management's strong project control. By the end of this year the company expects to have its domestic network complete (allowing for migration of traffic from the Global Crossing-leased fiber to Level 3's own) and the trans-Atlantic submarine cable should be in operation. Construction will continue in 2001, largely in Europe, on the sole-owned Japan-Hong Kong cable and the Japan-US consortium cable. Interestingly, Level 3 is highly focused on building not just a scalable network, but also one that is adaptable to new innovations. For instance, the company's network will consist of 10 to 12 conduits (of which it will likely keep six for its own use) in the North American inter-city network. Extra conduit allows for the installation of future generations of fiber. The company plans to replace its fiber and electronics every 4-5 years, on the assumption that technological innovation will continue to advance rapidly. This assumption is included in management's projections (making them more conservative than those of other companies). The company maintains a rather conservative capitalization philosophy, with debt-to-capital expected to be just over 60% at the year end. We also note that the company has ownership stakes in several companies, such as Commonwealth Telephone and RCN, as well as the unfunded $600 million revolving credit facility which could provide future liquidity, if necessary. Our view into revenue growth by product segment is particularly comforting to us. Although still at relatively low levels, we can see that the company is clearly building sustainable revenues in its key products. Contracted dark fiber sales are also strong and beneficial to the company at this stage in its development. Assuming the company completes its network near the end of this year, it should benefit from cash payments on those fiber sales in the first half of 2001 (although accounting rules now require amortization of the revenue over time.) The cash flow development (excluding fiber sales) is still on plan, and we expect to see positive cash generation in just over two years. However, including dark fiber sales, cash from operating activities should be strong. In approximately four years Moody's expects debt-to- EBITDA could be less than five-times. Of course, the actual results may also be affected by the level of dark fiber sales and the company's decision to expand the business plan further. Ratings Summary Level 3 Communications, Inc.: B2 senior implied rating. B3 proposed $1 billion senior notes, cash-pay and deferred interest, due 2008 and 2010. B3 proposed euro 400 million senior notes, due 2008 and 2010. B3 $2 billion 9.125% senior notes, due 2008. B3 $834 million (principal amount)10.5% senior discount notes, due 2008. B3 issuer rating. Caa1 proposed $500 million convertible subordinated notes, due 2010. Caa1 $750 million 6% convertible subordinated notes, due 2009. Various operating subsidiaries: B1 $1.375 billion senior secured credit facility. Level 3 has its headquarters in Broomfield, Colorado. The company has completed approximately 9,300 miles of its planned 16,000 mile US conduit network, with fiber in 3,000 miles and the first segment lit. In Europe, approximately 2,100 miles of the planned 4,750 mile conduit network are installed. Service is offered in 31 US and European markets, 25 over Level 3's local fiber. LODESTAR HOLDINGS: Moody's Downgrades Sr. Notes; Negative Outlook ----------------------------------------------------------------- Moody's Investors Service lowered, to Ca from Caa2, its rating for Lodestar Holdings, Inc.'s $150 million of 11.5% guaranteed senior notes, due 2005. The downgrade was prompted by Lodestar's worsening financial condition as manifested by increasing operating losses, heightened debt, and lack of liquidity. Lodestar's senior implied rating was also lowered to Ca. The rating outlook is negative. Lodestar has consistently reported net losses and negative cash flow from operating activities over the last three years, but its financial performance worsened in the fiscal year ended October 31, 1999. In the last year, operating losses of $7 million, rising interest expense, and $30 million of acquisitions (including $18 million of cash paid and debt incurred) consumed essentially all of the company's cash and raised debt by $31 million, bringing it to $181 million. As of October 31, 1999, net unused availability under the senior credit facility was $9.8 million. In mid-November, Lodestar paid $4.9 million for the Ridge Top acquisition and $8.6 million for the semi-annual interest payment on the 11.5% senior notes. In order to fund these transactions, the company's senior credit facility was amended, granting the company access to $6.7 million of additional advances. As of January 18, 2000, Lodestar's total debt was $189 million and unused borrowing and letter of credit availability was $9.2 million. Simultaneous with the amendment, The Renco Group, Lodestar's parent company, entered into an agreement with the senior credit facility lenders to provide, under certain circumstances, subordinated loans of up to $6 million to