/raid1/www/Hosts/bankrupt/TCR_Public/010323.MBX
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, March 23, 2001, Vol. 5, No. 58
Headlines
ALLIED HOLDINGS: Moody's Junks Senior Notes Ratings
BRIDGE INFORMATION: Hires Bear Stearns as Investment Bankers
CAFE SOLEIL: Files Chapter 7 Petition in Texas
DEFERIET PAPER: New York Paper Mill Shuts Down & Looks For Buyer
EISBERG FINANCE: Fitch Downgrades Class D Notes To `CCC'
EZ2GET.COM: Files Chapter 11 Petition in N.D. Texas
FINOVA: Obtains Court's Nod To Continue Managing Loan Portfolio
FRUIT OF THE LOOM: Seeks To Reject Burdensome Contracts
HARNISCHFEGER: Moves to Ban Asbestos Claims for Voting Purposes
HOLT GROUP: Case Summary and 11 Largest Unsecured Creditors
INNOFONE.COM: Retains Desjardins Ducharme as Counsel in Quebec
INTERNATIONAL ISOTOPES: Selling Certain Assets To Pay Debts
J.C. PENNEY: Moody's Senior Unsecured Bond Ratings Slip to Ba2
K-TEL USA: Files Chapter 7 Petition in Minneapolis, Minnesota
KEY PLASTICS: Secures Approval of Disclosure Statement
KMART: Putnam Investments Controls 7+ Million Shares of Stock
LOEWEN GROUP: Files Updated 2000 Financial Results
LOEWEN: Summary Of Claims Treatment Under Amended Joint Plan
LTV CORPORATION: Court Approves New $700 Million DIP Financing
MARINER: Selling Havana Healthcare Assets for $1,764,000
NETMORF INC.: Shuts Down After Lender Bails-Out on Commitment
NYACK HOSPITAL: Fitch Cuts Revenue Bonds To BB+ Rating
OWENS CORNING: Court Grants Artisan Mechanical Relief From Stay
PARACELSUS HEALTHCARE: E&Y Resigns; Engages PwC as New Auditors
PAUL PACIFIC: Files Chapter 7 Petition in Los Angeles
PILLOWTEX CORPORATION: Rejecting Equipment Lease With Comdisco
SAFETY-KLEEN: Continuing to Pay Superfund Obligations into August
STEVENS FINANCIAL: Files Chapter 11 Petition in Phoenix
SUN HEALTHCARE: Settles Four Facilities With NHP
VENCOR INC.: Selling Wornall Property To Release Lien
VLASIC FOODS: Engages Lazard Freres as Investment Bankers
WHOLESALEPORTAL: Shuts Down Due To Cash Shortfall
XEROX CORPORATION: Inks $20 Million Printer Deal
Z'STRONG INTERNATIONAL: Files For Bankruptcy Protection in L.A.
ZILOG INC: Moody's Lowers Senior Secured Notes To Caa2
BOOK REVIEW: MERGER: The Exclusive Inside Story of the
Bendix-Martin Marietta Takeover War
*********
ALLIED HOLDINGS: Moody's Junks Senior Notes Ratings
---------------------------------------------------
Negative earnings last year prompted Moody's to downgrade several
bond ratings of Allied Holdings, Inc. to Caa levels.
The investors service believe the downward operating trend will
continue throughout most of fiscal year 2001. Hence, its ratings
outlook for the company is negative.
The following specific ratings actions were taken:
(i) Downgrade to Caa2, from B2, of Allied's $40 million of
12% senior subordinated notes due 2003.
(ii) Downgrade to Caa1, from B1, of Allied's $150 million of
8.625% guaranteed senior notes due 2007.
(iii) Downgrade to B2, from Ba2, of Allied's $230 million
guaranteed senior secured bank revolving credit facility
maturing 2002.
(iv) Downgrade to B3, from Ba3, of Allied's senior implied
rating.
(v) Downgrade to Caa1, from B1, of Allied's senior unsecured
issuer rating.
The ratings actions were due to Moody's concerns about several
fundamental issues which the rating agency has identified with
regard to Allied's operations and the company's uncertain ability
to generate adequate cash flows to service upcoming debt
obligations or guarantee sufficient liquidity over the near-term.
Allied's leverage materially increased during fiscal 2000, and
its interest coverage measures fell well below those typical of
the company's rating category just prior to this rating action.
Allied's break-even annual unit volume currently exceeds 15.5
million vehicles. However, there is considerable market sentiment
that 2001 North American OEM production could fall below this
15.5 million unit level, should consumer confidence measures and
other general economic factors fail to demonstrate improvement.
Although the company is taking proactive steps to reduce its
fixed overhead costs, market conditions have been deteriorating
at an even more rapid pace.
While Allied is the North American market leader for the short-
haul segment of the automotive transportation industry, with a
60% market share in the United States and approximately 98%
market share in Canada, the company is failing to earn adequate
returns for its services.
Allied's fiscal year 2000 EBITA return on assets was only 3.7%,
despite the fact that volumes were strong during the first half
of the year and the company has already increased prices and
implemented more flexible pricing policies to adjust for both
higher proportions of light trucks shipped and increases in
energy prices.
In addition, Allied has a significant 75% overall revenue
exposure to the "Big Three" domestic OEM's (including 15%
exposure to the distressed DaimlerChrysler), which have all been
losing market share and have recently been pressuring their
suppliers harder for rate reductions.
Allied is very vulnerable to the impact of cyclicality and volume
declines in North American new vehicle production, but is working
to mitigate this pressure through the expansion of the company's
globally-oriented Axis Group.
There is a high probability that Allied will violate the leverage
covenant under its bank revolving credit agreement for the first
quarter ending March 31, 2001, which may potentially threaten the
company's liquidity position.
However, Moody's agrees with management that the asset-based
character of the revolving credit facility supports management's
expectations that an amendment will be negotiated on the basis of
strong tangible asset coverage.
Allied's current capital structure is presently weighted toward
debt obligations maturing by early 2003. The associated
refinancing risk therefore places additional pressure on the
company to improve its cash flow generating abilities quickly.
Allied's stock price is currently approximately $3.00 per share,
down from a 12-month high of almost $8 per share. The company's
approximately $24.5 million market capitalization compares very
unfavorably with the approximately $325 million of debt on
Allied's balance sheet and limits the company's financial
flexibility.
Moody's is additionally unclear about whether the recent
elimination of three senior members of Allied's senior management
team will prove to be a prudent move, or one that has left the
company vulnerable.
The negative outlook also reflects the considerable ongoing
uncertainty regarding 2001 North American OEM production levels,
along with the significant downward pricing pressure by the
OEM's.
Allied's imminent covenant violations, near-term maturities and
material exposure to Chrysler also constrain the company's
outlook.
The B2 rating of Allied's $230 million senior secured revolving
credit facility reflects the benefits and limitations of the bank
group's collateral package, which consists of a first priority
lien on all assets and 100% of the stock of Allied and its US and
Canadian subsidiaries, and a pledge of 65% of the stock of
restricted foreign subsidiaries.
In addition, Allied's bank obligations are guaranteed by each of
Allied's domestic subsidiaries, and Allied guarantees the bank
obligations of its Canadian subsidiary borrower.
The company's December 31, 2000 borrowing base calculation, which
incorporates a percentage of eligible receivables and net
equipment value, was equal to the full $230 million maximum
amount for the facility despite the revenue downturn experienced
during the quarter.
The company had approximately $82 million of net availability at
year-end. The robust tangible asset coverage of the revolving
credit outstandings continues to provide support for the one-
notch differential of the bank facility rating above the senior
implied rating.
The Caa1 rating of the $150 million of Allied's 8.625% guaranteed
senior notes due 2007 reflects their unsecured status; their
effective subordination to borrowings under the $230 million
secured credit facility; and the risk of refinancing the $40
million of 12% senior subordinated notes which mature in 2003,
prior to the senior notes' 2007 maturity.
The Caa2 rating of the senior subordinated notes reflects their
contractual subordination to the senior notes, as well as to the
secured credit facilities.
For the fiscal year that ended on December 31, 2000, Allied's
"Total Debt/EBITDA" leverage was high at 4.0x, increased from
3.7x for the year ended December 31, 1999.
This calculation notably excludes the additional implied leverage
related to trailers acquired under operating leases, plus roughly
$10 million of non-recourse debt on the balance sheet of the Axis
Group's Brazilian joint venture.
EBITA coverage of interest, calculated at just below 0.70x for
the year, implied that Allied has to utilize its revolving credit
availability to service its debt, in the absence of improved
working capital management, reduced capital spending, or other
cash-generating measures.
"EBITDA-CapEx/Interest" coverage was materially better at about
1.45x. The company notably controlled CapEx spending at
approximately $32.5 million for the year, or only 55% of the 2000
depreciation level. Allied's LTM 3.7% EBITA return on assets fell
well below levels typical of its rating category and highlights
the company's vulnerability to industry cyclicality and high
operating leverage. Allied ended fiscal 2000 with $36 million of
negative tangible equity.
For the purposes of calculating EBITA and EBITDA levels included
in the ratios above, Moody's added into operating income the
amounts pertaining to cash received from joint venture equity
investments, as well as interest income earned by Allied's
captive insurance subsidiary which served to offset Allied's
insurance expenses.
Allied Holdings, Inc., headquartered in Decatur, Georgia, is the
parent company of several subsidiaries engaged in providing
logistics, distribution and transportation services to the
automotive industry.
The company's primary focus is on outbound finished vehicle
distribution and related activities. The services available span
the entire finished vehicle distribution continuum, and include
logistics, car-hauling, intramodal transport, inspection,
accessorization, and dealer prep.
Axis Group is the global management arm of Allied Holdings, with
operations in the United States, Canada, Mexico, Brazil, South
Africa, Europe, and the United Kingdom.
BRIDGE INFORMATION: Hires Bear Stearns as Investment Bankers
------------------------------------------------------------
Nunc pro tunc to its Petition Date, Bridge Information Systems,
Inc., asked Judge McDonald for authority to employ and retain
Bear, Steams & Co. Inc. as its Investment Bankers. "The Debtors
urgently require in order to explore their alternatives and to
achieve a successful Chapter 11 proceeding," Gregory D. Willard,
Esq., at Bryan Cave LLP, told Judge McDonald.
Under the terms of a February 28, 2001 Retention Letter, Bridge
hired Bear Stearns to provide investment banking services to the
Debtors in connection with the possible sale of all or a portion
of the Debtors' assets and business. At the request of the
Debtors and because of the limited liquidity available to the
Debtors, Bear Stearns agreed to commence work for the Debtors
simultaneously with the preparation of the Retention Letter and
prior to its approval by the court. The Debtors turn to Bear
Stearns for assistance in:
(a) developing a list of prospective purchasers and a
strategy for the sale of Bridge, Inc.;
(b) preparing a descriptive memorandum that describes
Bridge, Inc.'s operations, management, results of operation and
financial condition and incorporates current financial data and
other appropriate information furnished by Bridge, Inc.; and
(c) contacting and soliciting interest from prospective
parties to a Transaction.
Senior Managing Director Davies S. Beller leads the engagement
from Bear Stearns' New York office. Bear Stearns will review and
analyze all indications of interest and proposals that are
received by Bridge, Inc. and will assist Bridge, Inc. in
negotiations with prospective parties to a Transaction.
Mr. Beller assured the Court that the directors, managers, and
employees of Bear Stearns do not have any connection with the
Debtors, their creditors, equity security holders or any other
parties in interest in any matters relating to-the Debtors or
their estates. Mr. Beller disclosed that Bear Stearns and
affiliated companies have, from time to time and in the usual
course of business, in the past provided financial advisory
services to the Debtors and the Debtors' affiliates, including:
(1) serving, pursuant to engagement agreements of November
2, 2000 and March 28, 2000, as exclusive financial advisor and
private placement agent in contemplated private financings for
Bridge, Inc.'s Japanese business and for Bridge, Inc.,
respectively, which financings were never consummated and for
which no securities were ultimately issued and the Debtors have
no ongoing financial obligation to Bear Stearns; and
(2) serving as co-manager of an initial public offering for
shares of Savvis Communications Corporation, for which the
Debtors have no ongoing financial obligation to Bear Stearns.
This initial public offering, together with subsequent
transactions, reduced Bridge, Inc.'s ownership interest in Savvis
from approximately 69% to less than 50%. Bear Stearns and its
affiliates continue to provide equity research coverage of Savvis
and may, from time to time and in the usual course of business,
trade in Savvis' common stock.
Bear Stearns has lots of other connections with the Debtors,
their creditors and other parties-in-interest, and Mr. Beller
disclosed that:
(A) From time to time and in the usual course of its
business, Bear Stearns and its affiliate companies buy and sell
corporate bank debt in the marketplace. Bear Stearns currently
holds technical title to $7.3 million (face amount) of Bridge,
Inc. bank debt, all of which was sold on November 8, 2000.
Although the transaction has not been settled as of the date
hereof, settlement is expected to occur in the near future.
(B) Bear Stearns and certain of the Debtors and their
affiliated companies purchase services from each other in their
usual course of business on an ongoing basis, including: (1) Bear
Stearns' purchase of financial data services from Bridge, Inc.;
and (2) Bridge Trading Corp.'s, a non-Debtor subsidiary of
Bridge, Inc., purchase of agency services provided by
Institutional Direct Inc., a subsidiary of The Bear Stearns
Companies Inc., an affiliate of Bear Stearns.
(C) The Bear Stearns Private Equity Opportunity Fund L.P.
has a $10 million capital commitment ($9.1 million of which has
been funded) to Welsh, Carson, Anderson & Stowe VIII L.P. Bear
Stearns FOF Asset Management LLC, a subsidiary of Bear Stearns
Asset Management, Inc., which in turn is a subsidiary of the The
Bear Stearns Companies Inc., is the general partner of The Bear
Stearns Private Equity Opportunity Fund L.P. Welsh, Carson,
Anderson & Stowe VIII L.P. has invested $120 million in Bridge
Information Systems, Inc. and $170 million in Savvis
Communications Corporation. The investment committee that
determines The Bear Stearns Private Equity Opportunity Fund
L.P.'s investments includes senior executives of Bear Stearns.
Employees of Bear Stearns, some of which may work on this case,
may be invested in The Bear Stearns Private Equity Opportunity
Fund L.P.
(D) The Bear Stearns Private Opportunity Ventures L.P. has a
$6.6 million capital commitment ($1.2 million of which has been
funded) to Welsh, Carson, Anderson & Stowe IX L.P. Bear Stearns
Private Opportunity Ventures Management LLC, a subsidiary of Bear
Stearns Asset Management, Inc., which in turn is a subsidiary of
The Bear Stearns Companies Inc., is the general partner of The
Bear Stearns PrivatU-Opportunity Ventures-L.P. Welsh, Carson,
Anderson & Stowe IX L.P. has $120 million invested in Bridge
Information Systems, Inc. The investment committee that
determines Bear Stearns Private Opportunity Ventures Management
LLC.'s investments includes senior executives of Bear Stearns.
Employees of Bear Stearns, some of which may work on this case,
may be invested in The Bear Stearns Private Opportunity Ventures
Fund L.P.
(E) The Bear Stearns Employee Fund II L.P., which has been
formed for the benefit of senior employees, some of which may
work on this case, has a $3.4 million capital commitment ($0.7
million of which has been funded) to Welsh, Carson, Anderson &
Stowe IX L.P. BSCGP, Inc., a subsidiary of The Bear Stearns
Companies, Inc., is the general partner of The Bear Stearns
Employee Fund II L.P. Pursuant to its chatter, The Bear Stearns
Employee Fund II L.P. portfolio invests on a pro rata basis (in
proportion to their respective capital commitments) with The Bear
Stearns Private Opportunity Ventures L.P. portfolio.
(F) Bear Stearns has been engaged by Alliance Data Systems
Corporation to be lead manager of its pending initial public
offering of common stock. Bear Stearns expects to receive
customary fees and reimbursement of expenses in the range of $6.0
million - $7.0 million if this offering is consummated. Various
funds controlled by Welsh, Carson, Anderson & Stowe beneficially
own (determined in accordance with the rules of the United States
Securities and Exchange Commission) 74.1%o of Alliance Data
Systems Corporation common stock. Following the consummation of
this initial public offering, and in accordance with market
practices, Bear Stearns anticipates actively trading the common
stock of Alliance Data Systems Corporation, as well as providing
the company with equity research coverage.
