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/raid1/www/Hosts/bankrupt/TCR_Public/000329.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, March 29, 2000, Vol. 4, No. 62 Headlines ADVANCED MICRO DEVICES: Annual Meeting Set For April 27 AMERISERVE FOOD DISTRIBUTION: Court Approves Rittenmeyer APPLIANCE OUTLET: Closes All 10 Stores; Withdraws Petition BELDEN & BLAKE: Sells Stock of Peake Energy CAMBRIDGE INDUSTRIES: Financial Relief From General Motors, Ford CENTENNIAL COMMUNICATIONS: Announces Record Results For Earnings CENTENNIAL COMMUNICATIONS: Letter of Intent To Acquire Pegasus CROWN PAPER: Reports $100M DIP Loan From Morgan Guaranty Trust DERBY CYCLE: Moody's Confirms Ratings; Outlook Negative DOANE PET CARE: Moody's Places Ratings On Review For Downgrade FIRST MERCHANTS ACCEPTANCE: Court Rules For Committee Fees FOSTER WHEELER: Taps PricewaterhouseCoopers as Accountant FRONTIER INSURANCE: Standard& Poor's Lowers Ratings GREEKTOWN CASINO: Harrah's and MGM Grand Potential Buyers GP STRATEGIES: Reports Fourth Quarter Operating Loss HOMEMAKER INDUSTRIES: Intended Auction Sale IMPERIAL HOME DCOR: Seeks Order To Establish Bar Dates INTERNATIONAL WIRELESS: Order Confirms Third Amended Plan IPM PRODUCTS: Seeks Authority To Retain Lowenstein Sandler IPM PRODUCTS: Seeks Time To Assume/Reject Headquarters Lease JITNEY JUNGLE: Exits Little Rock, Memphis Markets LIVENT: Hughes & Luce Announce Amended Class Action Complaint KENETECH: Board Authorizes Repurchase of 2M Shares of Stock KOMAG: Expects Strong Demand To Continue Into Second Quarter LUMENYTE: Seeks Order Extending Time To Assume/Reject Lease OXFORD HEALTH PLANS: Thompson Appointed New CFO PACIFIC INTERNATIONAL: Status of Chapter 11 Case PARAGON TRADE: Announces Fourth Quarter And Full Year Results PENN TRAFFIC: Losses Continue; Bosses Still Say Outlook Rosy PHILIP SERVICES: Sets Record Date to Determine Issuance of Shares REGAL GOLDFIELDS: Announces Sale of Assets To New Subsidiary US AIRWAYS: Moody's Confirms Ratings, Changes Outlook to Negative ********* ADVANCED MICRO DEVICES: Annual Meeting Set For April 27 ------------------------------------------------------- Advanced Micro Devices, Inc. will hold the annual meeting of stockholders at the St. Regis Hotel, 2 East 55th Street, New York, New York 10022, on Thursday, April 27, 2000. The meeting will start at 10:00 a.m. local time. At the meeting, stockholders will: . Elect eight directors, . Ratify the appointment of Ernst & Young LLP as the company's independent auditors for the current fiscal year, . Approve an increase in the number of shares authorized to be issued under the Advanced Micro Devices, Inc. 1996 Stock Incentive Plan by 7,250,000 shares, . Approve the Advanced Micro Devices, Inc. 2000 Employee Stock Purchase Plan, . If properly presented, consider a stockholder proposal to amend the company's bylaws, which is opposed by the Board of Directors. AMERISERVE FOOD DISTRIBUTION: Court Approves Rittenmeyer -------------------------------------------------------- The appointment of Ronald A. Rittenmeyer as president and chief executive officer of AmeriServe Food Distribution, Inc., was approved on Friday, March 17, by the U.S. Bankruptcy Court in Wilmington, Delaware. AmeriServe has continued operations since filing a voluntary petition under Chapter 11 on January 31 and has received interim financing from its two largest customers, Tricon Global Restaurants, Inc., and Burger King Corporation. AmeriServe, headquartered in Addison, Texas, a suburb of Dallas, is the nation's largest distributor specializing in chain restaurants, serving leading quick service systems such as Burger King, Chick-fil-A, KFC, Long John Silver's, Pizza Hut and Taco Bell. APPLIANCE OUTLET: Closes All 10 Stores; Withdraws Petition ---------------------------------------------------------- The Patriot Ledger (Quincy, MA)reports on March 24, 2000 that The Appliance Outlet chain, based in Hingham, Ma. has closed its 10 stores and withdrawn a bankruptcy reorganization petition filed in U.S. Bankruptcy Court. The company has stores in Quincy, Hingham, Brockton, Norwood, Kingston, Burlington, Hyannis, New Bedford, Warwick, R.I., and Nashua, N.H. Company President Larry Newcomb, of Duxbury, and company lawyer John S. Rodman could not be reached for comment yesterday. No one answered telephone calls at any of the Appliance Outlet stores. The Appliance Outlet filed for Chapter 11 bankruptcy protection on March 13. Court protection would have allowed it to restructure its debt and negotiate with creditors, but the company withdrew its petition and the filing was dismissed March 16. None of the Appliance Outlet stores has re-opened since that date, according to a former manager who was reached at his home last night. The former manager did not know whether the Appliance Outlet would try to re-open the stores. In the Chapter 11 filing, Appliance Outlet said it had projected sales of $ 894,516 for April. Its cost of goods in the month would have been $ 687,552 and it would have held a pre-tax net income of $ 26,000, the company said. The Appliance Outlet listed G.E. Capital Corp. among its largest creditors. It owed the company $ 313,479 as of Feb. 25, when it was due to make an $ 111,813 payment. BELDEN & BLAKE: Sells Stock of Peake Energy ------------------------------------------- On March 17, 2000, Belden & Blake Corporation sold the stock of Peake Energy, Inc., a wholly owned subsidiary to North Coast Energy, Inc., an independent oil and gas company, with an effective date of January 1, 2000. The sale included substantially all of the company's oil and gas properties in West Virginia and Kentucky. The sale resulted in net proceeds of approximately $69 million. CAMBRIDGE INDUSTRIES: Financial Relief From General Motors, Ford ----------------------------------------------------------------- Cambridge Industries Inc. has obtained financial relief from General Motors, Ford Motor Co. and other customers as the plastic components supplier seeks a buyer. The company in Madison Heights, Mich., said last week that its largest customers and its banking consortium granted new financial terms that will free up cash for the capital expenditures it needs to launch major new programs for GM and Ford. Accelerated payments and other relief from the automakers is expected to carry the company until it can sell a division or the entire company. CENTENNIAL COMMUNICATIONS: Announces Record Results For Earnings ----------------------------------------------------------------- Centennial Communications Corp. announces record results for revenues and earnings for the quarter ended February 29, 2000. Consolidated revenues grew 30% from the same quarter last year to $127.6 million, and earnings before interest, taxes, depreciation, amortization and recapitalization costs ("adjusted EBITDA") increased 9% from the same quarter last year to $53.3 million. For the nine months ended February 29, 2000 compared to the same period in the prior year, revenues and adjusted EBITDA increased 40% and 31%, respectively. The company's wireless subscribers at February 29, 2000 were 585,500, compared to 426,700 on the same date last year, an increase of 37%. "The subscriber growth in Domestic Cellular was tremendous," said Michael J. Small, president and chief executive officer. "Centennial also created the largest single-technology wireless footprint in the Caribbean when we announced a transaction to enter the Dominican Republic." In January 2000, Centennial acquired a 70% interest in All America Cables and Radio Inc. in the Dominican Republic. The remaining 30% interest is held by local partner, Abraham Selman. The purchase price was $25 million, subject to adjustment, of which $14 million has been paid to date and $11 million will be paid upon completion of due diligence. For the quarter, domestic operations revenues were $76.4 million and adjusted EBITDA was $33.1 million, up 23% and 6% respectively from the same quarter last year. The increases are due to