/raid1/www/Hosts/bankrupt/TCR_Public/010521.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Monday, May 21, 2001, Vol. 5, No. 99
Headlines
ACR GROUP: Obtains Waiver of Debt Covenant Default from BofA
AUTUMN HILL: Defaults on NHI Loan Pact & Files For Bankruptcy
BANYAN STRATEGIC: Closes 27-Property Sale to Denholtz for $185MM
CAREMATRIX: Case Summary & 20 Largest Unsecured Creditors
CROWN RESOURCES: Looking For Funds To Pay $15MM Convertible Debt
CYBERREBATE.COM: Files Chapter 11 Petition in E.D. New York
CYBERREBATE.COM: Chapter 11 Case Summary
DIAL CORPORATION: Amends $450 Million Credit Facility
eMARKETWORLD.COM: Trade Show Organizer Files For Chapter 11
eMARKETWORLD.COM: Case Summary & 20 Largest Unsecured Creditors
FINOVA GROUP: Disclosure Statement Hearing Set for June 7
FOUNTAIN VIEW: S&P Slashes Corporate & Sub Debt Ratings to 'D'
GENESIS HEALTH: Creditors Ask For More Time To Challenge Liens
GENESIS HEALTH: Reports Second Quarter Fiscal 2001 Results
GENESIS HEALTH: Multicare Discloses 2001 Second Quarter Results
HARNISCHFEGER: Settles Claims Asserted by United Steelworkers
INNOFONE.COM: S. Solis & W. Pickering Join Board of Directors
INSILCO HOLDINGS: S&P Downgrades & Puts Ratings on Credit Watch
INTEGRATED HEALTH: Court Okays Transfer Of 2 Nevada Facilities
KINDRED HEALTHCARE: Renews 22 Leases With Health Care Property
LERNOUT & HAUSPIE: Acquires Sail Labs' ICM Technology
LOCALBUSINESS.COM: Offers Nonessential Assets for Sale
LODGIAN INC.: Moody's Downgrades Sr. Subordinated Notes to Caa2
LOEWEN GROUP: Proposes Mandatory Mediation Procedures For Claims
LTV CORP.: Clarifies & Supplements Cash Management Order
LTV CORP.: Cleveland-Cliffs & Minnesota Power Bid On Mine Assets
MARINER HEALTH: Assumes And Assigns TN Lease To Branham & Day
NVID INTERNATIONAL: Recurring Losses Raise Going Concern Doubts
OXIS INTERNATIONAL: Nasdaq Denies Appeal And Delists Shares
PACIFIC GAS: Files Comments On Ratepayers' Committee Formation
PACIFIC GAS: Shareholders Call For CEO Bob Glynn to Resign
PARAGON CORPORATE: S&P Affirms Corporate & Senior Ratings At CC
PATHNET: Seeks Court Approval For Employee Retention Plan
SABLE INSURANCE: S&P Assigns 'R' Financial Rating
SERVICE MERCHANDISE: Hires Jane Gilmartin As President and CMO
SNTL CORPORATION: New Ticker Symbol Is SNLLQ
SSE TELECOM: Files for Chapter 11 Bankruptcy Protection
STELLEX TECHNOLOGY: Creditors to Recover Less Than Half of Debt
STERLING CHEMICALS: S&P Junks Debt Ratings
TCPI INC.: Losses & Cash Burn May Trigger Bankruptcy Filing
TRANSTECHNOLOGY: Posts Fourth-Quarter and FY 2001 Losses
TRAVELERS: Finantra Capital Forecloses Investment After Default
W.R. GRACE: Moves To Reject Four Unprofitable Subleases
WASHINGTON GROUP: Nevada Court Approves All First Day Motions
ZANY BRAINY: Obtains Court Nod For $115 Million DIP Financing
BOND PRICING: For the week of May 21 - May 25, 2001
*********
ACR GROUP: Obtains Waiver of Debt Covenant Default from BofA
------------------------------------------------------------
ACR Group, Inc. (OTC Bulletin Board: ACRG) announced that it
amended its loan agreement with its senior lender, Bank of
America, N.A., to waive the Company's non-compliance with
certain financial covenants of its agreement as of February 28,
2001, the end of its last fiscal year. The Company believes that
it will be in compliance during fiscal 2002 with amended
financial covenants contained in the agreement.
The Company also announced that it had received from Nasdaq
notice that the Nasdaq Listing Qualifications Panel was
unwilling to grant the Company additional time for the Company's
common stock to again attain a closing bid price of at least
$1.00 per share, and accordingly determined to delist the
Company's common stock from The Nasdaq Stock Market, effective
May 9, 2001.
A market for the stock now is being made over-the-counter under
the symbol "ACRG" as before, or by the symbols "ACRG.OB", or
"ACRG.BB", depending on the source of the quote.
About ACR Group, Inc.
ACR Group, Inc. is a wholesale distributor of air-conditioning,
heating, and refrigeration ("HVACR") equipment and supplies. The
Company owns and operates 10 companies with 47 locations in 10
states including Texas, Louisiana, Alabama, Georgia, Tennessee,
Florida, California, Nevada, Colorado and New Mexico.
AUTUMN HILL: Defaults on NHI Loan Pact & Files For Bankruptcy
-------------------------------------------------------------
National Health Investors, Inc. (NYSE:NHI) (NYSE:NHIPr), one of
the nation's largest health care real estate investment trusts,
announced that its borrower, Autumn Hill Convalescent Centers,
Inc. has filed for reorganization under the bankruptcy law.
In 1997 NHI funded a mortgage loan for Autumn Hills in the
original principal amount of $51,500,000. Collateral for the
loan included first mortgages on the health care facilities and
certain corporate and personal guarantees. Due to the fact that
NHI had not received all of the principal and interest payments
due since April of 2000, the company had entered into a
forbearance agreement with Autumn Hills. Autumn Hills has since
breached that forbearance agreement and filed for
reorganization.
It is yet to be determined if NHI will receive mortgage payments
from Autumn Hills during the bankruptcy period. It is NHI's
policy to report revenue only as payments are received on non-
performing loans. The current book value on this loan is
$42,000,000.
National Health Investors, Inc. is a health care real estate
investment trust that makes first mortgage loans and leases
certain owned real estate. The common and preferred stocks of
the company trade on the New York Stock Exchange with the
symbols NHI and NHIPr respectively. Additional information
including the company's most recent press releases may be
obtained on NHI's Web site www.NHInvestors.com.
BANYAN STRATEGIC: Closes 27-Property Sale to Denholtz for $185MM
----------------------------------------------------------------
Banyan Strategic Realty Trust (Nasdaq: BSRTS) completed the sale
of twenty-seven of its properties to affiliates of Denholtz
Management Corp. pursuant to a contract entered into on January
8, 2001. The total sales price for the twenty-seven properties
was $185.25 million, of which $3 million was in the form of
promissory notes due June 30, 2002, and the remainder in cash.
Denholtz made an immediate pre-payment against the promissory
notes in the amount of $0.6 million.
Banyan indicated that the sale proceeds were used to retire
$93.06 million in debt and $4.85 million for prorations and
transaction expenses. The remaining proceeds of $84.34 million,
including $1.5 million which is being held in escrow for post-
closing adjustments, will be available for general corporate
purposes, including the anticipated first liquidating
distribution to shareholders. Banyan announced that it intends
to distribute between $4.60 and $4.80 per share to shareholders
within thirty days.
The transaction leaves Banyan with three real estate assets:
(i) University Square in Huntsville, Alabama, which is under
contract of sale to Denholtz and is scheduled to close
in December, 2001;
(ii) 6901 Riverport Drive in Louisville, which can be "put"
to Denholtz upon 90 days notice and
(iii) The Northlake Festival Tower Shopping Center in Atlanta,
Georgia, which is subject to the same "put" provisions
as the Riverport property.
L.G. Schafran, Banyan's Chairman and Interim Chief Executive
Officer/President, commented: "We are gratified to have
completed the sale of 85% of our portfolio and to have achieved
this major milestone in furthering Banyan's announced plan of
liquidation. We will now focus on marketing the Riverport and
Northlake properties and on the pending litigation with Leonard
G. Levine, Banyan's suspended president. We anticipate that the
liquidation will be completed when these matters have been
resolved, and the purchase money notes that are a part of the
Denholtz transaction, have been paid in full. However, we
believe that interim liquidating distributions will be made as
these separate items are addressed and resolved. Absent
extenuating circumstances, we anticipate the plan of liquidation
will be completed before the end of 2002. We remain on target
for total liquidating distributions of approximately $6.00 per
share."