(G) In addition, because of the nature of their business,
Bear Stearns and its affiliated companies, in the usual course of
their businesses may, from time to time, trade securities and
other financial instruments with, or provide other financial
services to, many different companies and financial institutions
some of whom may be creditors or other parties with significant
connections to the Debtors.
The Debtors agree to pay Bear Stearns:
(x) Upon execution of the Retention Letter, Bridge, Inc.
shall pay to Bear Stearns an initial cash fee in the amount of
$300,000. Commencing on the first monthly anniversary of the
Retention Letter, Bridge, Inc. shall pay a monthly cash fee of
$150,000, payable in advance for the remainder of the term of the
Retention Letter, in each case on the monthly anniversary date of
the Retention Letter (or on the first business day thereafter);
(y) If a Transaction (as defined in the Retention Letter) is
consummated, then Bridge, Inc. shall pay Bear Stearns,
immediately upon such consummation, an additional cash fee equal
to the product of (i) the Aggregate Transaction Value and (ii)
the applicable Fee Percentage specified:
Aggregate Transaction Value Fee Percentage
--------------------------- --------------
$20,000,000 3.35%
$30,000,000 2.35%
$40,000,000 1.85%
$50,000,000 1.60%
$60,000,000 1.55%
$70,000,000 1.50%
$80,000,000 1.45%
$90,000,000 1.40%
$100,000,000 1.30%
$125,000,000 1.25%
$150,000,000 1.20%
$175,000,000 1.15%
$200,000,000 1.10%
$250,000,000 1.05%
$300,000,000 1.01%
$350,000,000 0.96%
$400,000,000 0.92%
$450,000,000 0.87%
$500,000,000 0.83%
$600,000,000 0.78%
$700,000,000 0.74%
$800,000,000 0.69%
$900,000,000 0.65%
$1,000,000,000 0.60%
$1,250,000,000 0.59%
$1,500,000,000 0.58%
$1,750,000,000 0.57%
$2,000,000,000 0.56%
$2,500,000,000 0.53%
$3,000,000,000 0.51%
$3,500,000,000 0.49%
$4,000,000,000 0.47%
$4,500,000,000 0.44%
$5,000,000,000 0.42%
(z) If a Transaction involves the acquisition of less than
50% of the voting power of the then outstanding Securities (as
defined in the Retention Letter) of the Company or a subsidiary
of the Company, as the case may be, the fee payable to Bear
Stearns shall equal 7% of the Gross Proceeds.
None of these compensation schemes allow for duplicate payments.
Additionally, notwithstanding the forgoing compensation scheme,
if the Debtors reorganize pursuant to a Transaction involving a
chapter 11 plan or reorganization under which the parties holding
claims under (i) the Amended and Restated Credit and Guarantee
Agreement dated as of July 7, 1998, as amended, among Bridge,
Inc., as borrower, certain subsidiaries of Bridge, Inc., as
guarantors, and certain banks as lenders, and (ii) the Master
Lease Agreement dated March 18, 1999 and certain related
guarantees, as amended, with General Electric Capital Corporation
for itself and as agents for participants, exclusively fund such
plan or reorganization through the conversion of the Defined
Claims to equity and/or the provision of additional financing,
then any fees payable to Bear Stearns pursuant to paragraph 4
relating to such Transaction shall be discounted by 50%.
The Company agreed to "indemnify and hold harmless Bear Stearns,
to the fullest extent permitted by law, from and against any and
all losses, claims, damages, obligations, assessments, penalties,
judgments, awards, and other liabilities, and will fully
reimburse Bear Stearns for any and all fees, costs, expenses and
disbursements, as and when incurred, of investigating, preparing
or defending any claim, action, suit, proceeding or
investigation, whether or not in connection with pending or
threatened litigation or arbitration, and whether or not Bear
Stearns is a party (including any and all legal and other
Expenses in giving testimony or furnishing documents in response
to a subpoena or otherwise), directly or indirectly, caused by,
relating to, based upon, arising out of or in connection with (a)
any act or omission by Bear Stearns in connection with the
agreement dated February 28, 2001 between Bear Stearns and the
Company, as it may be amended from time to time, (b) any
Transaction, or (c) any untrue statement or alleged untrue
statement of a material fact contained in, or omissions or
alleged omissions from, the Memorandum or similar statements or
omissions in or from any Information furnished by the Company to
Bear Stearns, any Agency or any prospective party to a
Transaction; provided, however, such indemnity agreement shall
not apply to any portion of any such Liability or Expense to the
extent it is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have resulted
primarily and directly from the gross negligence or willful
misconduct of Bear Stearns." (Bridge Bankruptcy News, Issue No.
4; Bankruptcy Creditors' Service, Inc., 609/392-0900)
CAFE SOLEIL: Files Chapter 7 Petition in Texas
----------------------------------------------
Cafe Soleil Partnership Ltd., San Antonio, Tx., has now filed
Chapter 7 in the U.S. Bankruptcy Court in San Antonio. The firm
listed assets and liabilities of $500,000 and $1.5 million
respectively. The case number is 01-50582. (New Generation
Research, March 21, 2001)
DEFERIET PAPER: New York Paper Mill Shuts Down & Looks For Buyer
----------------------------------------------------------------
Deferiet Paper Company, a New York-based company located near
Watertown, shut down its paper mill yesterday, The New York Times
reports. Company officials said that they expect to file for
bankruptcy protection soon.
Higher costs for pulp, the rising energy cost, and a booming
overseas market that produces paper cheaper are just among the
reasons the company cited for the shutdown.
Although, some workers will still stay on to maintain the mill,
an undetermined number of employees will be losing their jobs,
according to The New York Times.
Deferiet's officials disclosed that the company currently seeks
refinancing through a buyer.
EISBERG FINANCE: Fitch Downgrades Class D Notes To `CCC'
--------------------------------------------------------
Fitch has downgraded one class of notes issued by Eisberg Finance
Ltd., a synthetic cash flow CDO established by UBS AG, London
Branch to provide credit protection on a $2.5 billion portfolio
of investment grade, corporate debt obligations.
The following securities have been downgraded:
-- $15,000,000 class D notes from 'B' to 'CCC'.
Fitch's rating action reflects the deterioration in credit
quality of several of the underlying assets.
This has resulted in higher than expected credit protection
payments under the credit default swap agreement with UBS, and a
diminished level of credit enhancement for the class D notes.
No rating action has been taken or is contemplated at this time
for the class A, class B and Class C notes which are rated 'AAA',
'A', and 'BB' respectively.
Based on the current risk profile of the reference portfolio, the
class A, class B and class C notes continue to maintain credit
enhancement levels consistent with the assigned ratings.
EZ2GET.COM: Files Chapter 11 Petition in N.D. Texas
---------------------------------------------------
EZ2Get.com, Inc. and 18 affiliates filed for Chapter 11
protection with the U.S. Bankruptcy Court in the Northern
District of Texas. The case number is 01-41772, and Judge Houser
is presiding. The Company is represented by John Bonds, III of
Fort Worth, Texas. (New Generation Research, March 21, 2001)
FINOVA: Obtains Court's Nod To Continue Managing Loan Portfolio
---------------------------------------------------------------
In the ordinary course of The FINOVA Group, Inc.'s business, the
Debtors engage in a variety of strategies with respect to lending
to maximize the value of their portfolio and loans, including,
without limitation:
(a) waiving, modifying and forbearing on financial
covenants, within established underwriting guidelines or
as otherwise approved, and/or non-financial covenants,
(b) extending loan maturities,
(c) renewing or extending commitment periods,
(d) modifying or deferring payments of principal and/or
interest,
(e) approving overadvances on credit lines,
(f) increasing commitments or overlines,
(g) releasing collateral for a loan,
(h) substituting collateral,
(i) writing off loans,
(j) compromising loans,
(k) selling loans,
(l) converting loans into equity,
(m) releasing and/or modifying guarantees and
(n) voting on bankruptcy plans of borrowers.
The Debtors generally expect a fee or enhanced compensation for
granting any concession to a borrower. The Debtors have specific
procedures in place for authorizing modifications and concessions
which authorization includes the consideration of the adequacy of
compensation received for concessions.
For some types of financing, the Debtors receive warrants to
purchase typically anywhere from 3%-20% of the borrower's stock
with an exercise price of $.O1 per share. As a result, the
Debtors have equity interests in the form of warrants or stock in
approximately four hundred companies. In addition, the Debtors
formerly invested in microcap public companies through debentures
or convertible preferred stock which the Debtors retain. Because
of the equity component of this type of financing, the Debtors'
portfolio management activities include the following:
(1) exercising warrants and paying the stock purchase price,
(2) selling warrants in various contexts, including a sale
of all or part of the borrower's stock or assets,
(3) converting preferred stock into common stock,
(4) selling stock at public or private offerings or in the
market after they have been public,
(5) selling section 144 restricted securities or private
placements,
(6) converting debentures into equity and
(7) restructuring or returning warrants.
All of these activities are in the ordinary course of the
Debtors' businesses and are integral to the Debtors' ability to
manage their portfolios.
Against this backdrop, the Debtors sought and obtained Bankruptcy
Court authority to continue managing their portfolios and loans
in the ordinary course of business, including, without
limitation, modifying, compromising and selling loans,
purchasing, selling, disposing and otherwise handling equity
securities as noted above, and entering into any agreements,
executing any documents or taking any other action necessary to
effectuate these transactions. Because third parties might not
be familiar with section 363(c) of the Bankruptcy Code, which
authorizes the Debtors to engage in portfolio management
activities in the ordinary course of business, Judge Wizmur
entered an order affirming the Debtors' ability to engage in
portfolio management activities. (Finova Bankruptcy News, Issue
No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900)
FRUIT OF THE LOOM: Seeks To Reject Burdensome Contracts
-------------------------------------------------------
Fruit of the Loom, Ltd. moved the Court for an order, pursuant to
11 U.S.C. Sec. 365(a), authorizing the rejection of certain
executory contracts where the Debtor has determined that the
burdens of the contract outweigh the benefits:
Counterparty Debtor Entity Contract Type
------------ ------------- -------------
Canon Financial Union Underwear Equipment Lease
Canon Financial Union Underwear Equipment Lease
Canon Financial Union Underwear Equipment Lease
Copelco Capital Fayette Cotton Mill Equipment Lease
Fidelity Leasing FTL Arkansas Equipment Lease
GE Capital Fruit of the Loom Inc. Equipment Lease
GE Capital Union Underwear Equipment Lease
GE Capital Union Underwear Equipment Lease
IKON Office Solutions Fruit of the Loom Inc. Maintenance
IKON Office Solutions Fruit of the Loom Inc. Maintenance
IKON Office Solutions Fruit of the Loom Inc. Maintenance
IKON Office Solutions Fruit of the Loom Inc. Maintenance
IKON Office Solutions Fruit of the Loom Inc. Maintenance
IKON Office Solutions Fruit of the Loom Inc. Maintenance
IKON Office Solutions Martin Mills Maintenance
IKON Office Solutions FTL Arkansas Maintenance
IKON Office Solutions Martin Mills Maintenance
IKON Office Solutions Rabun Apparel Maintenance
IKON Office Solutions Martin Mills Maintenance
IKON Office Solutions Rabun Apparel Maintenance
IKON Office Solutions Fruit of the Loom Inc. Maintenance
IKON Office Solutions Fruit of the Loom Inc. Maintenance
IKON Office Solutions Fruit of the Loom Inc. Maintenance
IKON Office Solutions Fruit of the Loom Inc. Maintenance
Imaging Financial Service Fruit of the Loom Inc. Equipment Lease
Imaging Financial Service Artek Manufacturing Equipment Lease
IOS Capital Rabun Apparel Equipment Lease
IOS Capital Rabun Apparel Equipment Lease
IOS Capital Union Underwear Equipment Lease
IOS Capital Union Underwear Equipment Lease
IOS Capital Union Underwear Equipment Lease
IOS Capital Union Underwear Equipment Lease
IOS Capital Union Underwear Equipment Lease
IOS Capital Union Underwear Equipment Lease
IOS Capital Fruit of the Loom Inc. Equipment Lease
Minolta Leasing FTL Arkansas Equipment Lease
Missco Leasing Greenville Mfctg. Equipment Lease
Pitney Bowes FTL Arkansas Equipment Lease
Pitney Bowes Aliceville Cottonmill Equipment Lease
Pitney Bowes Winfield Cottonmill Equipment Lease
Pitney Bowes Martin Mills Equipment Lease
Sharp Electronic Credit FTL Texas Equipment Rental
Sharp Electronic Credit FTL Texas Equipment Rental
Sharp Electronic Credit FTL Texas Equipment Rental
Sharp Electronic Credit FTL Texas Equipment Rental
US Office Products Fayette Cottonmill Maintenance
US Office Products Greenville Mfctg. Maintenance
Xerox Corporation Fruit of the Loom Inc. Equipment Lease
Xerox Corporation Martin Mills Equipment Lease
Xerox Corporation Fruit of the Loom Inc. Equipment Lease
Xerox Corporation Martin Mills Equipment Lease
(Fruit of the Loom Bankruptcy News, Issue No. 24; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
HARNISCHFEGER: Moves to Ban Asbestos Claims for Voting Purposes
---------------------------------------------------------------
Goldberg, Persky, Jennings & White filed approximately 1,763
proofs of claim on behalf of about 542 Claimants alleging
personal injury related to asbestos exposure. These Claims were
filed against five of the Debtors: Harnischfeger Industries,
Inc., Harnischfeger Corporation (HarnCo), Joy Technologies Inc.,
Ecolaire Incorporated and New Ecolaire, Inc. The Claimants sought
multiple recoveries for the same loss by filing the same
underlying claim against more than one of the Debtors.
The Debtors objected to the Goldberg Claims based on "no
causation" on their 78th, 79th, 80th, 81st and 82nd Omnibus
Objection to Claims. Each Asbestos Objection argued that the
Claimants have failed to meet their burden of proof of a prima
facie case against the Debtor named. Because of these pending
objections, the Claimants were precluded from voting on Plan
confirmation.
Goldberg filed a motion for temporary allowance of the Goldberg
Claims for voting purposes under Rule 3018, seeking to allow each
Goldberg Claim in the amount of $1,000 per claim for purposes of
voting.
The Debtors argued that the 3018 Motion is moot because it was
not set for hearing although it was timely filed, and the
Claimants did not vote before the January 30, 2001 voting
deadline. The Debtors remarked that the confirmation process
should not be delayed because one law firm fails to prosecute one
motion.
The Debtors also argued against the voting rights of the
claimants as sought in the 3018 motion. First, the Debtors
believe that the asbestos-related claims filed against HII have
no merit and should not be entitled to vote on the HII Subplan.
Second, the Debtors contended that, if allowed to vote, each
Claimant should receive no more than one vote against one Debtor.
Finally, the Debtors believe that each asbestos-related should be
allowed at $1.00 for voting purposes. The Debtors note that
courts have provided little guidance on procedures to use to
estimate claims, and claimants bear the burden of showing that
their claims have merit. In the present case, the Debtors assert
that because the Goldberg claims were filed as unliquidated
personal injury claims, where the facts of each claim are not
provided, both liability and damages are uncertain and suited to
estimation at $1.00. The Debtors cited In Kane v. Johns-Manville
Corp. et al., in which each claim for asbestos-related injury was
estimated in the amount of $1.00 for purposes of voting pursuant
to Rule 3018(a).
Moreover, the Debtors pointed out that historical data indicate
that the Debtors' liability for asbestos-related claims is non-
existent or insignificant:
HII, being a holding company that neither sold nor
manufactured asbestos-containing products, has no liability for
asbestos claims.
HarnCo in the past sold overhead cranes that contained
brakes whose linings may have contained asbestos but past
asbestos-related claims were dismissed or settled, with no
finding of liability for asbestos related injury.
Joy or its subsidiaries has settled asbestos-related claims
for an aggregate average of less than $100.00 per plaintiff and
other claims were dismissed.
Ecolaire became a subsidiary of Joy on June 24, 1987.
Ecolaire has sold ash-handling systems that sometimes utilized
asbestos-containing packing and gaskets in the piping. As of the
Petition Date, (a) only a handful of asbestos-related claims were
settled for nominal amounts and paid by Ecolaire (or its
insurer), (b) other asbestos-related claims were dismissed, and
(c) the Goldberg firm had just begun to sue Ecolaire.
