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/raid1/www/Hosts/bankrupt/TCR_Public/010508.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, May 8, 2001, Vol. 5, No. 90 Headlines BIG CITY: Senior Discount Note Rating Cut To Caa3 From B3 C*STRATEGIC: S&P Lowers Rating on Class D Notes To B From BB CAPITAL ENVIRONMENTAL: Reports 2000 and Fourth Quarter Losses COLLABWARE CORP: Ceases Operations & Continues To Look For Buyer COVENTRY HEALTH: Annual Shareholders' Meeting Is On June 7 DTE BURNS: S&P Lowers Senior Secured Note Rating to BB From BB+ EASTERN PULP: Reviewing U.S. Notice Of Claim FRIEDE GOLDMAN: Moves To Reject Two Petrodrill Contracts FRUIT OF THE LOOM: Creditors Seek Nod To File Records Under Seal INTEGRATED PACKAGING: Shareholders' Meeting Set For May 29 KEY PLASTICS: Carlyle Management Group Completes Acquisition LERNOUT & HAUSPIE: Wants To Assume ISI Stock Purchase Agreement LOCALBUSINESS.COM: Files Chapter 11 Petition in Florida LOCALBUSINESS.COM: Chapter 11 Case Summary MARINER: Court Okays Transfer Agreement re Grancare HCC-Phoenix MAXICARE HEALTH: Closing Indiana Unit to Stem Continuing Losses MISSISSIPPI CHEMICAL: Fitch Cuts Senior Debt Ratings To Low-B's NCS HEALTHCARE: Reports Fiscal 2001 Q3 Financial Results NEXTAR FINANCE: Moody's Rates Senior Discount Notes at Caa1 PILLOWTEX: Moves To Pay-off Certain Revenue Bond Financings RAYTHEON COMPANY: Discloses Pricing of Public Share Offerings RAYTHEON COMPANY: SEC Subpoenas Documents SAFETY-KLEEN: EQ Entities Ask For Stay Relief To Effect Setoff SONG CORPORATION: Shuts Down & Liquidates Assets To Pay Debts SPECTRANETICS: Stockholders To Convene In Colorado On June 12 SUN HEALTHCARE: Rejecting 9 NHP Healthcare Facilities Leases SUNBEAM CORP.: Court Approves Chapter 11 Disclosure Statement TANDYCRAFTS: Gets Delisting Notice From New York Stock Exchange TOMANET: Appoints Consultants To Develop Reorganization Plan URSUS TELECOM: Nasdaq Notifies of Possible Delisting of Shares VALUE HOLDINGS: Names Alison Cohen As Interim President VLASIC FOODS: Has Until September 30 To Make Lease Decisions W.R. GRACE: U.S. Trustee Appoints Asbestos Claimants' Committee WESTPOINT STEVENS: Moody's Slashes Senior Notes' Rating To Caa2 WHEELING-PITTSBURGH: Exclusive Period Extended To June 14 WICKES INC.: Stockholders To Meet In Illinois On May 23 WINSTAR COMMUNICATIONS: Paying Prepetition Tax Obligations WORLD KITCHEN: Appoints Joseph McGarr As Senior VP & CFO WORLDTEX: Court Okays Disclosure Statement Despite Objection ********* BIG CITY: Senior Discount Note Rating Cut To Caa3 From B3 --------------------------------------------------------- Moody's Investor's Service downgraded the rating on Big City Radio, Inc.'s $174 million of senior discount notes to Caa3 from B3 and changed the outlook to negative. The ratings of Big City's senior implied and senior unsecured issuer rating were lowered to Caa3 as well. Approximately $174.0 million of debt securities are affected. According to Moody's, the downgrade and negative outlook reflect Big City's significant liquidity shortfall for the year 2001, its continued operating losses and the imminence of the notes cash pay requirement. Although Moody's sees a material asset value associated with the company's portfolio of radio stations, the rating agency noted that in a liquidation scenario, there might be distressed pricing. Big City's senior discount notes become cash pay this year with a payment of $9.8 million due September 15, 2001. However, it lacks the funds to make the payment. The company, since inception, has reportedly been operating with negative cash flow. Moody's reported that the company's marketable securities which had been funding the company are mostly depleted at $1.9 million. While the company does not have any outstanding bank debt, should it borrow in the future, it is likely the senior notes would be subordinated to any future outstandings, Moody's said. Based in Hawthorne, New York, Big City Radio, Inc. owns and operates radio stations. C*STRATEGIC: S&P Lowers Rating on Class D Notes To B From BB ------------------------------------------------------------ Standard & Poor's lowered its rating on the class D1 and D2 floating-rate notes co-issued by C*STrategic Asset Redeployment Program 1999-2 Ltd. and C*STAR 1999-2 Corp. Standard & Poor's also affirmed its rating on C*STrategic 1999-2's class A1, A2, B1, B2, C1, and C2 notes. The rating actions on the notes follow the increase in the expected default rate at the double-'B' level caused by the deterioration in the credit quality of the portfolio, combined with the expected reduction in credit enhancement following the default of three reference entities that together make up 1% of the portfolio. The reference pool is a $4 billion revolving pool comprising senior unsecured loan debt obligations originated by Citibank N.A. and domiciled in the U.S. or Canada. Under the terms of the credit default swap, the face amount of the notes will be reduced as a result of cumulative losses in the reference pool in excess of the loss threshold amount. C*STrategic 1999-2's ratings continue to reflect the credit quality of the reference credits, the level of credit enhancement provided by subordination and the loss threshold, and Citibank's ability to meet its payment obligations as counterparty under the credit default swap, Standard & Poor's said. Outstanding Ratings Lowered C*STrategic Asset Redeployment Program 1999-2 Ltd. Eur9 Million and $47 Million Floating-Rate Notes Due November 2009 Class Rating To From D1 B BB D2 B BB Outstanding Ratings Affirmed C*STrategic Asset Redeployment Program 1999-2 Ltd. Eur65 Million, $33 Million, Eur24 Million, $24 Million, Eur35 Million, and $43 Million Floating-Rate Notes Due November 2009 A1 AAA A2 AAA B1 AA B2 AA C1 A C2 A CAPITAL ENVIRONMENTAL: Reports 2000 and Fourth Quarter Losses ------------------------------------------------------------- Capital Environmental Resource Inc. (Nasdaq: CERI) reported fourth quarter and fiscal year 2000 results. For the fourth quarter, the Company reported a loss after certain one-time items of $17.5 million or $2.43 per share (diluted) compared to net income of $0.8 million or $0.11 per share for the comparable period in 1999. Revenue for the quarter was $28.3 million, compared with $28.0 million for the year earlier period. Adjusted EBITDA in the fourth quarter of 2000 (after adjusting for a $13.5 million provision for impairment of goodwill, $0.5 million of business interruption gain and a $0.2 million gain on foreign exchange) was $4.8 million or 17.1% of revenue, a 1.1% decrease from the comparable period in 1999 of $4.9 million or 17.5% of revenue (after adjusting for a $1.1 million gain on fixed assets). EBITDA is defined as net income (loss) plus income taxes, net interest expense, depreciation and amortization. Operating loss for the fourth quarter of 2000 was $12.2 million, compared to an income of $3.5 million or 12.4% of revenue for the year earlier period. Adjusted for the unusual items noted above in the fourth quarters of 2000 and 1999 and an additional $1.1 million (for depreciation and amortization expense related to a review of the Company's fixed assets in the fourth quarter of 2000) produces operating income of $1.8 million or 6.3% of revenue, a 25.5% decrease from the year earlier period of $2.4 million or 8.5% of revenue. As announced on April 2, 2001, the Company sold substantially all of its assets in New York and Pennsylvania for a total cash purchase price of approximately $21.0 million. The net cash proceeds (after taking into account a holdback plus transaction and other related costs) from the transaction of approximately $16.4 million were used to repay indebtedness to the Company's senior lenders. In connection with the sale of these assets, the Company established a provision for impairment of goodwill of $13.5 million in the fourth quarter of 2000. Additional unusual charges in the fourth quarter of 2000 included approximately $2.3 million of a tax valuation allowance and approximately $0.2 million of financing costs associated with the third amendment to the Company's credit facility and term loan agreements (Senior Debt) in December of 2000. For the year ended December 31, 2000, losses were $18.3 million or $2.54 per share (diluted), compared to a net income of $3.0 million or $0.51 per share for 1999. Revenue for 2000 increased 19.9% to $117.0 million from $97.6 million last year. Adjusted EBITDA for 2000 (after adjusting for $2.1 million of selling general and administrative expenses, $0.2 million of costs of operations and the fourth quarter items noted above) increased 12.9% to $20.7 million, or 17.7% of revenue, from $18.3 million or 18.8% of revenue for 1999. Operating loss for 2000 was $6.6 million compared to an income of $11.3 million or 11.6% of revenue for the comparable period last year. Adjusting for unusual items noted above, operating income for the years ended December 31, 2000 and 1999 were approximately $9.6 million (8.2% of revenue) and $10.2 million (10.5% of revenue) respectively. The unusual selling, general and administrative expenses of $2.1 million primarily related to costs associated with restructuring fees, failed acquisitions, severance costs, an employment contract renegotiation, legal fees and various associated accruals. The balance of the changes in operating results for the year 2000 compared to 1999 were primarily a result of the 1999 acquisitions having a full year impact in 2000 and additional cost associated with being a public company for a full year. As announced on March 15, 2001, the Company is in default of one of its obligations under its Senior Debt facilities. In conjunction with the sale of certain of the Company's United States assets disclosed above, the senior lenders have agreed to modifications to the Company's Senior Debt facilities to exclude the effects of the transaction for the purposes of determining the Company's compliance with its financial covenants. In addition, the Senior Debt lenders have agreed that they will not take action under the Senior Debt facilities with respect to certain defaults by the Company provided that the Company satisfies certain conditions, including that it continues to make reasonable progress towards a transaction to reduce or refinance the Senior Debt facilities by June 15, 2001. The Company is in discussions with certain parties with respect to possible transactions which would satisfy these conditions. As a result of the Company being in default under its Senior Debt facilities, and not withstanding the forbearance agreement with the Company's senior lenders, the Company's December 31, 2000 financial statements are required to contain a going concern note. Capital Environmental Resource Inc. is a regional integrated solid waste services company that provides collection, transfer, disposal and recycling services in secondary markets in Canada. The Company's web site is http://www.capitalenvironmental.com COLLABWARE CORP: Ceases Operations & Continues To Look For Buyer ---------------------------------------------------------------- CollabWare Corporation disclosed it has ceased all regular operations. The company has been unable to obtain the funding it required to continue regular operations, but will continue to seek potential buyers for the company and/or its assets on a very limited basis. On January 31, 2001, the company was compelled to terminate all 21 of its regular employees and cease all regular sales, marketing and product development efforts. Since that time, CollabWare's board of directors has been seeking buyers for the company and/or its assets, as well as exploring options for restructuring the company's trade obligations. CollabWare's data center, which has remained operational, will soon be shutdown and the company will migrate its customers to other hosting service providers. COVENTRY HEALTH: Annual Shareholders' Meeting Is On June 7 ---------------------------------------------------------- The Annual Meeting of Shareholders of Coventry Health Care, Inc., a Delaware corporation, will be held on Thursday, June 7, 2001, at 9:30 a.m., Eastern Daylight Saving Time, at the offices of Epstein Becker & Green, P.C., Seventh Floor, 1227 25th Street, N.W., Washington, D.C. 20037-1156, for the following purposes: (1) To elect three Class I Directors to serve until the annual meeting of shareholders in 2004; (2) To ratify the selection of Arthur Andersen LLP, certified public accountants, as the Company's independent auditors for the year ending December 31, 2001; and (3) To transact such other business as may properly come before the meeting or at any adjournment(s) thereof. Only shareholders of record of the outstanding shares of the Company's Common Stock, $ .01 par value per share, at the close of business on