Banyan Strategic Realty Trust is an equity Real Estate
Investment Trust (REIT) that, prior to this transaction, owned
primarily office and flex/industrial properties. The properties
are located in certain major metropolitan areas of the Midwest
and Southeastern United States, including Atlanta, Georgia and
Chicago, Illinois, and smaller markets such as Huntsville,
Alabama; Louisville, Kentucky; Memphis, Tennessee; and Orlando,
Florida. As of this date Banyan has 15,488,137 shares of
beneficial interest outstanding.
CAREMATRIX: Case Summary & 20 Largest Unsecured Creditors
---------------------------------------------------------
Debtor: CareMatrix of Palm Beach Gardens
951 Mariner's Island Blvd., Suite 700
San Mateo, CA 94404
Type of Business: Operates a nursing home facility known as "the
Garden's Court, located at 3803 PGA Boulevard,
Palm Beach Gardens, Florida. "The Gardens
Court" provides long-term care, post-acute
care, rehabilitative care, respite care and
other specialized services to the elderly.
Chapter 11 Petition Date: May 3, 2001
Court: District of Delaware
Bankruptcy Case No.: 01-01635
Judge: John C. Akard
Debtor's Counsel: Michael Lastowski, Esq.
Duane, Morris, & hecksher
1100 North Market Street
Suite 1200
Wilmington, DE 19801-1246
(302) 657-4942
Total Assets: $2,800,000
Total Debts: $5,300,000
Debtor's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
Mariner Health Resources, Inc. $1,282,448
and Prism Rehab Systems, Inc.
c/o Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
CareMatrix of Massachusetts, Inc. $327,082
120 Wells Avenue
Newton, Ma 02459
Compscript $69,883
PBG Medical Mall $36,520
Bethesda Memorial $29,662
Reliable Health Care Services $24,930
First Coat Services Options $19,092
City of Palm Beach Gardens $16,593
Wound Management Technology $16,307
Medical Staffing Network $14,218
Shapiro & Adams $10,000
MacArthur Center Property $9,331
Owners' Association
Gulf South Medical supply $8,640
Florida Department of Labor $7,853
& Employment
Seacrest Services $6,771
S&D Coffee, Inc. $5,273
Cheney Brothers, Inc. $3,870
George Britain Land Design $3,030
Kronos Incorporated $2,932
Starmed Health Personnel $2,709
CROWN RESOURCES: Looking For Funds To Pay $15MM Convertible Debt
----------------------------------------------------------------
Crown Resources Corporation reported a net loss of $370,000, or
$0.03 per share, for the first quarter of 2001, compared with a
net loss of $813,000, or $0.06 per share, for the first quarter
of 2000.
On October 18, 2000, Crown's ownership percentage of Solitario
Resources Corporation was reduced from 57.2% to 41.3% as a
result of Solitario's completion of a Plan of Arrangement
whereby it acquired Altoro Gold Corp. of Vancouver, Canada,
through the issuance of approximately 6.2 million shares of
Solitario. Accordingly, Crown has accounted for its investment
in Solitario under the equity method since October 18, 2000.
Prior to that date Solitario's income, expenses and minority
interest were included in the Consolidated Statement of
Operations.
The reduced loss for 2001 is primarily attributable to a
reduction in exploration, property abandonments and general
administrative expenses during the first quarter compared to the
prior year.
During the first quarter of 2001, Crown exchanged 100% of its
shares in its wholly owned subsidiary Judith Gold Corporation
for 200,000 shares of Canyon Resources Corporation common stock
valued at $213,000, resulting in a gain on sale of $210,000.
Crown's revenues during the first quarter of 2000 included
$100,000 of mineral property option proceeds related to
Solitario's Bongara property.
Crown incurred no exploration expense during the first quarter
of 2001, compared to $418,000 in 2000 as a result of the
deconsolidation of Solitario and Crown's decision to terminate
its exploration program in Mexico. Crown recorded no property
abandonments during the first quarter of 2001, compared to
$59,000 during the first quarter of 2000, related to its Mexican
exploration properties. Administrative expenses were $125,000 in
the current quarter, compared to $392,000 in 2000 as a result of
reduced exploration activities, the deconsolidation of Solitario
expenses and reduced staff and travel-related expenses in 2001.
During the quarter ended March 31, 2001, the Company spent
$8,000 for mineral property additions, compared to $46,000 in
the first quarter of 2000.
As of March 31, 2001, Crown had cash of $383,000 and a negative
working capital of $14,550,000. Crown has reported it has
insufficient resources to pay its $15,000,000 convertible
debentures which are due in August 2001. Management is seeking
outside financing to raise additional funds through either
borrowing arrangements or the sale of assets to facilitate
payment of the debentures. Additionally, management may seek to
restructure the terms of the debentures. There is no assurance
that Crown will be able to raise sufficient funds or to
restructure the debentures on acceptable terms.
Crown is traded on the OTC bulletin board under the trading
symbol "CRRS" and on the Toronto Stock Exchange under the symbol
"CRO."
CYBERREBATE.COM: Files Chapter 11 Petition in E.D. New York
-----------------------------------------------------------
CyberRebate.com, Inc., an on-line retailer headquartered in Long
Island, NY, filed for bankruptcy protection under Chapter 11 in
the Eastern District of New York.
As of the filing time, CyberRebate.com suspended operations on
its Web site.
Questions regarding customers, vendors and others affected by
this action will be resolved as the bankruptcy process proceeds.
Most employees were already released Wednesday morning. A small
staff will remain to take the company through bankruptcy.
More information will be available once the bankruptcy process
gets underway.
Customers will be contacted regarding their rights and remedies.
CYBERREBATE.COM: Chapter 11 Case Summary
----------------------------------------
Debtor: CyberRebate.com Inc
fka ERG Corp
70 East Sunrise Highway
Valley Stream, NY 11580
Chapter 11 Petition Date: May 16, 2001
Court: Eastern District of New York (Brooklyn)
Bankruptcy Case No.: 01-16534
Judge: Carla E. Craig
Debtor's Counsel: Ruskin Moscou, Esq.
Evans & Faltischek
170 Old Country Road
Mineola, NY 11501
516-248-9500
DIAL CORPORATION: Amends $450 Million Credit Facility
-----------------------------------------------------
The Dial Corporation (NYSE: DL) has reached agreement with its
lenders to extend and amend an existing $450 million credit
facility. The agreement effectively extends the $180 million
short-term committed portion of the credit facility from July
2001 to May 2002. The $270 million long-term committed portion
expires in July 2005.
The credit facility's minimum net worth covenant will be
adjusted for losses, subject to certain maximum amounts, from
any disposition of its Specialty Personal Care (SPC) and/or
Argentine businesses. In addition, the Company agreed to other
changes that are consistent with its strategy of repaying debt,
including the limitation of dividends to current levels and
restrictions on share repurchases. Further, the Company agreed
to use the cash proceeds from asset sales and debt or equity
financings to reduce by varying amounts the commitments under
the facility.
The Dial Corporation, headquartered in Scottsdale, Ariz., is one
of America's leading manufacturers of consumer products,
including Dial soaps, Purex laundry detergents, Renuzit air
fresheners, Armour Star canned meats, and the Sarah Michaels and
Freeman Cosmetics specialty personal care brands. Dial products
have been in the marketplace for more than 100 years. For more
information about The Dial Corporation, visit the Company's Web
site at www.dialcorp.com.
eMARKETWORLD.COM: Trade Show Organizer Files For Chapter 11
-----------------------------------------------------------
Richmond-based eMarketWorld Inc., faced with at least $12
million in debt, filed for chapter 11 petition in the US
Bankruptcy Court in the Eastern District of Virginia on May 11,
2001.
Rather than be forced by creditors into an involuntary
bankruptcy, company Chairman and Chief Executive Officer Skip
Brickley said that it was better that the company filed itself
for it to be able to continue to pursue refinancing or a sale of
all or parts of its assets, according to Richmond Times-
Dispatch.