New Ecolaire is a shell company, has never manufactured a
product, and has never settled or been found liable for an
asbestos-related injury.
The Debtors believe that if this trend continues, most of the
Goldberg claims will be dismissed.
In this motion, the Debtors sought the Court's authority (1)
disallowing for purposes of voting all asbestos-related claims
filed by Goldberg, or in the alternative, (2) disallowing the
Goldberg Claims filed against HII and allowing each individual
asbestos claimant only one claim in the amount of $1.00 against
one subsidiary solely for the purposes of voting. (Harnischfeger
Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
HOLT GROUP: Case Summary and 11 Largest Unsecured Creditors
-----------------------------------------------------------
Lead Debtor: The Holt Group, Inc.
101 South King Street
Gloucester City, NJ 08030
Debtor affiliates filing separate chapter 11 petitions:
Murphy Marine Services, Inc.
B.H. Sobelman & Co., Inc.
Boringquen Maintenance, Inc.
Broadway Equipment Leasing Corp.
C.R.T., Inc.
Dockside International Fish Co., Inc.
Dockside Refrigerated Warehouse, Inc.
Emerald Equipment Leasing, Inc.
Holt Cargo Systems, Inc.
Holt Hauling & Warehousing System, Inc.
New-Port Stevedores, Inc.
NPR Holding Corporation
NPR, Inc.
NPR-Navieras Receivables, Inc.
NPR S.A., Inc.
Oregon Avenue Enterprises, Inc.
Pattison Avenue Warehousing Corp.
Refrigerated Distribution Center, Inc.
Refrigerated Enterprises, Inc.
The Riverfront Development Corporation
San Juan International Terminals, Inc.
777 Pattison Avenue, Inc.
Triple Seven Ice, Inc.
Wilmington Stevedores, Inc.
Type of Business: The Holt Group is a holding company for various
companies that provide cargo transportation and
services in industries such as truck, rail and
ocean transportation; marine terminal services,
warehousing and logistics management.
Chapter 11 Petition Date: March 21, 2001
Court: District of Delaware
Bankruptcy Case Nos.: 01-00926 through 01-00950
Judge: The Honorable Mary F. Walrath
Debtors' Counsel: Laura Davis Jones, Esq.
Pachulski, Stang, Ziehl, Young & Jones P.C.
919 North Market Street
Wilmington, Delaware 19801
(302)652-4100
Total Assets: $257,499,778
Total Debts: $197,728,391
List of Debtor's 11 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
The Bank of New York Publicly held $ 140,000,000
101 Barclay Street Notes
21 Floor
New York, NY 10286
Contact: Michael Fisco, Exq.
Facgre & Benson LLP
2200 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Amwest Surety Insurance Bonds $ 4,825,000
Company
457 Haddonfield Road
Suite 200
Cherry Hills, NJ 08002-2220
Pennsylvania Business Bank Bank Loan $ 900,000
7 Penn Center
1635 Market St.
Philadelphia, PA 19103
Norbridge, Inc. Trade Debt $ 89,242
Fox, Rothschild, O'Brien & Trade Debt $ 25,176
Frankel
Portcare International Ltd. Trade Debt $ 1,500
Commerce National Insurance Trade Debt $ 1,180
Delaware Valley Family Trade Debt $ 500
Business Center
Burrups, Inc. Trade Debt $ 293
City of Gloucester Litigation claim Unknown
Nelson Torres Vazquez Property & Unknown
Liability claim
INNOFONE.COM: Retains Desjardins Ducharme as Counsel in Quebec
--------------------------------------------------------------
Innofone.com Inc., (Pink Sheets:INNF) announced that a hearing on
the Petition for a Receiving Order filed against its principal
subsidiary Innofone Canada Inc., was held on March 13th, 2001 and
was adjourned to March 15th, 2001 at which time arguments for
Jurisdiction were heard before a Judge of the Bankruptcy and
Insolvency Division of the Superior of Quebec, District of
Montreal.
The Court concluded that it had jurisdiction to hear the matter,
and fixed the hearing on the merits of this application for the
2nd and 3rd of May, 2001, before the presiding Judge of the
Court, Bankruptcy and Insolvency Division of the Superior Court
for the District of Montreal.
The Company has retained the services of DESJARDINS DUCHARME
STEIN MONAST as legal Counsel in the Province of Quebec to
represent it with respect to this petition.
INTERNATIONAL ISOTOPES: Selling Certain Assets To Pay Debts
-----------------------------------------------------------
International Isotopes Inc (Nasdaq: INIS; BSE: ITL) (I3)
announced Definitive Agreements have been signed to sell specific
assets of the Company.
NeoRx Corporation has conditionally agreed to acquire the
Company's radiopharmaceutical facility and assets located on Jim
Christal Road in Denton, Texas for cash and warrants to purchase
common stock of NeoRx.
Imagyn Medical Technologies has conditionally agreed to acquire
the Company's brachytherapy seed assets located within the
radiopharmaceutical facility for cash.
Dr. David M. Camp, Chairman and CEO of International Isotopes,
stated, "These transactions, when completed, allow I3 to
significantly reduce our secured and unsecured debt. We are very
glad to have found NeoRx and Imagyn who have the resources to
grow these assets and for our employees to be part of
organizations that have the vision and funding to be successful.
"These sales were necessary because the Company has effectively
run out of money. In the fourth quarter of 2000, it became
apparent that the Company was not going to be successful in
completing its third round of preferred stock funding. This
funding was unsuccessful partially because of tightening equity
markets and partially because of specific revenues not developing
at the rate we expected. Because the Company has been a
development stage company with virtually no other sources of
funds than additional financing, this funding was essential to
continue operations.
"With no funds to continue operations the Company investigated
and pursued several alternatives in an attempt to salvage the
business. First, the Company pursued several partnering
relationships with customers. These attempts were not successful
primarily due to the Company's weak financial condition. Since
early December, banking institutions and entities that have an
interest in acquiring certain Company assets have funded our
operations.
"The Company also seriously considered seeking relief under
Chapter 11 of the Bankruptcy Code. The Company even considered
liquidation under Chapter 7 of the Bankruptcy Code. The Company
concluded that in bankruptcy the claims of our secured creditors
and bankruptcy administration costs would likely exceed the
realizable value of our assets and that our unsecured creditors
would receive nothing due to the radiation license liabilities,
the anticipated difficulty in selling assets containing
radioactive materials, and the probable loss of critical highly
skilled employees who are needed to maintain and operate the
Company and without whom the assets' value to a potential
purchaser would be greatly diminished.
"All of the cash proceeds of the NeoRx and Imagyn transactions
will be directed to the creditors of I3. Even though we have
today signed agreements for the divestiture of our Jim Christal
assets, we still must obtain approval of 90% of the unsecured
creditors. Our preferred shareholders have already voted to
accept NeoRx warrants with a value substantially less than their
investment in the Company in exchange for certain reductions in
the rights of the preferred stock, and the unsecured creditors
must also accept less than the amount that we owe them, or we
cannot complete the above transactions. We are contacting our
unsecured creditors beginning tomorrow and, with their acceptance
of less than full repayment, we will make the reduced payment to
them within a few days after the closing of these transactions.
"If we are unsuccessful in obtaining creditor approval, and, as a
result the NeoRx and Imagyn transactions cannot be completed, the
Company will have no alternative to a filing under the Bankruptcy
Code, which we believe would result in unsecured creditors and
shareholders receiving nothing with respect to their
investments."
Dr. Camp continued, "We are continuing to try to sell our Shady
Oaks facility, which has been closed since November, 2000, and
the real estate we own in Waxahachie. If we can sell these
assets, the only remaining International Isotopes business will
be our operations in Idaho. For that business to continue it will
be imperative that we complete our asset sales, satisfy our
unsecured creditors and reduce further our secured debt."
J.C. PENNEY: Moody's Senior Unsecured Bond Ratings Slip to Ba2
--------------------------------------------------------------
A number of J.C. Penney's notes suffered substantial downgrades
Wednesday on account of poor operating performance of its
department stores and drug store chains.
Moody's Investments Services lowered the long and short-term
ratings of the giant retailer after noting the decline in credit
fundamentals of its department stores and its Eckerd drug store
chains.
The rating action concludes the review that began on January 25,
2001. Ratings downgraded are:
-- J.C. Penney Company, Inc.
* senior unsecured debt and medium term notes to Ba2 from
Baa3;
* issuer rating to Ba2 from Baa3; and
* senior unsecured shelf registration to (P) Ba2 from (P)
Baa3.
-- J.C. Penney Funding Corporation
* the commercial paper rating to Not-Prime from Prime-3
-- J.C. Penney Company, Inc.
* senior implied rating at Ba2
The rating outlook is negative.
Penney's management is essentially trying to achieve a major
change in corporate culture and in merchandising philosophy at
the department stores.
The bond ratings agency opined that due to the difficult
competitive environment and the general economic weakness, the
profitability and credit metric improvements of the stores will
be difficult to achieve in the near term.
The negative outlook reflects Moody's concern that operating
performance could deteriorate further if management is
unsuccessful in implementing its strategies for improving its
businesses.
Also, the competitive and economic pressures may inhibit expected
benefits from changes in operations that are in process.
The long-term, potential benefits are clear. Among these are
improved product offerings, consistency in the message being
presented to consumers, the ability to move more quickly in
selecting and sourcing trend-right items and the ability to
identify strong and weak selling items and capitalize on the
benefits of that recognition.
However, new management is still at the beginning of putting into
place an organization that has the potential to achieve these
benefits.
Analysts at Moody's concur with management's statement that this
is a two to five year process. However, Moody's recognizes that
during this time-frame there is significant execution risk and
that improvements may not materialize as expected.
Further, continuing changes in the competitive landscape may
lessen the potential improvement in financial results, even if
the organization becomes more efficient and achieves its
operational objectives.
In the near-term, analysts expect that the department stores will
continue to have negative sales comparisons and low operating
profit margins which may put further pressure on credit
statistics.
Meanwhile, the ratings agency also recognized the potential
benefit from the plans being enacted at Eckerd to improve
customer traffic and to improve front-end sales and
profitability.
The new store prototype that is being rolled-out to existing
locations over a three year period does appear to provide a
significant benefit to Eckerd in terms of how long a customer
spends in the store and in highlighting its most profitable
merchandise offerings. In addition, expense reductions and
improvements in vendor relationships may also help to improve
returns.
However, while improvement in Eckerd's performance may occur on a
faster time frame than at the department stores, Eckerd is not
expected to achieve a level of profitability that matches past
performance in the near future.
Further, if profitability at the department stores continues to
decline, the pace of the planned improvement at Eckerd may not
offset the potential impact on overall credit metrics.
While Moody's analysts are not optimistic in the possibility of
improved performance in the near term, they recognize that the
structural changes that have been made to date by the new
management at both divisions are absolutely essential if the
company is to be successful in its turnaround.
Analysts also recognize that with the announced sale of Direct
Marketing Services, and its large cash position, the company has
good liquidity to meet its upcoming obligations and fund its
working capital needs for the foreseeable future.
This cash position, when combined with the potentially
monetizable assets on its books, such as its owned real estate
portfolio and drug store receivables, provide the company with
the financial cushion and flexibility that is required as it
implements its turnaround strategy.
Moody's believes that the pending sale of the DMS division is
generally a credit positive because of the liquidity that a sale
generates.
However, the fact remains that Penney will lose last year's
largest contributor to operating profit and its most stable
business unit. This will put further pressure on the other
divisions to improve performance if credit ratios are to show
stability or improvement.
J.C. Penney Company, Inc headquartered in Plano, Texas is one of
the largest retailers in the United States. It operates the J.C.
Penney department stores and catalog, Eckerd Drug Stores, and a
growing internet presence with "jcpenney.com".
K-TEL USA: Files Chapter 7 Petition in Minneapolis, Minnesota
-------------------------------------------------------------
K-tel International, Inc. (OTCBB:KTEL) disclosed that its U.S.
music distribution subsidiary, K-tel International (USA), Inc.
("K-tel USA"), has ceased operations and filed for protection
under Chapter 7 of the Bankruptcy Code in the United States
Bankruptcy Court, 4th District, Minneapolis, Minnesota on March
19, 2001. K-tel International, Inc. and its other subsidiaries
including Dominion Entertainment, Inc., K-tel Entertainment (UK)
Ltd., and K-tel DVD, Inc. continue their operations.
K-tel USA had distributed licensed music mainly to retail record
stores. The decision to close down had been made after almost a
year of cost and staff reductions along with detailed
examinations of current and potential future operations. Senior
management of K-tel International, Inc., assisted by outside
consultants, concluded that K-tel USA was no longer viable. The
main factors resulting in this decision were related to K-tel
USA's operating environment and the fact that one of K-tel USA's
largest customers had continuously failed to pay for goods
supplied by K-tel USA.
K-tel USA has been forced to sue Trans World Entertainment, one
of its largest customers, for payment of amounts owed. This suit
is currently before the Federal Court in St. Paul, Minnesota.
According to K-tel USA's complaint, Trans World unilaterally
proposed and implemented terms under which K-tel USA was required
to finance a large portion of the K-tel USA inventory in Trans
World stores. This unilateral arrangement was implemented by
withholding regular payments to K-tel USA until they had retained
their targeted amount of financing. During this period, there
were seven consecutive months when Trans World remitted one
dollar per month to K-tel USA. At a time when K-tel USA was
struggling to deal with its operating and profitability
difficulties, this action by Trans World put tremendous financial
pressure on K-tel USA's financial resources, which had a
detrimental effect on the ability of K-tel USA's parent to offset
funds withheld by Trans World. At the same time as it was
withholding payment, Trans World was not returning unsold goods
in a timely manner, forcing K-tel USA to manufacture new product
for other customers rather than recycling returned product to
fill orders. K-tel USA's bankers refused to advance funds against
amounts receivable from Trans World and K-tel USA was forced to
repay amounts previously borrowed against the Trans World
account. The cash flow problems at K-tel USA caused by Trans
World's actions resulted in suppliers limiting credit, which then
resulted in other customers not receiving their orders in a
timely fashion. Trans World told K-tel USA that it would return
all unsold K-tel USA merchandise by the end of March 2001 and pay
all amounts owed immediately thereafter. Trans World's attorney
advised the Federal Court in St. Paul, Minnesota at a hearing
late in January 2001, that Trans World had initiated a recall
order to its stores for K-tel USA merchandise to be shipped back
to Trans World distribution centers. However, K-tel USA was
informed by Trans World's distribution center that Trans World's
management issued contrary instructions ordering its distribution
centers to hold all K-tel USA returns. Trans World thus continues
withholding payment on K-tel USA's account and refuses to return
K-tel USA's inventory.
When K-tel USA's senior management was advised of this decision
by Trans World, and when numerous other customers also began
withholding payments, senior management of K-tel International,
Inc. concluded that K-tel USA could no longer operate in this
environment.
The closure of K-tel USA's operations follows the earlier closure
of Dominion Vertriebs GmbH in Germany and K-tel Marketing Ltd. in
England. The closing of these three entities eliminates
operations that lost a total of $15.43 million for the fiscal
year ended June 30, 2000. Consolidated losses for K-tel
International, Inc. were $15.7 million for the fiscal year ended
June 30, 2000.
On February 27, 2001, K-5 Leisure Products, Inc., a company
wholly owned by K-tel International Inc.'s Chairman and CEO,
Philip Kives, and the largest shareholder of K-tel International,
Inc., purchased a loan and security agreement from Foothill
Capital Corporation entered into by K-tel USA and other
subsidiaries of K-tel International, Inc. Following assignment to
K-5 of the loan and all rights and obligations of Foothill
Capital thereunder, K-5 took possession of collateral pledged by
K-tel USA in connection with the loan. K-5 is proceeding
vigorously to collect receivables from K-tel USA's debtors and,
by doing so, intends to alleviate the need for K-tel
International, Inc. and its subsidiaries to devote their time and
efforts to collecting such receivables.
Going forward, K-tel International, Inc.'s operating subsidiaries
will focus their efforts on areas which K-tel International, Inc.
believes are profitable and will take prudent, measured steps to
develop new opportunities. Dominion Entertainment, Inc. plans to
expand the licensing of its catalogue and, along with other K-tel
International, Inc. subsidiaries, plans to minimize reliance on
licensed material from the major record labels by developing new
products from its own Dominion catalogue. K-tel DVD, Inc.
continues to develop its DVD catalogue. The operations of K-tel
Entertainment (UK) Ltd. in England became profitable in the
second quarter under new management after reorganizing and
refocusing its business. In addition, K-tel International, Inc.
has developed extensive plans to explore new business ventures
and opportunities.