Wednesday, April 11, 2001 are entitled to notice of and to vote at the 2001 Annual Meeting or at any adjournment thereof, notwithstanding the transfer of any stock on the books of the Company after such record date. DTE BURNS: S&P Lowers Senior Secured Note Rating to BB From BB+ --------------------------------------------------------------- Standard & Poor's lowered its rating on DTE Burns Harbor LLC's (DTE LLC) $163 million senior-secured notes to double-'B' from double-'B'-plus and placed the rating on CreditWatch with negative implications. The proceeds from the notes were used by DTE LLC to purchase the No. 1 coke battery from Bethlehem Steel Corp. (single- 'B'/CreditWatch Negative/--). The rating downgrade and CreditWatch listing follows the downgrade of Bethlehem Steel Corp.'s rating to 'B' from 'B+' and similar placement on CreditWatch with negative implications. It comes as a result of DTE LLC's reliance on sales of coke to Bethlehem Steel for a portion of its cash flow. Cash flow from other revenue sources, specifically Section 29 tax credits, is not sufficient to completely cover debt service. The ability of the project, however, to sell coke on the spot market if any of Bethlehem Steel Corp.'s facilities do not require coke, combined with the acceptance of DTE Energy Co. (triple-'B'/Stable/'A-2') of any changes in law, or later disallowances with respect to Section 29 tax credits, provide support for the rating. The project continues to operate well, and is producing and selling coke to Bethlehem Steel and realizing tax credits. The downgrade of Bethlehem Steel Corp.'s rating comes as a result of substantial, unanticipated erosion of the company's liquidity in the first quarter of 2001 and concerns about near-term financial flexibility because of difficult operating conditions within the steel industry. These conditions remain weak due to high levels of imports, softening demand, and soaring energy costs. The current rating for Bethlehem Steel incorporates expectations that the company will successfully increase availability under its bank facility and complete asset sales by year end. Unless the company resolves its liquidity issues by such means, the rating could be lowered again in the near-term, resulting in a similar deterioration in DTE LLC's credit rating. Standard & Poor's will continue to monitor Bethlehem Steel's financial flexibility, as well as developments in the steel industry and their effect on DTE LLC's rating. EASTERN PULP: Reviewing U.S. Notice Of Claim -------------------------------------------- Eastern Pulp & Paper Corporation said that it is reviewing the Notice of Claim filed by the United States government in connection with the past discharge of dioxin into Maine's Penobscot River. U.S. officials recently told Eastern executives that the government to date has not identified any significant or immediate risks from the Lincoln, Maine, mill. Eastern executives also said U.S. officials told them that the government doesn't know the extent of possible claims--and that the government was not prepared to make any specific factual allegations against the company. Eastern said government lawyers filed the Notice of Claim to meet a procedural deadline established by the U.S. Bankruptcy Court for filing claims, after which any potential claim may be barred. The Notice of Claim is not a lawsuit, but rather a legal filing to preserve the government's place for a possible claim. U.S. officials have told Eastern that the government is still conducting an environmental study of the Penobscot River--and that it will continue to do so for some time. U.S. officials have also told Eastern that they have not made any decisions on what cleanup, if any, may be required. The Notice of Claim said that the government believes there could be a very wide range of future costs and damages and set the range at between $400,000 and $60 million. The wide cost range underscores the speculative nature of this matter, said George Marcus, an attorney representing Eastern Pulp & Paper Corp. Eastern Pulp & Paper, which employs more than 900 people, remains fully operational under Chapter 11 creditor protection at its two manufacturing facilities in Lincoln and Brewer, Maine. The company said it is now fully compliant or greatly exceeding compliance with U.S. and State of Maine environmental regulations governing pulp and paper manufacturing facilities. Eastern Pulp & Paper has conducted several studies of its Lincoln, Maine, facility over the past 10 years and is aware of data gathered by the State of Maine and the U.S. Environmental Protection Agency at the mill and on the Penobscot River. All of that data shows there are no health or environmental risks of significance from the Lincoln facility. EPA's current data on Penobscot River sediment levels for dioxin are below 1 part per trillion. This is more than 1,000 times below the 1 part per billion standard the EPA uses as a cleanup standard at other sites. Dioxin in sediments are also below those found in other rivers in the U.S., and lower than those found in other Maine rivers with kraft pulp mills, where no claims have been brought. Two previous independent health studies commissioned by the Penobscot Indian Nation - including one conducted by the U.S. Government Centers for Disease Control and Prevention--concluded there was no link between dioxin and any Penobscot Indian Nation health problems. The 1999 installation of Eastern's state-of- the-art bleaching technology, enviro2, assures the complete elimination of dioxin from the mill's discharge. FRIEDE GOLDMAN: Moves To Reject Two Petrodrill Contracts -------------------------------------------------------- Friede Goldman Halter, Inc. (OTCBB: FGHLQ) is filing with the bankruptcy court a motion to reject the two contracts for the construction of the two Amethyst offshore drilling rigs for Petrodrill, a Brazilian company. These highly unprofitable contracts caused substantial losses to the Company, and led to the Company's recent Chapter 11 filing. Unsuccessful negotiations for the terms of completion of these two unprofitable contracts with the surety, Fireman's Fund Insurance Company, a wholly owned subsidiary of the German insurance company Allianz, led to the filing of this rejection motion. Friede Goldman Halter is a world leader in the design and manufacture of equipment for the maritime and offshore energy industries. Its operating units are Friede Goldman Offshore (construction, upgrade and repair of drilling units, mobile production units and offshore construction equipment); Halter Marine (construction of vessels for commercial and governmental markets); FGH Engineered Products (design and manufacture of cranes, winches, mooring systems and other types of marine equipment); and Friede & Goldman Ltd. (naval architecture and marine engineering). FRUIT OF THE LOOM: Creditors Seek Nod To File Records Under Seal ---------------------------------------------------------------- Kasowitz, Benson, Torres and Friedman, special counsel for the Official Committee of Unsecured Creditors in Fruit of the Loom, Ltd.'s chapter 11 cases, asked Judge Walsh for permission to file its time records under seal. David M. Fournier Esq., of Pepper Hamilton, relies on section 107(b), because Kasowitz represents the committee in its suit against the prepetition lenders. He asserts that the second interim allowance of compensation contains detailed time entries and activity descriptions. Revealing the time records could disclose litigation issues and strategies to the committee's adversaries to the detriment of all unsecured creditors. The sensitive nature of the services provided and the privileged access to confidential information makes the time record a document best kept confidential. It should be available only to the Court and the U.S. Trustee. Kasowitz asserted that such relief will not prejudice any party in interest as the allowance of fees remains subject to Court approval. On April 13, 2001, a certificate of no objection was filed by Aaron A. Garber Esq., counsel for the committee. (Fruit of the Loom Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) INTEGRATED PACKAGING: Shareholders' Meeting Set For May 29 ---------------------------------------------------------- The Annual Meeting of Stockholders of Integrated Packaging Assembly Corporation, a Delaware corporation, will be held on Tuesday, May 29, 2001, at 10:00 a.m., local time, at the Company's offices at 2221 Old Oakland Road, San Jose, California, for the following purposes: (1) To elect five (5) directors to serve for the ensuing year and until their successors are duly elected and qualified. (2) To approve a change in the Company's name from "Integrated Packaging Assembly Corporation" to " OSE USA, Inc.". (3) To increase the number of authorized shares of common stock of the Company to 300,000,000, and to increase the number of authorized shares of preferred stock of the Company to 20,000,000. (4) To increase the number of shares in the Company's employee stock purchase plan by 3,000,000 to an aggregate of 5,000,000. (5) To ratify the appointment of Grant Thornton LLP as independent auditors for the Company for the 2001 fiscal year. (6) To transact such other business as may properly come before the meeting or any adjournment thereof. Only stockholders of record at the close of business on April 3, 2001 are entitled to notice of and to vote at the meeting. KEY PLASTICS: Carlyle Management Group Completes Acquisition ------------------------------------------------------------ On April 26, 2001, Carlyle Management Group (CMG), the Dallas based turnaround and management group, finalized and closed its acquisition of Key Plastics from Chapter 11 bankruptcy protection via a plan of reorganization. Key Plastics, headquartered in Novi, Michigan, is a leading global supplier of highly engineered plastic components and assemblies to the automotive and light truck Tier I suppliers and original equipment manufacturers in North America and Europe. The company has 32 facilities located in nine countries and generated revenues of over $550 million for calendar year ending December 31, 2000. With this acquisition, CMG now manages $1.4 billion in revenues across several industrial sectors: defense, aerospace and automotive. Within this portfolio, CMG manages over 12,500 individuals in 9 countries and 17 states. This group of companies generates over $175 million in operating cash flow with a large portion of that cash flow used to retire acquisition debt and fund ongoing operations. The installation of financial and operational discipline has been instrumental in significantly improving the operating performance and shareholder value creation of these companies. CMG is part of The Carlyle Group, a Washington, DC based private equity firm with over $12 billion of equity capital under management. With the closing of the transaction, B. Edward Ewing, Chief Executive Officer of CMG, will assume the role of President and CEO of Key Plastics. Commenting on the transaction Mr. Ewing said, "I would like to thank the customers, employees, and suppliers for standing by this company during this long and difficult process. With the bankruptcy now behind the company, the focus of Key's management team will be to have the customers, employees, and shareholders say that it is a great management team." LERNOUT & HAUSPIE: Wants To Assume ISI Stock Purchase Agreement --------------------------------------------------------------- Lernout & Hauspie Speech Products, N.V., asked that Judge Wizmur permit it to assume a Stock Purchase Agreement with Interactive Systems, Inc. Through the assumption of this agreement, the Debtor seeks to ensure the continued association of the ISI Founders with ISI, a wholly owned subsidiary of the Debtor, and a focal point of research and development within L&H and the other Debtors. The ISI Founders are responsible for developing advanced speech recognition technologies which insure to the benefit of all members of the debtor group, not just L&H. The technology developed by ISI not only exceeds industry standards, but offers the added benefit of being compatible with various product offerings through the Debtors. ISI was founded by several professors associated with Carnegie Mellon University in Pittsburgh, Pennsylvania. The company specializes in the design and development of speech recognition engines or "conversation systems", which use speech and language technology to allow users to access information and accomplish various tasks through speech and natural language interfaces. The Debtor asserts that ISI developed these speech recognition systems entirely as a result of its own research and development effort. L&H told Judge Wizmur that it is possible, however, that the ISI Founders may discontinue their relationship