Lodestar should the company fail to maintain certain financial covenants during the remaining term of the credit facility. Lodestar's high level of senior credit facility borrowings, negative cash flow, and negative net worth, -$61 million as of October 31, 1999, suggest that severity of loss for the senior notes could be high in the event of a default. Lodestar paid $57 million for all its acquired assets, which includes certain Eastern Kentucky coal operations that have been idled. Low coal prices and increased regulatory uncertainties have negatively impacted coal property values in the last year. Lodestar Holdings and its subsidiaries are engaged in surface and underground coal mining in Eastern and Western Kentucky and Utah. The company has its headquarters in Lexington, Kentucky. LONDON FOG: Seeks Extension to Assume/Reject Leases --------------------------------------------------- London Fog Industries, Inc. seeks an extension of the period within which the debtors may assume or reject unexpired leases of nonresidential real property. A hearing on the motion will be held before the Honorable Peter J. Walsh US Bankruptcy Court, 6th Floor, 824 Market Street, Wilmington, Delaware on February 18, 2000 at 9:30 AM. The debtors assert that they have not yet determined how the remaining 40(approximately) store locations will fit into their long term plan post-reorganization. Similarly, the debtors are not in a position to make a judgment as to whether to assume or reject their Office Leases or Warehouse Leases. The debtors seek an order for a ninety-day extension of the period during which the debtors may assume or reject their unexpired, nonresidential real property leases to and including May 26, 2000. ML CLO: Moody's Places Two Classes Of Notes On Review ----------------------------------------------------- Moody's Investor's Service announced that it is placing on review for possible downgrade two Classes of Notes issued by ML CLO XIX Sterling (Cayman) Ltd.: (1) the U.S. $22,000,000 Class B-1 Floating Rate Senior Secured Notes due 2010 and the U.S. $25,000,000 Class B-2 Fixed Rate Senior Secured Notes due 2010 and (2) the U.S. $14,500,000 Class C Floating Rate Senior Secured Notes due 2010. Citing recent deterioration in the credit quality of the underlying portfolio, Moody's noted that, as of the last monthly report distributed, just over 20% of the portfolio was rated Caa1 or lower (including defaulted securities) and that the weighted average rating test is being violated. Moody's indicated that since this report, the collateral manager had taken steps to reduce the portion of the portfolio rated Caa1 or lower and the weighted average rating of the portfolio. Finally, Moody's noted that although the overcollateralization ratio tests are not in violation, it remains concerned about continued trends in the quality of the collateral. RATING ACTION: REVIEW FOR DOWNGRADE Issuer:ML CLO XIX Sterling (Cayman) Ltd. Description:U.S. $22,000,000 Class B-1 Floating Rate Senior Secured Notes due 2010 and U.S. $25,000,000 Class B-2 Fixed Rate Senior Secured Notes due 2010 Rating:Baa2 RATING ACTION: REVIEW FOR DOWNGRADE Issuer:ML CLO XIX Sterling (Cayman) Ltd. Description:U.S. $14,500,000 Class C Floating Rate Senior Secured Notes due 2010 Rating:Ba2 PAYLESS CASHWAYS: Dimensional Fund Advisors Reports Holdings ------------------------------------------------------------ Dimensional Fund Advisors Inc. reports holding 20,164 shares of the common stock of Payless Cashways Inc. with sole voting and dispositive powers. This represents 5.35% of the outstanding common stock of the company. Dimensional Fund Advisors Inc. is an investment advisor furnishing investment advice to four investment companies, and serves as investment manager to certain other commingled group trusts and separate accounts. In its role as investment adviser or manager, Dimensional possesses voting and/or investment power over the securities of Payless Cashways Inc. that are owned the various entities mentioned above. All securities reported here are owned by these companies, trusts and accounts. Dimensional disclaims beneficial ownership of such securities. PENNCORP FINANCIAL: Files Voluntary Chapter 11 Petition ------------------------------------------------------- PennCorp Financial Group, Inc. (NYSE: PFG) announced that in order to facilitate the previously announced sale of its Dallas, Texas-based life insurance operations, it has filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. None of PennCorp's insurance company subsidiaries are included in the case, which affects only the parent company, PennCorp Financial Group, Inc. On January 10, 2000, PennCorp announced it had entered into a definitive agreement for the sale of Southwestern Life Insurance Company and Security Life & Trust Insurance Company to Reassure America Life Insurance Company, an indirect U.S. subsidiary of Swiss Reinsurance Company of Zurich, Switzerland, for $260 million in cash, subject to certain adjustments. The sale agreement requires that the Company effectuate the sale through a voluntary Chapter 11 case and is subject to