About K-tel International, Inc.
K-tel International, Inc. is a holding company with operating
subsidiaries that develop, market and distribute music and
entertainment products to retailers, wholesalers, distributors,
and licensees worldwide. K-tel Online, Inc. markets product lines
through the Internet. For more information on K-tel
International, Inc. and its subsidiaries, or to sign up for the
email list, please contact us at ktel@visioncc.net.
KEY PLASTICS: Secures Approval of Disclosure Statement
------------------------------------------------------
Key Plastics LLC received court approval Friday of a disclosure
statement related to its proposed chapter 11 plan, bringing the
automotive plastic parts manufacturer and distributor one step
closer to being acquired by an affiliate of private equity firm
the Carlyle Group. Counsel for the company's official committee
of unsecured creditors told DBR on Monday that the U.S.
Bankruptcy Court in Detroit required the company to make some
further disclosures, but overruled other objections that had been
asserted against the disclosure statement. The committee's main
objection was put off until the plan confirmation hearing, which
is scheduled for March 30. (ABI World, March 21, 2001)
KMART: Putnam Investments Controls 7+ Million Shares of Stock
-------------------------------------------------------------
While Marsh & McLennan Companies, Inc. holds no beneficial
ownership in the stock of Kmart Corporation, Putnam Investments,
LLC. owns 5,756 shares of Kmart's common stock with shared voting
power, and 7,587,772 shares over which it holds shared
dispositive power. This represents 1.6% of the outstanding common
stock of Kmart.
Putnam Investment Management, LLC, shares dispositive power over
7,448,129 shares of Kmart common stock representing 1.5% of the
outstanding common stock of company, and The Putnam Advisory
Company, LLC holds shared voting power on the 5,756 shares, and
shared dispositive power on 139,642 shares. The aggregate total
held by The Putnam Advisory Company, LLC. is so slight as not to
represent even 1% of the outstanding common stock of Kmart.
Putnam Investments, LLC, which is a wholly-owned subsidiary of
Marsh & McLennan, wholly owns two registered investment advisers:
Putnam Investment Management, LLC, which is the investment
adviser to the Putnam family of mutual funds and The Putnam
Advisory Company, LLC, which is the investment adviser to
Putnam's institutional clients. Both subsidiaries have
dispository power over the shares as investment managers, but
each of the mutual fund's trustees have voting power over the
shares held by each fund, and The Putnam Advisory Company, LLC
has shared voting power over the shares held by the institutional
clients.
Both Marsh & McLennan and Putnam Investments, LLC., disavow any
beneficial ownership of the stock in question.
LOEWEN GROUP: Files Updated 2000 Financial Results
--------------------------------------------------
The Loewen Group Inc. announced that in connection with the
filing of its Annual Report on Form 10-K with the Securities and
Exchange Commission, it has revised its previously announced
earnings for the year ended December 31, 2000.
During the period since the Company's year end, the Company has
completed the sale of 49 funeral homes and 43 cemeteries. As
well, agreements have been reached but not yet approved by the
bankruptcy courts for additional sales contemplated to close in
2001. As a result of the values obtained by the Company in these
transactions, the analysis for potential asset impairment has
been updated to include an additional provision for asset
impairment at December 31, 2000, of $40.2 million. This is a non-
cash provision and has been recorded in the fourth quarter of
2000.
Year End 2000
Including the additional provision for asset impairment, loss
from operations improved substantially to a loss of $26.2 million
in 2000 from a loss in 1999 of $248.6 million. The net loss for
the year also significantly declined, to $112.7 million in 2000
from $465.2 million in 1999. Included in the 2000 net loss are
reorganization costs of $45.9 million and the revised asset
impairment provision of $132.3 million. All other previously
announced numbers remain the same.
Fourth Quarter 2000
For the fourth quarter, the loss from operations improved
substantially to $21.8 million in 2000 from a loss of $343.0
million in 1999. The Company reported a substantial improvement
in the net loss, $56.2 million in 2000 from $368.7 million in
1999. Included in the net loss for both years are reorganization
costs and asset impairment provisions.
Cash Position
The Company's cash position continues to improve, with a balance
of approximately $201 million at February 28, 2001, up from $159
million at December 31, 2000.
Basis of Presentation
The Company's attached consolidated statements of operations and
deficit, balance sheets and cash flow statements have been
prepared on a "going concern" basis in accordance with Canadian
generally accepted accounting principles. The going concern basis
of presentation assumes that the Company will continue in
operation for the foreseeable future and will be able to realize
its assets and discharge its liabilities and commitments in the
normal course of business. As a result of the creditor protection
proceedings and circumstances relating to this event, including
the Company's debt structure, recent losses, cash flow and
restrictions thereon, such realization of assets and discharge of
liabilities are subject to significant uncertainty.
The consolidated financial statements do not reflect adjustments
that would be necessary if the going concern basis was not
appropriate. If the going concern basis was not appropriate for
these consolidated financial statements, then significant
adjustments would be necessary in the carrying value of assets
and liabilities, the reported revenues and expenses, and the
balance sheet classifications used. Additionally, the amounts
reported could materially change as part of a plan of
reorganization, since the reported amounts in these consolidated
financial statements do not give effect to all adjustments to the
carrying value of the underlying assets or amounts of liabilities
that may ultimately result. The appropriateness of the going
concern basis is dependent upon, among other things, confirmation
of a plan of reorganization, future profitable operations,
compliance with the terms of the DIP financing facility and the
ability to renegotiate such facility, if necessary, and the
ability to generate sufficient cash from operations and other
financing arrangements to meet obligations.
Based in Toronto, The Loewen Group Inc. currently owns or
operates 1,000 funeral homes and 350 cemeteries across the United
States, Canada, and the United Kingdom. The Company employs
11,000 people and derives approximately 90 percent of its revenue
from its U.S. operations.
LOEWEN: Summary Of Claims Treatment Under Amended Joint Plan
------------------------------------------------------------
In the Amended Plan, The Loewen Group, Inc. have added one
Impaired Class of Claim - Class 18 (Other Loewen Group Capital,
L.P. MIPS Partnership Interests): interests in LGCLP other than
on account of the MIPS. Accordingly, the original Unimpaired
Class 18 is changed to Class 19.
The Claims and Interests are classified and treated as:
I. Unimpaired Classes Of Claims
Class 1 Unsecured Priority Claims against any Debtor that are
entitled to priority under section 507(a)(3), 507(a)(4) or
507(a)(6) of the Bankruptcy Code.
- Full payment in cash on the Effective Date.
Class 4 Secured Claims Other Than CTA Note Claims against any
Debtor that are not classified in Class 5.
- On the Effective Date, unless otherwise mutually agreed, the
applicable Debtor will elect Option A, B, or C for the treatment
of such Allowed Claim. The applicable Debtor will be deemed to
have elected Option B if no such election is specified in a
certification filed prior to the conclusion of the Confirmation
Hearing. To the extent that the applicable Debtor elects Option C
treatment for any Class 4 Claims, such Claims will be deemed
impaired and to have rejected the Plan.
Option A: full payment in cash.
Option B: each Allowed Claim in Class 4 will be Reinstated.
Option C: release and transfer of the collateral securing
such Allowed Claim.
Class 16 Loewen Company Owned Old Stock In Non-Ownership
Regulated Debtors: Interests in any Non-Ownership Regulated
Debtor held by any Loewen Company.
- On the Effective Date, subject to the Subsidiary
Restructuring Transactions, Allowed Interests in Class 16
will be Reinstated.
Class 19 [instead of Class 18 as under the Original Plan]
Other Equity Interests: Interests in any Debtor other than
Interests in Class 12, 13, 14, 15, 16 or 17 or 18['18' is an
addition under the Amended Plan].
- On the Effective Date, subject to the Subsidiary
Restructuring Transactions, Allowed Interests in Class 19 will be
Reinstated.
II. Impaired Classes Of Claims And Interests
TLGI's transfer of assets to LGII as part of the Reinvestment
Transactions will occur before the cancellation of the LGII Old
Stock and the issuance of the New Common Stock.
Class 2 Loewen Subsidiary Debtor Convenience Claims): Unsecured
Claims against any Loewen Subsidiary Debtor that otherwise
would be included in Class 9, but with respect to each such
Claim, the applicable Claim either
(a) is equal to or less than $10,000 or
(b) is reduced to $10,000 pursuant to an election by such
holder made on the Ballot provided for voting on the Plan
by the Voting Deadline.
- On the Effective Date, each holder will receive cash equal
to the amount of such Claim or as reduced, if applicable,
pursuant to an election by the holder.
- For purposes of treatment under Class 2, multiple Claims of
a holder against a particular Debtor arising in a series of
similar or related transactions between such Debtor and the
original holder of such Claims will be treated as a single Claim
and no splitting of Claims will be recognized for purposes of
distribution.
Class 3 TLGI And LGII Convenience Claims: Unsecured Claims
against TLGI or LGII that otherwise would be included in Class
9, but with respect to each such Claim, the applicable Claim
either,
(a) is equal to or less than $1,000 or
(b) is reduced to an aggregate of $1,000 pursuant to an
election by such holder made on the Ballot provided for
voting on the Plan by the Voting Deadline.
- For purposes of treatment under Class 3, multiple Claims of
a holder against a particular Debtor arising in a series of
similar or related transactions between such Debtor and the
original holder of such Claims will be treated as a single
Claim and no splitting of Claims will be recognized for purposes
of distribution.
- On the Effective Date, each holder of an Allowed Claim in
Class 3 against TLGI or LGII will receive cash equal to the
amount of such Claim against such Debtor, or as reduced, if
applicable, pursuant to an election by the holder.
Class 5 CTA Note Claims: Secured and Unsecured Claims against the
Debtors that are CTA Note Claims.
- On the Effective Date, each holder will receive in full
satisfaction of its Allowed CTA Note Claims:
(a) a Pro Rata share of cash in an amount equal to (i) the
sum of the New Secured Debt Principal Amount, if the Exit
Financing Term Loan Closing occurs, (ii) the Realized Asset
Disposition Proceeds Amount (iii) the Excess Cash Distribution
Amount;
(b) a Pro Rata share of New Five-Year Secured Notes in an
original principal amount equal to the New Secured Debt Principal
Amount, unless the Exit Financing Term Loan Closing occurs;
(c) a Pro Rata share of New Two-Year Unsecured Notes in an
original principal amount equal to the Unrealized Asset
Disposition Proceeds Amount;
(d) a Pro Rata share of New Seven-Year Unsecured Notes in
an original principal amount equal to the New Seven-Year
unsecured Notes Principal Amount; and
(e) a Pro Rata share of 36,060,200 shares of New Common
Stock. [36,616,300 shares under the Original Plan].
- The foregoing distributions shall be without prejudice to
the rights and claims of any Indenture Trustee or holder of a CTA
Note Claim against Tolling Parties or other third parties
relating to the CTA. [the phrase "provided that, as of the
Effective Date, and upon the cancellation of the CTA, each
Indenture Trustee, each holder of a CTA claim will be deemed to
forever release each Loewen Company, including as a pledgor under
the CTA, from any claims in respect to the CTA and CTA Note
Claims discharged through the respective distributions" is not
found in the Amended Plan.]
Class 6 O'Keefe Note Claims: The Original Plan specifies that
these are Unsecured Claims against LGII, Reimann Holdings,
Inc., Wright & Ferguson Funeral Home and TLGI in respect of
the O'Keefe Note Claims. [The Amended Plan says this class
consists of all O'Keefe Note Claims.]
Under the Original Plan,
- On the Effective Date, each holder will receive a Pro Rata
share of 620,200 shares of New Common Stock.
Under the Amended Plan,
- On the Effective Date, each holder will receive a Pro Rata
share of (a) 781,800 shares of New Common Stock; (b) a Pro Rata
share of New Warrants exercisable to purchase 243,800 shares of
New Common Stock and (c) a Pro Rata share of a 13.37% interest in
the Liquidating Trust.
Class 7 Under the Original Plan classification, this class refers
to MIPS Debenture And Guaranty Claims: Unsecured Claims
against (a) TLGI and LGII under or in respect of the MIPS
Junior Subordinated Debenture and the MIPS Guaranty, (b) LGII
as general partner of LGCLP.
- Under the Original Plan, no property will be distributed to
or retained by the holder of Allowed Claims in Class 7.
The Amended Plan says Class 7 refers to MIPS Debenture Claims:
Unsecured Claims against TLGI and LGII under or in respect of the
MIPS Junior Subordinated Debenture and the MIPS Junior
Subordinated Debenture Guarantee.
- Under the Amended Plan, on the Effective Date, in full
satisfaction of all of its Class 7 Claims against LGII and TLGI,
if Class 17 accepts the Plan, LGCLP will receive New Warrants
exercisable to purchase 382,400 shares of New Common Stock, which
New Warrants will in turn be distributed by LGCLP to the holders
of Allowed Interests and Claims 17. If Class 17 does not accept
the Plan, no property will be distributed to or retained by the
holder of Allowed Claims in Class 7.
Class 8 Intercompany Claims: Claims of any Loewen Company against
any Debtor that are not classified in Class 7 and are not
Administrative Claims.
- Claims in Class 8 will be Reinstated, provided that:
(a) on the Effective Date, each holder of an Allowed Claim
in respect of the MEIPs Debentures will receive its Pro Rata
share of $10,000 in complete discharge of any such Claim; ("MEIPS
DEBENTURES" means the 1994 Exchangeable Floating Rate Debentures
due July 15, 2001 issued by LGII to Loewen Management Investment
Corporation.)
(b) no property will be distributed to or retained by any
Loewen Company on account of any Claim in Class 8 with respect to
which, immediately prior to the Effective Date, the obligor is
LGII or a wholly owned, direct or indirect subsidiary of LGII and
the holder is a non-United States, wholly owned, direct or
indirect subsidiary of TLGI (but not TLGI);
(c) any such Claims, after being offset by any amounts owed
by the holder thereof to the particular Debtor obligor, will be
discharged on the Effective Date.
- Notwithstanding this treatment of Class 8 Claims, each of
the Loewen Companies holding an Allowed Claim in Class 8 will be
deemed to have accepted the Plan.
Class 9 Unsecured Nonpriority Claims: Unsecured Claims against
any Debtor (including the unsecured portion of any Claim that
if fully secured would have been classified in Class 4 and
including any Claims in respect to the BMO Letter of Credit
Facility and the UBS Option Contract) that are not otherwise
classified in Class 1, 2, 3, 5, 6, 7, 8, 10 or 11.
Under the Original Plan,
- On the Effective Date, each holder will receive, based upon
the principal amount of the Claim, its Pro Rata share of shares
of New Common Stock reserved in respect of the Division in which
such Debtor is classified as follows:
Shares Reserved For Each
Division Division Of Allowed Class 9 Claims
-------- ----------------------------------
A 215,000
B 265,100
C 1,214,100
D 302,200
E 196,700
F 268,900
G 239,400
H 62,100
Under the Amended Plan,
- On the Effective Date, each holder will receive, based upon
the principal amount of the Claim:
(a) its Pro Rata share of shares of New Common Stock
reserved in respect of the Division in which such Debtor is
classified as indicated below;
(b) a Pro Rata share of New Warrants exercisable to purchase
the number of shares of New Common Stock for such Division, if
any;
(c) a Pro Rata share of the percentage interest in the
Liquidating Trust for such Division, if any:
Shares of New
Common Stock Percentage
Purchasable upon Interest in
Shares of New Exercise of Liquidating
Division Common Stock New Warrants Trust
-------- -------------- ------------ -----------
A 139,300 489,000 16.10%
B 465,300 1,633,200 53.79%
C 1,214,100 0 0%
D 1,100,000 0 0%
E 244,400 0 0%
F 172,500 93,500 4.55%
G 263,500 156,000 7.59%
H 92,700 94,800 4.60%
Class 10 MIPS Securities Litigation Claims: Unsecured Claims,
including the Securities Litigation Claims, against TLGI, LGII
or LGCLP arising:
(a) from rescission of a purchase or sale of the MIPS;
(b) for damages arising from the purchase or sale of the
MIPS, including Claims for damages for fraud or misrepresentation
or otherwise subject to section 510(b) of the Bankruptcy Code; or
(c) for reimbursement or contribution allowed under section
502 of the Bankruptcy Code on account of such Claims.