with L&H if the Stock Agreement is not assumed and L&H does not honor its obligation under that agreement to make the First Earnout Payment to the ISI Founders. Because the Stock Agreement contains sensitive and confidential information regarding the development of certain speech recognition technology which, if disclosed to the public, might be misappropriated by the Debtor's competitors, the Stock Purchase Agreement itself was submitted to the Court under seal. In March 2000 L&H acquired ISI under the Stock Agreement. The parties to the Agreement are L&H, ISI, and the former shareholders of ISI -- the ISI Founders. The terms of the agreement include, among other nondisclosed terms: (a) Total Purchase Price: $12,900,000. (b) Payment Terms: (i) $200,000 paid by L&H to ISI in February 2000; (ii) $8,700,000 paid by L&H proportionately to each ISI Founder at closing; (iii) $2,000,000, being the First Earnout Payment, paid by L&H proportionately to each ISI Founder upon the first anniversary of the Stock Agreement upon the achievement of a specifically defined milestone; and (iv) $2,000,000, being the Second Earnout Payment, paid by L&H proportionately to each ISI Founder upon the second anniversary of the Stock Agreement in 2002, upon the achievement of a specifically defined milestone. (c) The Milestones: The First and Second Milestones are specifically defined in the Stock Agreement and relate to the development of foreign language speech recognition technology. The objective criteria which the speech recognition technology must satisfy are articulated fully in the Agreement. The ISI Founders have performed one of their obligations under the Stock Agreement by developing certain foreign language speech recognition technology, and the Debtor told Judge Wizmur that it must satisfy one of its corresponding obligations and provide the First Earnout Payment. The Debtor argued that assumption of this agreement, which it describes as an "executory" agreement as defined by the Bankruptcy Code, represents a reasonable exercise of business judgment. The Debtor assured Judge Wizmur that assumption of the Stock Agreement and payment of the Earnout Payment are critical to its reorganization efforts. Without the First Earnout Payment, the ISI Founders may terminate their association with ISI, which would strip the Debtor and the related debtors of some of their most talented and critical members of the research and development team. Additionally, ISI and the ISI Founders have developed a speech recognition system named "X Calibur" which the Debtor said constitutes one of the most configurable systems of its kind available. Indeed, the Debtor believes that X Calibur is more advanced and provides more compatible applications than similar products developed by the Debtor's competitors and is currently being used in several product offerings throughout the debtor group. The current speech recognition systems used by the Debtors do not possess the same interchangeable characteristics as X Calibur, which can be used to replace many of the existing, incompatible speech recognition engines. The X Calibur system insures to the benefit of all members of the Debtors, given its universal application, including to the areas of automotive information systems, medical transcription, desktop dictation, audio data labeling and indexing (audiomining) and general dialog systems. Widespread application of X Calibur reduces research and development costs throughout the Debtors, while providing a competitive advantage to various product offerings. ISI, and the ISI Founders, are also developing products in the emerging area of "Voice XML", an evolving industry standard for the design of speech dialog systems for telephone voice portals. As such, the Debtors say that ISI, and more specifically, the ISI Founders, are a critical component of the Debtors' reorganization efforts because ISI is becoming an innovation center. Accordingly, assumption of the Stock Agreement and payment of the First Earnout Payment to ensure the ISI Founders' continued association with ISI constitutes a sound exercise of business judgment. (L&H/Dictaphone Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) LOCALBUSINESS.COM: Files Chapter 11 Petition in Florida ------------------------------------------------------- LocalBusiness.com, a business news site that employed more than 75 full-time journalists in some 28 U.S. cities, shut down operations last week and filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in Ft. Lauderdale, Fla., according to The Wall Street Journal. Most of the web publisher's revenues were generated by advertising, and the news web site had been wrestling with a weak advertising environment. Charles Lunan, Localbusiness.com's managing editor, said he does not know whether the company will be sold or if it will file for bankruptcy. The company received $16 million in investment capital from U.S. Equity Partners LP; Rustic Canyon Ventures; and Tribune Ventures, an arm of the Tribune Co., last year. (ABI World, May 4, 2001) LOCALBUSINESS.COM: Chapter 11 Case Summary ------------------------------------------ Debtor: LocalBusiness.com, Inc. dba dbusiness.com, Inc. dba American Digital Media Services Inc. 6440 NW 5 Way Ft. Lauderdale, FL 33309 Chapter 11 Petition Date: May 2, 2001 Court: Southern District of Florida (Broward) Bankruptcy Case No.: 01-23262 Judge: Raymond B. Ray Debtor's Counsel: Lawrence A Gordich, Esq 701 Brickell Ave #1900 Miami, FL 33131 305-789-2700 MARINER: Court Okays Transfer Agreement re Grancare HCC-Phoenix --------------------------------------------------------------- Mariner Post-Acute Network, Inc.'s wholly-owned subsidiary HOSTMASTER's, Inc. and the other MPAN Debtors sought and obtained the Court's approval of: (1) the Lease Termination Agreement, including the Operations Transfer Agreement by and between Imprimis Partners Limited Partnership (the Landlord), and HOSTMASTER's as former tenant, with respect to the Grancare HHC-Phoenix nursing home facility located at 16640 North 38th Street, Phoenix, Arizona; (2) the rejection of certain executory contracts related to the Facility; (3) the assumption and assignment to the Landlord of the Medicare Provider Agreement between HOSTMASTER's and the Health Care Financing Administration (HCFA) relating to the Facility; and The lease was rejected on or about January 15, 2001. HOSTMASTER'S represented that to provide for an orderly transition of operations at the facility, which will minimize Landlord's damages and the costs of exiting the facility, while at the same time minimizing or avoiding any disruption in patient care, the parties have agreed to the Lease Termination Agreement, subject to the Court's approval. (A) The Lease Termination Agreement provides for: (1) The payment by HOSTMASTER'S of all administrative claims owed to third parties and incurred in connection with the operation of the Facility from the Petitiou Date to the date the Landlord or its designee takes over operation of the Facility (the Transition Date); (2) The payment to the Landlord of an amount equal to the total liabilities assumed by the Landlord for outstanding claims due to employees of the Facility for accrued vacation and sick pay; (3) Payment of all rent and real property taxes due under the Lease from the Petition Date through March 31, 2001; provided, however, that such payments will thereafter cease if operations of the Facility have not been transitioned to the Landlord or its designee on or before April 5, 2001 through no fault of HOSTMASTER'S; and (4) Payment of $45,000 in full and complete satisfaction of any and all claims, including, without limitation, administrative, priority, and prepetition claims, that the Landlord may have against HOSTMASTER'S relating to the Lease, its rejection by HOSTMASTER'S, or HOSTMASTER'S use or occupancy of the Facility, including all maintenance claims, whether or not entitled to administrative priority. (B) The Operations Transfer Agreement generally governs the transition of operations at the Facility, including: (1) The transfer of supplies on hand at the Facility and the facility transportation van, free and clear of liens and encumbrances, all of which are believed to have nominal value. (2) The orderly transfer of Patient Trust Fund accounts; (3) The coordination of final cost reports; (4) The employment of all or virtually all of HOSTMASTER'S employees at the Facility as of the Transition Date, thereby avoiding any WARN Act and severance claims which might otherwise be asserted if the Facility were to cease operations; (5) The assumption by the landlord of claims of employees for accrued vacation and sick pay as a result of the payment of such amounts to the Landlord by HOSTMASTER'S; (6) The assumption by Landlord of certain group health care obligations; (7) The reconciliation of future amounts received from the collection of accounts receivable; (8) Prorations as of the Transition Date; (9) The transfer of patient records and financial data; and (10) The assumption or rejection of certain executory contracts. (C) Assumption And Assignment Of The Medicare Provider Agreement HOSTMASTER'S will assume and assign to the Landlord the Medicare Provider Agreement between HOSTMASTER'S and HCFA relating to the facility on terms substantially identical to terms which have been previously approved by HCFA and the Court with respect to dispositions of similar facilities. HOSTMASTER'S will seek HCFA's approval of such terms. Notwithstanding the assumption and assignment of the Medicare Provider Agreement, any claim of Medicare, the applicable fiscal intermediary, the Department of Human Services (HHS), or any other party against the Debtors under the Medicare Provider Agreement arising prior to the petition date will continue to be treated as a prepetition claim and will not be offset against any of the Debtors' claims arising after the Petition Date. Instead, HCFA will be allowed to offset all such claims (to the extent valid, and without prejudice to the Debtor's right to dispute such claim) against any prepetition underpayment claim of the Debtors against Medicare, 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 that to the extent HCFA's claim is not satisfied in full via exercise of the offset right, the United States will have an administrative expense claim pursuant to 11 U.S.C, which will be capped at an amount presently under discussion with HCFA, but which the Debtors believe will not exceed $50,000 with respect to the facility. The rights accorded the United States under the Approval Order will constitute "cure" under 11 U.S.C. Section 365 so that the Landlord 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 Landlord. However, the Landlord (or its designee) will succeed to the quality of care history of HOSTMASTER'S as to the Facility, except that the assignee will not be liable to pay any civil monetary penalty accruing prior to the Transition Date. (D) Rejection of the Service Contracts Because HOSTMASTER'S intends to cease doing business at the Facility, the service contracts related to the Facility will be unnecessary and burdensome to HOSTMASTER'S estate upon the Transition Date. Accordingly, HOSTMASTER'S and the Landlord have agreed that HOSTMASTER'S is not and will not be obligated to assume or assign to the Landlord the Service Contract, except as designated by Landlord and presented to the Court on the exhibit to the motion, and that the Service Contracts not so designated by the Landlord will instead be deemed rejected effective as of the Transition Date. (Mariner Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) MAXICARE HEALTH: Closing Indiana Unit to Stem Continuing Losses --------------------------------------------------------------- Maxicare Health Plans Inc. (Nasdaq:MAXI) announced that due to continuing losses in the managed care business of Maxicare Indiana Inc., its Indiana subsidiary, the subsidiary has determined to close its business operations in the state of Indiana. The Indiana Department of Insurance filed for rehabilitation of Maxicare Indiana on May 4, 2001. Maxicare Indiana has conferred and is working with the Commissioner of the Indiana Department of Insurance in the interest of members receiving the continuation of their medical benefits. The company emphasized that Maxicare, its California managed care subsidiary, which is totally separate from Maxicare Indiana, is financially sound and operated profitably in the first quarter of 2001. The company also stated that Maxicare is in full compliance with California's tangible net equity requirements. The company further stated that, excluding the operations of Maxicare Indiana, it expects to report earnings of approximately $1 million for the first quarter of 2001 when results are announced this week. Due to a difficult