subscriber growth and strong growth in roaming revenue. EBITDA was negatively impacted by the sales and marketing expenses resulting from record net internal subscriber additions of 47,000. Also for the quarter, Puerto Rico revenues were $51.2 million and adjusted EBITDA was $20.2 million, up 43% and 15% respectively from the same quarter last year. CLEC revenues for the quarter reached $9.9 million from $5.1 million in the same quarter last year. CENTENNIAL COMMUNICATIONS: Letter of Intent To Acquire Pegasus -------------------------------------------------------------- On January 11, 2000, the company entered into a letter of intent to acquire the cable television assets of Pegasus Communications for $170 million in cash subject to certain closing conditions. Pegasus' cable systems serve various communities in the western region of Puerto Rico, passing 170,000 homes with their 123 route-miles of fiber optic and 1,268 route-miles of coaxial cable. The Pegasus cable system has approximately 55,000 subscribers. On March 10, 2000, Centennial announced the purchase of an international gateway switch located in Miami, Florida from Worldport Communications. The company expects to connect this switch with its network in Puerto Rico utilizing capacity it owns on Americas II undersea fiber optic cable. This switch will reduce the Caribbean operations' cost of delivering calls to the United States. On February 29, 2000, Centennial Communications completed an amendment and $200 million expansion of its bank facility to finance the announced transactions. A charge of $2.5 million was recorded to Puerto Rico's general and administrative expense as a result of the amendment to the bank facility. Centennial is one of the largest independent wireless telecommunications service providers in the United States, Puerto Rico and the Dominican Republic with approximately 17.4 million Net Pops. Centennial's domestic Rural Cellular operation has 6.1 million Net Pops and serves over 416,500 customers. Centennial de Puerto Rico, is a fully integrated provider of communications services in Puerto Rico, utilizing a PCS license that covers 3.9 million Pops in Puerto Rico and the U.S. Virgin Islands and a Competitive Local Exchange Carrier license to operate in Puerto Rico. In addition, the company now owns 70% of a PCS license in the Dominican Republic representing approximately 6.2 million Net Pops, and holds minority shares representing approximately 1.2 million Net Pops in U.S. cellular operations controlled and managed by other operators. Welsh, Carson, Anderson & Stowe and an affiliate of The Blackstone Group are controlling shareholders of Centennial. WCAS is a private investment firm based in New York and founded in 1979. WCAS currently manages over $8 billion in private equity capital and focuses primarily on the information services and healthcare industries. The Blackstone Group is a New York based private investment bank whose current corporate investment vehicle, Blackstone Capital Partners III Merchant Banking Fund, LP, has approximately $3.8 billion in committed capital. CROWN PAPER: Reports $100M DIP Loan From Morgan Guaranty Trust -------------------------------------------------------------- Crown Vantage has filed voluntary petitions in the U.S. Bankruptcy Court for the Northern District of California, Oakland Division, to reorganize under Chapter 11 of the U.S. Bankruptcy Code. The company said that it initiated the Chapter 11 cases because they offered the most viable way to access new working capital and restructure finances while continuing normal operations. Crown Vantage's operations in the U.K. are not included in the filing. This allows the U.K. mills to continue to operate apart from any Court supervision. There should be no change in their day-to-day business. To ensure that it has the capital necessary to continue operating its business as normal during the restructuring process, the company said that it has arranged for $100 million in debtor-in- possession (DIP) financing from Morgan Guaranty Trust Company of New York as administrative agent, The Chase Manhattan Bank as syndication agent, and a group of institutional lenders. Morgan Guaranty is the administrative agent for the company's current pre-petition credit facility. The company has sought and expects to receive the Court's approval to pay employee salaries, wages and benefits without interruption. The DIP financing will enable the company to pay for the post-petition delivery of goods and services and continue operations and administration necessary to meet customer demands. Borrowings under the DIP facility are subject to Court approval. "After evaluating a number of alternatives for recapitalization, we chose to implement our restructuring through a Chapter 11 filing because it provides the most appropriate and efficient means by which the company can resolve its long-term financial problems and reduce indebtedness," said Robert Olah, president and chief executive officer of Crown Vantage. "While under the protection of the Bankruptcy Court, we now have the flexibility to restructure our pre-petition obligations and gain access to additional working capital that should ensure that day-to-day operations are minimally impacted." DERBY CYCLE: Moody's Confirms Ratings; Outlook Negative ------------------------------------------------------- Moody's Investors Service confirmed its Caa1 ratings of Derby Cycle Corporation's ("Derby") $100 million of 10% senior notes, due 2008, and Lyon Investments B.V.'s (formerly Lyon Cycle B.V.) DM 110 million of 9.375% senior notes (US $56 million), due 2008. The notes are the joint and several obligations of the two issuers. Concurrently, Moody's confirmed its B1 rating of Derby's DM 214 million (US $109 million) secured revolving credit facility, as well as the company's B2 senior implied rating and its Caa2 senior unsecured issuer rating. However, the outlook has been changed to negative from stable. In reviewing Derby's 4Q and year-end 1999 operating results, Moody's recognizes the recent improvements in the company's UK and Germany operations, as well as the healthy and stable performance of its business in The Netherlands. Collectively, these three markets were the primary drivers behind Derby's 16% revenue growth (7% excluding Diamondback and at constant exchange rates) and its 17% unit growth (4% excluding Diamondback) in fiscal 1999. Primarily through the execution of management's turnaround plan, Derby appears to making some preliminary progress in improving its profitability and cash flow. Nevertheless, additional progress will need to be achieved in order for the company to maintain its current debt ratings. The change in the ratings outlook to negative from stable reflects the potential for rating downgrades in the near term should Derby be unsuccessful in materially improving its cash flow, or if the company fails to maintain adequate liquidity or the support of its bank group. To date, the banks have been supportive of the company despite its repeated covenant violations. Although Derby's current liquidity needs have been temporarily satisfied, the next squeeze could occur during the peak borrowing period of March and April 2001. Derby's liquidity pressures will be heightened once its bank credit facility is permanently reduced by $14 million after June 30, 2000. The company will also need to repay a $7 million shareholder bridge loan which comes due in August 2000. In addition to concerns over the company's high leverage and weak cash flow, Moody's also has concerns over the potentially negative impacts that lower priced foreign imports could have on Derby's operations, especially in the US market. Presently, Derby is extremely dependent on its operations in The Netherlands and Germany for the generation of most of its cash flow. Combined, these two markets account for nearly 50% of the company's total revenues and nearly 80% of its consolidated EBITDA. Derby US accounts for 22% of total revenues but