Mr. Brickley also disclosed that from nearly 200 employees last
year, the company is down to about 20 at present, many of whom
are working without pay to organize an upcoming health care
industry trade show, the Richmond Times-Dispatch related. He
said, 'The mission now is to produce the spring health care show
in San Diego this month. If I can get that show to market, I can
still sell [the rights to produce the show] to somebody for
value. If I don't, I add more creditors to the list and I
compound the situation.'
Reportedly, the company had $24 million in revenue in 2000, but
it also posted a $17 million loss, which included one-time
write-offs linked to office closures and other items.
Meanwhile, some former employees have suggested that
eMarketWorld's troubles can be attributed to poor management and
blame Brickley for fumbling opportunities to sell the company or
some of its shows, Richmond Times-Dispatch reported.
eMARKETWORLD.COM: Case Summary & 20 Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: eMarketWorld.com, Inc.
1400 Everman Parkway
Forth Worth, TX 76140
Chapter 11 Petition Date: May 11, 2001
Court: Eastern District of Virginia
Bankruptcy Case No.: 01-60845-DOT
Judge: Douglas O. Tice Jr.
Debtor's Counsel: Paula S. Beran, Esq.
LeClair Ryan, A Professional Corporation
707 East Main Street, Suite 1100
Richmond, VA 34679
(804) 783-2003
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $10 Million to $50 Million
Debtor's List of 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Sheraton Hotels Trade $969,286
P. Leva
52nd Street
811 7th Avenue
New York, NY 10019
(212) 841-6425
iXL Trade $955,394
Phillip Wade
4600 Cox Road
Glen Allen, VA 23060
(804)217-8888
Audio Visual Headquarters Trade $704,833
Richard Tucker
2300 Gladwick Street
Rancho Dominguez. CA 90220
(310) 885-4200
Hilton Trade $572,331
Ernie Garcia
san Francisco Towers
333 O'Farrell Street
San Francisco, CA 94102
(415) 923-5013
Freeman Decorating Company Trade $411,574
John O'Connell
1515 Washington Street
Braintree, MA 02184
(781) 360-7550
American Express Trade $384,130
PO Box 114
Newark, NJ 07101
(800) 553-6464
Lorraine Cichowski Severance $369,281
4102 Bromley Lane
Richmond, VA 23221
(804) 358-4786
Mariott Trade $338,610
Gail Frzer
New York Mariott Marquis
1535 Broadway
New York, NY 10036
(212) 398-1900
Christian & Barton, LLP Trade $314,979
909 East Main Street
Suite 1200
Richmond, VA 23219
Merritt 7 Venture LLC Notes Payable $300,000
John P. Crossby
401 Merritt 7 Corporate Park
Norwlk, CT 06850
(203) 849-8087
Mason Dirrickson Severance $277,500
3603 Muirfield Green Place
Midlothian, VA 23112
(804) 744-7202
Robin Webster Severance $237,500
Roy Beller Severance $233,750
Jonathan Yarmis Severance $218,750
Walt Tudor Severance $218,750
Amsterdam RAI Trade $203,165
Hyatt Regency Grand Cypress Trade $199,702
Pan Communications Trade $165,293
Het Strategem Trade $163,604
Edgar McIntyre Severance $161,458
FINOVA GROUP: Disclosure Statement Hearing Set for June 7
---------------------------------------------------------
A federal bankruptcy judge in Wilmington, Del., will hear
arguments on June 7 regarding Finova Group Inc.'s disclosure
statement, according to TheDeal.com. The statement was filed on
May 3. Approval of that statement will allow the Scottsdale,
Ariz.-based company to solicit votes required for the overall
plan's approval. The court has set a July 13 deadline for
creditors to make claims against Finova.
Warren Buffett's Berkshire Hathaway Inc. and Leucadia National
Corp. have agreed to infuse Finova with $6 billion in exchange
for control, via a joint venture dubbed Berkadia. Unhappy
creditors have been trying to arrange a new deal with GE Capital
Corp. If an alternate plan can be worked out, it's likely the
proposal will be submitted to the Finova board before next
month's hearing. Finova, a specialty finance company, filed for
chapter 11 protection in March under an agreement between the
company, Berkshire and Leucadia. (ABI World, May 17, 2001)
FOUNTAIN VIEW: S&P Slashes Corporate & Sub Debt Ratings to 'D'
--------------------------------------------------------------
Standard & Poor's cut Fountain View Inc.'s corporate credit
rating D from CC and subordinated debt rating to D from C. All
ratings are removed from CreditWatch, where they were placed
April 17, 2001.
The downgrade follows the nursing home chain's announcement that
it has not made the payment of interest on its subordinated
notes within the 30-day grace period following the original due
date of April 16, 2001. The company cited that it was unable to
reach agreement with its bank group on a restructuring of its
debt. The ratings were placed on CreditWatch following the
company's announcement that it would defer payment of interest
on the notes because of inadequate liquidity related to
substantial increases in professional liability and workers'
compensation insurance costs. At that time, the company said
that it might be unable to make payments due on its bank loan
also.
GENESIS HEALTH: Creditors Ask For More Time To Challenge Liens
--------------------------------------------------------------
The Prepetition Secured Lenders and the Official Committee of
Unsecured Creditors of Genesis Health Ventures, Inc. agreed and
sought the Court's authority to extend the Initial Deadline,
pursuant to the DIP Order, up to and including July 16, 2001 for
the purpose of allowing the Committee to challenge (without any
admission by the Banks that any such challenge is meritorious
and with full reservation of the Banks' rights to object to any
such challenge) the following:
(a) twenty-four fixture and mortgage filings (the Pre-
petition Preference Liens), which the Committee asserts that the
Banks completed during the ninety days prior to the Petition
Date (June 22, 2000);
(b) eight fixture and mortgage filings which the Committee
asserts that the Banks completed on or after the Petition Date
(the Post-petition Liens) which were not authorized by the
Bankruptcy Court and may have been in violation of the automatic
stay;
(c) two of the Banks' security interests in certain of the
Debtors' real property which the Committee asserts may attach
only to a portion of the real property owned by the Debtors (the
incomplete Liens);
(d) liens which the Banks may have on the Debtors' cash on
hand at the Petition Date (the Cash Liens);
(e) payments made by the Debtors to the Banks in exchange
for the Banks' agreement to refrain from accelerating the loans
made under the Fourth Amended and Restated Credit Agreement or
exercising their right of setoff as a result of the Debtors'
default under the Fourth Credit Agreement, which the Committee
asserts may be recoverable as preferential payments pursuant to
11 U.S.C. Section 547 (the Preferential Forbearance Payments);
(f) the Adequate Protection Payments paid to the Banks
pursuant to paragraph 14 of the DIP Order.
Specifically,
-- the 24 fixture and mortgage filings (the Pre-petition
Preference Liens) in (a) above refer to:
Property
Debtor Description Issue
------ ----------- -----
Genesis Eldercare Atlantis Center Second leasehold
Properties, Inc. Palm Beach County, mortgage ($16.8 mil)
Florida filed on 3/30/00.
The first mortgage
is limited to $41.1
mil plus interest
and advances for
taxes and insurance.
Same Debtor Same Description UCC-1 filed for
fixtures on 3/30/00.
Genesis Eldercare Bowmans Center; Second leasehold
Properties, Inc. Volusia County, mortgage ($16.8 mil)
Florida filed on 4/3/00.
The first mortgage
is limited to $41.1
mil plus interest
and advances for
taxes and insurance.
Genesis Eldercare Same Description Not clear why Debtor
National Centers, is different. UCC-1
Inc. filed for fixtures
on 4/3/00.
Genesis Eldercare Fairway Oaks Center; Second leasehold
Properties, Inc. Hillsborough County, mortgage ($16.8 mil)
Florida filed on 4/3/00. The
first mortgage is
limited to $41.1 mil
plus interest and
advances for taxes
and insurance.
Same Debtor Same Description UCC-1 filed for
fixtures on 4/3/00.
Genesis Eldercare Oakwood Center; Second leasehold
Properties, Inc. Lake County, mortgage ($16.8 mil)
Florida filed on 4/4/00. The
first mortgage is
limited to $41.1 mil
plus interest and
advances for taxes
and insurance.