bankruptcy court approval. The proceeds from the sale should provide full payment of PennCorp's approximately $65 million of bank debt, approximately $115 million of subordinated debt, and other unsecured claims. It is anticipated that any balance would be distributed to the Company's preferred stockholders, and no distribution would be made to the Company's common stockholders. The Company expects that the Bankruptcy Court will establish procedures to consider alternative sale or recapitalization proposals in the near future. These procedures, when established, will be made generally known to the public. The sale is expected to close prior to the end of the first quarter. The Company filed its petition in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. PennCorp Financial Group, Inc. is an insurance holding company. Through its subsidiaries, the Company underwrites and markets life insurance and accident and sickness insurance to the middle market throughout the United States. PENNCORP FINANCIAL GROUP, INC.: S&P Cuts Ratings ------------------------------------------------ On February 7, 2000, Standard & Poor's lowered its counterparty credit rating on PennCorp Financial Group Inc. (PennCorp) to single-'D' from double-'C'. At the same time, Standard & Poor's lowered its subordinated debt rating to single-'D' from double- 'C' and its preferred stock rating to single-'D' from single-'C'. The downgrade reflects Penncorp's actual filing of a Chapter 11 petition today. PennCorp is filing for bankruptcy through Chapter 11 to effectuate the sale of certain insurance subsidiaries. PennCorp has been troubled by a weak financial structure, including high debt leverage and liquidity strain, throughout 1999. Subject to bankruptcy court approval, PennCorp intends to sell various operating units, which could provide full payment of outstanding bank debt, subordinated debt, and other unsecured claims, Standard & Poor's said. PREMIER GRAPHICS: Moody's Lowers Ratings ---------------------------------------- Moody's Investors Service lowered the debt ratings of Premier Graphics' $130 million senior unsecured notes, due 2005, to Caa3 from B3. The senior unsecured issuer rating is Caa3. Moody's also lowered the ratings of each tranche of the $80 million senior credit facility to Caa2 from B2, respectively. The credit facility consists of a $20 million revolver, $30 million term A loans and $30 million term B loans. The senior implied rating was lowered to Caa2 from B2, and the ratings outlook is negative. The downgrades reflect Premier Graphics' significantly weakened financial profile primarily resulting from substantial erosion in operating margins during the second half of 1999 which in turn is causing low profitability, high financial leverage and extremely tight liquidity. Results for the year ended December 1999 are expected to be materially lower than the soft results posted in the third quarter and well below Moody's original expectations. Operating difficulties principally stem from margin erosion associated with lower year over year sales, intercompany pricing mechanisms and increased raw material costs during the start-up of new equipment installations during 1999. Additionally, the company experienced significant managerial distractions at its locations as new information and quality management systems were implemented during the year. While management is currently focused on its reorganization plan for the year 2000, Moody's is concerned that the significant amount of EBITDA recovery, which is required to sustain the company as a going concern, will not be fully achieved in the near to intermediate term. Moreover, the company's limited financial flexibility exacerbates credit concerns. More positively, the ratings recognize management's current efforts to improve profitability through its Year 2000 operating plan. These efforts are concentrated on cost rationalization through personnel reductions (approximately 6% of total headcount already terminated), divisional consolidations, where appropriate, and the restructuring of pricing mechanisms. These are the strategies currently in place attempting to return the company to historical levels of profitability by the second half of fiscal 2000. The Caa3 rating assigned to the senior notes reflects their unsecured status and incorporates Moody's concerns regarding the heightened probability and severity of default given the company's severely weakened financial condition. There is little value given to the unconditional guarantee of the senior notes by Master Graphics, the parent holding company with no operating assets or operations. The Caa2 rating assigned to each tranche of the credit facility reflects the relative value of the collateral and the secured position in the capital structure. The $20 million revolver is subject to a borrowing base. As of September 30, 1999, the company had only approximately $4 million of availability under the revolver. Availability has not increased materially to date. Premier Graphics does not appear to be in compliance with financial covenants, and Moody's anticipates that the