- No property will be distributed or retained.
Class 11 Other Securities Litigation Claims: Unsecured Claims,
including the Securities Litigation Claims, against any Debtor
arising:
(a) from rescission of a purchase or sale of TLGI Old
Preferred Stock, TLGI Old Common Stock or any other equity
security of any Debtor (other than the MIPS);
(b) for damages arising from the purchase or sale of any
such security, including Claims for damages for fraud or
misrepresentation or otherwise subject to section 510(b) of the
Bankruptcy Code; or
(c) for reimbursement or contribution allowed under section
502 of the Bankruptcy Code on account of such Claims.
- No property will be distributed to or retained.
Class 12 TLGI Old Preferred Stock: Interests in TLGI on account
of the TLGI Old Preferred Stock.
- No property will be distributed.
Class 13 TLGI Old Common Stock: Interests in TLGI on account of
the TLGI Old Common Stock.
- No property will be distributed.
Class 14 LGII Old Stock: Interests in LGII on account of LGII Old
Stock.
- No property will be distributed to or retained by the
holders and such Interests will be canceled on the Effective Date
as part of the Reinvestment Transactions.
Class 15 Third Party Owned Old Stock Of Non-Ownership Regulated
Debtors: Interests in any Non-Ownership Regulated Debtor held
by any person or entity other than a Loewen Company.
- No property will be distributed to or retained by the
holders and such Interests will be canceled on the Effective
Date; provided, however, that with respect to any Non-Ownership
Regulated Debtor that is determined by the Bankruptcy Court to be
solvent as of the Confirmation Date, a holder of an Allowed
Interest in Class 15 in such Debtor will receive, on the
Effective Date, New Common Stock with an aggregate value, based
on the reorganization value per share as set forth in the
Disclosure Statement, equal to the value of such holder's
interest in such Debtor as determined by the Bankruptcy Court.
Class 17 Loewen Group Capital, [MIPS] L.P. Partnership Interests:
Interests in LGCLP on account of the MIPS and the partnership
interests in LGCLP. ([MIPS] has been added in the Amended
Plan.)
The Original Plan says,
- No property will be distributed to or retained by the
holders and such interests will be canceled on the Effective
Date.
The Amended Plan says,
- If Class 17 accepts the Plan, on the Effective Date, each
holder of Allowed Interests and Claims in Class 17 will receive a
Pro Rata share of New Warrants distributed to LGCLP as the holder
of Class 7 Claims and exercisable to purchase 382,400 shares of
New Common Stock. If Class 17 does not accept the Plan, no
property will be distributed to or retained by holders of Allowed
Interests in Class 17.
Added under the Amended Plan is:
Class 18 Other Loewen Group Capital, L.P. Partnership Interests:
Interests in LGCLP other than on account of the MIPS.
- No property will be distributed to or retained by holders of
Allowed Interests in Class 18.
NAFTA Claims
In October 1998, TLGI filed the NAFTA Claims against the U.S.
government seeking damages under the arbitration provisions of
NAFTA (North American Free Trade Agreement). As mentioned in the
Original Plan, the Amended Plan says that these NAFTA Claims will
be the subject of certain restructuring and reinvestment
transactions:
(1) Prior to the Effective Date, TLGI will cause LGII to
form (a) Delco and (b) Nafcanco.
(2) On the Effective Date, LGII will transfer its rights to
receive any proceeds of the NAFTA Claims arising under Article
1117 of NAFTA to Delco and will transfer the membership interests
of Delco to TLGI. TLGI will assign to Reorganized LGII, and
Reorganized LGII will assume the NAFTA Contigency Fee Agreement
and the NAFTA Arbitration Agreement.
Immediately thereafter, TLGI will:
(a) transfer to Nafcanco all right, title and interest to
any proceeds of the NAFTA Claims arising under Article 1116 of
NAFTA that TLGI receives;
(b) irrevocably delegate to Nafcanco all powers and
responsibilities of TLGI in respect of the pursuit and
prosecution of the NAFTA Claims;
(c) cause Delco to transfer to LGII all right, title and
interest to any proceeds of the NAFTA Claims arising under
Article 1117 of NAFTA that Delco receives.
While the Debtors asserted that these actions will not affect the
claims, they anticipate that the U.S. government, as respondent
in the NAFTA proceeding, will likely argue that these actions, if
taken before an award is issued, would divest the arbitration
panel of jurisdiction over some or all of the claims. The Debtors
do not think it is possible at the time the Disclosure Statement
is submitted to predict the final outcome of this proceeding or
to establish a reasonable estimate of the damages, if any, that
may be awarded, or the proceeds, if any, that may be received in
respect of the NAFTA Claims.
Treatment of Allowed Secondary Liability Claims
Under the Original Plan,
On the Effective Date, Allowed Secondary Liability Claims will
be:
(a) reinstated if such Claims arise from or relate to any
Debtor's joint or several liability for the obligations under any
(a) Allowed Claim that is being Reinstated under the Plan or (b)
Executory Contract or Unexpired Lease that is being assumed or
deemed assumed by another Debtor or being assumed by and assigned
by another Debtor or entity.
(b) entitled to only one distribution from the primary
obligor in respect of such underlying Allowed Claim but no
multiple recovery will be provided or permitted.
Under the Amended Plan,
(a) No distribution in respect of any Secondary Liability
Claims will be made;
(b) Notwithstanding any provision to the contrary, a
creditor holding multiple Allowed Claims against more than one
Debtor that do not constitute Secondary Liability Claims and that
arise from the contractual joint, joint and several or several
liability of such Debtors, the guaranty by one Debtor of another
Debtor's obligation or other similar circumstances may not
receive in the aggregate from all Debtors more than 100% of the
amount of the underlying Claim giving rise to such multiple
Claims.
Substantial Contribution Claims
Each holder of a Substantial Contribution Claim will receive from
Reorganized LGII cash in accordance with the procedures described
in the Disclosure Statement, in full satisfaction of Claims of
(a) any of the Principal CTA Creditors, Bank of Montreal,
Morgens, Waterfall, Vintiadis & Company, Inc. and Wachovia Bank,
N.A., to the extent that such entity votes to accept the Plan,
for fees and expenses incurred by such entity in connection with
the issues surrounding the status of certain CTA Note Claims
under the CTA in an amount not to exceed the Substantial
Contribution Claims Amount (that is, an aggregate of $2 million)
and
(b) counsel for the Creditors' Committee for services
rendered prior to the formation of the Creditors' Committee in an
amount not to exceed $60,000.
To the extent that the aggregate amount of Claims in (a) exceeds
the Substantial Contribution Claims Amount, the holders of such
Claims will receive their Pro Rata share of the Substantial
Contribution Claims Amount in full satisfaction of such Claims.
Distributions received by holders of Allowed Claims in respect of
Class 5 pursuant to the Plan will not be reduced on account of
the payment of Substantial Contribution Claims.
Within 60 days after the Effective Date, each holder of a
Substantial Contribution Claim will:
(a) submit to Reorganized LGII appropriate documentation in
support of such fees and expenses incurred through the Effective
Date, whether incurred prior to or subsequent to the Petition
Date.
(b) file a motion with the Bankruptcy Court seeking approval
of its fees and expenses for services incurred through the
Effective Date under the terms of the applicable Prepetition
Indenture or CTA; and serve such motion on (i) Reorganized LGII
and the Reorganized Debtors and (ii) the United States Trustee.
Any Indenture Trustee or CTA Trustee that does not timely file
such motion will be forever barred from asserting such Claims and
such Claims will be deemed discharged as of the Effective Date.
The request of a holder of a Substantial Contribution Claim for
approval of its Substantial Contribution Claim will not be
subject to the additional standards contained in section 503(b)
of the Bankruptcy Code.
The Original Plan says that, promptly upon approval by the
Bankruptcy Court, the approved Substantial Contribution Claims
for the period subsequent to the Petition Date and prior to the
Effective Date will be paid by Reorganized LGII.
The Amended Plan says that, promptly upon approval by the
Bankruptcy Court, the approved Substantial Contribution Claims
for the period subsequent to the Petition Date and prior to
November 14, 2000 will be paid by Reorganized LGII.
Claims Under the Rose Hills Put/Call Agreement
The Amended Plan provides that in full satisfaction of the Claims
of Blackstone and RHI under the Rose Hills Put/Call Agreement,
including the exercise of the put, subject to the prior
satisfaction of all conditions as set forth in the Blackstone
Settlement Agreement, on the Effective Date, Reorganized LGII
will issue to Blackstone and to RHI the New Unsecured
Subordinated Convertible Notes in an original principal amount
equal to the New Unsecured Subordinated Convertible Note
Principal Amount and 389,500 shares of New Common Stock in
accordance with the terms of the Blackstone Settlement Agreement.
Indenture Trustees' Claims
The Amended Plan provides that, in full satisfaction of each
Indenture Trustee's fee and expense Claims for services under the
respective Prepetition Indenture, and the fee and expense Claims
of the CTA Trustee for services under the CTA, including Claims
secured by charging lien, each Indenture Trustee and the CTA
Trustee will receive cash from Reorganized LGII equal to the
amount of such Claims on the Effective Date. Any charging lien
held by such Indenture Trustee or the CTA Trustee will be
released on the Effective Date. Distributions received by holders
of Allowed Claims in Classes 5, 7 and 17 pursuant to the Plan
will not be reduced on account of the payment of the Indenture
Trustees' Claims or the CTA Trustee's Claims.
Within 60 days after the Effective Date, each Indenture Trustee
and the CTA Trustee will submit to Reorganized LGII appropriate
documentation in support of fees and expenses incurred through
the Effective Date, whether incurred prior to or subsequent to
the Petition Date. No later than 60 days after the Effective
Date, the respective Indenture Trustee or CTA Trustee will: (a)
file a motion with the Bankruptcy Court seeking approval of its
fees and expenses for services incurred through the Effective
Date under the terms of the applicable Prepetition Indenture or
CTA; and (b) serve such motion on (i) Reorganized LGII and the
Reorganized Debtors and (ii) the United States Trustee.
Any Indenture Trustee or CTA Trustee that does not File such
motion by such date will be forever barred from asserting such
Claims against the Debtors, the Reorganized Debtors or their
respective property and such Claims will be deemed discharged as
of the Effective Date.
The Bankruptcy Court will approve such fees and expenses
requested in such motion to the extent that such amounts are
reasonable and appropriate under the terms of such Prepetition
Indenture or CTA, which, notwithstanding the cancellation of such
Prepetition Indenture and CTA pursuant to the Plan, will govern
this determination. An Indenture Trustee's or CTA Trustee's
request for approval of such fees and expenses will not be
subject to the additional standards contained in section 503(b)
of the Bankruptcy Code. Promptly upon approval by the Bankruptcy
Court, an Indenture Trustee's or CTA Trustee's approved fees and
expenses for the period prior to the Effective Date will be
treated as Allowed Claims and will be paid by Reorganized LGII.
Any Claims of an Indenture Trustee or the CTA Trustee for fees
and expenses (a) incurred in connection with the issues
surrounding the status of certain CTA Note Claims under the CTA
or (b) otherwise not incurred for services rendered in the
ordinary course under the respective Prepetition will be subject
to the other applicable provisions of this Plan and, if
applicable, section 503(b) of the Bankruptcy Code.
Administrative Claims
As mentioned in both the Original Plan and the Amended Plan, this
means a Claim (other than a Substantial Contribution Claim) for
costs and expenses of administration allowed under 503(b), 507(b)
or 1114(e)(2) of the Bankruptcy Code including (a) actual and
necessary costs incurred after the Petition Date of preserving
the respective Estates and operating the businesses of the
Debtors, (b) compensation and reimbursement for professional
services, (c) all fees and charges assessed against the Estates
under chapter 123 of 28 U.S.C. 1922-1930 (d) claims for
reclamation allowed in accordance with section 546(c)(2) of the
Bankruptcy Code and section 2- 702 of the Uniform Commercial Code
and (e) all intercompany claims accorded priority pursuant to
section 364(c)(1) of the Bankruptcy Code or the Cash Management
Order.
Unless otherwise agreed, each holder will receive cash in full
satisfaction of the Administrative Claim either: (a) on the
Effective Date; (b) if the Administrative Claim is not allowed as
of the Effective Date, 30 days after the date on which the order
allowing such Administrative Claim becomes a Final Order or a
Stipulation is executed. (Loewen Bankruptcy News, Issue No. 35;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
LTV CORPORATION: Court Approves New $700 Million DIP Financing
--------------------------------------------------------------
The LTV Corporation (OTC BULLETIN BOARD: LTVCQ) announced that
the U.S. Bankruptcy Court has approved new debtor-in-possession
financing facilities of approximately $700 million. The new
facilities will enable LTV to continue the normal operation of
its businesses, maintain the confidence of customers, suppliers
and creditors and make needed capital improvements. LTV and its
lenders will now finalize the required documents and expect to
close the financing by the end of this month.
"With these competitive debtor-in-possession financing
facilities, we are now positioned to focus on restructuring LTV's
integrated steel operations and take other actions to put this
company on a strong, competitive footing for the future," said
William H. Bricker, chairman and chief executive officer of The
LTV Corporation.
The new financing arrangements consist of two components:
(1) A Replacement Facility will provide a term loan and
letters of credit totaling about $600 million (the
amount outstanding under the previous working capital
agreements) and will resolve the dispute and litigation
concerning the Interim Order issued by the Court on
December 29, 2000. The Facility will be funded by the
previous inventory lenders and receivables lenders.
Chase Manhattan Bank will act as the agent and Abbey
National Treasury Services plc will serve as co-agent.
(2) A Working Capital Facility will provide $100 million of
additional financing in the form of a $35 million term
loan facility and an undrawn $65 million revolving
credit facility. The Facility is to be arranged by
Ableco Finance LLC.
The Facilities mature on June 30, 2002, or upon the substantial
consummation of a confirmed plan of reorganization, whichever
occurs first. The LTV Corporation is a manufacturing company with
interests in steel and metal fabrication. LTV's Integrated Steel
segment is a leading producer of high-quality, value-added flat
rolled steel, and a major supplier to the transportation,
appliance, electrical equipment and service center industries.
LTV's Metal Fabrication segment consists of LTV Copperweld, the
largest producer of tubular and bimetallic products in North
America and VP Buildings, a leading producer of pre-engineered
metal buildings for low-rise commercial applications.
MARINER: Selling Havana Healthcare Assets for $1,764,000
--------------------------------------------------------
Mariner Post-Acute Network, Inc., its wholly-owned subsidiary EH
Acquisition Corporation and other affiliates sought and obtained
the Court's approval for:
(a) the sale of the Havana Health Care Center and its
related assets free and clear of liens, claims, encumbrances and
interest at a purchase price of $1,764,000 in cash, subject to
adjustments and prorations;
(b) the Asset Purchase Agreement by and between Petersen
Health Care of Illinois, Inc., as buyer and EH Acquisition as
seller, with respect to the sale of the Havana Health Care
Center;
(c) the assumption and assignment to the buyer of the
Medicare provider agreement between EH Acquisition and the Health
Care Financing Administration (HCFA) relating to the Facility;
(d) the rejection of certain executory contracts related to
the Facility.
The Debtors expect net proceeds of approximately $1.4 million,
approximately 25% of which will be available to satisfy EH
Acquisition's working capital needs, and 75% will be paid to its
prepetition secured lenders as adequate protection.
The Buyer has escrowed a $100,000 deposit which is non-refundable
so long as EH Acquisition's senior secured prepetition lenders
consent to the Sale, and the Sale is approved by the Court, and
so long as the Facility passes a termite inspection to be
performed by the Buyer prior to the closing of the sale.
The Facility, built in 1971, is a 98-bed licensed long-term care
skilled nursing facility, located at 609 North Harpham Street in
Havana, Illinois a rural area approximately 45 miles from both
Peoria and Springfield.
It faces strong competition from a nearby county-operated
facility -- Mason County Nursing Home, which receives most
referrals from the Mason City Hospital and dominates the market
share in the community. While Mason operates at approximate 100%
occupancy rate and maintains a constant waiting list for new
residents, Havana Healthcare operates at 77.6% occupancy on the
average, and suffers operating losses of approximately $138,000
before interest, taxes, depreciation, and amortization (EBITDA).