health care provider and pricing environment in the Indiana market, the company has concluded, after investigating all reasonable alternatives, to cease operations of Maxicare Indiana, said Maxicare's chairman and chief executive officer, Paul Dupee. "We are working with the Commissioner of the Indiana Department of Insurance so that our members receive continuity of care to the greatest extent possible during this difficult transition. At the same time, we are encouraged by the recent improvements in the operating performance of Maxicare, our California HMO. And we plan to take steps to make sure that Maxicare continues to operate as a viable, sustainable business in the California markets. About Maxicare Maxicare Health Plans Inc., with headquarters in Los Angeles, is a managed health care company with operations in California. In August 2000, Maxicare received the status of Accredited from the National Committee for Quality Assurance (NCQA) for its California HMO product and California Medicare HMO Plan. NCQA is an independent, nonprofit organization dedicated to measuring the quality of managed care organizations nationally. Maxicare has been serving the health care needs of families through managed health care plans since 1973. Maxicare offers a variety of health programs including various employee benefit packages through its subsidiaries, Maxicare Life and Health Insurance Co. and HealthAmerica Corp. MISSISSIPPI CHEMICAL: Fitch Cuts Senior Debt Ratings To Low-B's --------------------------------------------------------------- Fitch has downgraded Mississippi Chemical's senior secured debt rating to 'BB-' from 'BB' and downgraded the company's senior unsecured debt rating to 'B+' from 'BB-'. The senior secured debt rating of 'BB-' applies to the company's $200 million senior secured bank facility due 2002 and the senior unsecured debt rating of 'B+' applies to the company's $200 million of outstanding senior unsecured notes due 2017. Both debt ratings are on Rating Watch Negative. The one notch differential between the senior secured credit facility and the unsecured notes is based on the limited nature of assets pledged under the company's credit facility. The credit facility has been secured as permitted under the senior note indenture. Mississippi Chemical continues to experience poor operating margins primarily due to high natural gas costs that have largely offset improvements in product prices. A wet spring planting season has resulted in weak sales volumes during the third fiscal quarter. For the quarter ending March 31, 2001, Mississippi Chemical generated net sales of $147.5 million with an EBITDA of $18.1 million. The company's total debt as of March 31, 2001, was approximately $360 million, up from $330 million at June 30, 2000. The company had $44 million available under the secured credit facility down from $74 million at fiscal year-end 2000 (ended June 30). Inventory builds have resulted in higher debt levels than would have been expected if sales volumes had been closer to typical results. Credit protection measures, particularly EBITDA coverage, have improved recently, however, much of this improvement was the result of the realization of gains from selling natural gas hedges. Approximately $3 million in gains from natural gas hedges sold remain on the balance sheet to provide additional EBITDA in future quarters. The credit facility contains covenants related to EBITDA coverage. As a result of high domestic natural gas costs, flat agricultural demand and rising fertilizer imports, the U.S. fertilizer market is likely to continue to experience trough cash margin levels. Shorter term, a decline in operating rates could provide some support for higher pricing levels, however high natural gas costs are likely to offset pricing strength. With few signs of a substantial near term improvement in the cyclical fertilizer business given the ramp-up of new offshore capacity and sustained high natural gas costs, Fitch maintains a Negative Rating Watch on the debt ratings. NCS HEALTHCARE: Reports Fiscal 2001 Q3 Financial Results -------------------------------------------------------- NCS HealthCare, Inc. (Pink Sheets: NCSS) announced financial results for its fiscal third quarter ended March 31, 2001. For the three months ended March 31, 2001, revenues decreased 9.1% to $154,890,000 from $170,462,000 in the third quarter of the previous fiscal year. Net loss for the quarter, excluding bad debt expense for non-core businesses which had been either sold or shut down (exited businesses), fixed asset impairment and restructuring charges, was $7,624,000 or $0.32 per diluted share as compared to net loss, excluding restructuring, other related charges, and a non-cash charge related to a valuation allowance recorded against the Company's net deferred tax assets, of $3,555,000 or $0.16 per diluted share for the third fiscal quarter of the previous year. For the nine months ended March 31, 2001, revenues decreased 11.7% to $471,373,000 from $533,976,000 recorded in the comparable period of the previous fiscal year. Net loss, excluding bad debt expense for exited businesses, fixed asset impairment and restructuring charges, was $21,940,000 or $0.93 per diluted share as compared to net loss, excluding nonrecurring, other special charges, and a non-cash charge related to the deferred tax asset valuation allowance, of $2,810,000 or $0.13 per diluted share, in the comparable prior- year period. During the last several quarters, NCS has continued to execute its strategic restructuring plan, which has included the shutdown, restructuring or sale of certain non-core ancillary lines of business. Of the $15.6 million and $62.6 million revenue decline for the three and nine month periods ended March 31, 2001, the sale or shutdown of these businesses accounted for approximately $7.7 million and $34.9 million, respectively, as compared to the previous fiscal year. The remainder of the decline in revenues for the current quarter and year to date periods was partially due to the termination by the Company of marginal contracts and those with unacceptable credit risk. Results for the three and nine month periods ended March 31, 2001 include incremental default interest expense of $1.0 million and $3.1 million, incremental professional fees related to restructuring activities of $1.5 million and $4.2 million, and higher bad debt expense on continuing businesses of $3.3 million and $9.0 million for the three and nine month periods, respectively. These additional costs were partially offset by operating improvements in selling, general and administrative expenses. Kevin B. Shaw, President and Chief Executive Officer of NCS commented, "We have made significant progress in the restructuring of our operations. By closing marginal sites, eliminating certain business lines and terminating uneconomic customers we have re-established a strong foundation on which to build. Looking forward, we believe that the essential mandate for NCS HealthCare is to address our customers' most pressing need -- providing uncompromised care to patients in the most cost efficient manner. In the post-PPS environment nursing homes need to save money on their pharmacy bills. To do so, nursing homes need more timely information and greater clarity as to the actions they can take to reduce costs while maintaining or improving clinical outcomes. We have developed tools, such as eAstral, and we look forward to distributing them widely in the coming quarters." During the fiscal 2001 third quarter, the Company recorded $10,043,000 of additional bad debt expense to fully reserve for remaining accounts receivable of non-core and non-strategic businesses exited during the past twelve months. These businesses were ancillary to the core pharmacy operations and as part of the restructuring activities were either sold, if there was an available buyer, or shut down. During the fiscal 2001 third quarter, the Company recorded restructuring and other related charges of approximately $1.0 million before taxes associated with the continuing implementation and execution of strategic restructuring and consolidation activities. Also during the quarter, in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of" (SFAS No. 121), the Company recorded a fixed asset impairment charge of $2.1 million before taxes. This charge relates primarily to changes in asset values resulting from the impact of restructuring activities and changes in operational processes under restructured operations. NCS' core pharmacy business represented 85.5% of revenues for the quarter just ended as compared to 84.8% in the previous quarter. Intravenous solutions revenues were 3.8% of the total as compared to 3.3% in the previous quarter. Other revenues declined to 10.7% of the total versus 11.9% in the previous quarter. Gross margin for the three months ended March 31, 2001 was 17.9% as compared to 18.2% for the previous quarter ended December 31, 2000. The decline in gross margin was due primarily to a continued shift toward lower margin payer sources such as Medicaid and insurance. Medicaid and insurance revenues accounted for approximately 58.5% of revenues in the fiscal 2001 third quarter versus 57.0% in the previous quarter and 51.7% in the prior fiscal year third quarter. In addition, the decrease in gross margins in the current quarter reflected the full quarter impact of the implementation of the Health Care Financing Administration Federal Upper Limits (FUL's). The FUL's were implemented in December 2000 and reflected lower reimbursement from State Medicaid programs. Selling, general and administrative expenses, excluding bad debt expense for exited businesses, fixed asset impairment and restructuring charges, were $27.3 million for the third fiscal quarter, compared to $27.4 million during the previous quarter. Depreciation and amortization for the three months ended March 31, 2001 was $5.9 million as compared to $6.3 million during the previous quarter. Net interest expense was $7.9 million for the most recent quarter as compared to $8.4 million for the quarter ended December 31, 2000 due primarily to lower interest rates. NCS' cash position at March 31, 2001 was $42.2 million as compared to $36.0 million at December 31, 2000 due primarily to a reduction in accounts receivable during the most recent quarter. Kevin B. Shaw, President and Chief Executive Officer commented, "As we reported above, NCS has succeeded in a key objective: conserving and growing our cash position, despite the difficult nursing home operating environment. We believe that credit discipline is an essential requirement for success and we have strengthened our credit processes and our collection rates. In this area, we are committed to improving our credit quality, while being creative in finding win-win solutions to assist our customers. At the end of the day, we must help improve their performance as well as our own." As previously reported, net losses incurred during fiscal 2000 resulted in certain covenant defaults under the Company's bank credit facility. The Company has engaged Brown, Gibbons, Lang & Company L.P. (BGL&C) to act as NCS' sole financial advisor in its continuing discussions with the bank group with respect to these defaults. During the quarter, the Company elected to not make a $2,875,000 interest payment due February 15, 2001 on its 5 3/4% Convertible Subordinated Debentures due 2004. As a result of the non-payment of interest, the Company received a formal Notice of Default and Acceleration and Demand for Payment from the indenture Trustee. BGL&C is also serving as NCS' sole financial advisor in its continuing discussions with an ad hoc committee of holders of the Company's 5 3/4% Convertible Subordinated Debentures due 2004 with respect to the defaults and a possible restructuring of the indebtedness. NCS can give no assurance with respect to the outcome of these discussions or negotiations. NCS HealthCare, Inc. is a leading provider of pharmaceutical and related services to long-term care facilities, including skilled nursing centers, assisted living facilities and hospitals. NCS serves approximately 210,000 residents of long-term care facilities in 33 states. NEXTAR FINANCE: Moody's Rates Senior Discount Notes at Caa1 ----------------------------------------------------------- Moody's Investors Service assigned a Caa1 rating to Nexstar Finance Holdings' 16% senior discount notes. The rating agency also confirmed the following: * the B3 rating on the $150 million of 12% senior subordinated notes due 2008 of Nexstar Finance L.L.C. * the Ba3 ratings of the combined $275 million of senior secured credit facilities of Nexstar and the Bastet Group (Bastet Broadcasting and Mission Broadcasting. * The senior implied B1 rating and * the B2 senior unsecured issuer rating. The