only 10% of consolidated EBITDA. Derby's reported a weaker-than-expected operating performance during fiscal 1999, despite some notable improvements in the fourth quarter. In fiscal 1999, Derby reported sales and EBITA of approximately $540 million and $21 million (EBITDA of $30 million), respectively. Compared to 1998, sales were up nearly 16% (5% excluding Diamondback) while EBITA was flat. The current EBITA margin is a low 4% (6% EBITDA margin). Although Derby's gross margin decreased modestly in 1999, period- over-period gross margin improvements were realized in the third and fourth quarters. Based on total debt of approximately $246 million and 1999 EBITA of $21 million (EBITDA of $30 million), Derby's EBITA leverage remains very high at nearly 12 times (8 times EBITDA) and its EBITA interest coverage insufficient at .81 times (1.2 times EBITDA). The company's EBITA return on liabilities is approximately 5%. Headquartered in Stamford, Connecticut, The Derby Cycle Corporation is one of the world's largest designers, manufacturers and marketers of bicycles. Its operations are centered in the U.K., The Netherlands, Germany, the United States and Canada; with additional sales and marketing operations in Europe and South Africa. The company also operates components manufacturing business and has a trading arm in the Far East. Its brands include, among others, Raleigh, Nishiki, Univega, Gazelle, Winora and Diamondback. DOANE PET CARE: Moody's Places Ratings On Review For Downgrade -------------------------------------------------------------- Moody's Investors Service placed the ratings of Doane Pet Care Company ("Doane") under review for potential downgrade. Ratings affected include: Doane's guaranteed $345 million senior secured credit facility, rated B1; Doane's $150 million 9.75% senior subordinated notes, due 2007; the company's B1 senior implied rating; and its B2 senior unsecured issuer rating. Moody's action follows Doane's announcement that it has entered into an agreement to acquire A/S Arovit Petfood ("Arovit"), headquartered in Denmark, for approximately DKK 1.2 billion (approximately $156 million) and that it will assume DKK 64 million (approximately $8 million) of Arovit's debt. Doane intends to fund the acquisition cost with debt. The sizeable addition to debt to fund the Arovit acquisition could weaken Doane's credit statistics, depending on the underlying earnings and cash flow of Arovit. In addition to looking at Arovit's business position and financial condition, Moody's review will consider the integration challenges in successfully combining the businesses, the likely effects of the enhancement to Doane's business position, and Doane's business strategies following the acquisition. Doane has a dominant position as a leading producer of private label pet food in the U.S. It entered the European market in 1996, and now has a presence in Spain, Italy and the U.K. Arovit is a leading producer of private label pet food in Europe, and will add materially to Doane's position in that market. Doane Pet Care Company, based in Brentwood, Tennessee, is a leading producer of pet food products. The company produces dog and cat food, treats and biscuits from 33 manufacturing plants, with operations in the U.S., Spain, the U.K., and Italy. FIRST MERCHANTS ACCEPTANCE: Court Rules For Committee Fees ---------------------------------------------------------- In an article written by John J. Rapisardi, a member of the firm of Weil, Gotshal & Manges, L.L.P. and Jacqueline Stuart, of counsel at the firm, The New York Law Journal reports on March 16, 2000, that the United States Court of Appeals for the Third Circuit recently held that the Bankruptcy Code provision that authorizes reimbursement of expenses to a member of a creditors' committee also authorizes reimbursement of attorneys' fees incurred by a committee member in the performance of committee duties. In the case In First Merchants Acceptance Corp. v. J. C. Bradford & Co., the United States Trustee formed an official committee of unsecured creditors. Pursuant to section 1103(a) of the Bankruptcy Code, the committee employed attorneys whose retention was approved by the district court. J. C. Bradford & Co., the holder of one of the largest claims against the debtor, was appointed to the creditors' committee and served as its chairman. Bradford retained its own law firm to assist Bradford in its capacity as both a creditor and a member and chairman of the creditors' committee. After the district court approved the debtor's chapter 11 plan, Bradford applied for reimbursement, as an administrative expense, of some of the attorneys' fees it had incurred as a member and chair of the committee. Bradford contended that some of its attorneys' services had been performed with the knowledge of, and at the request of, committee members and the committee's counsel. The district court approved the applications for attorneys' fees of counsel to both the debtors and the creditors' committee, but denied Bradford's application for reimbursement of its attorneys' fees. The Third Circuit concluded that a straightforward reading of the statute permits committee members to recover attorneys' fees for work performed in connection with the member's service on the committee. FOSTER WHEELER: Taps PricewaterhouseCoopers as Accountant --------------------------------------------------------- The annual meeting of the stockholders of Foster Wheeler Corporation will be held at the Hunterdon Hills Playhouse, 88 Route 173 West, Hampton, New Jersey, on Friday, April 28, 2000, at 10:30 a.m. Stockholders will consider the following: 1. The election of two directors. 2. Ratification of appointment of PricewaterhouseCoopers LLP as the corporation's independent accountants for 2000. 3. Transaction of any other business which properly arises. The Board of Directors has fixed the close of business on March 10, 2000, as the record date for determination of stockholders entitled to notice of, and to vote at, the meeting. Admission to the meeting will be by ticket only. FRONTIER INSURANCE: Standard& Poor's Lowers Ratings --------------------------------------------------- Standard & Poor's lowered its long-term rating on the $10 million Celebration 2000 Funding LLC medium-term note issue, which is fully-supported by Frontier Insurance Co., to double-'C' from double-'B'-plus. The implied single-'B' short-term rating of the note issue is withdrawn. The long-term rating of the Celebration 2000 Funding LLC medium-term note issue remains on CreditWatch with negative implications, Standard & Poor's said. These rating actions follow the March 24, 2000, Standard & Poor's suspension of the double-'B'-plus counterparty and financial strength ratings on Frontier Insurance Co. The rating of Frontier Insurance Co. is now 'NR' or not rated. The suspension of Frontier Insurance's ratings reflects Standard & Poor's concern about the quality and quantity of information that Frontier Insurance management is providing. According to the terms of the Celebration 2000 Funding LLC medium-term note transaction, the issuer was obligated to make payments to the trustee by March 1, 2000. Insufficient funds were on deposit with the trustee on March 1, 2000, to pay the principal of the notes due on March 31, 2000. A notice of claim was submitted by the trustee to Frontier Insurance in accordance with the terms of the transaction. To date, Frontier Insurance has not made any payments to the trustee. Full payment on the notes is due to noteholders on March 31, 2000. If Frontier Insurance does not honor the claim by March 31, the notes will be in default, Standard & Poor's said. GREEKTOWN CASINO: Harrah's and MGM Grand Potential Buyers --------------------------------------------------------- Conti Electric of Sterling Heights, an electrical contracting company, says it has not been paid for at least $3.5 million in work it has done on the Greektown Casino. The Company has a $9 million contract with the casino. Company officials