Same Debtor Same Description UCC-l filed for
fixtures on 4/4/00.
Genesis Eldercare Riverwood Center; Second leasehold
Properties, Inc. Duval County, mortgage ($16.8 mil)
Florida filed on 4/4/00. The
first mortgage is
limited to $41.1 mil
plus interest and
advances for taxes
and insurance.
Same Debtor Same Description UCC-1 filed for
fixtures on 4/4/00.
Genesis Eldercare Tierra Pines Center; Second leasehold
Properties, Inc. Pinellas County, mortgage ($16.8 mil)
Florida filed on 4/3/00. The
first mortgage is
limited to $41.1 mil
plus interest and
advances for taxes
and insurance.
Same Debtor Same Description UCC-1 filed for
fixtures on 4/5/00.
Meridian Heritage at First mortgage
Healthcare, Inc. Longwood; recorded on
Seminole County, FL 4/14/00.
McKerley Health Laurel Center; First mortgage
Care Centers, Inc. Hillsborough County, filed on 5/3/00.
New Hampshire
Same Debtor Same Description UCC-l filed for
fixtures on 5/3/00.
McKerley Health Lebanon Center; UCC-l filed for
Facilities Grafton County, fixtures on
New Hampshire 6/22/00.
Genesis Eldercare Williamsburg Center; Subordinate deed of
Properties, Inc. James City County, trust filed on
Virginia 4/4/00.
Genesis Eldercare Windham Center; Subordinate Credit
Properties, Inc. Albermarle County, Line Deed of Trust
Virginia filed on 5/2/00.
Recovery against the
property is limited
to $25.5 million.
Same Debtor Same Description UCC-1 filed for
fixtures on
4/13/00.
Genesis Eldercare Woodmont Center; Subordinate deed of
Properties, Inc. Stafford County, trust filed on
Virginia 4/7/00. Recovery
against the property
is limited to
$25.5M.
Genesis Eldercare Same Description Not clear why the
National Centers, Debtor is different.
Inc. UCC-l filed for
fixtures on 4/7/00.
State Street Headquarters; Subordinate mortgage
Associates, L.P. Kennett Square, filed on 6/13/00.
Pennsylvania There are two senior
mortgages recorded
on 3/7/97 executed
by State Street
Associates, L.P. and
Genesis Eldercare
Properties, Inc.
Crestview North, Bucks County, Second Mortgage
Inc. Pennsylvana recorded on 06/12/00
Same Debtor Same Description Fixture filing
recorded on 06/12/00
-- the 8 fixture and mortgage filings (the Post-petition
Liens) in (b) above refer to:
Property
Debtor Description Issue
------ ----------- -----
Genesis Health Harrington Center; UCC-1 filed
Ventures of Colchester, for fixtures
Bloomfield, Inc. Connecticut on 6/22/00
Meridian Heritage at Longwood; UCC-1 filed for
Healthcare, Inc. Seminole County, FL fixtures on 6/22/00
Keystone Nursing Keystone Center; UCC-1 filed for
Home, Inc. Worcester County, MA fixtures on 8/2/00
Lincoln Nursing Lincoln Center, UCC-1 filed
Home, Inc. Worcester County, MA for fixtures on
8/2/00
Wayside Nursing Wayside Center; UCC-1 filed for
Home Worcester County, MA fixtures on 6/22/00
McKerley Health Holton Point; UCC-1 filed for
Facilities Coos County, NH fixtures on 6/22/00
McKerley Health Lebanon Center; UCC-1 filed for
Facilities Grafton County, NH fixtures on 6/22/00
State Street Headquarters; UCC-1 filed for
Associates, L.P. Kennett Square, PA fixtures on 6/23/00
-- the 2 Banks' security interests in certain of the
Debtors' real property (the incomplete Liens) in (c)
above refer to:
Property
Debtor Description Issue
------ ----------- -----
Meridian Highland Lakes Mortgage does not
Healthcare, Inc. Center; encumber Parcel IV
Polk County, FL (which appears to be
an easement)
Geriatric and Lacey Center; Mortgage does not
Medial Services, Ocean County, encumber
Inc. New Jersey Tract II (which
appears to be
10 plus acres)
-- the Preferential Forbearance Payments in (e) above refer
to:
(1) $666,667.00 paid as a "forbearance fee" to the Banks
on March 22, 2000, pursuant to the forbearance
agreement executed between the Debtors and the Banks
on or about March 20, 2000 (the Forbearance
Agreement);
(2) $1,250,000 paid to the Banks on May 19, 2000 as a
"forbearance payment" pursuant to the forbearance
agreement executed between the Banks and the Debtors
on May 19, 2000 (the Second Forbearance Agreement);
and
(3) $l,250,000 paid to the Banks on May 31, 2000 as a
"forbearance payment" pursuant to the Second
Forbearance Agreement.
The parties expressly stipulated that the Initial Deadline is
not extended for the Committee as to any other potential
challenge to the Banks' liens on pre-petition collateral or as
to any claim or cause of action against the Banks that is not
specified in the Stipulation.
The parties agreed that the July 16, 2001 deadline may be
extended by consent pursuant to a writing signed by counsel to
Mellon Bank, N.A. and the Committee without the need for further
Court Order.
The Multicare Stipulation
The parties in the Multicare cases also agreed that the deadline
for the Committee will be extended through and including July
16, 2001, for all purposes referred to in paragraph 23 of the
DIP Order only with regard to the following issues:
-- Whether the Pre-Petition Secured Parties have a valid,
enforceable or perfected pre-petition security interest in any
of the Debtors' assets that have been identified and set forth
on schedule 1 attached to the motion;
-- Whether the Pre-Petition Secured Parties have a valid,
enforceable or perfected pre-petition security interest in the
real property assets set forth on schedule 2 attached to the
motion;
-- Whether the Pre-Petition Secured Parties have a valid,
enforceable and perfected pre-petilion security interest in the
fixtures at the centers set forth on schedule 3 attached to the
motion;
-- Whether the Pre-Petition Secured Parties have a valid,
enforceable and perfected prepetition security interest in the
assets identified by asset schedules B-1, 8-2, B-3, B-17, B-20,
B-22, B-23 and B-33; and
-- Whether, as identified by the debtors' Statement of
Financial Affairs, any payments to any lenders during the 90 day
period preceding the filing of the debtors' bankruptcy
petitions, or during any applicable state law period, including
approximately $33 million in payments made to Mellon Bank, N.A.,
constitute avoidable and recoverable preferential payments.
The parties in the Multicare cases agreed that the effect of the
subordination provisions of the indenture dated August 11, 1997
among Genesis ElderCare Acquisition Corp., PNC Bank, National
Association, and Banque International A Luxembourg S.A are not
subject to the deadline for the Committee set forth in the DIP
Order and that such issues expressly are preserved for the
Committee's continued analysis. (Genesis/Multicare Bankruptcy
News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
GENESIS HEALTH: Reports Second Quarter Fiscal 2001 Results
----------------------------------------------------------
Genesis Health Ventures, Inc. (OTCBB:GHVIQ.OB) announced results
for the second quarter of fiscal 2001 concurrently with the
filing of its Form 10-Q.
Revenues were $630.1 million and $1.259 billion for the three
and six months ended March 31, 2001, respectively.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) and excluding $14.0 million of debt restructuring,
reorganization costs and other charges, and a loss of $2.3
million on the sale of an eldercare center were $45.3 million
for the quarter ended March 31, 2001.
EBITDA excluding $28.2 million of debt restructuring,
reorganization costs and other charges and a net loss of $0.5
million on the sale of two eldercare centers were $95.9 million
for the six months ended March 31, 2001.
Loss attributed to common shareholders was $36.7 million ($0.75
per share) and $69.5 million ($1.43 per share) for the three and
six months ended March 31, 2001, respectively.
"Our results for the three and six months ended March 31, 2001
were consistent with our expectations", commented George V.
Hager, Jr., Executive Vice President and Chief Financial
Officer. "The organization remains focused on maximizing cash
flow as we continue through our financial restructuring under
Chapter 11", stated Hager.
Genesis Health Ventures, a debtor-in-possession, provides
eldercare in the eastern United States through a network of
Genesis ElderCare skilled nursing and assisted living centers
plus long-term care support services nationwide including
pharmacy, medical equipment and supplies, rehabilitation, group
purchasing, consulting and facility management.