Operating loses are expected to continue.
Moreover, the facility requires significant capital expenditures.
Among other things, approximately $100,000 must be incurred
immediately to repair the roof and replace certain essential
appliances.
After marketing the Facility for approximately ten months, the
Broker received other than that from Petersen two offers in the
amounts of $2,058,000 and $2,709,502. EH Acquisition tells the
Judge it accepted Petersen Health's offer because this was the
best offer by a buyer that was able to consummate the
transaction.
Assumption of Provider Agreements
As part of the sale, LCT will assume and assign to the Buyer the
Medicare Provider Agreement between LCT and HCFA relating to the
Facility, on terms which have been previously approved by HCFA
and the Court. EH Acquisition will seek HCFA's approval of the
same terms with respect to this Sale. Specifically, and subject
to HCFA approval, EH Acquisition will assume and assign the
Medicare Provider Agreement and provider number applicable to the
Facility to the Buyer after the Buyer obtains HCFA approval of
the change of ownership.
Notwithstanding the assumption and assignment of the Medicare
Provider Agreement, any claim under the Medicare Provider
Agreement arising prior to the Petition Date will continue to be
treated as a prepetition claim as if such Medicare Provider
Agreement had been rejected so that such claims will not be
treated as administrative claims, and will not be offset against
any of the Debtors' claims arising after the Petition Date.
HCFA will be allowed to offset such claims against any
prepetition Amounts due to the Debtors, even if the claim and
debt are not "mutual," as ordinarily required by 11 U.S.C.
section 553, and without further order of the Court, provided,
however, that to the extent HCFA'S claim is not satisfied in full
via exercise of the offset right, the United States shall have an
administrative expense claim pursuant to 11 U.S.C. section 507(b)
for any such deficiency against EH Acquisition's estate. Such
claim shall in no event exceed an amount to be agreed upon with
the HCFA, the DIP Lenders, and the Pre-Petition Secured Lenders.
The rights accorded the United States under the Sale Order will
constitute "cure" under 11 U.S.C. section 365 so that the Buyer
will not have successor liability for any claim against any
Debtors under the Medicare Provider Agreement arising prior to
the effective date of the assignment of such Medicare Provider
Agreement to the Buyer.
Even though the Buyer will have no successor liability for any
claim against any Debtors under the Medicare Provider Agreement
arising prior to the effective date of the assignment of such
Medicare Provider Agreement to the Buyer, the Buyer (or its
designee) will succeed to the quality of care history of EH
Acquisition as to the Facility, except that the assignee will
not be liable to pay any civil monetary penalty accruing prior to
the date of the Sale.
Rejection of the Service Contracts
Because EH Acquisition intends to sell all of the Assets
associated with the Facility and cease doing business at the
Facility, the service contracts related to the Facility will be
unnecessary and burdensome to LCT's estate upon the Closing of
the Sale. Accordingly, EH Acquisition and the Buyer have
agreed that EH Acquisition is not and will not be obligated to
assume or assign to the Buyer the Service Contracts, and that the
Service Contracts will instead be deemed rejected effective as of
the Closing Date.
EH Acquisition believes that selling the assets to Petersen
Healthcare is in the best interests of the estate, considering
the significant capital improvements required, the operating
losses, and the net proceeds of approximately $1.4 million that
the Debtors expect upon closing of the sale. (Mariner Bankruptcy
News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
NETMORF INC.: Shuts Down After Lender Bails-Out on Commitment
-------------------------------------------------------------
Troubled e-commerce wireless services company NetMorf Inc., shuts
down after an unnamed investor bailed out of its funding
commitment, TheDeal.Com relates.
A posting on the company's Web site said, "A lead investor in the
company's next round of financing withdrew unexpectedly, and
there was not sufficient time to secure additional funds given
the current business and economic climate."
The company has been in the process of soliciting funds from
various investors. Accordingly, NetMorf had raised $11.9 million
total in venture funding mostly from Vantage Point Venture
Partners in San Bruno, Calif., and from a group of private
investors.
The Deal.Com states that a spokeswoman for Vantage Point, which
led a $10.9 million first round of financing for NetMorf in late
February 2000, said the company had tapped J.P. Morgan Chase &
Co. to handle a second round of private placement. The investor
who defaulted was crucial to that placement, however, leaving
NetMorf with just $10.1 million of the $20 million minimum it
sought.
Consequently, NetMorf is putting itself up for sale.
NYACK HOSPITAL: Fitch Cuts Revenue Bonds To BB+ Rating
------------------------------------------------------
The Dormitory Authority of the State of New York's approximately
$31.4 million series 1996 hospital revenue bonds, issued on
behalf of Nyack Hospital, have been downgraded to `BB+' from
`BBB' by Fitch .
In addition, the bonds have been placed on Rating Watch Negative,
meaning the bonds may be lowered again in the near future.
The multi-notch downgrade stems from Nyack's recent announcement
that it anticipates its 2000 loss to be approximately $33
million.
Prior management had indicated to Fitch that Nyack's loss through
six months of 2000 was less than $1 million, and requests by
Fitch for a meeting with prior management were met with
disregard.
Nyack's financial profile has decreased materially in 2000,
primarily the result of a five-month nurses strike which ended in
May, and the subsequent departure of the following key members of
executive management: president and chief executive officer;
senior vice president of administration and chief financial
officer; chief nursing officer; and controller.
For the last six months of 2000, those key management roles have
been filled by prior Nyack executives who had been retired. A new
president and chief executive officer was appointed in January
2001, and a new controller was brought on board in November 2000.
The chief financial officer's position is currently being filled
on an interim basis, and there are no plans to recruit a senior
vice president of administration (chief operating officer role).
Nyack announced last week that it anticipates 2000 losses to be
$33 million, with $19 million attributable to the nurses strike
and $4 million as a result of a write-down of a clinic.
Management believes the remaining $10 million loss is a function
of operations. Fitch has not been adequately informed of Nyack's
financial position, largely as a result of changes in management
and the organization's reluctance to share information it does
not consider completely accurate.
According to management's estimate, Nyack's cash position has
eroded to $10.4 million as of Jan. 31, 2001 from $28.1 million in
fiscal 1999.
Fitch expects to review Nyack's 2000 audited financial statements
in two weeks (management's expected completion date) and to meet
with management shortly thereafter. Fitch warns that the rating
may be reduced further at that time.
OWENS CORNING: Court Grants Artisan Mechanical Relief From Stay
---------------------------------------------------------------
Artisan Mechanical entered into an agreement with Owens Corning
to provide labor, material, and equipment to perform multiple
construction maintenance projects associated with the Debtor's
construction project known as Owens Corning Trumbull Division.
This site, owned by the Debtor, is located in North Bend, Ohio.
Artisan Mechanical began work at the Owens Corning Trumbull
Division job site on or about June 26, 2000. Artisan Mechanical
continues to provide work at the Owens Corning Trumbull Division.
Artisan Mechanical has invoiced the Debtor for the work in the
total amount of $47,972.23. The Debtor has acknowledged the
outstanding invoices dated July 31, 2000 through October 9, 2000.
Artisan Mechanical told Judge Judith Fitzgerald that the total
amount owed by the Debtors to Artisan Mechanical for the work is
$47,972.23, plus interest and costs allowable by law.
By virtue of the services provided for the benefit of the Debtor,
Artisan Mechanical believes that it has certain mechanics' lien
rights against the real property and improvements owned by the
Debtors, and desires to foreclose on its lien against the
Debtors. However, out of an abundance caution, Artisan Mechanical
said that even though it continues to provide services to the
Debtor and has 75 days from the last work performed at the job
site to perfect its mechanics' lien in state court, Artisan
Mechanical seeks to perfect its mechanics' lien in state court as
soon as possible to preserve all its rights.
Accordingly, Lisa McLaughlin, representing Artisan Mechanical,
asked Judge Judith Fitzgerald to grant Artisan Mechanical relief
from the automatic stay for that purpose. McLaughlin urged Judge
Fitzgerald to expressly authorize Artisan Mechanical to take all
steps necessary to perfect its lien, including filing its
affidavit of lien and notation on the Registered Land Certificate
of title.
Artisan Mechanical told Judge Fitzgerald that if the requested
relief is not granted, it will suffer irreparable injury through:
(a) Substantial and continuing delays in payment for work
performed and which directly benefits the Debtor; and
(b) The loss of important state law mechanics' lien rights
against non-debtor parties.
Lisa McLaughlin further told Judge Fitzgerald that compared to
the hardship, if any, suffered by the Debtor, the burden on
Artisan Mechanical is much greater. Artisan Mechanical assured
Judge Fitzgerald that it will not seek to enforce any judgment it
may obtain against the Debtor without further Order of the Court.
In the absence of any opposition by the Debtors or the
Committees, Judge Fitzgerald has granted limited relief from the
stay to permit Artisan to take all steps necessary to perfect its
lien, including filing and recordation of its affidavit, but
requires and obtains the consent of Artisan that Artisan will not
seek to enforce any judgment it may acquire against the Debtors
absent further Order. (Owens Corning Bankruptcy News, Issue No.
10; Bankruptcy Creditors' Service, Inc., 609/392-0900)
PARACELSUS HEALTHCARE: E&Y Resigns; Engages PwC as New Auditors
---------------------------------------------------------------
Paracelsus Healthcare Corporation (OTC Bulletin Board: PLHCQ)
said that its accounting firm, Ernst & Young, LLP ("EY"),
resigned as the auditor of the Company's financial statements on
March 15, 2001. EY resigned because statements made by a
representative of the Creditors Committee in the Paracelsus
bankruptcy could in the future create the appearance that EY
lacks the necessary independence to remain as the auditors for
the Company. In a Form 8-K filed with the Securities and Exchange
Commission, the Company stated that there were no disagreements
between EY and the Company related to matters of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedures.
The Company also announced that on March 15, 2001, it engaged
PricewaterhouseCoopers LLP ("PwC") as its new accounting firm to
audit the Company's financial statements for the year ended
December 31, 2000. The decision to engage PwC was approved by the
Company's Board of Directors and is subject to the approval of
the Bankruptcy Court. The Company filed a motion with the
Bankruptcy Court today seeking the Court's approval of the
Company's engagement of PwC.
Given the above events, the Company will not be able to file its
Form 10-K with the SEC by the statutory due date of March 31,
2001.
Paracelsus Healthcare Corporation, a public company listed on the
OTC Bulletin Board, was founded in 1981 and is headquartered in
Houston, Texas. Including a hospital partnership, Paracelsus
presently owns the stock of hospital corporations that own or
operate 10 hospitals in seven states with a total of 1,287 beds.
PAUL PACIFIC: Files Chapter 7 Petition in Los Angeles
-----------------------------------------------------
Paul Pacific Plumbing Corp., South El Monte, Ca., has now filed
Chapter 7 in the U.S. Bankruptcy Court in Los Angeles. The firm
listed assets of only $39,000 and liabilities of $1.3 million.
The case number is LA01-12932-KM. For further information contact
the debtor's attorney, Robert Rubin, at 310-828-7400. (New
Generation Research, March 21, 2001)
PILLOWTEX CORPORATION: Rejecting Equipment Lease With Comdisco
--------------------------------------------------------------
Pillowtex Corporation is the lessee under a Master Lease dated
April 1988, with Comdisco, Inc. Pillowtex and its affiliates from
time to time entered into equipment leases which were governed by
the terms of the Master Lease. In January, 1996, Fieldcrest
Cannon and Comdisco added an Equipment Schedule to the Master
Leased, under which Fieldcrest Cannon leased eight IBM "LIC"
Drawer Arrays, and one IBM "LIC" Dual Controller from Comdisco.
Monthly rent for this equipment is $5,368.
Under an Electronic Funds Debit Authorization Agreement, Comdisco
withdraws the monthly rent from a certain Pillowtex bank account
on the first banking day of each month.
The Schedule has a 60-month initial term that ended on January
31,2001; however, the Schedule remains in effect until notice of
termination by either party is given. This notice must be given
no fewer than 60 days prior to the requested termination date.
Notwithstanding that Fieldcrest Cannon returned the leased
equipment to Comdisco months before the end of the initial term
on January 31, 2001, Comdisco has taken the position that,
because Fieldcrest Cannon did not given notice of the termination
to Comdisco, Comdisco has the right to draw on the Debtors' bank
account for another 60 days.
The Debtors told Judge Robinson that rejection of this lease will
ensure that Comdisco cannot continue to draw on the Debtors' bank
accounts, and prevent further administrative liability to
Comdisco.
Further, the Debtors requested that authorization to reject the
lease be retroactive to the date that the Motion requesting the
same was filed. (Pillowtex Bankruptcy News, Issue No. 5;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
SAFETY-KLEEN: Continuing to Pay Superfund Obligations into August
-----------------------------------------------------------------
Safety-Kleen Corp. have previously filed their Initial Superfund
Motion, in which they sought and obtained authority to make
payments on Superfund Obligations through August 31, 2001. The
Initial Superfund Motion set forth the necessity of making
payments of the Superfund Obligations and discussed these likely
substantial harm to the Debtors' businesses if such payments were
not made. The prospective harm includes:
(a) The negative impact on the Debtors' relationships with
other potentially responsible parties, or PRPs, at other
Superfund sites;
(b) The loss of business from PRPs who are also customers of
the Debtors;
(c) The loss of confidence in the market place, resulting in
the Debtors' inability to attract new customers; and
(d) The risk of alienating regulators.
There were no formal objections to the Initial Superfund Motions.
Nevertheless, following discussions with the Lenders and the
Creditors' Committee, the Debtors submitted a modified order
limiting the payment of Superfund Obligations through the quarter
ending November 30, 2000, without prejudice to the Debtors' right
to seek court approval for payments after November 30, 2000.
For the same reasons discussed in the Initial Superfund Motion,
Patricia Widdoss, Gregg Galardi, and Eric Davis of Skadden, Arps
in Delaware, together with David Kurtz, J. Gregory St. Clair, and
Joseph Miller III of Skadden, Arps, in Illinois, representing
Safety-Kleen Corp., asked Judge Walsh to authorize the Debtors to
make payments on account of Superfund Obligations that become
due on or before December 31, 2001.
Patricia Widdoss assured Judge Walsh that no payments will be
made on account of the Superfund Obligations unless prior court
approval is obtained from the Lenders and the Creditors'
Committee in accordance with these procedures:
(i) The Debtors will notify the Lenders and the Creditors'
Committee of the Debtors' intent to make payments of
the Superfund Obligations on a quarterly basis and
prior to the payment of any such Superfund Obligation;
(ii) The Lenders and Creditors' Committee shall have a
"Superfund Payment Review Period" of 10 days from the
Notification to review the proposed payments. If no
written objection to the payment of the obligations is
made within this period, the Debtors shall be
authorized to make payments of the Superfund
Obligations without further notice or entry of a
further Order of the Court.
(c) If a timely objection to the Superfund payment is made,
and such objection is not resolved consensually, the Debtors may:
(i) Forego the payment of the applicable Superfund
Obligations for the applicable calendar quarter; or
(ii) Seek authority from the Court to pay the applicable
Superfund Obligations.
Courts have often recognized that in certain instances pre-
petition amounts must be paid in order to maintain and enhance
the overall value of a debtor's operations and businesses. Ms.
Widdoss said that, without the authority to pay the Superfund
Obligations, the Debtors' businesses will suffer immeasurable
and irreparable harm. Thus, payment of the Superfund obligations
is necessary to both the orderly and efficient operation of the
Debtors' businesses during the pendency of these cases and the
enhancement of the Debtors' prospects for a successful
reorganization.