said they planned to detail outstanding bills at a public meeting on the group's license. The Michigan Gaming Control Board, deciding Greektown's fitness as a casino operator requested that attorneys for the casino submit requested documents by May 1, 15 days before the regulators now are to meet for a hearing to include reviewing any Greektown transactions. A pre-hearing conference has been set for May 23, with hearings to begin June 2. Four key investors are said to be considering offers to sell their 40 percent of the casino after investigators for the gaming board found problems in their background. Harrah's Entertainment Inc. and MGM Grand are said to be the top contenders for the available shares. The casino is owned 50 percent by the Sault Ste Marie Tribe of Chippewa Indians, 40 percent by the Papas and Gatzaros couples and 10 percent by a group of mostly black Detroit investors. The $149 million casino is nearly finished but may not open for months, depending on what happens with the sale of its shares. GP STRATEGIES: Reports Fourth Quarter Operating Loss ---------------------------------------------------- GP Strategies Corporation (NYSE:GPX) reported a net loss of $12,814,000 or $1.12 per share diluted for the quarter ended December 31, 1999 compared to net income of $452,000, or $.04 per share diluted, for the quarter ended December 31, 1998. Included in the net loss for the quarter ended December 31, 1999, is approximately $11,200,000 of specific charges and losses discussed below. Net sales for the 1999 quarter decreased to $48,857,000 from $64,733,000 in the 1998 quarter. For the year ended December 31, 1999, the Company reported a net loss of $ 22,205,000 or $1.95 per share diluted on net sales of$224,810,000 compared to a net loss for the year ended December 31, 1998 of $2,061,000 or $.19 per share diluted, on net sales of$284,682,000. Included in the 1998 net loss was a $ 6,225,000 loss related to the sale of the assets of Five Star Group (which took place in the third quarter of 1998), and included in 1998 net sales was net sales of $64,148,000 of the Five Star Group. The Company's General Physics subsidiary suffered a downturn in the fourth quarter of 1999, due to increased losses in its IT Group, as well as a slowdown in General Physics' Manufacturing and Process Groups. The Company believes that the results were primarily due to clients diverting potential training dollars to resolve possible Y2K issues, a lack of new software product introductions and product sales in the IT area, delays in plant launches, and a general weakness in the technology enhancement business. The Company took further steps in the fourth quarter of 1999, in addition to the steps it took in the second quarter, to better define the focus of its IT and consulting services, including closing or consolidating offices, terminating employees, and reducing related costs. As a result, the Company took restructuring and other charges that contributed to a fourth quarter loss for the IT Group of approximately $6,200,000 and recognized an additional loss of approximately $1,400,000 in connection with streamlining its consulting services practice. In addition, the Company incurred expenses of $2,700,000 relating to the terminated merger with an affiliate of Veronis, Suhler & Associates (VS&A) and incurred losses of approximately $900,000 related to its Hydro Med Sciences division, which is focusing its efforts to obtain FDA approval for its prostate cancer drug delivery system. As a result of its operating loss and such specific charges and losses, the Company is in technical violation of certain financial covenants contained in its bank credit agreement. Based on discussions with its banks, the Company believes the agreement will be amended to eliminate the technical defaults. The Company has reduced its borrowings under its revolving credit and term loan agreement from approximately $54,500,000 at December 31, 1999 to $47,500,000 currently. The Company believes that the downturn in the fourth quarter of 1999 of the Manufacturing and Process Groups is only a temporary decline. The Company believes that it is still well positioned and unrivaled in its scope of services, quality and performance of its people. The Company anticipates that business will start improving in the second quarter of 2000. The Company recently received several major awards from Fortune 500 corporations. The Company intends to continue to evaluate the sale of non-core assets and recently sold substantially all of its remaining shares in GTS Duratek, Inc. HOMEMAKER INDUSTRIES: Intended Auction Sale ------------------------------------------- On April 4, 2000 at 11:00 AM a hearing will be held before the Honorable Jeffry H. Gallet, US Bankruptcy Judge for the Southern District of New York to consider the motion of Homemaker Industries, Inc., debtor, for an order authorizing and approving a bid to purchase with A&M, Inc., for the sale of substantially all of the debtors assets. The Buyer has agreed to pay a purchase price of an amount not to exceed $1 million, assuming post-petition accounts payable and expenses, and payment of cured amounts and fees and expenses of professionals retained by the Bankruptcy court for which there is no carve-out. And the payment of the net pre-petition funding balance of Foothill Capital Corporation in the amount equal to $12.3 million less an amount equal to the net post-petition collections through closing plus accrued and accruing fees and expenses of Foothill, which net pre-petition funding balance will not exceed $6.5 million. The debtor is a manufacturer and wholesaler of rugs and other home furnishings. IMPERIAL HOME DCOR: Seeks Order To Establish Bar Dates ------------------------------------------------------- The debtors, The Imperial Home Decor Group, Inc., et al. seek to establish Bar Dates for filing proofs of claim and approving notice. A hearing will be held on April 5, 2000 at 11:30 AM, Courtroom 1, US Bankruptcy Court, District of Delaware, 824 Market Street, Wilmington, DE. The debtors request that the Court establish the General Bar Date as of July 3, 2000. INTERNATIONAL WIRELESS: Order Confirms Third Amended Plan --------------------------------------------------------- On December 29, 1999,the third amended joint Chapter 11 plan of reorganization was approved by Judge Mary F. Walrath, US Bankruptcy Judge. The Effective Date occurred on February 17, 2000. IPM PRODUCTS: Seeks Authority To Retain Lowenstein Sandler ----------------------------------------------------------------- IPM Products Company and IPM Service Corporation, debtors, seek to retain Lowenstein Sandler PC as substitute counsel for Ravin, Sarasohn, Cook, Baumgarten, Fisch & Rosen PC. Kenneth A. Rosen, attorney has switched firms, as of February 12, 2000, and the debtors desire to retain his services and the services of his new firm. The debtors had given Ravin, Sarasohn a retainer in the amount of $215,000, and to the extent that it has not been used, it will be turned over to Lowenstein Sandler. The firm will perform the following services on behalf of the debtors: Take all necessary action to protect and preserve the debtors' estates, including the prosecution of actions on the debtors' behalf, the defense of any actions commenced against the debtors, negotiations concerning all litigation in which the debtors are involved, and objecting to claims filed against their estates; To Prepare on behalf of the debtors all necessary motions, applications, answers, orders, reports and papers in connection with the administration of the states herein, including the petitions, schedules and statements of financial affairs; To prepare and assist in preparation of any applications of filings with the SEC; and To negotiate and prepare on behalf of the debtors a plan or plans or reorganization and all related documents. IPM PRODUCTS: Seeks Time To Assume/Reject Headquarters Lease ------------------------------------------------------------ The