GENESIS HEALTH: Multicare Discloses 2001 Second Quarter Results
---------------------------------------------------------------
Genesis ElderCare Corp., the joint venture that owns The
Multicare Companies, Inc., announced results for the second
quarter of fiscal 2001 concurrently with the filing of its Form
10-Q.
Revenues were $158.9 million and $319.3 million for the three
and six months ended March 31, 2001, respectively.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) and excluding $4.4 million of debt restructuring,
reorganization costs and other charges, and a loss of $2.3
million on the sale of an eldercare center were $7.9 million for
the quarter ended March 31, 2001.
EBITDA excluding $7.9 million of debt restructuring,
reorganization costs and other charges, and a loss of $2.3
million on the sale of an eldercare center were $18.1 million
for the six months ended March 31, 2001.
Net loss was $8.1 and $11.2 million for the three and six months
ended March 31, 2001, respectively.
"Our results for the three and six months ended March 31, 2001
were consistent with our expectations", commented George V.
Hager, Jr., Executive Vice President and Chief Financial
Officer. "The organization remains focused on maximizing cash
flow as we continue through our financial restructuring under
Chapter 11", stated Hager.
Multicare, a debtor-in-possession, is a 43.6% owned consolidated
subsidiary of Genesis Health Ventures, Inc. for financial
reporting purposes and is managed by Genesis. Multicare provides
eldercare services in the eastern and mid-western United States
through skilled nursing and assisted living centers.
HARNISCHFEGER: Settles Claims Asserted by United Steelworkers
-------------------------------------------------------------
Harnischfeger Industries, Inc. seeks the Court's approval for
the Stipulation between the United Steelworkers of America and
the Maurer Class (collectively, the Claimants) and them
regarding proofs of claim for retiree health care benefits and
the Objections to the Joint Plan by United Steelworkers of
America, AFL-CIO and the Maurer Class.
The Claims
The Claimants filed on behalf of a class of retirees formerly
employed at Joy Technologies Inc.'s former New Philadelphia,
Ohio plant:
(a) proof of claim designated as Claim No. 6203 in the name
of the Maurer Class against Joy for prepetition retiree health
care benefits in the estimated amount of $573,333, and
(b) request for payment of administrative expenses
designated as Claim No. 12093 in the name of the Maurer Class
against Joy for postpetition retiree health care benefits
through December 31, 2000 in the amount of $171,537.
The Mauer Litigation and the Appeals
The underlying dispute giving rise to the Claims is litigation
styled as Donald H. Maurer et al. v. Joy Technologies Inc. which
as on the Petition Date, was pending in the U.S. Court of
Appeals for the Sixth Circuit as Nos. 98-3964 and 98-4029.
The Court of Appeals rendered its decision May 12, 2000, and
such opinion is reported at Maurer el al. v. Joy Technologies,
Inc., 212 F.3d 907 (6th Cir. 2000).
Stipulation to Lift Stay to Liquidate Damages
By Stipulation and Order dated November 21, 2000 Joy and the
Claimants agreed, among other things, that the automatic stay
would be modified to permit the parties to return to the U.S.
District Court for the Northern District of Ohio to liquidate
the remaining damages in accordance with the opinion of the
Sixth Circuit to determine what if any injunctive relief is
appropriate for future benefits; and for the parties to appeal
these determinations (if appropriate) to the Sixth Circuit.
The Maurer Litigation continues pursuant to the Stipulation, and
the amount of Joy's liability in the Maurer Litigation remains
to be determined by the District Court.
The Supersedeas Bond
Before the Petition Date, Joy filed a supersedeas bond with the
U.S. District Court for the Northern District of ohio in the
amount of approximately $410,000 to cover any possible
determination of liability on the part of Joy.
The Current Motion and Stipulation
The stipulation provides that
(A) With respect to Claim No. 6203 regarding prepetition
damages,
(1) the Claimants will elect, either,
(i) a cash payment for prepetition damages,
interest, and other costs that are asserted in
the Maurer Litigation and represented in Claim
No. 6203, which cash payment will not exceed
$410,000 subject to the parties' appeal rights,
or
(ii) treatment as a Class R3 unsecured claim against
Joy under the Debtors' Third Amended Plan of
Reorganization, as modified, subject to the
parties' appeal rights,
(2) if the Claimants elect the cash payment, then Claim
No. 6203 shall be expunged with prejudice without
further order of the Bankruptcy Court.
(B) Damages for retiree health benefits accruing on or
after the Petition Date through such date and in such amount as
may be determined by the District Court shall be paid in cash,
subject to the parties' appeal rights. The Debtors shall be
barred from arguing that any such damages accruing on or after
the Petition Date, subject to the parties' appeal rights, are
not administrative claims.
(C) Claim No. 12093 shall be expunged with prejudice
without further order of the Bankruptcy Court. Claimants are not
required to file an additional proof of claim for administrative
expenses for the period January 1, 2001 through the Confirmation
Date.
(D) The Claimants shall not draw on the Supersedeas Bond,
and shall execute any documents necessary to release the
Supersedeas Bond.
(E) Any distribution to the claimants will be made
according to procedures specified in the nonbankruptcy forum,
notwithstanding any order entered in the Bankruptcy Court.
(F) The Objections to the Plan filed by United Steelworkers
of America, AFL-CIO and the Maurer Class are withdrawn.
(Harnischfeger Bankruptcy News, Issue No. 42; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
INNOFONE.COM: S. Solis & W. Pickering Join Board of Directors
-------------------------------------------------------------
Innofone.com Inc., (OTCBB:INNF) announced the appointment of two
new members to its Board of Directors.
Ron Crowe, Chairman of the Board expressed the unanimous support
of the current Board of Directors in the new appointments of Mr.
Stephane Solis and Mr. Walter Pickering to the Board. Mr. Crowe
went on to say, "the addition of these new board members will
strengthen the Board and enhance our overall position while
assisting Innofone in moving forward with its plans to
restructure the company, and build shareholder value."
Stephane Solis is an independent consultant providing financial
services to emerging companies in the technology sector. Mr.
Solis was previously with Groome Capital.com Inc., leading that
company's corporate finance activities in Montreal. Prior to
that, Mr. Solis co-founded GLS Capital Inc. in 1993, an
institutional research boutique specializing in the information
technology sector. Two years later, Mr. Solis sold GLS Capital
to Yorkton Securities Inc. and joined the corporate finance team
heading the company's Montreal operations. He holds a B.A in
Political Sciences from the University of Quebec and an M.A in
Economics from McGill University. Mr. Solis currently serves as
Director on the board of Equilar Capital Corporation and its
wholly owned subsidiary Credit-Chip Corporation.
Walter Pickering joins the Innofone board with more than 23
years management experience, with the last 15years being spent
in the high tech sector. As President of a management consulting
firm in British Columbia, Canada (BC) Mr. Pickering has worked
with major BC Universities, Companies, the National Research
Council, the Science Council of BC, and a large number of
engineering and R&D firms since 1987. For the past three years
he has also held the position of Executive Director of the
Canadian Institute for Market Intelligence, an NRC financed
Institute. He has also had significant experience in the past 10
years with international tech transfer in Asia and Central
Europe. Mr. Pickering has a Master in Business, and has served
on the Board of several public companies including, Waverider
(WAVC) and ePhone (EPHO).
Innofone will seek to be acquired by or acquire an interest in a
business entity that desires to seek the perceived advantages of
a corporation, which has a class of securities, registered under
the Securities Exchange Act of 1934. The Company does not plan
to restrict its search to any specific business, industry or
geographic location.
INSILCO HOLDINGS: S&P Downgrades & Puts Ratings on Credit Watch
---------------------------------------------------------------
Standard & Poor's lowered its ratings on Insilco Holding Co. and
its subsidiary, Insilco Technologies Inc. (see list below). At
the same time, Standard & Poor's placed all ratings on
CreditWatch with negative implications. Total debt was
approximately $440 million as of March 31, 2001.
The rating actions reflect the company's significant decline in
operating performance in the first quarter of fiscal 2001,
resulting in very weak credit protection measures, constrained
financial flexibility, and heightened financial risk.