The Debtors anticipate that the Superfund Obligations to be paid
through December 31, 2001 will be approximately $1,100,000.00 in
the aggregate. (Safety-Kleen Bankruptcy News, Issue No. 14;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
STEVENS FINANCIAL: Files Chapter 11 Petition in Phoenix
-------------------------------------------------------
Stevens Financial Group, a Springfield consumer finance company,
is seeking federal bankruptcy protection while it reorganizes the
company to recover from a Missouri securities investigation. "We
need breathing room to restructure," said Clarence Stevens, the
company's president. The company currently owes about $70 million
to about 5,000 investors, many of whom are in Arizona, Stevens
said. The Chapter 11 bankruptcy was filed in U.S. Bankruptcy
Court in Phoenix. (New Generation Research, March 21, 2001)
SUN HEALTHCARE: Settles Four Facilities With NHP
------------------------------------------------
Sun Healthcare Group, Inc. previously asked the Court for
authority to reject certain real property leases relating to 21
of the Debtors' healthcare facilities. Four of the facilities
dealt with in the Debtors' motion are leased by the Debtors from
NHP under two separate leases. A master lease covers three
facilities: SunBridge Care & Rehabilitation for Brighton,
Mediplex of Greater Hartford, and SunBridge Care & Rehabilitation
for Lakeland. The Debtors lease the Rehabilitation & Healthcare
Center of Torrington from NHP under a separate lease.
The parties subsequently reached agreement pursuant to which the
Torrington Facility and the Lakeland Facility will undergo
continued operation, the Brighton Facility will be returned to
NHP, and the Greater Hartford Facility will be closed.
Specifically, the agreement, which has been approved by the
Court, provides for:
(1) Treatment of the Torrington Facility which will undergo
continued operation.
The Debtors agreed to continue operating until February 28, 2001,
or such earlier date as designated by NHP upon three business
days' advance notice, and to transfer the Facility to NHP or its
designee on or before that date. In the event NHP or its designee
does not take operational and financial control of Torrington on
or before February 28, 2001, the Debtors may close Torrington at
no cost to NHP, without objection by NHP and without further
order of the Bankruptcy Court.
As of the Transfer Date, and consistent with an operations
transfer agreement, the Torrington Lease will be rejected without
further order of the Bankruptcy Court, the Medicare provider
agreement will be assumed and assigned to NHP, or its designee,
and the Medicaid provider agreement will be rejected. On the
Transfer Date, NHP will pay the Debtors $20,000 in exchange for
the transfer of the Medicare provider agreement.
If there is no transfer, the Lease and the Medicare and Medicaid
agreements will be rejected as of the date of closure. The
Debtors will continue to pursue a global settlement of
overpayment and other Issues with the State of Connecticut and
will not seek separate treatment of the Medicaid provider
agreement related to Torrington.
However, the Debtors will have no obligation to reach such global
agreement or resolve successor liability issues. NHP will release
claims related to the rejection of the Torrington Lease, the
Debtors' operations of Torrington or relating to the Debtors'
pursuit of a global settlement with the State of Connecticut.
(2) Treatment of the Brighton Facility which will be
returned to NHP
Effective February 19, 2001, the Debtors will:
(a) stop making rental payments;
(b) no longer be obligated to perform all other
executory Master Lease obligations applicable to
Brighton;
(c) reject the Medicare and Medicaid provider agreements
related to Brighton, without further order of the
Bankruptcy Court;
(d) turn over any remaining possessory rights or
interests in Brighton to NHP;
(e) transfer to NHP or its designee, upon receipt of the
sum of $30,000 the bed rights for Brighton.
NHP acknowledges that the Debtors will not be responsible for
resolving any issues relating to successor liability arising from
or related to the Medicare or Medicaid provider agreements.
NHP will retain rights to claims for damages. The Brighton Proof
of Claim was to be filed no later than March 8, 2001 and the
Debtors retain defenses, counterclaims, rights and remedies
relating to the Brighton Proof of Claim.
(3) Treatment of the Greater Hartford Facility which will be
closed
On or before February 19, 2001, the Debtors will apply for a
certificate of need to close Greater Hartford. Upon receipt of
this, the Bankruptcy Court or other court of competent
jurisdiction authorizing the closure of Greater Hartford will
close Greater Hartford at no cost to NHP, without objection by
NHP and without further order of the Bankruptcy Court.
The Master Lease and the Medicare and Medicaid provider
agreements related to Greater Hartford will be rejected effective
as of the actual date of closure, without further order of the
Bankruptcy Court.
The Debtors will continue to pursue a global settlement of
overpayment and other issues with the State of Connecticut and
will not seek separate treatment of the Medicaid provider
agreement related to Greater Hartford. However, the Debtors will
have no obligation to reach such global agreement or resolve
successor liability issues.
In the event that a certificate of need is not obtained from the
state, then the parties will use their best efforts and/or
negotiate for a transfer or closure of Greater Hartford, which
will provide for the rejection of the Master Lease, as well as
disposition of the Medicare and Medicaid agreements relating to
Greater Hartford.
Upon closure of Greater Hartford, the Debtors will
(a) stop paying the Greater Hartford Allocated Rent;
(b) no longer be obligated to perform all other executory
Master Lease obligations applicable to Greater Hartford;
(c) transfer possession of Greater Hartford to NHP; and
(d) transfer to NHP or its designee, upon receipt of the sum
of $30,000, the bed rights for Greater Hartford.
NHP acknowledges that the Debtors will not be responsible for
resolving any issues relating to successor liability arising from
or related to the Medicare or Medicaid provider agreements.
NHP will retain rights to claims for damages. The Brighton Proof
of Claim must be filed no later than April 28, 2001 or within 30
days after transfer or closure of Greater Hartford. The parties
acknowledge that NHP may amend its claim and the Debtors reserve
the right to object to such claim.
(4) Treatment of the Lakeland Facility which will be in
continued operation
The Debtors agreed to continue operating Lakeland until NHP or
another qualified operator receives licensure to operate Lakeland
from the State of Florida, with a transfer to NHP or such New
Operator to occur three business days after the date on which NHP
gives written notice to the Debtors of such licensure, provided,
however, that any such transfer will be pursuant to an operations
transfer agreement.
In the event that such notice has not been given on or before
April 12,2001, the Debtors may close Lakeland at no cost to NHP
without objection by NHP and without further order of the
Bankruptcy Court. NHP agreed to use its best efforts to obtain
the licensure.
The Medicare and Medicaid provider agreements related to Lakeland
will be rejected, effective as of the Lakeland Transfer Date, or
the date of closure if there is no transfer, without further
order of the Bankruptcy Court.
The Debtors will submit to NHP profit and loss statements (which
will include management fees), within thirty days after the end
of each month during the Lakeland Rent Abatement Period. In the
event of net operating loss, NHP will reimburse the Debtors
within 10 business days after its receipt of the Statement.
NHP will retain rights to claims for damages. The Lakeland Proof
of Claim must be filed no later than April 28, 2001 or within
thirty days after transfer or closure of Lakeland, and the
Debtors retain defenses, counterclaims, rights and remedies
relating to the Brighton Proof of Claim. (Sun Healthcare
Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
VENCOR INC.: Selling Wornall Property To Release Lien
-----------------------------------------------------
Vencor, Inc. sought and obtained the Court's approval, pursuant
to sections 363(b)(1) of the Bankruptcy Code, to convey Property
located at 12000 Wornall Road, Kansas City, Missouri, to Dunn
Realty, Inc. in exchange for a release of the Mechanics' Lien in
the amount of $720,667 filed by J.E. Dunn Construction, a
construction company that performed work on the Wornall Property,
and all other claims the Purchaser and the Lienholder may have
against the Debtors.
When the Debtors acquired the Wornall Property, it was closed.
The Debtors purchased it in October 1998 for $8,200,000 in order
to satisfy a lease default "put" obligation because the sublessee
had allowed the facility to become inoperative.
On August 31, 1999, J.E. Dunn Construction, a construction
company that performed work on the Wornall Property, filed a
mechanics' lien against the Wornall Property in the amount of
$720,667 (plus accrued interest at the rate of 10% per annum from
June 30, 1999).
From June 1999 to January 2001, the Debtors sought to sell the
Wornall Property as a nursing home, using both internal and
external marketing procedures. Although two prospective buyers
had emerged each with an offer of $1,000,000, each of the offers
was withdrawn after it was determined that the prospective buyer
could not obtain the required licenses and certificates of need
to operate the Wornall Property as a health care facility.
Pursuant to the current Sale Agreement, the Purchaser is
responsible for costs related to title examination, inspection
and surveying. The parties agreed that the closing date will
occur on a date mutually agreed upon by the Debtors and
Purchaser, but in no event later than March 15, 2001.
While not reflected in the Sale Agreement, the Debtors are
requesting that the Lienholder execute the Sale Agreement and/or
assign to the Purchaser the Mechanics' Lien and any other claims
the Lienholder may have against the Debtors.
The Debtors believe that the sale of the Wornall Property is in
the best interests of the Debtors, their estates and their
creditors, and is amply justified by several factors.
First the Wornall Property serves no operational purpose for the
Debtors. The Debtors have determined that maintaining the nursing
home would not be profitable in the current health care
regulatory climate. Furthermore, the Debtors must make monthly
security and maintenance related payments in order to maintain
the safety and marketability of the Wornall Property. In order
to re-open, the Debtors would be required to obtain a certificate
of need from the appropriate state agency, but the appropriate
state agency has indicated to the Debtors that they would be
unable to obtain the necessary certificate of need under the
relevant criteria. Even if a certificate of need were obtained,
the Debtors estimate that it would cost approximately $5,000,000
to re-open the facility. In comparison, the sale of the Wornall
Property would allow the Debtors to shed an excess property and
release the Mechanics' Lien.
Second, the Debtors have been unable to find purchasers other
than the Purchaser, and do not believe that alternate purchasers
for the Wornall Property are likely.
Third, the sale of the Wornall Property to the Purchaser will
alleviate the Debtors of any obligation to maintain the Wornall
property's rapidly deteriorating physical plant.
Under the DIP Credit Agreement, the Debtors may sell certain
specified Properties Held For Sale without prior written approval
of the DIP Lenders as long as the sale is at that property's fair
market value and the consideration received is cash. The Wornall
Property is included as Properties Held For Sale and in the
judgment of the Debtors' internal business planning and real
estate officers, the sale price of the Wornall Property is equal
to the fair market values of the Wornall Property. Because the
consideration to be received is not in cash, the Debtors intend
to request written approval from the DIP Lenders for the sale of
the Wornall Property on the terms described above. (Vencor
Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
VLASIC FOODS: Engages Lazard Freres as Investment Bankers
---------------------------------------------------------
Through their counsel, Vlasic Foods International, Inc. asked
that Judge Walrath approve their employment of Lazard Freres &
Co. LLC, as investment bankers to the Debtors nunc pro tunc to
the Petition Date. The Debtors also asked that in making her
decision, Judge Walrath waive certain information otherwise
required by the Court's local rules. The services that Lazard is
to perform are:
(a) Evaluation of strategic alternatives;
(b) Advice to the Debtors in connection with negotiations,
and aid in any transactions in which the Debtors are
participants, including any acquisition, recapitalization,
merger, sale of all or a portion of the Debtors or any of the
Debtors' non-debtor affiliates or its assets, spin-off, joint
venture, leveraged buyout or similar transaction;
(c) Advice to the Debtors with respect to any restructuring,
reorganization, whether or not under Chapter 11, and/or
recapitalization of the Debtors or any of the Debtors' non-debtor
affiliates that is achieved which results in the modification of
some or all of the existing debt obligations by means of, without
limitation, a solicitation of waivers and consents from
bondholders, rescheduling of debt maturities, change in interest
rates, repurchase, settlement or forgiveness of debt, conversion
of debt into equity, an exchange offer involving new debt or
equity securities, the issuance of new securities, a plan of
reorganization, or other similar transaction or series of
transactions;
(d) Review and analysis of the businesses and financial
condition of the Debtors;
(e) Provision of financial advice and assistance to the
Debtors in developing and obtaining approval of a plan of
reorganization, as the same may be modified from time to time;
(f) Advice and attendance in meetings of the Debtors' Boards
of Directors and committees;
(g) Provision of testimony, as necessary, in any proceeding
in a judicial forum; and
(h) Provision to the Debtors of other appropriate, general
restructuring advice.
The Debtors initially retained Lazard in April 2000. In
connection with this initial retention, Lazard received fees and
reimbursements of expenses in the amount of $547,042.93, and was
fully paid. Lazard is not a creditor of the Debtors.
For its postpetition services, Lazard will be paid:
(a) A monthly financial advisory fee payable on the first
day of each month until the termination of Lazard's engagement in
the amount of $150,000;
(b) In the event of a sale transaction involving a sale of
all or a portion of the Debtors or a non-debtor subsidiary, or a
division of the Debtors, to another corporation or business
entity, which transaction may take the form of a merger or a sale
of assets or equity securities or other interests, a transaction
fee payable upon the closing of each such sale transaction
according to a percentage of specified portions of the aggregate
consideration ("aggregate consideration" meaning the total amount
of cash and the fair market value on the date of payment of all
other property paid or payable, including amounts paid into
escrow, to the Company or its security holders in connection with
the transaction) received in the sale transaction; provided,
however, that in the event of a separate sale in more than one
sale transaction of assets comprising the Debtors' North American
business, Lazard will be paid a fee upon each closing of a sale
transaction equal to the applicable percentages of the specified
portions of the aggregate consideration received in connection
with all such sale transactions relating only to the North
American business which have been closed within the prior twelve
months, including the relevant sales transaction, less the fees
with respect thereto that have been paid prior to the relevant
closing; and in the event of the sale of a majority or more of
the stock or assets of the Debtors, such sale will be considered
a sale in accordance with this provision, with a transaction fee
calculated based on the sale of 100% of the Debtor; provided that
any fee obligation for the sale of any of the Debtor's United
Kingdom subsidiaries shall be an obligation of the Debtor's
United Kingdom subsidiaries to be satisfied out of the proceeds
of any such sale upon allowance by the Bankruptcy Court;
The sale transaction fee for a transaction between $0 and $100
million is 2.00%, plus for that portion between $100 million and
$200 million, 1.50%, plus for that portion between $200 and $300
million, 1.25%, plus for that portion which is in excess of $300
million, 1%.
(c) In the event that neither of the Debtor's principal
North American businesses (the Vlasic pickles business and the
Swanson frozen foods business) are sold and there is a
restructuring transaction, a restructuring fee of $5.0 million,
payable upon the closing of such restructuring transaction. In
the event that only one of the principal North American
businesses is sold, and accordingly a transaction fee is paid on
that sale) and there is a restructuring transaction, a
restructuring fee of $2.5 million payable upon the closing of
such restructuring transaction is due. In the event that both of
the principal North American businesses are sold, and accordingly
transaction fees are paid on such sales, no additional
restructuring fee will be due.
(d) Lazard has agreed to credit $250,000 paid under the
prepetition engagement letter against the first fee that is paid
as a sales fee. In the event that there is a restructuring
transaction for which Lazard receives a restructuring fee, the
monthly financial advisory fee that has been paid to Lazard will
be credited against the restructuring fee (such credit not to
exceed the amount of the restructuring fee). In the event that
there is not a restructuring fee payable to Lazard, 50% of the
monthly financial advisory fee that has been paid to Lazard will
be credited against any transaction fee payable to Lazard (such
credit not to exceed the amount of the transaction fee). No other
fees paid or payable shall be applied as a credit.
As part of the compensation payable to Lazard, the Debtors have
agreed to indemnification and contribution obligations. The
Debtors have agreed to indemnify Lazard for any claims arising
from, related to, or in connection with Lazard's prepetition
performance of the services as described in its prepetition
engagement letter. The Debtors also sought authority to indemnify
Lazard for any claim arising from, related to, or in connection
with its engagement, but not for any claim arising from, related
to, or in connection with Lazard's postpetition performance of
any services other than those in connection with the engagement,
unless such postpetition services and indemnification are
approved by the Court.
Further, the Debtors will have no obligation to indemnify Lazard,
or provide contribution or reimbursement to Lazard, for any claim
or expense that is either (i) judicially determined (the
determination having become final) to have arisen solely from
Lazard's gross negligence or willful misconduct, or (b) settled
prior to a judicial determination as to Lazard's gross negligence
or willful misconduct, but determined by this Court, after notice
and a hearing, to be a claim or expense for which Lazard should
not receive indemnity, contribution or reimbursement under the
terms and conditions of the Application and the Order on the
Application.
If, before the earlier of (i) the entry of an order confirming a
Chapter 11 plan in these cases (that order having become a final
order no longer subject to appeal), and (ii) the entry of an
order closing these Chapter 11 cases, Lazard believes that it is
entitled to the payment of any amounts by the Debtors on account
of the Debtors' indemnification, contribution and/or
reimbursement obligations, including without limitation the
advancement of defense costs, Lazard will file an application
therefore in this Court, and the Debtors may not pay any such
amounts to Lazard before the entry of an order by this Court
approving the payment. This provision is intended only to specify
the period of time under which the Bankruptcy Court will have
jurisdiction over any requests for fees and expenses by Lazard
for indemnification, contribution or reimbursement, and not as a
provision limiting the duration of the Debtors' obligation to
indemnify Lazard.