debtors, IPM Products Company and IPM Service Corporation seek entry of an order extending the period within which the debtors may assume or reject a lease for 2700 Lone Star Drive, Dallas, Texas. The debtors utilize these premises for their corporate headquarters and primary distribution center. The debtors are awaiting a bid for all of their assets, and until the auction sale has been conducted, the debtors will not be able to ascertain their need for the Lease. The worst scenario, according to the debtors, would be to have the lease terminate in the middle of an auction or liquidation, at a great cost to the debtors. The debtors therefore submit that an extension of the statutory period is warranted through the Confirmation Date. JITNEY JUNGLE: Exits Little Rock, Memphis Markets ------------------------------------------------- Jitney Jungle Stores of America, Inc. today announced the sale of six stores and the closure of three grocery stores and two companion gas stations in the Memphis, TN. and Little Rock, AR. markets. Included in the sale are four companion Pump & Save gas stations. Plans are in place to sell four more grocery stores and three companion gas stations in Memphis on April 4, 2000. Ron Johnson, President and Chief Executive Officer of JJSA, Inc. said, "The exit from the Little Rock and Memphis markets through the sale and closure of these 13 grocery stores is part of our transition into a smaller more viable company. Our objective since the bankruptcy filing back in October has been to use the reorganization process to strengthen our business operation and this exit is an important step in achieving this objective." Johnson added, "Jitney expects to emerge from bankruptcy by the end of the year without debt and with a financial structure in place that will enable us to compete successfully in the years to come." In exiting the Little Rock and Memphis markets, Jitney Jungle Stores of America closed the three stores located in Southhaven, MS., Cordova, TN., and Little Rock, AR and closed two Pump & Save gas stations adjacent to those stores. The company currently operates 163 grocery stores, 48 gas stations and 10 liquor stores throughout Mississippi, Alabama, Louisiana and Florida. LIVENT: Hughes & Luce Announce Amended Class Action Complaint ------------------------------------------------------------- According to the law firm Hughes & Luce, LLP, there is a current class action lawsuit pending the US District Court for the Southern District of New York on behalf of purchasers of certain debt securities from Livent, Inc. anytime after Oct. 10, 1997. The class action lawsuit referenced above has been brought on behalf of Alice F. Rieger, Cerberus Capital Management, L.P., Tri-Links Investment Trust and all others similarly situated. The lawsuit, originally filed on Sept. 1, 1999 was amended on March 13, 2000. The Amended Complaint re-defines the class as all "persons or entities who purchased 9 3/8% Senior Unsecured Notes Due 2004 from Livent, Inc. during the period from Oct. 10, 1997 to the present." Excluded from the class are the defendants, their immediate families, any entity in which any defendant has a controlling interest or is a parent or subsidiary of or is controlled by Livent, Inc., including the officers, directors, affiliates, legal representatives, heirs, predecessors or assigns of any Defendant. The Amended Complaint also names all of the following persons as defendants: Garth Drabinsky, Myron Gottlieb, Gordon Eckstein, Robert Topol, Conrad M. Black, Joseph Rotman, Scott M. Sperling, H. Garfield Emerson, Martin Goldfarb, A. Alfred Taubman, Estate of Andrew Sarlos, Thomas H. Lee, James Pattison, Lynx Ventures, L.P., Lynx Ventures, L.L.C., Micheal S. Ovitz, Ronald W. Burkle, Robert M.D. Cross, Quincy Jones, Heather Munroe-Blum, Jerry I. Speyer, Furman Selz, Inc., Roy Furman, PaineWebber Incorporated, Deloitte & Touche, L.L.P., Deloitte & Touche Chartered Accountants, Canadian Imperial Bank of Canada, CIBC World Markets, CIBC Capital Partners, CIBC Wood Gundy Securities, Inc., CIBC Wood Gundy Capital, and CIBC Oppenheimer Securities, Inc. The Amended Complaint charges that the Defendants violated federal securities laws, as well as New York state law, by, among other things, misleading investors regarding the financial condition of the Company, as presented by the company's financial statements for fiscal years 1996 and 1997 and the first quarter of fiscal year 1998. Plaintiffs contend that the Defendants engaged in various schemes to defraud investors by overstating Livent's financial condition and by participating in an ongoing scheme to cover up the impact of such overstatements on the Company's financial position. Plaintiffs allege that Defendants allowed Livent to enter into financial arrangements that, as disclosed to the investing public, appeared to be revenue-generating transactions when, in fact, undisclosed side agreements required repayment of the sums advanced. Plaintiffs allege that such false disclosures resulted in the overstatement of the revenues and the understatement of the liabilities of the Company. Plaintiffs claim that Defendants allowed Livent to violate generally accepted accounting practices, and then, even when these violations became apparent, continued to overstate Livent's financial condition by understating the effect of Livent's accounting manipulations and by failing to disclose the full extent of the manipulations and their impact on the Company. Plaintiffs allege that Defendants' statements, actions and omissions in this regard led the Company into bankruptcy and destroyed the value of Plaintiffs' investments. The law firms of Hughes & Luce, L.L.P., and Diamond, McCarthy Taylor & Finley, LLP based in Dallas will be acting as class co- counsel in this lawsuit and will represent the interests of the class. KENETECH: Board Authorizes Repurchase of 2M Shares of Stock ----------------------------------------------------------- Kenetech Corporation's Board of Directors has authorized the repurchase of an additional 2,000,000 shares of its common stock, par value $0.0001. The company has completed the repurchase of 2,000,000 shares under the repurchase program announced in November 1999. The new repurchase program will continue until the company acquires the 2,000,000 shares or until December 31, 2000. KOMAG: Expects Strong Demand To Continue Into Second Quarter ------------------------------------------------------------ Komag, Incorporated, a technical leader in the disk drive component industry, reports shipments in the first quarter of 2000 will exceed previous estimates. At the same time the company has effected an upward revision of its financial results for the fourth quarter and fiscal year ended January 2, 2000 due to the favorable resolution of certain income tax audits. At the time of the announcement of the company's fourth quarter 1999 results on January 25, 2000, the company expected first quarter 2000 unit shipments to be sequentially flat compared to the 8.9 million units shipped in the fourth quarter of 1999. Currently the company expects unit shipments will actually increase between 12% and 18%. "There is strong demand for our 10 gigabyte per platter disks, especially in 7200 RPM drive platforms," said T.H. Tan, Komag's president and chief executive officer. "The performance advantages of these fast drives is particularly attractive in the mainstream of the desktop market. Further our current expectation is that the strong demand we are now experiencing will continue into the second quarter." "In addition to strong shipment performance, the positive impact of our restructuring activities is beginning to improve our financial results. As a result of the high utilization of our Malaysian factories we have achieved significantly lower production costs. While we do not expect to become profitable at current volume levels, our first quarter financial results should show a significantly lower operating loss than in any quarter last year," added