outlook is stable. Moody's said the ratings continue to reflect the limited operating history of Nexstar Broadcasting, the likelihood of additional leveraged acquisitions, the integration risk associated with its potential acquisitions, and the impending capital expenditures for digital readiness. Accordingly, Nexstar is highly leveraged and as a result has limited financial flexibility. However, Moody's said that Nexstar's ratings benefit from the company's history of rapidly improving the cash flow and margin performance of its acquired stations and its diversification by number of stations, network affiliations, and region. The stable outlook incorporates the expectation that cash flow should benefit from operating efficiencies despite the weaker advertising environment, according to Moody's. The rating agency is comfortable that Nexstar is likely to meet its budget for 2001. Nexstar Broadcasting owns or operates 17 stations in 13 markets. It is headquartered in Clarks Summit, Pennsylvania. PILLOWTEX: Moves To Pay-off Certain Revenue Bond Financings ----------------------------------------------------------- Gold Kist, Inc., predecessor-in-interest to Opelika Industries, Inc. of the Pillowtex Corporation Debtors, entered into a revenue bond financing with Macon-Bibb County Industrial Authority. The financing documents for the bond facility indicates that Macon-Bibb, (a) authorized the issuance of $2,600,000 in aggregate principal amount of its revenue bonds and (b) loaned Gold Kist the bonds' proceeds to finance Gold Kist's acquisition and renovation of warehouse and distribution facilities in Bibb County, Georgia. A loan agreement between Macon-Bibb and Gold Kist, which Gold Kist subsequently assigned to the Debtor, requires the Debtor to make loan repayments at the times and in the amounts sufficient to pay the principal of, and premium if any, and interest on, the bonds. As required by the bond facility and, as a security for loan repayment, Gold Kist granted a mortgage on the warehouse and distribution facility acquired and renovated with the proceeds of the bonds in favor of Macon-Bibb. Macon-Bibb subsequently assigned its mortgage interest to the bondholders' trustee, as security for the payment of the bonds. As additional security for the bonds' payments, Gold Kist executed a guaranty agreement with the trustee and unconditionally guaranteed payment of the bonds' principal, and premium if any. At the time the Debtor assumed Gold Kist's obligations, agreements and liabilities under the loan agreement, the Debtor also assumed Gold Kist's obligations, agreements and liabilities under the mortgage and guaranty, and Leshner Corp., the Debtor's parent company, executed a guaranty agreement in favor of the trustee. William H. Sudell, Jr., Eric D. Schwartz, and Michael G. Busenkell, at Morris, Nichols, Arsht & Tunnell, in Delaware, explained to Judge Robinson that a final principal installment on the bonds in the amount of $173,333.38 is due and payable on March 1, 2001, together with all accrued and unpaid interest on the bonds, which interests accrues at the annual rate of about 5.75%. By motion, the Debtor seeks Court authority to make final payment on the bond facility, including all accrued interest and any reasonable fees and costs due. Pillowtex Corp. claimed that, in the exercise of business judgment, the Debtor has determined that making the final principal and interest payment on the bond facility, is in the best interests of its estates and creditors. The value of the collateral securing the bonds greatly exceeds the amount owed under the bond facility. Until the bond facility is paid off, the trustee and Macon-Bibb will be entitled to all interest and reasonable fees and costs to the extent provided for under the loan agreement. The Debtors maintained that they have more than sufficient operating funds to make the final principal payment, and by making payment rather than waiting for confirmation of a reorganization plan, will: (a) Avoid the continuing accrual of interest and potential fees and costs; (b) Eliminate the administrative burden of dealing with the debt under the bond facility in any reorganization plan; and (c) Avoid any dispute regarding the trustee's and Macon- Bibb's entitlement to fees and costs incurred during the bankruptcy proceedings. (Pillowtex Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) RAYTHEON COMPANY: Discloses Pricing of Public Share Offerings ------------------------------------------------------------- Raytheon Company (NYSE: RTNA, RTNB) announced the public offerings of 12.5 million shares of Class B common stock at $27.50 per share and 15 million, 8.25 percent equity security units at $50 per unit. The company has also granted the underwriters an option to purchase up to an additional 1.875 million shares to cover over- allotments of Class B common stock, if any and an option to purchase up to an additional 2.25 million equity security units to cover over-allotments of equity securities units, if any. Each equity security unit will initially consist of a contract to purchase shares of common stock of Raytheon Company and $50 in principal amount of a trust preferred security of RC Trust I, a Delaware Business Trust formed by Raytheon with a stated liquidation amount of $50. The offerings were priced yesterday and are expected to close on May 9, 2001. The net proceeds of the offering will be used to reduce debt and for general corporate purposes. With headquarters in Lexington, Mass., Raytheon Company is a global technology leader in defense, government and commercial electronics, and business and special mission aircraft. RAYTHEON CO.: SEC Subpoenas Documents ------------------------------------- Raytheon Co. said that the Securities and Exchange Commission subpoenaed documents related to the engineering and construction unit that it sold to Washington Group International last year, according to The Wall Street Journal. The subpoena came after months of fighting between the two companies over a final purchase price. The Boise, Idaho-based Washington Group, which has said the controversy may force it into bankruptcy, maintains the defense contractor withheld financial information. In March, Washington Group filed an amended complaint against Raytheon claiming that the defense contractor grossly overstated the assets and understated the liabilities of the unit. Raytheon has denied the allegations. Washington Group paid $50 million for the division last year and assumed $450 million in liabilities. Washington Group maintains the liabilities were as high as $700 million. (ABI World, May 4, 2001) SAFETY-KLEEN: EQ Entities Ask For Stay Relief To Effect Setoff -------------------------------------------------------------- The EQ Entities consisting of (i) The Environmental Quality Co., (ii) EQ Industrial Services, Inc., (iii) Michigan Recovery Systems, Inc., and (iv) Wayne Disposal, Inc., seek relief from stay to effect setoff. Gail A. Eynon, at Honigman Miller Schwartz and Cohn LLP, told Judge Walsh that the EQ Entities have purchased goods and services from the Debtor Safety-Kleen Corp., pursuant to the General Terms and Condition of the EQ Entities' purchase orders and the common and statutory laws of the State of Michigan. The Debtor also purchased goods and services from the EQ Entities. Ms. Eynon contended that as of Petition Date, the Debtor and its Canadian affiliate owe the EQ Entities EQ $160,365.65 on open account for goods and services. Meanwhile, as of Petition Date, the EQ Entities owe the Debtor and its Canadian affiliate $324,281.91 on open account for goods and services provided to them. However, since Petition Date, the EQ Entities have paid $173,700.50 to the Debtors. She claimed that applicable state law and the terms of the purchaser order grant the EQ Entities the right to setoff the remaining $150,581.41 they owed the Debtor on open account from the $160,365.65 the Debtor owed EQ on open account. In pleading for the EQ Entities, Ms. Eynon asserted that bankruptcy law does not impair the right of a creditor to offset a mutual debt owing by such creditor to the Debtor that arose before the commencement of the bankruptcy proceedings against a claim of such creditor against the Debtor that arose before the commencement of the bankruptcy case. She assured the Court that the EQ Entities do not seek relief from automatic stay to setoff or recoup any amount that has accrued on or after the Petition Date. The Debtors respond Gregg M. Galardi, at Skadden, Arps, Slate, Meagher & Flom LLP, in Delaware, said that the Debtors never consented to this Motion or the proposed setoff, and pointed out to the Court that, in the motion, the EQ Entities allege prepetition business dealings with the Debtors and one of the Debtors' Canadian affiliates. He averred that the EQ Entities seek to effectuate a single setoff between and among (a) one or more of the Debtors and a Canadian affiliate of the Debtors, a non-Debtor entity, on the one hand, and (b) EQ Entities, consisting of four separate and distinct legal entities, on the other. With further elaboration, Mr. Galardi indicated several reasons why the EQ Entities' request is flawed. Lack of mutuality The EQ Entities appear to treat all 74 Debtors, together with a non-Debtor Canadian affiliate, as a single "obligor" for setoff purposes. Consolidation of multiple Debtors' obligations, let alone a non-Debtor affiliate's obligations, into a single obligation in order to effectuate a setoff is not permitted because the Debtors' bankruptcy cases are consolidated only for procedural purposes. In like manner, the EQ Entities, four separate legal entities, inexplicably seek to treat themselves as a single "obligor" for purposes of the setoff they seek to effectuate. No right to setoff by State law The law of the State of Michigan does not provide the EQ entities with a right to setoff. The law merely states that for purposes of Michigan law, the term 'counterclaim' includes rights of setoff and recoupment. This provision is definitional in nature and confers no setoff right. The EQ Entities have failed to establish their right to setoff, if any, under applicable non-bankruptcy law. Prohibition by Credit Agreement The credit agreement governing the Debtors' postpetition financing facility specifically prohibits the Debtors from satisfying any prepetition claims, which, of course, would include those asserted by the EQ Entities. The Debtors submitted that, even if the EQ Entities could establish their entitlement to setoff, which they have not, absent the consent of the Debtors' postpetition lenders the setoff would result in a default by the Debtors under the DIP Agreement. Insufficiency of Information The Debtors protested that the EQ Entities, in their motion, have not provided sufficient information, such as copies of purchase orders, invoices, correspondence, and ledger entries, for the Debtors to confirm either the nature and amount of the obligations, if any, between the Debtors and the EQ Entities, or the exact identity of the obligors on both sides of the transactions. Mr. Galardi informed Judge Walsh that, notwithstanding the lack of information, the Debtors have undertaken to analyze their business relationships with each of the EQ Entities, and verify the prepetition amounts due and owing, if any, between each of the EQ Entities and each of the Debtors. As yet, the Debtors have been unable to complete these analyses and so the Debtors cannot consent to the relief requested in the lift stay motion. Mr. Galardi explained to the Court that, prior to filing their objection, the Debtors requested an adjournment of the hearing on the lift stay motion until the next omnibus hearing date to afford the Debtors time for a comprehensive review of all of their accounts with the EQ Entities, but the EQ Entities refused. The Debtors submit that, until such a review can be completed, it would be premature to lift the automatic stay to permit the EQ Entities to effectuate a setoff. The Debtors reserve the right to amend or supplement their objection at any time prior to a hearing on the lift stay motion, and requested that the motion be denied in its entirety or, alternatively, adjourned to the next omnibus hearing date. The EQ Entities respond The EQ Entities contended that the Debtors' bare denial of having consented to the filing of a motion for relief from stay pales, in light of the fact that the Debtor's counsel, Chip Duff, and a business person, David Sprinkle, participated in a conference call with the EQ Entities' counsel and Thomas Schuck, the EQ Entities' business person, in which the subject of the motion for relief from stay and the facts underlying the motion were discussed for approximately one hour. The EQ Entities reiterated that during that call, Mr. Duffy and Mr. Sprinkle stated