Insilco is a manufacturer serving niche markets, primarily in
the telecommunications and electronics markets. Products include
cable and wire assemblies, data connector systems, power
transformers, and precision stampings.
While the company currently has $30 million of liquidity, with
$24 million of cash on its balance sheet and approximately $6
million available under its revolving line of credit, financial
flexibility remains constrained. In addition, although the
company was in compliance with its bank covenants as of March
31, 2001, bank covenants remain very restrictive. Insilco's
current elevated debt levels, along with weak cash flow
generation, could lead to potential bank covenant violations in
the near term, further constraining liquidity and increasing
financial risk.
Sales declined 25% to $80 million from $106 million for the
first quarter of fiscal 2001 versus the same prior-year period
due to the slowing economy and the significant decline in demand
from the company's business lines, with particular weakness in
demand for customer assemblies from the telecommunications
optical equipment market. EBITDA on a pro forma basis for the
first quarter of 2001 declined 59% to $7.3 million from $17.7
million.
This led to very weak credit protection measures with EBITDA
interest coverage of only about 0.6 times (x) in the first
quarter of fiscal 2001, compared with 1.5x in the same prior-
year period.
The company is responding to weak demand with significant
workforce reductions in North America and worldwide, as well as
limiting capital expenditures to maintenance levels, actively
consolidating manufacturing facilities, and taking other cost-
saving initiatives in fiscal 2001.
Nonetheless, near-term fundamentals remain challenging and
visibility is uncertain, resulting in heightened financial risk.
Standard & Poor's will meet with Insilco's senior management to
discuss the company's near-term business objectives and
prospects for achieving operating improvements in 2001, and will
closely monitor the status of its bank credit agreement.
Continued soft demand from the telecommunications end market
could thwart efforts to improve cash flow generation, resulting
in increased liquidity pressures and lower ratings, Standard &
Poor's said.
Ratings Lowered & Placed On Credit Watch
With Negative Implications
To From
Insilco Holding Co.
Corporate credit rating B B+
Senior unsecured debt CCC+ B-
Insilco Technologies Inc.
Corporate credit rating B B+
Senior secured debt B B+
Subordinated debt CCC+ B-
INTEGRATED HEALTH: Court Okays Transfer Of 2 Nevada Facilities
--------------------------------------------------------------
Integrated Health Services. Inc. and certain of its direct and
indirect subsidiaries, including IHS Acquisition No. 151, Inc.
sought and obtained the Court's approval, pursuant to sections
105(a), 363(b), and 365(a) and (b) ofthe Bankruptcy Code and
rules 6004 and 6006 of the Bankruptcy Rules, of:
(1) the Operations Transfer Agreement providing for the
transfer to AW Boulder Health. LLC of the nursing facility known
as Boulder City Care Center, located at 601 Adams, Boulder City,
Nevada; and,
(2) the Operations Transfer Agreement providing for the
transfer, to AW Sierra Health LLC of the nursing facility known
as the Sierra Convalescent Center, located at 201 Koontz Lane,
Carson City, Nevada.
Acquisition operates a skilled nursing center at each of the
locations. Each Transfer Agreement represents a discreet
transaction. However, because the Facilities are operationally
related inasmuch as they are geographically proximate, to
conserve time and reduce costs, the Debtors included the
Transfer Agreements in one motion.
Acquisition leases the Boulder Facility and the Sierra Facility
pursuant to 2 respective leases with Nevada Associates
Enterprises Limited. Pelham-Ohio Limited Partnership is the
successor-in-interest to Nevada Associates under the Boulder
Lease.
The Debtors represented that retaining either Facility will
jeopardize the successful reorganization of their estates, in
light of consistent operating losses. In the Debtors'
estimation, the Facilities incur an aggregate annual
administrative liability in excess of $1,000,O00. Annualized
fourth quarter year 2000 earnings before interest, taxes,
depreciation, and amortization, minus Capital Expenditures
(EBITDA minus CapEx) for the Boulder Facility is negative
$308,648 while EBITDA minus CapEx for the Sierra Facility is
negative $736,149. Therefore, the Debtors are seeking Court
authorization to divest the Facilities pursuant to the Transfer
Agreements.
The Transfer Agreements govern the transition of each Facility
in accordance with applicable state and federal regulations.
Therefore, the Debtors seek approval and authorization of the
transactions pursuant to section 363 of the Bankruptcy Code
which, in pertinent part, provides for a debtor-in-possession to
dispose of estate assets other than in the ordinary course of
business.
The Transfer Agreements also govern the disposition of each
Facility's Medicare Provider Agreement and its Medicaid Provider
Agreement. Therefore, the Debtors seek Court approval of the
Transfer Agreements pursuant to section 365 of the Bankruptcy
Code, which, in pertinent part, provides that a debtor-in-
possession, subject to the court's approval, may assume or
reject any executory contract or unexpired lease of the debtor."
In addition, a Facility Transferee may elect to take assignment
of the Facility's Medicaid and Medicare Provider Agreement if it
cures all defaults and if the Health Care Financing
Administration (HCFA) releases the Debtors from all liabilities
and obligations thereunder. Accordingly, the Debtors submitted
that, inasmuch as their estates will incur no liability in
connection with the assignment, if any, of the Provider
Agreements, such assignments are exercises of sound business
judgment. (Integrated Health Bankruptcy News, Issue No. 16;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
KINDRED HEALTHCARE: Renews 22 Leases With Health Care Property
--------------------------------------------------------------
Kindred Healthcare, Inc. (OTC BB:KIND), formerly Vencor, Inc.,
and Health Care Property Investors, Inc. (NYSE:HCP) have reached
an agreement to renew 22 nursing center leases.
The leases were due to expire in August, 2001. The annual rent
for these facilities will increase $3.3 million to $16.1 million
in the initial lease year. This increase was anticipated in
Kindred's plan of reorganization, which was approved by the
United States Bankruptcy Court for the District of Delaware in
March of 2001.
The agreement is for 10 years, plus three, five-year renewal
periods. Rent escalations will be based on the Consumer Price
Index, with increases of no less than 1 1/2% nor more than 3
1/2%. The 22 facilities, with a total of 3,640 beds, are located
in California, Colorado, Indiana, Kentucky, Massachusetts,
Mississippi, Ohio, Tennessee and Wisconsin.
"We are pleased with these facilities and their operations and
look forward to continuing the positive relationship with HCPI,"
said Edward L. Kuntz, Chairman, Chief Executive Officer and
President of Louisville-based Kindred.
"We are very pleased to continue our long relationship with
Kindred," said Kenneth B. Roath, Chairman and Chief Executive
Officer of HCPI. "The Company's successful emergence from
bankruptcy has created a financially stronger business with
higher levels of facility operating performance. This agreement
gives us good reasons for optimism about improvements in the
long-term care industry as a whole."
Eleven other facilities, which Kindred presently subleases to
others, will be leased to third parties or sold at lower
economics to HCPI, estimated to be $800,000 per year.
Kindred Healthcare is a national provider of long-term
healthcare services primarily operating nursing centers and
hospitals.
Health Care Property Investors, based in Newport Beach, Calif.,
is a real estate investment trust that invests in healthcare-
related real estate throughout the United States.
LERNOUT & HAUSPIE: Acquires Sail Labs' ICM Technology
-----------------------------------------------------
Lernout & Hauspie Speech Products N.V. (Nasdaq Europe: LHSP,
OTC: LHSPQ), a world leader in speech and language technology,
products and services, has reached an agreement with Sail Labs
Holding NV, a privately-held company based in Antwerp, Belgium,
that settles in good faith all disputes between the parties and
gives L&H ownership of Sail Labs' valuable Intelligent Content
Management (ICM) intellectual property. The agreement has been
approved by the U.S. Bankruptcy Court for the District of
Delaware and by the composition trustees appointed by the Ieper
Commercial Court of Belgium.
Under the terms of the agreement, L&H will acquire 100% of the
outstanding common shares of Sail Labs' wholly-owned subsidiary,
Sail Labs bvba, including all intellectual property rights to
ICM technologies developed by this subsidiary, for the
equivalent of 9 million Euros. These technologies include state-
of-the-art multilingual retrieval solutions that function in 8
languages.