Mr. Tan. In February 2000, the company obtained favorable resolution of certain income tax return audits that were in process at the end of its last fiscal year. These audits were resolved with no taxes owed by the company. As a result, the company has reduced its related recorded tax liability as of January 2, 2000 by $27 million. Because this settlement occurred subsequent to the company's announcement of fourth quarter and fiscal 1999 results but before the filing of the company's annual report for such periods, generally accepted accounting principles require the company to reflect the impact of this change in estimate on its financial results for the fourth quarter and fiscal year ended January 2, 2000. After recording this change in estimate, net income for the fourth quarter of 1999 was $5.9 million. This compares to the previously reported net loss of $21.1 million. The revised net loss for fiscal 1999 was $283.0 million. The previously reported net loss for the fiscal year was $310.0 million. Founded in 1983, Komag, Incorporated has produced over 435 million thin-film disks, the primary storage medium for digital data used in computer disk drives. The company is well positioned as the broad-based strategic supplier of choice for the industry's leading disk drive manufacturers. Through its advanced development facilities in the United States and high volume production factories in Southeast Asia, Komag provides high quality, leading-edge disk products at a low overall cost to its customers. These attributes enable Komag to partner with customers in the execution of their time-to-market design and time-to-volume manufacturing strategies. LUMENYTE: Seeks Order Extending Time To Assume/Reject Lease ----------------------------------------------------------- Lumenyte International Corporation, debtor, seeks an extension of the time period within which Lumenyte may move to assume, assume and assign, or reject its unexpired leases of nonresidential real property for its headquarters located at 12 Whatney, Irvine, California 92618 through and including June 30, 2000, or such later date as the court may hereafter order. Because of the manufacturing process of fiber optics, several large pieces of equipment and fixtures are installed permanently into the facility. Removal, reinstallation and rehabilitation of the premises would be prohibitively costly. The debtor and its professionals are currently investigating possible investment partners in the company. Such an investment may take the form of a capital infusion or merger partner. In either event, the debtor would likely continue to operate form its current headquarters. If, in the unlikely event the debtor were to sell its assets to a potential buyer, or merge with another company, the debtor may no longer need its facility. OXFORD HEALTH PLANS: Thompson Appointed New CFO ----------------------------------------------- Oxford Health Plans, Inc., has appointed Kurt B. Thompson, age 39, as executive vice president and chief financial officer, effective March 16. He was formerly vice president of finance since joining the company in August 1998. Yon Y. Jorden, Oxford's former CFO, is leaving to pursue other business opportunities. As CFO, Thompson will report directly to Norman C. Payson, M.D., chairman and chief executive officer, and is responsible for all aspects of Oxford's financial operations, including investor relations, actuarial and underwriting, treasury, financial planning, tax, accounting and risk management. "Oxford is entering a new stage of leadership in the tri-state metropolitan area," Dr. Payson said. "Kurt has played a very important role in Oxford's resurgence. And with more than 15 years experience in finance and his outstanding performance at Oxford, Kurt now can play an increasingly more significant role in the financial growth of this company." Prior to joining Oxford, Thompson was a financial executive with Kmart Corporation in Troy, Mich., for three years. Additionally, he has held various financial positions at F&M Distributors, Inc., a drug store chain, and Arthur Andersen & Co. Addressing the departure of Jorden, Dr. Payson said, "Yon contributed importantly to Oxford's recovery and we wish her every success in her in next venture." Founded in 1984, Oxford Health Plans provides health plans to employers in New York, New Jersey and Connecticut, through its direct sales force and through independent insurance agents and brokers. Oxford's services include traditional health maintenance organizations, point-of-service plans,third-party administration of employer-funded benefit plans and care+Choice plans. PACIFIC INTERNATIONAL: Status of Chapter 11 Case ------------------------------------------------ Pacific International Enterprises, Inc.'s CFO, Anthony Broughton, said,, "On September 7, 1999, as a result of a dispute with KCDK, a Washington LLC, PCIE's landlord, PCIE was forced to file the Chapter 11 action to preserve its rights to use the land and building for its ongoing board manufacturing operation. Since the execution of the various agreements acquiring the assets and businesses in January 1999 PCIE Management's ability to operate effectively has been totally restricted by third party interests and was never given the chance to participate in and optimize its 1999 orders. The various parties, at one stage or another, blocked financing efforts by refusing to cooperate, have not agreed on the business plan, have reneged on promises and generally interfered in the attempts by management to operate this business." On March 22, 2000, the United States Bankruptcy Court ordered, adjudged and decreed as follows: 1. The security interests of the Murrays in the Debtor's assets as adopted in both States of Washington and California, are hereby determined and declared to be senior in priority to the competing security interests claimed by France Sports Mfg. and KCDK. 2. The Murrays are hereby entitled to exercise their default remedies, if they elect to do so, in accordance with prior orders of the Court and applicable bankruptcy law. On the same day the Court also approved the Zaremba/PCIE Agreement. "These critical and positive judgements in our favor open the door to prepare and submit to the Court our Chapter 11 reorganization plan. Through our agreement with the Zaremba Group LLC, which buys out the Murrays' position as senior lien holder, $7 million in support financing for our operations is already in place," states Binks Graval, President and CEO of PCIE. "We look forward to getting back to the business of making snow, wake and skateboards, this time with the proper working capital and without negative third party interference." PARAGON TRADE: Announces Fourth Quarter And Full Year Results ------------------------------------------------------------- Paragon Trade Brands, Inc. today reported its fourth quarter and full year 1999 financial results. The results reported reflect the effect of charges related to previously announced settlements with the Procter & Gamble Company and Kimberly Clark Corporation related to patent disputes, expenses related to the Company's Chapter 11 filing and expenses related to the Company's recapitalization and emergence from Chapter 11. Paragon reported a net loss of $7.5 million, or $.63 per share, for the fourth quarter ended December 26, 1999, compared with a net loss of $78.8 million or $6.59 per share for the same period in 1998. Net sales for the fourth quarter of 1999 were $126.1 million compared to $132.9 million for the same period in 1998. For the fiscal year ended December 26, 1999, the Company reported a net loss of $28.4 million, or $2.37 per share, compared to a net loss of $65.4 million, or $5.48 per share, for the year ended December 27, 1998. Net sales for the fiscal year were $498.7 million compared to $535.2 million for the year ended December 27, 1998. Excluding non-recurring charges, operating earnings before interest, taxes, depreciation and amortization ("EBITDA") totaled