that the Debtors would not object to the motion for relief from stay. The EQ Entities claimed that their counsel's notes indicate that the Debtor's counsel Joseph Miller also participated in that call. Propriety of Consolidation for Setoff Purposes Gail A. Eynon, at Honigman Miller Schwartz and Cohn, in Michigan and Edward J. Kosmowski, at Young Conaway Stargatt & Taylor, LLP, in Delaware, argued that it is due to the Debtor's own wrongful misrepresentations that the EQ Entities are entitled to have the Debtors and the Canadian affiliate treated as a single entity for purposes of the motion for relief from stay. Having acted as a single entity, the Debtors cannot now proceed separately. Sufficient Basis to Right to Setoff The EQ Entities refuted the Debtor's argument that they have failed to establish the right to setoff. Ms. Eynon and Mr. Kosmowski asserted that the following contentions against the Debtors' objection illustrate the EQ Entities' legal and equitable rights of setoff and recoupment which, under Michigan laws, are treated as counterclaims: (a) A secured creditor with priority over other creditors of the estate remains subject to setoff or recoupment as a counterclaim; (b) Michigan law also recognizes that courts of equity have independent jurisdiction to compel offset as an equitable remedy; (c) Bankruptcy courts sitting in Michigan recognize that setoff is an equitable right of a creditor to deduct a debt it owes from a claim it has against the Debtor, arising out of a separate transaction; and (d) Setoff occupies a favored position in our history of jurisprudence. Courts should interfere with a creditor's rights of setoff "only under the most compelling circumstances." The Credit Agreement's Prohibition of Setoff The EQ Entities assailed the Debtor's assertion that the prohibition imposed by the Debtors' postpetition financing prevent the Debtors from satisfying the EQ Entities' prepetition claims and effectively suppresses the EQ Entities right to setoff. The EQ Entities countered that the Debtors have not offered any authority for the proposition that the Debtor and its lenders can defeat the EQ Entities' prepetition statutory and equitable right of setoff and/or recoupment by way of their loan agreement, whether attached to the DIP Financing Order or not, any more than they could strip a properly perfected purchase money security interest of its property rights. Alleged Insufficiency of Information Based upon the telephone conference between the EQ Entities and the Debtors and the continued business relationship between the parties, it was the EQ Entities' understanding that the Debtors had all the factual information necessary to determine the validity of the EQ Entities' setoff rights and amounts at issue. Counsel for the EQ Entities complain that, prior to receiving the Debtors' objection, the Debtors had not made any request for information from the EQ Entities, which information appears to be the proper subject of discovery. The Debtors charged that the EQ Entities refused a request for adjournment of the hearing on the motion for relief from stay. The EQ Entities explained that their bankruptcy counsel received a call from their local counsel to discuss the Debtors' request for an adjournment and objection to the motion for relief from stay. The EQ Entities submitted that they were not inclined to grant the requested adjournment considering (i) the 30-day notice period provided since filing, (ii) the expense of mailing its notice to so many creditors, (iii) that it is unlikely that the court would hear evidence at the preliminary hearing, and (iv) that it is likely that the parties will need time to conduct discovery and/or reach a consensual resolution. (Safety- Kleen Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) SONG CORPORATION: Shuts Down & Liquidates Assets To Pay Debts ------------------------------------------------------------- The Song Corporation announced that due to its failure to raise additional equity financing it has made an assignment under the Canadian Bankruptcy and Insolvency Act for the benefit of its creditors. The Corporation's wholly-owned subsidiaries, Song Entertainment Distribution Inc., Song Publishing Inc., Song Recordings Inc. and Attic Music Limited, also made assignments for the benefit of their creditors. All directors of The Song Corporation and the four above-named subsidiaries have resigned. The Song Corporation has advised the Canadian Venture Exchange (CDNX) of these developments. It is anticipated that Mintz & Partners Limited, in its capacity as Trustee in Bankruptcy of The Song Corporation and its subsidiaries, will liquidate the assets of The Song Corporation and its subsidiaries, and that the respective proceeds of liquidation will be applied toward the payment of the corporations' respective creditors. The Song Corporation does not anticipate that the proceeds of liquidation will be sufficient to pay all of its debts, and therefore it is unlikely that there will be any funds or distributions available for shareholders. SPECTRANETICS: Stockholders To Convene In Colorado On June 12 ------------------------------------------------------------- The Annual Meeting of the Shareholders of The Spectranetics Corporation will be held at the Sheraton Colorado Springs Hotel, 2886 South Circle Drive, Colorado Springs, Colorado on June 12, 2001, at 9:00 a.m. (MDT) for the following purposes: (1) To elect three members of the Board of Directors to serve three-year terms until the 2004 Annual Meeting of Shareholders, or until their successors are elected and have been duly qualified. (2) To ratify the appointment of KPMG Peat Marwick LLP as independent auditors for the current fiscal year. Only shareholders of record as of the close of business on April 19, 2001, the record date, will be entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof. SUN HEALTHCARE: Rejecting 9 NHP Healthcare Facilities Leases ------------------------------------------------------------ In connection with nine of Sun Healthcare Group, Inc.'s healthcare facilities that together continue to lose money, the Debtors seek the Court's authority to (a) reject certain real property leases entered into with Nationwide Health Properties, Inc. and the Medicare and Medicaid provider agreements; (b) transition and/or wind up operations of the Divesting Facilities in accordance with relevant state law transition procedures. The Debtors also seek approval of the Implementation Procedures governing the transfer of the Divesting Facilities and the treatment of related claims. Of the nine facilities under the same Master Lease with NHP, six are underperforming facilities that have been identified for divestiture. During 2000, three of these facilities incurred net losses in excess of $1 million, the other three incurred approximately $1.2 million of negative EBITDA and actual net income for the six Facilities exceeded negative $3.5 million. The 2001 budget indicates possible improvement in financial performance, but still an aggregate negative EBITDA of approximately $450,000. The remaining three operated with a positive EBITDA but their economic performance is only marginal. The marginal facilities are included in the motion because the Debtors have determined that any benefit arising from the retention of the three marginal Master Lease Facilities is greatly outweighed by the expenditure of time, effort and monetary resources necessary to litigate the issue of whether the Master Lease prevents the Debtors' assumption of individual leases under the Master Lease. However, even for the six Divesting Facilities, the Debtors believe that if sufficient rent concessions were obtained, these would then become economically viable. However, in prior dealings, NHP indicated no willingness to provide rent concessions. After consultation with the Committee, the Debtors do not believe it would be a sound business judgment to continue to operate the Divesting Facilities indefinitely. Instead, they would have to embark on a course for disposition of the facilities, the Debtors believe. The Debtors remain hopeful that an agreement can be reached with NHP regarding going concern transfers of the Divesting Facilities, which is a preferred course of action. Therefore, the Debtors seek to pursue a dual track, whereby they will continue to engage in discussions with NHP while seeking authorization to initiate state law governed Transition procedures should those discussions fail to reach a mutually agreeable outcome. Accordingly, the Implementation Procedures include an opt-out mechanism which enables the Debtors to transfer a Divesting Facility as a going concern, upon the consent of NHP, if a new operator is identified during the Transition Process. Additionally, in order to maintain operations for the benefit of the residents in the Debtors' Divesting Facilities, the Implementation Procedures also provide that the requested rejection of the Leases and Provider Agreements become effective as of the actual date of divestiture of such facilities. The Implementation Procedures The proposed Implementation Procedures provide that: (1) Each Divesting Facility will be subject to divestiture in accordance with the applicable state laws that set forth the Transition Procedures for such healthcare facilities; (2) Within three business days after the completion of the divestiture of a Divesting Facility, the Debtors will file with the Court and provide the Transition Notice to the Creditors' Committee, the DIP lenders, NHP, HHS/DOJ and the relevant state Medicaid agency of the date of the completion of the state-law Transition Process (the Transition Date); (3) The rejection of any Lease or Provider Agreement with respect to a Divesting Facility shall be effective as of the Transition Date; (4) In the absence of an agreement to the contrary, NHP or a state Medicaid agency shall have 30 days from the date of the Transition Notice to submit a proof of claim for rejection damages; and (5) In the event that during the state-law Transition Process the Debtors and NHP agree on the transfer of a Divesting Facility as a going concern, the Debtors shall be entitled to opt out of the Transition Procedures with respect to such Divesting Facility (subject to any applicable state law), in which case the Debtors shall proceed in accordance with the Transfer Procedures. Rejection of the Medicare and Medicaid Provider Agreements The Debtors also seek to reject the Medicare and Medicaid Provider Agreements related to the operations at the Divesting Facilities because the Debtors are planning disposition of the Divesting Facilities and the Provider Agreements are consequently of no benefit to their estates. The Cross Default Provisions Certain of the Leases included in the motion contain provisions pursuant to which a default under one of those Leases constitutes a default under one or more leases with NHP that the Debtors are not presently seeking to reject. The Debtors believe that the cross default provisions are ineffective to bar a subsequent assumption of such other leases. In the event such cross-default provisions are found to be enforceable, the Debtors would need to reassess their business decision to reject certain of the Divesting Facilities' Leases because a rejection under those circumstances would jeopardize the Debtors' ability to assume certain other leases with NHP of facilities that the Debtors may wish to retain upon an emergence from chapter 11. Accordingly, the Debtors requested that the Court, as a condition to the rejection of such Leases, find to be unenforceable any cross-default provisions contained in any other leases between the Debtors and NHP. * * * The Debtors believe that the Implementation Procedures are fair and appropriate under the circumstances, represent a valid exercise of the Debtors' business judgment, and are an appropriate means to permit the Debtors to conclude their operational and financial responsibility for the Divesting Facilities. Accordingly, the Debtors requested that the Court enter an Order, pursuant to sections 363 and 365 of the Bankruptcy Code, (i) approving the rejection of the Leases, Medicare Provider Agreements and Medicaid Provider Agreements, effective as of the Transition Date, (ii) authorizing the commencement of the Transition Process, (iii) approving the Implementation Procedures, and (iv) granting the Debtors such other and further relief as is just. (Sun Healthcare Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) SUNBEAM CORP.: Court Approves Chapter 11 Disclosure Statement ------------------------------------------------------------ Judge Arthur J. Gonzalez of the U.S. Bankruptcy Court in Manhattan approved Sunbeam Corp.'s chapter 11 reorganization disclosure statement, according to Dow Jones. Gonzalez dismissed objections to the statement that weren't withdrawn or rendered moot by the modifications. A confirmation hearing will be held on July 17 and objections to the plan are due by June 28. The Boca Raton, Fla.