company will not be in compliance in the near term. Total debt at September 30, 1999 of $204 million was 8.9x LTM September 1999 EBITDA of $23 million. Materially lower EBITDA is anticipated for the full year ended December 1999. Seasonality further heightens immediate credit concerns regarding operations in 2000 since the first quarter tends to be the weakest in sales. LTM 9/99 EBITDA coverage of interest expense was nominal at 1.1x. The company currently has deficit free cash flow and nominal short term borrowing capacity. Required term loan amortization is approximately $4 million. Moody's expects that liquidity should be somewhat enhanced, albeit minimally, by some targeted improvements in working capital management. Reportedly, the company's relations with its vendors are still in tact to date. Premier Graphics, the operating subsidiary of Master Graphics, is a Tennessee-based service provider in all areas of general commercial printing. RCG LIQUIDATION: Order Extends Exclusivity ------------------------------------------ The US Bankruptcy Court for the District of Delaware entered an order on January 19, 2000 extending the exclusive period within which only the debtors may file a plan or plans of reorganization for sixty days through and including February 23, 2000. The court also approved the extension of the exclusive period within which only the debtors may solicit acceptances of any such plan through and including April 24, 2000. STYLESITE: Meeting of Creditors ------------------------------- A chapter 11 bankruptcy case concerning the debtor corporation Stylesite Marketing, Inc. was filed on January 13, 2000. The attorney for the Debtor is Neil Yahr Siegel 460 Park Avenue, 8th Floor, New York, NY 10022-1906. The meeting of creditors will be held on February 23, 2000, at 3:30 PM, Office of the US Trustee, 80 Broad Street, Second floor, New York, NY 10004-1408. SYBASE: Reports Fourth Quarter Earnings --------------------------------------- Sybase, Inc. reports fourth quarter earnings per share of $0.32 compared to analysts expectations of $0.21 EPS for the quarter ended December 31, 1999 and $0.76 EPS for the year ended December 31, 1999, exceeding analysts expectations of $0.62 EPS. Net income for the fourth quarter of 1999 was $26 million as compared to a net loss of $15 million for the same period in 1998. Quarter-on-quarter, total revenues increased by 9.7 percent to $237 million in the fourth quarter from $216 million in the third quarter of 1999. Cash and investments at year end were $353 million, as compared to $250 million in 1998 - a 41 percent increase. Days sales outstanding for the fourth quarter was 69 days. "The fourth quarter was the second most profitable quarter and 1999 was the second most profitable year in Sybase's history," said John Chen, Sybase chairman, president and chief executive officer. "Our results clearly demonstrate that we have effectively executed against our 1999 business objectives. "We enter Year 2000 with a strong balance sheet and a clear vision of the three areas driving our growth," said Chen. "Those are the Enterprise Portal market, where we aim to be the pre- eminent supplier e-commerce software infrastructure; the wireless and mobile solutions arena; and e-Business solutions for vertical markets, including financial services, telecommunications and media, healthcare and government markets." "Hurwitz Group recommends that organizations consider implementing an EIP as IT infrastructure for e-Business. Furthermore, these organizations should note that, of the software vendors that have thus far announced product plans for an EIP, Sybase's strategy and product set are by far the most impressive," said Philip Russom, director, Data Warehousing and Business Intelligence at Hurwitz Group. Sybase's recent acquisitions and strategic investments in the financial services market show the company's commitment to delivering enterprise class e-Business solutions for vertical markets. Highlights over the last 12 months included: - The acquisition, recently signed, of Home Financial Network and the subsequent formation of a new company targeted at the financial services community. This new company is designed to provide integrated e-business-to-business and e-business-to- consumer systems, end-to-end Web-based retail financial services, securities trading and straight-through processing technology and services - The acquisition of Data Warehouse Networks, providing business intelligence solutions in key vertical markets - The strategic investment in Demica, a UK-based company with a sophisticated back-end trading system for banks - The launch of Sybase Financial Server in a solution specifically tailored to the needs of banks, brokers and corporations requiring sophisticated banking application servers - The announcement in August of its strategy for the Enterprise Portals market - aiming to be the leader in this market - The support from market analyst firms such as GartnerGroup, Giga Information Group, META Group and Hurwitz Group for the company's portal vision - The establishment of Specialty Practices Teams worldwide. These