approximately $13.3 million in 1999. As previously reported, in late January, Wellspring Capital Management purchased approximately 97% of the new common stock of Paragon for approximately $115 million cash as part of Paragon's plan of reorganization. The remaining common stock was issued, together with a pro rata share of warrants to purchase new common stock, to Paragon's existing shareholders. In addition, the Company issued $146 million in 11.25% Senior Subordinated Notes due 2005 and established a $95 million three-year, secured credit facility with Citicorp USA, Inc., as Administrative Agent. Applications for quotation of the new common stock and warrants by the National Quotation Bureau and on the OTC Bulletin Board have been made. Commenting on the outlook for 2000, Bobby Abraham, Chief Executive Officer, said, "With the distraction of Chapter 11 behind us, we have been able to focus all our attention on executing the Company's strategy of leading product innovation and building retailers' own brands through superior program development. We expect these initiatives to significantly increase the Company's sales during the second half of the year in all product lines including, infant diapers, training pants, feminine care and adult incontinence products. With our renewed focus on our operations, we have made substantial strides in driving higher productivity, lower waste and better cost management. "As a result of these actions, EBITDA for the first two months of this year was $8 million compared to $4 million for the same two months last year. With the solid capital structure provided by the Wellspring plan and the considerable liquidity provided by the Citibank USA, Inc. credit facility, Paragon is back on the path of growth and being the industry leader in product and innovation." Paragon Trade Brands is the leading manufacturer of store brand infant disposable diapers in the United States and, through its wholly owned subsidiary, Paragon Trade Brands (Canada) Inc., is the leading marketer of store brand infant disposable diapers in Canada. PENN TRAFFIC: Losses Continue; Bosses Still Say Outlook Rosy ------------------------------------------------------------ Regional grocer The Penn Traffic Co., which operates stores in Ohio and three other states, today reported losses of more than $24.2 million in its fourth quarter. The loss amounts to $1.21 per share and brings Penn Traffic's losses to $60 million for the 31 weeks since it emerged from bankruptcy reorganization. The company lost $93.6 million in the fourth quarter a year ago. Penn Traffic has now lost more than $364 million since 1995. The company operates 213 stores in Ohio, Pennsylvania, New York and West Virginia under five trade names: P&C Foods, Big Bear, Big Bear Plus, Bi-Lo Foods and Quality Markets. Revenues from the fourth quarter totaled $625.7 million compared to $690.5 million for the same period a year ago, a decline of nearly 10 percent. However, company officials said revenue comparisons are skewed because Penn Traffic has closed more than four dozen stores over the past year as part of a bankruptcy restructuring. The company's same store sales fell 0.7 percent in the quarter ended Jan. 29. Last quarter, same store sales rose slightly, the first increase in return customers since Penn Traffic declared bankruptcy in 1998. For the year, same store sales were down 1.5 percent. Penn Traffic's president and chief executive officer, Joseph V. Fisher, blamed unseasonably mild winter weather for hurting grocery sales in the fourth quarter. In stormier weather, he said, shoppers tend to buy more. Despite the losses, company leaders said cash flow was stronger than expected for the quarter. PHILIP SERVICES: Sets Record Date to Determine Issuance of Shares ----------------------------------------------------------------- Philip Services Corp. (PHV: TSE) announced that March 31, 2000 has been set as the record date to determine shareholders entitled to receive shares of Philip Services Corporation, the newly restructured company. Shareholders of record as of March 31, 2000 will receive 2% of the shares of the restructured company, which represents a total of 480,000 common shares or one share of Philip Services Corporation for every 273 shares of Philip Services Corp. they held on March 31, 2000. The new shares will be issued upon the implementation of the Company's reorganization plan. Philip Services is in the final stage of completing a financial reorganization under Chapter 11 of the U.S. Bankruptcy Code and the Companies Creditors' Arrangement Act in Canada. Upon implementation of the reorganization, 24 million shares will be issued by Philip Services Corporation on a pro rata basis to its secured lenders (91%), unsecured creditors (5%), existing shareholders (2%), class action claimants (1.5%), other equity claimants (0.5%). American Securities Transfer and Trust Inc., Philip Services Corporation's transfer agent, will manage the share issuance. It is expected that the distribution of new shares will occur within one week of the effective date of the reorganization. Philip Services is an integrated metals recovery and industrial services company with operations throughout the United States, Canada and Europe. Philip provides diversified metals services, together with by-products management and industrial outsourcing services, to all major industry sectors. REGAL GOLDFIELDS: Announces Sale of Assets To New Subsidiary ------------------------------------------------------------ Regal Goldfields Limited (CDN:REGL) announces that, amongst other things, the following resolutions with respect to its proposed restructuring (as outlined below) were passed at the annual and special meeting of its shareholders held February 14, 2000: (a) A special resolution amending the articles of the Corporation to create a new class of common shares and a new class of preference shares (the "Preference Shares") and exchange all existing common shares for 0.1 new common shares and 0.1 Preference Shares; (b) A special resolution authorizing the Corporation to sell all or substantially all of its assets to a newly incorporated subsidiary of the Corporation ("Newco") for shares and warrants of Newco; and, (c) A resolution authorizing the Corporation to redeem the Preference Shares and satisfy the redemption price by distributing Newco common shares and Newco warrants. Shareholders of Regal as of 4:30 PM (EST) on March 29, 2000 (the "Record Date") will be entitled to receive the Preference Shares upon completion of the restructuring. Any investor acquiring shares of Regal subsequent to the Record Date will only be entitled to the appropriate number of new common shares upon completion of the restructuring. Any Regal shareholder as of the Record date who sells Regal shares subsequent to the Record Date will continue to be entitled to the Preference Shares. Timing of other events relating to the restructuring will be announced as they are established. The resolutions required to complete the following restructuring of Regal were approved at the February 14, 2000 meeting of shareholders: - the common shares of Regal will be redesignated as Class A common shares; - a new class of common shares and a new class of redeemable preference shares will be created and each Class A common share will be exchanged into 0.1 new common shares and 0.1 redeemable preference shares; - Newco, a new subsidiary of Regal, has been incorporated and all the assets and all but $55,000 of the liabilities of Regal will be transferred into Newco for shares and warrants to purchase shares of Newco. The number of these shares and warrants will be equal to approximately 25% of the currently outstanding shares of Regal. The warrants to purchase shares of Newco will be exercisable at $0.20 per share until December 31, 2002, provided however that, after December 31, 2000 until December 31, 2002, the warrants will expire 60 days after the 30 day weighted average market price of the Newco shares is $0.40 