Under the same agreement, L&H will also increase its stake in
Sail Labs from 19.9% to 26.4%, or an additional 213,950 common
shares, for the equivalent of 20 Euros per share, or a total of
4.27 million Euros. Both transactions will be financed through
an offset against Sail Labs' accounts payable due L&H. This
conversion of debt to equity, as well as the conversion of loans
due Peer Van Driesten, a majority shareholder of Sail Labs, will
increase Sail Labs' equity capital by 9,499,000 Euros. In
addition, Sail Labs will pay down in cash a remaining 1.13
million Euros in accounts payable due L&H. Payments will be made
over a 22-month period.
The agreement also stipulates that an existing licensing and
development agreement between L&H and Sail Labs be terminated
and that L&H will grant the voting rights of its shareholding in
Sail Labs above 19.9% to Peer van Driesten. Future licenses
between the parties will be negotiated at arms length. These
terms will enable Sail Labs to continue operating as an
independent technology company.
Philippe Bodson, L&H's president and CEO said: "ICM is an
important growth area for L&H. With this agreement, we have
secured access to strategically valuable technologies without
drawing upon the Company's near-term cash resources."
L&H Secures Strategically Important Intelligent Content
Management Technologies
About Lernout & Hauspie
Lernout & Hauspie Speech Products N.V. (L&H) is a global leader
in advanced speech and language solutions for vertical markets,
computers, automobiles, telecommunications, embedded products,
consumer goods and the Internet. The company is making the
speech user interface (SUI) the keystone of simple, convenient
interaction between humans and technology, and is using advanced
translation technology to break down language barriers. The
company provides a wide range of offerings, including:
customized solutions for corporations; core speech technologies
marketed to OEMs; end user and retail applications for
continuous speech products in horizontal and vertical markets;
and document creation, human and machine translation services,
Internet translation offerings, and linguistic tools.
L&H's products and services originate in four basic areas:
automatic speech recognition (ASR), text-to-speech (TTS),
digital speech and music compression (SMC) and text-to-text
(translation).
LOCALBUSINESS.COM: Offers Nonessential Assets for Sale
------------------------------------------------------
In an effort to reorganize its debts, LocalBusiness.com Inc. --
a network of local business news sites in 24 markets across the
United States and publisher of digitalsouth magazine -- will
consider the sale of some of its nonessential assets.
LocalBusiness.com filed for relief under Chapter 11 of the U.S.
Bankruptcy Code in the Southern District of Florida on May 2nd.
LocalBusiness.com is a publisher of breaking business news
stories in Atlanta, Austin, Baltimore, Boston, Charlotte,
Chicago, Dallas, Denver, Houston, Los Angeles, Minneapolis/St.
Paul, New York, Orange County, Orlando, Philadelphia, Portland,
Research Triangle, St. Louis, San Diego, San Francisco, Seattle,
South Florida, Tampa, and Washington, D.C. In addition, local
businesses have access to LocalBusiness.com's small business
tools and resources in each local market. LocalBusiness.com is
headquartered in Fort Lauderdale, Florida.
Assets of LocalBusiness.com include a content archive of more
than 48,000 original news stories and in-depth company profiles,
the VentureTracker database of original reporting on more than
2,800 private equity-funded companies, a national email
subscriber base totaling more than 100,000 names, as well as the
domain names LocalBusiness.com and dbusiness.com.
Digitalsouth magazine is a bimonthly publication, regionally
focused on uncovering hot Southern companies overlooked by
national magazines. Digitalsouth provides a blend of expert
commentary coupled with definitive stories on companies from
Austin, Texas, to Washington, D.C. The magazine produces the
oft-cited annual "50 to Watch" list highlighting up-and-coming
companies in the region, and provided the first in-depth look at
major companies before they hit it big (including
SportsLine.com, MindSpring, and Red Hat). Digitalsouth's
editorial and sales offices are in Atlanta, Georgia.
Assets of digitalsouth include archives of past stories, charts,
and information (22 issues), an email subscriber base totaling
more than 8,000 names, and a circulation database comprised of
entrepreneurs, top executives in fast-growing technology
companies, venture capitalists, investment bankers, and the
high-tech "ecosystem" of lawyers, accountants, and other
professionals. In addition, the domain name digitalsouth.com is
available.
Parties interested in purchasing assets of LocalBusiness.com
and/or digitalsouth may contact Cathy Lerman at 954/776-5279 and
leave contact information or via email at
clerman@localbusiness.com.
LODGIAN INC.: Moody's Downgrades Sr. Subordinated Notes to Caa2
---------------------------------------------------------------
Moody's Investors Service lowered its ratings on Lodgian, Inc.
as follows:
* $175 million 7% convertible junior subordinated
debentures due 2010 to Ca from Caa2,
* senior implied rating to B3 from B1, and
* senior unsecured issuer rating to Caa1 from B2.
Concurrently, Lodgian Financing Corp.'s $200 million 12 %
senior subordinated notes due 2009 was also lowered to Caa2 from
B3 and Lodgian Capital Trust 1's $175 million 7% convertible
redeemable equity trust certificates due 2010 were lowered to
"ca" from "caa".
The ratings outlook was changed to negative from stable while
approximately $375.0 million of debt securities are affected.
Moody's stated that the downgrades consider Lodgian's
significant near-term debt service burden relative to its cash
flow generating ability, uncertainty surrounding the company's
strategic alternatives, and weakness in some of the company's
markets as a result of a less than favorable economic
environment.
The negative ratings outlook also reflects the rating agency's
belief that a challenging economic environment combined with the
company's need to invest capital in its asset base, will
continue to put pressure on operating margins and keep debt
levels high relative to operating cash flow, Moody's said. It
also considers the continued uncertainty with respect to the
company's business plan going forward. While the company
continues to sell assets to reduce debt and expects to pursue
several new initiatives related to expense reductions, Moody's
said that the exact direction of the company has not yet been
determined. Accordingly, the most important issue at this point
in time appears to be the sale of assets and a refinancing of
the company's existing senior secured credit facility.
Lodgian, Inc. owns a portfolio of 109 full-service hotels in 32
states and Canada. Substantially all of Lodgian's hotels are
affiliated with nationally recognized hospitality brands such as
Holiday Inn, Crowne Plaza, Marriott, Radisson, Hilton and
Starwood.
LOEWEN GROUP: Proposes Mandatory Mediation Procedures For Claims
----------------------------------------------------------------
At the Court's hearing on motions filed by The Loewen Group,
Inc. to disallow proofs of claim asserted in respect of the
rejection or termination of noncompetition agreements, the Court
recommended that the Debtors file a motion seeking approval of a
mandatory mediation program to assist in resolving claims
arising from noncompetition and consulting agreements. In this
regard, the Court stated in part as follows:
"[I]t does seem to me that this is an area where one . . .
mediator with expertise in bankruptcy should be able to, I
think, settle a lot of these matters. And so I would encourage
the debtor to file such a motion and, in that regard, perhaps
put on hold the existing ADR procedure with respect to claims
arising out of non-compete and consulting agreements."
Thus, the Debtors are proposing the Mediation Procedures. The
Debtors are proposing these in addition to the alternative
dispute resolution procedures previously approved by the Court.
The Debtors believe that the mediation approach recommended by
the Court will be beneficial in resolving not only claims
arising from noncompetition and consulting agreements, but also
other types of claims arising from the prepetition acquisition
transactions described above.
Claims to Be Submitted to the Mediation Procedures
Prior to the Petition Date, the Debtors entered into thousands
of agreements in connection with their acquisition of hundreds
of funeral home and cemetery businesses and their ongoing
business operations. Such agreements most commonly include:
purchase agreements, noncompetition agreements, consulting
management, employment and other similar agreements, leases and
right of first refusal agreements. In addition, the Debtors
frequently issued promissory notes in connection with their
acquisitions.
Some of the nondebtor parties to these transactions and
agreements already have filed proofs of claim in these cases.
Others either have objected to the Debtors' requests to reject
agreements and/or may file proofs of claim for rejection damages
in the future. Certain of the proofs of claim filed have been
included on claims objections filed by the Debtors.