teams are located in centers of excellence for e-Business computing in New York City, London, Frankfurt and Hong Kong. These centers are designed to deploy leading edge vertical e- Business solutions to market according to customer requirements. Sybase, Inc. is headquartered in Emeryville, CA, and is one of the largest global independent software companies. Sybase helps businesses integrate, manage and deliver applications, content and data anywhere they are needed. The company's products, combined with its world-class professional services and partner technologies, provide a comprehensive platform for integrated, end-to-end solutions in mobile and embedded computing, data warehousing and Web environments. Sybase focuses especially on Enterprise Portal (EP) solutions, which give businesses the ability to extend their enterprise to customers, partners and suppliers by converting stored data into useful information, which can be organized, integrated and personalized for use anywhere at anytime. Sybase customers represent the industries leading the global economy, with strong concentrations in financial services, public sector, telecommunications and healthcare. THERMATRIX: Authorized To Continue Operations --------------------------------------------- Thermatrix Inc. (OTC:TMXI.OB) announced that the U.S. Bankruptcy Court, Central District of California, has authorized the Company to continue to operate in Chapter 11 status. In a hearing conducted on February 3, 2000, the Court ruled that the secured creditor's collateral is adequately protected and that the Company is permitted to continue operations. The ruling allows the Company to continue filling its significant backlog of existing orders while developing its restructuring plan. The next hearing is scheduled for March 21, 2000 at which time the Company expects to present the details of its proposed business plan. Thermatrix is an industrial Company primarily serving the global market of continuously operating facilities for a broad range of industries that include the refining, chemical, steel, pharmaceutical, pulp and paper, electric utilities, co-generation plants, and industrial manufacturers. Thermatrix provides a wide variety of air pollution control solutions, including its unique flameless thermal oxidation technology, as well as a wide range of engineered products and services to meet the needs of its clients. THERMATRIX: Senior Management Changes ------------------------------------- Thermatrix Inc. (OTC: TMXI.OB) announced the resignation of John T. Schofield as a Director and Chairman of the Board, President and Chief Executive Officer and the appointment of Frank R. Pope as Chairman of the Board and Chief Executive Officer. Mr. Pope, a long-time director of the Company and the Managing Director of Critical Resources of San Francisco, will assist management in the current restructuring. Daniel S. Tedone was appointed President of the Company and elected to the Board of Directors. Mr. Tedone has been serving as the Executive Vice President and Chief Financial Officer of the Company. He will lead the restructuring and assume overall management responsibility for Company operations. Mr. Tedone has held senior executive positions in environmental manufacturing and service businesses for the past twenty years. "John Schofield was instrumental in taking Thermatrix from a technology to a respected commercial company with world-wide operations and blue chip customers. His strategic vision and spirit will be missed," said Mr. Pope. "Dan Tedone is a seasoned professional who is highly qualified to assume leadership of the firm. He will provide the stability and discipline needed to successfully restructure the Company and lead it to profitability." "The Wahlco Air Systems and Wahlco Metroflex Divisions have been very successful in booking new business during the past six months," said Mr. Tedone. "Their performance coupled with the potential of the recently announced agreement with The Dow Chemical Company indicates that the Company's business is robust and viable. Our strong client list is one of our most important assets as we proceed to restructure the organization," he said. Thermatrix is an industrial Company primarily serving the global market of continuously operating facilities for a broad range of industries that include the refining, chemical, steel, pharmaceutical, pulp and paper, electric utilities, co-generation plants, and industrial manufacturers. Thermatrix provides a wide variety of air pollution control solutions, including its unique flameless thermal oxidation technology, as well as a wide range of engineered products and services to meet the needs of its clients. TRANSTEXAS: Court Confirms Plan of Reorganization ------------------------------------------------- TransTexas Gas Corporation (OTCBB:TTGGQ) announced that the United States Bankruptcy Court for the Southern District of Texas, Corpus Christi Division, has signed an order confirming the Company's Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code. The Plan will take effect and be consummated on the Effective Date, which is