per share or greater, or December 31, 2002, whichever is earlier; - A group of investors has indicated that they will invest $500,000 in Regal by purchasing a private placement of the new common shares; - Newco will settle as much of its debt as possible by the issue of Newco shares and warrants. Discussions are underway with the creditors; - Newco will attempt to complete a private placement of Newco shares and warrants to fund ongoing activities. Progress is being made in this regard; - Regal will redeem the preference shares by distributing the Newco shares and warrants that it holds. Newco plans to file a prospectus so that the shares and warrants distributed are freely tradeable; and - Regal Goldfields Limited changes its name to Regal Consolidated Ventures Limited ("Ventures"). Upon completion of this restructuring, including the private placement into Regal and Newco and the conversion of certain Newco debt to equity, the current Regal shareholders will own: (i) one share of Ventures for each 10 shares of Regal which they currently own; Ventures will have approximately $450,000 in cash, no debt and be aggressively searching for a new deal; and (ii) four shares and four warrants of Newco for each 10 shares of Regal which they currently own. Newco will have the same assets that Regal currently owns and should have significantly reduced debt from that presently outstanding and more cash for ongoing activities. The principal assets of Newco will be the interest in the Touquoy Gold Project which has defined resources of approximately 400,000 ounces of contained gold. Other opportunities are also being reviewed for Newco. The ongoing quotation of the shares of Ventures and Newco on the Canadian Dealing Network will be subject to regulatory approval. US AIRWAYS: Moody's Confirms Ratings, Changes Outlook to Negative ----------------------------------------------------------------- Moody's Investors Service confirmed the ratings of US Airways Group, Inc. ("US Airways") following contract agreement with its flight attendants. However, Moody's changed its ratings outlook to negative. This outlook change is prompted by Moody's concerns that both the near and intermediate term financial performance of US Airways will show continued weakness, despite the potential benefits of the new labor agreement. Moody's believes that the airline's near term financial results will show further deterioration as a result of disruptions to its bookings in the weeks leading up to the now averted job action. Moody's anticipates continued intermediate term pressures on financial results due to a combination of increased fuel prices, intensifying competition in the company's primary markets and substantial capital expenditure commitments. While the company has presented a reasonable plan to compete effectively and restore profitability over time, execution against that plan has been weak and combined with a poor operating environment and increased competition has produced considerably weaker than expected results. Considered in the ratings are US Airway's strength in its primary hub markets, the profit potential demonstrated in 1998 earnings, and its longer term strategic initiatives to reduce costs and improve passenger satisfaction. US Airway's senior implied rating is confirmed at B2 and the outlook is changed to negative from stable. Ratings confirmed: US Airways, Inc.: senior implied rating, B2; senior unsecured ratings, B3; pass through certificates, Ba3; enhanced equipment trust certificates: series 1996-A, A2; series 1996-B, Baa1;, series 1996-C, Ba2; series 1998-1A, A3; series 1998-1B, Baa2; series 1998-1C, Ba2; series 1999-1A, A3; series 1999-1B, Baa2; series 2000-1G, Aaa; Bank Credit Facility, B1; Shelf registration for senior unsecured, (P)B3, for senior secured, (P)Ba3, and for senior subordinated, (P)Caa1; IRBs, B3. Piedmont Aviation: Pass through certificates, Ba3, IRBs, B3. US Airways Group, Inc.: Preferred stock "caa"; shelf registration for senior unsecured debt, (P)Caa2, for subordinated debt, (P)Caa3, for preferred stock, (P)"ca." The change in the ratings outlook to negative reflects Moody's opinion that lost revenue leading up to the now averted job action has added to the weakness of US Airway's near term cash flow, an area of concern noted in Moody's downgrade in October of 1999. The lost of revenues as a result of the possibility of a shutdown, as well as the incentives needed to regain bookings going forward, has added to the stress on the company's cash flow at a time of significant cash needs at the airline. The company's refleeting (approximately $2 billion in capital expenditures anticipated in 2000) will continue due to commitments to Airbus. Although financing has already been arranged for some of these future deliveries, Moody's estimates that US Airways will need to return to the debt markets in 2000 and in each of the next several years. Compounding these higher capital costs is the potential for reduced internally generated cash flow. In Moody's opinion, the intensity of competition in many of US Airways markets has increased, limiting the company's ability to increase revenue. While its major hubs of Pittsburgh, Philadelphia and Charlotte remain profitable, increasing competition from major, regional and low cost carriers in important locations such as Washington, DC, Baltimore and Boston combined with the continued competitive environment in the North Atlantic routes place increasing pressure on the company's overall returns. While the degree of lost revenue as a result of the labor negotiations is unknown, the completion of negotiations between US Airways and its flight attendants without a work action or a suspension of operations, is a positive factor for the airline. It completes the series of negotiations the company has undertaken with its primary unions over the past three years and better positions the company vis a vis it peers with regard to work rules and wages. This and several other initiatives will provide the company with an opportunity to reduce its non-fuel CASM, an important process in making the airline competitive in its most fiercely contested markets. A work action or a suspension of operations would have severely depleted the company's liquidity and increased the uncertainty regarding its ability to complete its long term refleeting plans. Key to maintaining the rating will be the company's ability to quickly rebuild its internally generated cash flow. This will come from actions to rebuild customer loyalty, to achieve, over time, the cost competitiveness it anticipates from its new labor contracts, and to find the key to profitably competing in the US North East and North Atlantic markets. The B3 rating of the company's senior unsecured debt, one refined rating category below the company's B2 senior implied rating, reflects the effective subordination of the company's unsecured debt to the large amount of secured debt in the company's capital structure and the limited protection available to unsecured creditors under an expected loss analysis. Moody's anticipates that this effective subordination of the senior unsecured debt will become progressively more pronounced as the company continues to fund its refleeting with secured financings. The company's equipment trust certificates, rated two refined rating levels or more above the company's senior implied rating, benefit not only from security in the underlying aircraft but the provisions of Section 1110 of the US Bankruptcy Code. Should US Airways Group, Inc. issue debt without the benefit of guarantees from US Airways Inc. and other operating companies, such debt would be considered to be structurally subordinate to debt at US Airways Inc. and would be assigned ratings no higher than the lowest rated debt at US Airways Inc. US Airways Group, Inc. and US Airways, Inc. are headquartered in Arlington, Virginia. ********* 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. 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