-based company and its affiliates filed for chapter 11 protection on Feb. 6, listing assets of about $3 billion and liabilities of about $3.2 billion. (ABI World, May 4, 2001) TANDYCRAFTS: Gets Delisting Notice From New York Stock Exchange --------------------------------------------------------------- Tandycrafts, Inc. (NYSE: TAC) has been advised by the New York Stock Exchange (NYSE) that the Company's plan for compliance with continued listing standards has not been accepted by the NYSE and that the NYSE has determined that the Company's stock should be suspended prior to the opening on May 14, 2001. The Company has a right to a review of this determination and is evaluating this right. The Company is also evaluating its alternative trading options, including the pink sheets. The NYSE stated that this action was taken due to the Company's failure to meet the NYSE's continued listing standards requiring total global capitalization of not less than $50 million and total stockholder's equity of not less than $50 million, average market capitalization of not less than $15 million over a thirty (30) day trading period, and a 30-day average share price of not less than $1.00. Tandycrafts, Inc. (www.tandycrafts.com ) is a maker and marketer of picture frames and wall decor. Tandycrafts' products are sold nationwide through wholesale distribution channels, including mass merchandisers and specialty retailers. TOMANET: Appoints Consultants To Develop Reorganization Plan ------------------------------------------------------------ TomaNet Inc. (CDNX: Common Shares: YTI; Class A Shares: YTI - A) announced the appointment of a team of management consultants to develop a reorganization plan for the Company. The consulting team is comprised of Rod MacDonald, Bill Love and Patrick McDougall. MacDonald and Love are the principals of YNN Holdings Inc., which holds a 53% interest in Athena Educational Partners (AEP) Inc. Patrick McDougall is a Toronto businessman. The consulting team was appointed on April 2, 2001 by the Company's then CEO with the mandate to: (1) manage the day-to- day affairs of the Company on an interim basis; (2) develop a reorganization plan for the Company; and (3) cause a meeting of shareholders to be called. The consulting team also has been appointed to carry out a similar mandate on behalf of SKG Interactive Inc., which holds approximately a 54.2% interest in the Company. SKG Interactive currently holds a convertible debenture of Athena in the principal amount of $3.65 million. The current outstanding amount of the debenture is approximately $4.0 million. The Company also announced that a meeting of TomaNet shareholders is expected to be called within approximately three weeks for the purpose of electing a new Board of Directors. The shareholders meeting is expected to take place approximately during the last week of June, 2001. Moreover, two Company directors, Bernard G. Abrams and Charles T. Newman, both resigned on March 5, 2001, leaving the Company's board of directors without a quorum. Paul S. Romanchuk subsequently submitted his resignation as CEO and as the sole remaining director of the Company on April 26, 2001. Alan Magnacca resigned as president of the Company effective March 16, 2001 but is continuing to assist the Company on a consulting basis. The consulting team intends to present a reorganization and restructuring plan to the Company's new Board of Directors. URSUS TELECOM: Nasdaq Notifies of Possible Delisting of Shares -------------------------------------------------------------- Ursus Telecom Corporation (Nasdaq:UTCCQ), an international long distance carrier that provides VoIP, long distance, direct dial, value added and Internet based services, had been notified by the Nasdaq Listing Qualification Department the Ursus's securities would be delisted from the Nasdaq National Market for the Company's inability to maintain its net tangible assets above the minimum requirement of $4 Million, required for the continued listing on the Nasdaq National Market in accordance with the National Association of Securities Dealers, Inc.'s Rule 4450(a)(3). About Ursus Telecom Ursus, a specialist in carrier grade VoIP solutions worldwide, is an international long distance carrier that provides VoIP, long-distance, direct-dial, value-added and Internet-based services. Ursus has retail operations throughout Latin America, the Middle East, Africa and Europe, along with wholesale and retail operations in the United States. Ursus is also a licensed national and international long-distance carrier in Argentina and Peru. VALUE HOLDINGS: Names Alison Cohen As Interim President ------------------------------------------------------- Value Holdings, Inc. (OTCBB:VALH) announced that Alison Cohen, a director and past president of the company, has been named as interim president. I have accepted the resignations of Mr. Ziner and Mr. Maker and have rejoined the board of directors of Value Holdings, Mrs. Cohen said. "I shall serve as interim president and Value Holdings is committed to staying in business. Value Holdings will continue as a holding company seeking to acquire businesses with secure market niches and the potential for significant growth, she continued. "We will seek to utilize the tax loss carry-forwards in the company to attract profitable businesses and attempt to restore shareholder value. We will review opportunities presented to us by Gemini Integrated Financial Services Corp., our financial and investor-relations advisors. I have been advised that the receiver has now put Network Forest Products into bankruptcy, and Value Holdings will most likely write off its entire investment in Network and its subsidiaries. While Harron Hardware and Building Supplies and Cutler Forest Products are viable businesses, they are considered assets of Network by the receiver and while not in receivership at this time appear to be assets of Network's bankruptcy estate." VLASIC FOODS: Has Until September 30 To Make Lease Decisions ------------------------------------------------------------ Vlasic Foods International, Inc. sought and obtained an order extending their time to decide whether to assume, assume and assign, or reject unexpired non-residential leases of real property for the earlier of a period of six months to and including September 30, 2001, or the date of confirmation of the Debtors' plan of reorganization, subject to the rights of each lessor to request, upon appropriate notice and motion, that the Court shorten the extension period and specify a period of time in which the Debtors must determine whether to assume or reject an unexpired lease. In support of this request, the Debtors told Judge Walrath that they are lessees under a number of unexpired leases of nonresidential real property, the majority of which are leases used by the Debtors to operate corporate offices, sales offices, and warehouse space. All of these leases are assets of the Debtors' estates, and are integral to the Debtors' continued operations as they seek to reorganize. Although the Debtors expect that they ultimately may seek the Court's permission to reject some of the unexpired leases prior to the conclusion of these Chapter 11 cases, many, if not most, of the unexpired leases will prove to be desirable -- or necessary -- to the continued operation of the Debtors' businesses and thereby enhance the value of the Debtors' business. Still other unexpired leases, while not necessary for the Debtors' ongoing operations, may prove to be "below market" leases that may yield value to the estates through their assumption and assignment to third parties. Until the Debtors have had the opportunity to complete a thorough review of all of the unexpired leases, however, they cannot determine exactly which unexpired leases should be assumed, assigned or rejected. Although the Debtors have made progress in their evaluation of these leases, the Debtors simply have not yet been able to assess the value or marketability of all of the leases and therefore cannot make determinations with respect to which leases should be assumed and which, if any, should be rejected. Indeed, the Debtors told Judge Walrath they believe that, due to the importance of the task, and the Debtors' immediate and primary focus on stabilizing their businesses in the early stages of their Chapter 11 cases, it will be impossible for them to adequately assess whether to assume or reject the unexpired leases within the period specified by statute. The Debtors' decision to assume, assign or reject particular unexpired leases, as well as the timing of such assumption, assignment or rejection, depends in large part on the Debtors' business plans for the future. At this early juncture in these Chapter 11 cases, it is not yet possible for the Debtors to determine whether or not each of the locations covered by the unexpired leases will play a party in the Debtors' businesses going forward. (Vlasic Foods Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) W.R. GRACE: U.S. Trustee Appoints Asbestos Claimants' Committee --------------------------------------------------------------- Pursuant to 11 U.S.C. Sec. 1102(a)(1), the United States Trustee for Region III appointed these creditors and plaintiff-lawyers to serve on an 11-member Official Committee of Asbestos Personal Injury Claimants in W. R. Grace & Co.'s chapter 11 cases: Anthony Angiuli c/o Weitz & Luxenberg 180 Maiden Lance New York, NY 10038 (212) 558-5500 Harvey Blair C/o Goldberg, Persky, Jennings & White, P.C. 1030 Fifth Avenue Pittsburgh, PA 15219 (412) 471-3980 Roberta Jeffery, Esq. C/o Kazan, McClain, Edises, Simon & Abrams 171 Twelfth Street, Third Floor Oakland, CA 94607 (510) 465-7728 Steven Jones, as Personal Representative of The Estate of Barbara Ellen Hammack C/o Barron & Budd The Cantrum 3102 Oak Lawn Avenue, Suite 1100 Dallas, TX 75219 (214) 523-6265 Thomas J. Jones C/o Kelley & Ferraro Attention Michael Kelley, Esq. 1300 East Ninth St. 1901 Panton Media Building Cleveland, OH 44114 (216) 575-0777 Beverly Mauldin, as Personal Representative of The Estate of John Wesley Mauldin C/o Silber Pearlman 2711 North Haskell Ave., 5th Floor, LB 32 Dallas, TX 75204 (214) 874-7000 Jeanette Parent, as Personal Representative of The Estate of Thomas Parent C/o Ness, Motley, Loadholt, Richardson & Poole 28 Bridgeside Blvd. P.O. Box 1792 Mt. Pleasant, SC 29464 (843) 216-9545 Nathan O. Phillips, Jr. C/o Robins, Cloud, Greenwood & Lubel, L.L.P. 910 Travis, Suite 2020 Houston, TX 77002 (713) 650-1200 John Russell C/o Jacobs & Crumplar, P.A. 2 East 7th Street P.O. Box 1271 Wilmington, DE 19899 (302) 656-5445 Royce N. Ryan C/o McGarvey, Heberling, Sullivan & McGarvey, PC Attention John L. Herberling, Esq. 745 South Main St. Kalispel, MT 59901 (406) 752-5566 John Smutko C/o Cooney & Conway Attention John D. Cooney 120 North LaSalle St., 30th Floor Chicago, IL 60602 (312) 236-3029 Frank J. Perch, III, Esq., is the attorney assigned to monitor and represent the interests of the U.S. Trustee in W.R. Grace's chapter 11 cases. (W.R. Grace Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) WESTPOINT STEVENS: Moody's Slashes Senior Notes' Rating To Caa2 --------------------------------------------------------------- Moody's Investors Service downgraded the long-term debt ratings of WestPoint Stevens, Inc., which include: * $525 million issue of 7.875% senior unsecured notes due 2005, to Caa2 from B1 * $475 million issue of 7.875% senior unsecured notes due 2008, to Caa2 from B1 * Senior implied rating was lowered to Caa1 from Ba3, and * Issuer rating to Caa2 from B1. The rating outlook is negative while approximately $1.0 billion of debt securities are affected. Accordingly, this concludes Moody's rating review initiated on February 13, 2001. Moody's said the rating action is a result of WestPoint's weak balance sheet with debt levels approximating revenues; weak profit margins due to the loss of sales, higher raw material and energy costs and under-absorption of fixed costs; a significant de-capitalization of the company over the last couple of years which, coupled with adverse industry fundamentals, has decreased WestPoint's financial flexibility as well as debt protection measurements. Further, the ratings reflect WestPoint's weak returns on assets, poor cash generation and inventory management challenges, related Moody's. The negative outlook reflects Moody's belief that the company's sales will not materially improve this year and that, in fact, the company's core product sales may actually decline as vendors look to streamline their category presentation and continue promotional activity to stimulate