Lazard irrevocably submits to the exclusive jurisdiction of the
Bankruptcy Code over any suit, action or proceeding arising out
of or relating to the Lazard engagement agreement, or this
Court's Order on this Application, and over the approval of its
requests for fees and reimbursements, including any request for
indemnification, accruing through confirmation of a plan of
reorganization in these Chapter 11 cases or, in the event no plan
of reorganization is confirmed in these cases, fees and expenses
accruing prior to the last day of Lazard's employment under the
postpetition engagement. This Court will retain jurisdiction to
construe and enforce the terms of the Application, the engagement
letter, and its Order on the Application.
As a postpetition retainer, Lazard received from the Debtors an
amount equal to one month's advisory fee, or $150,000.
The Debtors have been advised by Lazard that it is not the
general practice of investment banking firms to keep detailed
time records similar to those customarily kept by attorneys. For
certain departments within Lazard, such as its high-yield and
investment-grade bond trading departments, it is not reasonable
to expect that traders keep time logs on any particular client
since the speed and complexity of this department would not allow
it. The capital markets knowledge these professionals possess
originates from Lazard's investment in its trading operations.
The Debtor regards their knowledge and insights as extremely
valuable.
Similarly, in the Research Department analysts research and write
about various companies. Their knowledge, gathered over time,
about the market, the competitive landscape, and the value of
various companies, cannot reasonably be accounted for by time
records on any one assignment, and yet the Debtor regards their
knowledge and insights as critical to a restructuring. Lazard's
research department has never kept time records of their
activities.
In a sale transaction, Lazard's knowledge and contacts with
prospective purchasers will be important. These relationships
have already been built over many years and cannot be quantified
only by hours. Lazard's restructuring professionals will keep
time records, and Lazard will supplement this with non-
restructuring professionals who spend time on this assignment,
but who are not capable of keeping time records. The Debtors
therefore ask Judge Walrath to accept applications for
compensation by category without the requirement for detailed
time records otherwise imposed by the local rules.
Barry W. Ridings, a Managing Director of Lazard, declared on
behalf of Lazard that it is a disinterested person within the
meaning of the Bankruptcy Code, and neither holds nor represents
any interest adverse to the Debtors or these estates on the
matters for which approval of employment is sought. However, in
the interests of full disclosure, Mr. Ridings advised Judge
Walrath that JP Morgan Chase & Company, and Citibank N.A., are
each one of many providers of financing to Lazard in the ordinary
course of its business. JP Morgan Chase is the agent for and a
lender under both Vlasic Foods International Inc.'s prepetition
secured credit facility, and the Debtors' anticipated
postpetition credit facility. Lazard's relationships to JP Morgan
Chase and Citibank do not relate to these Chapter 11 cases and
Lazard does not believe that these relationships create a
conflict of interest regarding the Debtors or these Chapter 11
cases.
Further, Lazard has in the past acted as a financial advisor to
Campbell Soup Company with respect to the sale of certain assets.
In May 1996 Lazard sold Mrs. Paul's frozen seafood to VDK
Holdings for approximately $70 million. In May 1997 Lazard sold
Marie's Salad Dressing to Dean Foods for approximately $45
million, and in 1998 Lazard sold Campbell's European Confection
business to Glide for approximately $60 million. None of the fees
which Lazard received were material to the financial condition of
Lazard. Lazard does not currently represent Campbell Soup
Company, and does not believe that this past relationship creates
a conflict of interest regarding the Debtors or these Chapter 11
cases.
While not formally engaged during the summer of 2000, Lazard
advised certain members of the Dorrance family regarding their
interest in Campbell Soup Company, with respect to a potential
merger transaction that did not occur. These discussions and
potential transaction were unrelated to VFI or its affiliates.
Lazard has not had any relations with any members of the Dorrance
family before or since that time. One of these individuals is on
the Board of Directors of VFI, and several are on the Board of
Directors of Campbell Soup Company. While not a group, these
individuals collectively own 26% and 32% of the outstanding
equity of VFI and Campbell Soup Company, respectively. According
to public records, the Dorrance family collectively own
approximately 40$ and 46% of the outstanding equity of VFI and
Campbell Soup Company, respectively.
Certain members of the Dorrance family entered into a Master Loan
Participation Agreement among those Dorrance family members and
the lenders under VFI's prepetition secured credit facility.
Lazard does not believe that this past relationship creates a
conflict of interest regarding the Debtors or these Chapter 11
cases.
Lazard represented MCI in its acquisition of WorldCom in 1998.
WorldCom, Inc., now MCI WorldCom, Inc., is a trade creditor to
the Debtors, providing telecommunications services. Lazard does
not believe that this relationship creates a conflict of interest
regarding the Debtors or these Chapter 11 cases.
Lazard is currently retained by SBC Communications, Inc., f/k/a
Southwestern Bell Corp. on an unrelated matter. SBC
Communications is a trade creditor of the Debtors, and provides
telecommunications services.
Robert C. Larson, one of Lazard's Managing Directors, is a board
member of Brandywine Realty Trust. LF Strategic Realty Investors
LP, a Lazard affiliate, has an equity interest (10.2% of common
shares outstanding as of May 16, 2000) in Brandywine Realty
Trust. Brandywine Realty Trust is a trade creditor of the
Debtors.
Vernon E. Jordan, Jr., one of Lazard's Managing Directors, is a
board member of American Express. American Express is a trade
creditor to the Debtors.
In January 2001 Harvey Golub joined Lazard as a senior advisor.
As such he is an employee of the firm, but not a partner, and has
no management or operational responsibility at Lazard. Mr. Golub
is a director of the Campbell Soup Company, a director of
American Express. Mr. Golub will not be involved in Lazard's
assignment with the Debtors.
As part of its business as a broker-dealer, Lazard acts as a
broker in a variety of securities, including high-yield debt,
investment-grade debt, convertible debt, preferred equity and
common equity. From time to time, Lazard may trade securities or
act as a broker trading securities unrelated to these cases with
some of the Debtors' significant creditors or equity holders.
Further, Lazard Asset Management manages approximately $80
billion in assets for institutions and individuals around the
world and is the advisor to several mutual fund families. LAM
may hold stock and/or bonds in various companies who may be
creditors in these cases. Lazard has in the past worked with,
continues to work with, and has mutual clients with certain law
firms who represent parties in interest in these cases. None of
these engagements or relationships relate to these cases, or are
material to the financial condition of Lazard.
In each instance, Lazard, through Mr. Ridings, assured Judge
Walrath that none of these relationships, past or present or
future, create a conflict of interest regarding the Debtors or
these Chapter 11 cases. (Vlasic Foods Bankruptcy News, Issue No.
3; Bankruptcy Creditors' Service, Inc., 609/392-0900)
WHOLESALEPORTAL: Shuts Down Due To Cash Shortfall
-------------------------------------------------
Wholesaleportal.com Inc. has shut down and auctioned off its
assets Wednesday, according LocalBusiness.com. Although the
precise closing date was not made clear, Jill Merriam, vice
president of finance for Wholesaleportal.com said that it
occurred "about a month ago. The biggest problem was that the
funding ran out," she said. The company declined to publicize how
much it owes, but says that the company's debts are not
overwhelming. Wholesaleportal.com was created to develop
business-to-business portal sites in a variety of niche markets.
The dot-com received $4.4 million in funding and was provided by
a combination of angel money, friends and family, and one
institutional round led by The Argentum Group of New York. (ABI
World, March 21, 2001)
XEROX CORPORATION: Inks $20 Million Printer Deal
------------------------------------------------
After troubled office equipment company Xerox Corp. announced
Tuesday that it inked a $20 million deal to sell 5,000 color
printers, its stock rose as much as 17 percent, according to
Reuters. The deal is key in the company's attempt to turn around
its struggling operations. Over the past several months, Xerox
has suffered through a myriad of problems that have ranged from
layoffs and possible bankruptcy to accounting irregularities. The
agreement is being touted as Xerox's "largest-ever office color
printer deal." Under the deal, the St. Louis-based financial
services firm Edward Jones will trade all of its black-and-white
printers for color printers in almost all of its 7,000 offices.
Xerox President Anne Mulcahy said that the color printing is the
key to return Xerox to profitability and called the agreement the
dawn of "The New Xerox." (ABI World, March 21, 2001)
Z'STRONG INTERNATIONAL: Files For Bankruptcy Protection in L.A.
---------------------------------------------------------------
Z'Strong International Inc., an El Monte, Ca. medical-equipment
wholesaler and exporter, has now filed Chapter 7 in the U.S.
Bankruptcy Court in Los Angeles. The firm listed assets and
liabilities of $264,000 and $1.1 million respectively. The case
number is LA01-13108-KM. For further information contact the
debtor's attorney, Michael Lo, at 626-289-8838. (New Generation
Research, March 21, 2001)
ZILOG INC: Moody's Lowers Senior Secured Notes To Caa2
------------------------------------------------------
Moody's Investors Service lowered the rating to Caa2 from B2 on
Zilog, Inc.'s $280 million 9-1/2% guaranteed senior secured
notes, due 2005, completing a review that was commenced on
December 27, 2000.
At the same time, Moody's lowered the company's senior implied
and senior unsecured issuer ratings to Caa2 from B2 and B3,
respectively.
As Zilog is currently constituted, it would be difficult for the
company to make its September 1 interest payment without a
significant reversal in market trends or assistance from the
company's equity sponsor, Texas Pacific Group. The ratings
outlook is negative.
The ratings downgrade takes into account a diminution in Zilog's
liquidity; the significant deterioration in revenues over
FY2000Q4 and, according to company guidance, extending through
FY2001Q1; the sluggish United States economy and the
ramifications of a domestic slowdown on the global economy; near-
term uncertainty for capital spending in the telecommunications
sector; and the implications of the two aforementioned
developments on the end markets for Zilog's communications
microcontrollers and embedded control devices.
Although the company closed out FY2000 with nearly $41 million
cash and cash equivalents, aided and abetted by a FY2000Q4 curb
on capital expenditures, cash is likely to be drawn down
substantially from the costs of operating the company's two
semiconductor fabrication facilities, the $13.3 million March 1
semi-annual interest payment on the senior secured notes, and the
prospective fulfillment of the deferred compensation arrangements
under departing CEO Curtis Crawford's employment agreement.
The rating action also considered the deterioration in Zilog's
various credit ratios. FY2000 debt to EBITDA of 7.4 times is
likely to rise for the LTM ending March 31, 2001. FY2000 EBITDA
provided only 1.3 times coverage of interest.
Even after adjusting for special charges, the majority of which
were taken in FY2000Q4, the company lost nearly $4 million from
operations during the year, a period over which semiconductor
industry sales had increased by 34%.
Although the current ratio was 1.27 as of December 31, 2000, the
$280 million outstanding notes exceeded total assets of $240
million. Capital expenditures, which were limited to about $22
million in FY2000, are now projected to be about $12 million in
FY2001.
However, research and development spending, which has been
running at about $9 million per quarter, is higher than the
projected revenue base is capable of supporting.
Alternatively, assessment of a non-recurring engineering fee for
new product design-ins may not be acceptable to the customer
base.
Zilog does have available a $40 million senior secured credit
facility (unrated) arranged with The CIT Group.
Comprised of a $25 million revolving credit facility expiring on
December 30, 2001 and a $15 million credit line that can be used
for capital expenditures, due in 2003, drawings are subject to a
borrowing base limited to the sum of the existing cash balance,
80% eligible accounts receivable, and the lesser of 40% eligible
inventory or 80% of the appraised net orderly liquidation
percentage value of eligible inventory.
The company would be subject to financial covenants if
availability declines to less than $7.5 million, provided that no
loans are outstanding under the capital expenditures line, and if
availability declines to less than $15 million once borrowings
have been commenced for capital expenditures.
The ratings derive some support from Zilog's adaptation of its
z80 8-bit microcontroller architecture for potentially high
growth applications in the telecommunications and Internet
infrastructure markets.
Two of the company's most promising initiatives are the
introduction by mid-2001 of a serial communications controller
with eight physical channels that will have the capacity to carry
256 phone calls simultaneously, and an Internet processor,
currently being sampled by customers, that relies on TCP/IP
(transmission control protocol over Internet protocol).
This new Internet processor can facilitate the online operation
of industrial controls in web page format in contrast to the
proprietary graphical user interface and discrete software
applications under which devices have been more recently managed.
The serial communications controller would virtually double the
capacity for voice transmission on switches and line cards
currently being deployed in central and branch offices operating
at OC-12 and OC-3 (optical carrier) speeds.
These voice channel products have previously been the domain of
competitors such as PMC-Sierra, Lucent and Fujitsu.
However, these organizations' current R&D efforts are likely to
concentrate on communications integrated circuits of greater
complexity that could command substantially higher average
selling prices.
Internet processors, based on the company's ez80 Internet Engine,
would enable users to execute secure communications with Internet
connected applications and equipment, whether consumer or
industrial, from any point of Internet access to permit the
remote management, control, diagnosis and reconfiguration of
those products in which the processors are embedded.
The company could benefit from leveraging its designs off of the
sizable installed base of z80 microcontrollers in existing
consumer appliances and industrial controls.
Finally, the ratings recognize a commitment to Zilog by its
equity sponsor, Texas Pacific Group, which contributed $118
million to the company's 1998 recapitalization.
Zilog, Inc., a designer, manufacturer and marketer of
semiconductor micro-logic devices for use in communications and
application standard products that target the embedded control
market, is headquartered in Campbell, California.
BOOK REVIEW: MERGER: The Exclusive Inside Story of the
Bendix-Martin Marietta Takeover War
-------------------------------------------------------
Author: Peter F. Hartz
Publisher: Beard Books
Soft cover: 418 pages
List Price: $34.95
Review by Gail Owens Hoelscher
William Agee, the youngest man ever to head one of the top 100
American corporations, seemed unstoppable. In 1977, at the age of
39, he took over Bendix Corporation, an aerospace, automotive,
and industrial firm, determined to diversify the company out of
the automotive industry. In his words, "Automobile brakes are in
the winter of their life and so is the entire automobile
industry." He sold off a few Bendix units, got some cash
together, and began to look for acquisitions.
Then Agee's relationship with Mary Cunningham burst into the
news. Agee had promoted Cunningham from his executive assistant
to vice president, to the outrage of other Bendix employees.
Their affair, replete with power, brains, youth, good looks,
charm, denial, and deceit, fascinated the American public.
Cunningham was forced to leave Bendix to work for Seagrams, with
the entire country wondering just how well she would do. The two
divorced their respective spouses and married soon thereafter. To
the chagrin of many, Cunningham continued to play a pivotal role
in Bendix affairs.
Eager to regain his standing, Agee turned to acquisition as soon
as the gossip died down. A failed attempt to acquire RCA left
him more determined than ever. He then set his sights on Martin-
Marietta, an undervalued gem in the 1982 stock market slump. Thus
began an all-out war of tenders and countertenders, egoism and
conceit, half-truths and dissimulation, and sudden alliances and
last-minute court decisions.
This is a very exciting account of the war's scuffles,
skirmishes, and battles. The author, son of a long-time Bendix
director, was able to interview some of the major participants
who most likely would have refused the requests of other authors.
Some gave him access to personal notes from the various
proceedings. The author thoroughly researched the documents
involved in the takeover war, as well as news reports and press
releases. He explains the complicated legal maneuverings very
clearly, all the while keeping the reader entertained with the
personal lives and thoughts of the players.
People love this book. The New York Times Book Review said
"Aggression and treachery, hairbreadth escapes and last-minute
reversals, "white knights" and "shark repellants" - all of these
and more can be found in the true-life adventure of the Bendix-
Martin Marietta merger war." The Wall Street Journal said
"Merger brims with tension, authentic-sounding dialogue and
insider detail."
Peter F. Hartz was born in Toronto, Canada, in 1953, and moved to
the U.S. as a child. He holds degrees from Colgate University
and Brown University. He lives in Toluca Lake, California.
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
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Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
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For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
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Metzler, Larri-Nil Veloso, Aileen Quijano and Peter A. Chapman,
Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
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