expected to be as soon as is practicable. On the Effective Date, the Company's existing securities, including a $450 million Senior Secured Note, $115.8 million of Subordinated Notes and all of its issued and outstanding shares of common stock will be canceled. The Company will issue $200 million in New Senior Secured Notes, shares of New Senior Preferred Stock, shares of New Junior Preferred Stock, shares of New Common Stock, Warrants to purchase additional shares of New Common Stock, and cash to the holders of the Senior Secured Note claim. Holders of the Subordinated Notes and old common stock, as well as holders of general unsecured claims, will receive no direct distributions under the Plan. However, the holders of the Senior Secured Note claim have agreed to reallocate a portion of their Plan distribution as follows: (i) holders of Subordinated Note claims will receive either cash, shares of New Senior Preferred Stock, or Shares of New Junior Preferred Stock, (ii) holders of general unsecured claims will receive cash and shares of New Senior Preferred Stock, and (iii) holders of old common stock will receive shares of New Common Stock and Warrants. Other classes of creditors will receive distributions as outlined in the Plan. Holders of allowed claims and interests as of 5:00 p.m. (CST) on February 15, 2000 (the Distribution Record Date) will be entitled to participate in Plan distributions. The Company also expects, in connection with the consummation of the Plan, to execute a $52.5 million exit financing facility and amend its existing DIP Credit Agreement and Revolving Accounts Receivable Credit Facility. The Company will be filing a Current Report on Form 8-K with the Securities and Exchange Commission within the next 15 days setting forth in more detail the terms of the Plan. The very brief summary set forth above is qualified in its entirety by reference to the Plan, a copy of which will be attached to the Form 8-K. The Company's SEC filings are available on the Internet at http://www.sec.gov/cgi-bin/srch-edgar?transtexas+adj+gas. Creditors and stockholders can also obtain a copy of the Plan from the Company by sending a written request to Investor Relations, TransTexas Gas Corporation, 1300 North Sam Houston Parkway East, Suite 310, Houston, Texas 77032. TULTEX CORP: Seeks To Implement Employee Programs -------------------------------------------------- The debtors, Tultex Corporation, et al. seek authority to implement a key employee retention program, and a CEO severance plan. The debtors intend to permit all 245 salaried employees to participate in the Retention Program. Should they receive further funding authority from their DIP Lenders, the debtors plan to continue the Retention Program through May 2000 at a total cost of $1.98 million. The retention incentive measures thatt he debtors are proposing offer compensation packages comparable to those provided to employees with similar positions and experience at competitors of the debtors in the textile industry. Under the CEO severance plan, O. Randolph Rollins, CEO, upon resignation, will receive a lump sum payment equal to 6 months of his monthly base pay, the continuance of health insurance coverage and the forgiveness of a $10,000 loan. WORLDCORP INC: Hearing on Approval of Disclosure Statement ---------------------------------------------------------- On January 10, 2000, WorldCorp, Inc. and WorldCorp Acquisition Corp. filed their joint liquidating plan of reorganization and accompanying Disclosure statement for debtors' joint liquidating plan of reorganization. A hearing will be held on March 3, 2000 at 9:30 AM before the Honorable Mary F. Walrath in the US Bankruptcy Court for the District of Delaware, 824 Market Street, Wilmington Delaware, to consider the adequacy of the information contained in the Disclosure Statement. XATA: Stock Holders Report 24% Ownership ---------------------------------------- William P. Flies and Linda Berg Flies, husband and wife, are the beneficial owners of 1,086,152 shares of the common stock of Xata Corporation, representing 24.4% of the outstanding common stock of Xata. The 24.4% is based upon 4,435,633 shares outstanding as of 12/31/99 plus 16,667 option shares. The stockholders exercise sole voting and dispositive powers over the shares. Ownership breaks down in this manner: o 100,000 shares held by William P. Flies and Linda Berg Flies (husband and wife) as Joint Tenants o 452,505 shares held by William P. Flies Revocable Trust U/A 11/14/96, for which William P. Flies and Linda Berg Flies are Co- Trustees o 516,980 shares held by Linda Berg Flies Revocable Trust U/A 11/14/96, for which William P. Flies and Linda Berg Flies are Co- Trustees o 16,667 shares which may be acquired by William P. Flies upon exercise of currently exercisable option ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ, and Beard Group, Inc., Washington, DC. Debra Brennan, Yvonne L. Metzler, Edem Alfeche and Ronald Ladia, Editors. Copyright 2000. All rights reserved. ISSN 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. 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