weak sales. The company may be unable to improve capacity utilization and to reduce unit variable cost, as uncertain demand creates challenges in production and inventory management which continue to stress operating margins and cash generation, Moody's said. WestPoint Stevens Inc. is located in West Point, Georgia. It is a vertically integrated manufacturer and marketer of bed linens, towels, blankets, comforters, and accessories that are sold across multiple price points through each major retail distribution channel. WHEELING-PITTSBURGH: Exclusive Period Extended To June 14 --------------------------------------------------------- Wheeling-Pittsburgh Steel Corp. sought and obtained extensions of their exclusive periods during which to file a plan of reorganization and solicit acceptances of that plan. James M. Lawniczak, Esq., and Scott N. Opincar, Esq., at Calfee, Halter & Griswold LLP, explained to the Court that, since the petition date, the Debtors have been dealing with a multitude of complex supply, employee and contract issues common to complicated bankruptcy cases, issues that justify the requested extension so that the Debtors could draw up the proper reorganization plan. Debtors' counsel argued that the request should be granted considering that the Debtors, (a) have not had sufficient time to negotiate and prepare an acceptable plan, (b) are making a good faith effort towards reorganization, (c) are paying their postpetition debts as they become due, (d) are negotiating in good faith with their creditors and have kept the Committees fully apprised of their work and progress towards reorganization and (e) are not seeking the extension to pressure creditors into accepting an unsatisfactory plan. Noteholders' Committee's Partial Opposition Jean R. Robertson, Esq., at Hahn Loeser & Parks LLP, in Ohio, clarified for Judge Bodoh that the Noteholders' Committee is not opposed to an extension of the exclusivity periods, since the committee recognizes that the Debtors' bankruptcy cases are large and complicated and this is the Debtors' first request for an extension. However, the Noteholders' Committee believes that the requested extension is too lengthy and, there is no reason to allow the Debtors' control over the plan process to remain unchecked for another six months considering that the state of the steel industry is uncertain as is the direction in which these cases will proceed. By way of counterproposal, the Noteholders' Committee submits that the exclusive periods be extended for a period of 90 days without prejudice to the Debtors' right to seek further extension, if warranted, at the expiration of that time. Agreed Order by and between Parties In accord with the agreement between the Debtors and the Noteholders' Committee, Judge Bodoh granted the Debtors' motion and extends (a) the period within which the Debtors may exclusively file a reorganization plan for an additional 90 days, to and including June 14, 2001, and (b) the period in which the Debtors may solicit acceptances of the reorganization plan is extended, to and including August 13, 2001. (Wheeling- Pittsburgh Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) WICKES INC.: Stockholders To Meet In Illinois On May 23 ------------------------------------------------------- The Annual Meeting of Stockholders of Wickes Inc. will be held on Wednesday, May 23, 2001, at 10:00 a.m., Central Daylight Time, at the executive offices of the Company, 706 North Deerpath Drive, Vernon Hills, Illinois. The meeting will be held for the following purposes: (1) To elect three members of the Board of Directors for three-year terms and until their successors have been elected and qualified. (2) To approve the appointment of Deloitte & Touche LLP as independent auditors for the Company. (3) To transact such other business as may properly come before the meeting. Stockholders of record at the close of business on April 6, 2001, will be entitled to vote at the Annual Meeting. WINSTAR COMMUNICATIONS: Paying Prepetition Tax Obligations ---------------------------------------------------------- Winstar Communications, Inc. asked the Court for permission to pay, in their discretion, the prepetition tax and fee obligations owed to domestic and foreign governmental entities, unless subject to dispute, in the ordinary course of business and on their normal due dates. Such obligations include assessments, charges, interest, penalties, fines, settlements, judgments and similar tax or fee related obligations. Winstar makes this request pursuant to 11 U.S.C. Sec. 105(a). The prepetition tax and fee obligations at issue are appropriate for payment to the extent that they are priority or secured claims that are payable in full or, alternatively under the doctrine of necessity. A substantial number of the obligations will be coming due shortly after the commencement of these cases and Winstar desires to avoid disputes with governmental entities and the attendant expenditures that accompany such disputes. Such expenses are imminent if Winstar delays payment because governmental entities typically attempt to enhance their rights to payment. Winstar estimates the prepetition tax and fee obligations at $3,850,000, exclusive of federal income taxes. Winstar has sufficient resources to make such payments, Pauline K. Morgan, Esq., at Young Conaway Stargatt & Taylor, LLP, indicates. Ms. Morgan told the Court that prior to the petition date, Winstar incurred obligations to the international, federal, state and local governments in which it conducted business. As of the petition date, Winstar was current on all undisputed and known tax obligations. The payment of tax obligations will ultimately preserve the resources of the estates, thereby promoting their rehabilitation. If they are not paid in a timely manner, Winstar will be required to expend resources to resolve a multitude of issues related to such obligations. For example, issues that will be argued include: (a) whether the obligations are priority, secured or unsecured in nature, (b) whether they are proratable, prepetition or postpetition in full, and (c) whether penalties, interest and attorney's fees and costs are priority, secured or unsecured in nature. Delayed payment may also subject Winstar to actions by the governmental entities to revoke licenses and other privileges. Moreover, certain taxes are sales or use taxes, which may be considered to be trust funds that are not included in property of the Winstar estates, or as to which officers and directors may be held personally liable in the event of nonpayment. Collection efforts would pose an obvious distraction to management and others during these Chapter 11 proceedings. Ms. Morgan informed the Court that protections afforded to Winstar by the U.S. Bankruptcy Code are unavailable in foreign countries. Thus, delayed payment of obligations may result in forfeiture of rights to conduct business in respective jurisdictions, seizure or impoundment of assets, and possible civil and criminal liability. Becoming technical, Ms. Morgan informed those who will listen that, to the extent the prepetition tax and fee obligations are priority claims pursuant to section 507(a)(8) of the Code, or secured claims pursuant to section 506(a) of the Code, their payment should be authorized on the basis that they are required to be paid in full in any event as a condition to satisfying the plan confirmation requirements contained in section 1129 of the Code. Alternatively, payment of prepetition tax obligations is appropriate for authorization under the "doctrine of necessity," which is grounded in section 105(a). This Court "may issue any order, process or judgment that is necessary or appropriate to carry out the provisions of this title." Thus, "the ability of a Bankruptcy Court to authorize the payment of prepetition debt when such payment is needed to facilitate the rehabilitation of the debtor is not a novel concept." In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y. 1989). The focus of these cases should be on restructuring the massive amount of obligations relating to unsecured bank loans and debt securities, Ms. Morgan suggests. This makes the obligations owed to governmental authorities insignificant and will have a negligible effect on the recoveries of the major creditors in these cases. Moreover, the amount of the payment will likely be offset by the amount of resources not required for disputes that are unnecessary and wasteful. Finding that the Debtors' Motion is well taken, Judge Farnan granted the request in all respects. (Winstar Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLD KITCHEN: Appoints Joseph McGarr As Senior VP & CFO -------------------------------------------------------- World Kitchen, Inc. announced the appointment of Joseph W. McGarr to the position of Senior Vice President and Chief Financial Officer, effectively immediately. Mr. McGarr will report to Steven G. Lamb, president and CEO. In this new position, Mr. McGarr will be responsible for leading all finance activities at World Kitchen, including: worldwide financial control & reporting, tax, treasury, credit & collection, audit, business analysis, and institutional relationships. He will also play a key role in ensuring that the company's previously announced restructuring program meets all of its key financial objectives. This program, announced on April 3, 2001, is aimed at improving the cost structure of the organization through consolidation of manufacturing capacity, outsourcing of certain operations, and reduction in inventories and distribution costs. Joseph McGarr, 49, joins World Kitchen from Fort James Corporation, Deerfield, Illinois, where he served as Executive Vice President and Chief Financial Officer. In addition to providing worldwide financial leadership, he was also responsible for leading the $11 billion acquisition of Fort James by Georgia-Pacific Corp. During his 19-year career with Fort James, Mr. McGarr served in a variety of strategic, finance, supply chain and marketing positions with a focus on process improvement, cost reduction and operational streamlining. From 1995 to 1999 he served as Vice President of System Effectiveness, Vice President of Productivity and Senior Vice President of Productivity and Strategy. In these roles he implemented a successful company-wide productivity program, rationalized the firm's business portfolio to sharpen their consumer products focus, and led the post-merger integration of James River Corporation's $5.6 billion acquisition of Fort Howard. Joe's 26 years experience in strategic financial management, productivity enhancement, and business integration will be a wonderful asset to us as we complete the operational transformation necessary to meet our aggressive corporate goals, said Mr. Lamb. Given his strong skills and action-oriented management style, I expect Joe to quickly become a key contributor to our leadership team. Mr. McGarr earned a Bachelor of Science degree from The Cooper Union, New York, New York in 1973. After completing his MBA in Finance and Economics from the University of Rochester, Rochester, NY in 1975, Mr. McGarr began his career as a capital analyst with General Foods Corporation. In 1978 he joined American Can Corporation as Senior Project Analyst and the following year assumed responsibility as Associate Director of Strategic Planning. He joined Fort James Corporation in 1982 as Director, Manufacturing Planning. World Kitchen's principal products are glass, glass ceramic and metal cookware, bakeware, kitchenware, tabletop products and cutlery sold under well-known brands including CorningWare, Pyrex, Corelle, Visions, Revere, EKCO, Baker's Secret, Chicago Cutlery, Regent Sheffield, OXO and Grilla Gear. World Kitchen has been an affiliate of Borden, Inc. and a member of the Borden Family of Companies since April 1998. World Kitchen currently has major manufacturing and distribution operations in the United States, Canada, United Kingdom, South America and Asia-Pacific regions. Additional information can be found at: www.worldkitchen.com. WORLDTEX: Court Okays Disclosure Statement Despite Objection ------------------------------------------------------------ Despite an objection from the U.S. Trustee assigned to its case, Worldtex Inc. received bankruptcy court approval of its disclosure statement last week. Judge Sue L. Robinson of the U.S. District Court in Wilmington, Del., signed the order on Monday. A plan confirmation is scheduled for July 30, and objections are due July 16. (ABI World, May 4, 2001) ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658- 9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L. Metzler, Aileen Quijano and Peter A. Chapman, Editors. Copyright 2001. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. *** End of Transmission ***