Accordingly, the Debtors request authority, in their sole
discretion, to submit to the Mediation Procedures unresolved
claims arising from noncompetition and consulting agreements or
from prepetition acquisition transactions. The Debtors
anticipate that the Claims, without limitation, include claims
asserted in proofs of claim, requests for payment of
administrative expense and rejection damages claims that may not
have yet been asserted. In some but not all instances, Claims
referred to the Mediation Procedures will be the subject of
pending claims objections filed by the Debtors. In general, the
Debtors intend to submit all related Claims held by a Claimant
or group of Claimants to mediation at the same time, so that the
Claims may be mediated together.
Based on filings by the Claimants and communications with the
Claimants, the Debtors believe that the following issues will
frequently arise in mediation of the Claims:
-- Whether the agreements at issue are executory contracts
subject to assumption or rejection or instead constitute
deferred purchase price obligations of the Debtors;
-- Whether the agreements at issue are stand-alone
agreements that may be independently assumed or rejected;
-- Whether the damages in respect of the termination or
rejection of noncompetition agreements are the unpaid balances
under the agreements or some other amount;
-- Whether the damages under an agreement denominated as a
consulting agreement are subject to the damages cap imposed by
section 502(b)(7) of the Bankruptcy Code;
-- Whether the parties have claims or counterclaims under
any related purchase agreement in respect of post-closing
adjustments and contingent purchase price obligations.
Proposed Mediation Procedures
The Debtors suggested that a Claim would be classified as a
Mediation Claim, and therefore be subject to the Mediation
Procedures, upon the filing and service of a Notice of
Designation on a Claimant by the Debtors.
A preliminary list of the initial Claims that the Debtors
anticipate will be subject to the Mediation Procedures (the
Preliminary Mediation Claims List) includes 37 Claimants and 68
Claims.
To provide holders of Claims notice of the Mediation Procedures,
the Debtors are serving copies of this Motion on holders of the
Claims on the Preliminary Mediation Claims List and, in
addition, on the holders of the filed Claims that the Debtors
have identified for possible submission to the Procedures (the
Potential Additional Mediation Claimants).
The Debtors stated that they reserve their rights to include
Claims not identified on either the Preliminary Mediation Claims
List or the Potential diation Claimants List in the Mediation
Procedures.
The Debtors proposed to implement the Mediation Procedures on
the following terms:
(1) Inclusion of Claims in the Mediation Procedures
A Claim may be included in the Mediation Procedures whether
or not a proof of claim has been filed and whether or not the
Debtors have filed an objection to the Claim. Claimants may
request that the Debtors include their Claims in the Mediation
Procedures, but the decision to include Claims in the Mediation
Procedures shall be in the sole discretion of the Debtors.
A Claim will be classified as a Mediation Claim, and therefore
be subject to the Mediation Procedures, upon the filing and
service of a notice of Designation on a Claimant by the Debtors.
Upon the entry of an order approving the Mediation Procedures,
the Debtors will designate certain Claims for resolution through
the Mediation Procedures by serving upon holders of such Claims
a Notice of Designation indicating that the applicable Claim has
been submitted to the Mediation Procedures.
The Debtors will send a copy of the Notice of Designation to the
mediator appointed by the Court notifying the Mediator of the
pending mediation and of the need for the scheduling of a
mediation conference.
(2) Reservation of Right to Withdraw Claim from the Mediation
Procedures
The Debtors shall have the right, in their sole discretion,
to withdraw from the Mediation Procedures any Claim that has
been submitted.
(3) Objection to Inclusion in the Mediation Procedures
Upon the entry of the Mediation Order, each Claimant who is
identified on either the Preliminary Mediation Claims List or
the Potential Additional Mediation Claimants List who fails to
file an objection to the Motion or whose objection is overruled
by the Court will be subject to the Mediation Procedures upon
service of the Notice of Designation on such Claimant, without
further opportunity to object to the Mediation Procedures in
this Court.
(4) Non-Included Claimants
"A Claimant not identified on the Preliminary Mediation
Claims List or the Potential Additional Mediation Claimants List
(a Non-Included Claimant) that the Debtors serve with
(a) a copy of the Mediation Order,
(b) a copy of the Mediation Procedures term sheet attached
to the Mediation Order and
(c) a Notice of Designation
will have 20 days to file an objection with the Court to the
inclusion in the Mediation Procedures of any of its Claim(s)
identified in the Notice of Designation (Non-Included Claims).
If the Non-Included Claimant fails to file with the Court an
objection to its inclusion in the Mediation Procedures within
this 20-day time period, the Non-Included Claimant shall be
subject to the Mediation Procedures without further order of the
Court. If the Non-Included Claimant timely files an objection to
its inclusion in the Mediation Procedures, the Debtors shall
have 20 days from the date of the filing of the objection to
file a response to the objection and a request for a hearing
before the Court regarding inclusion of the applicable Claim in
the Mediation Procedures."
"The Debtors anticipate that most of the Non-Included Claimants
will be Claimants who file claims subsequent to the date of this
Motion in respect of damages on account of the Debtors rejection
of executory contracts."
(5) Removal from ADR Procedures
If a Claim with respect to which a Notice of Designation is
served is subject to the ADR Procedures, the Claim will be
removed from the ADR Procedures and included in the Mediation
Procedures.
(6) The Mediation Conference
The Mediator, in consultation with the parties, shall set
the date of the Mediation Conference. The Mediator may schedule
one or more Mediation Conferences subsequent to the Mediation
Conference if the Mediator believes that doing so would further
the likelihood of resolution. Mediation Conferences will be
conducted for not longer than one-half day (four hours), unless
further extended by agreement of the parties.
(7) Telephonic Mediation Conferences
The Mediation Conferences may be held telephonically when
appropriate.
(8) In-Person Mediation Conferences
In-person Mediation Conferences will be held in Wilmington,
Delaware, unless the Mediator directs otherwise or the parties
mutually agree to another location.
(9) Submission Materials
Not less than 7 calendar days before the date of the
Mediation Conference, each party shall submit directly to the
Mediator, and serve on all counsel and pro se parties, a written
statement of no more than 5 pages, exclusive of exhibits,
setting forth the parties' respective positions on the Mediation
Claim(s). The Mediator may, at any time, request that the
parties submit additional materials or designate that materials
be submitted only to the Mediator. The Submissions and all other
materials provided to the Mediator shall not be filed with the
Court and the Court shall not have access to them.
(10) Persons Required to Attend
A representative of the Debtors (e.g, an attorney for the
Debtors) who has full authority to negotiate and settle the
matter on behalf of the Debtors must attend the Mediation
Conference.
(11) Failure to Attend
Willful failure to attend any Mediation Conference in
accordance with the Mediation Procedures will result in the
disallowance of the Claimant Mediation Claim(s). A person
required to attend the Mediation Conference is excused from
appearing if all parties and the Mediator agree in advance of
the Mediation Conference that the person need not attend.
(12) Mediation Fees
The fees and administrative costs of the mediation shall be
shared equally by the Debtors and the Claimant, unless otherwise
ordered by the Mediator.
(13) Mediation Procedures and the Local Rules
The Mediation Procedures are based in large part on Rule
9019-3 of the Local Rules of Bankruptcy Practice and Procedure
of the United States Bankruptcy Court for the District of
Delaware. Notwithstanding the Local Rules, however, except as
otherwise set forth in the Mediation Order and the Mediation
Procedures, the Mediator shall determine the methods, procedures
and timing of the mediation, in consultation with the Court, if
necessary. In the event of any conflict between the Local Rules
and the Mediation Procedures, the Mediation Procedures shall
govern.
(14) Confidentiality of Mediation Materials and Communications
All memoranda, work product and other materials contained
in the case files of the Mediator are confidential. Any
communication made in or in connection with the mediation that
relates to a controversy being mediated, whether made to the
Mediator or to a party, or to any person if made at the
Mediation Conference, is confidential. Confidential materials
and communications are not subject to disclosure in any judicial
or administrative proceeding.
(15) Civil Immunity
The Mediator shall be immune from civil liability for or
resulting from any act or omission done or made while engaged in
efforts to assist or facilitate a mediation unless the act or
omission was made or done in bad faith, with malicious intent or
in a manner exhibiting a willful, wanton disregard of the
rights, safety or property of another.
(16) Protection of Information Disclosed at Mediation
The Mediator and the participants in mediation are
prohibited from divulging, outside of the mediation, any oral or
written information disclosed by the parties or by witnesses in
the course of the mediation. No person may rely on or introduce
as evidence in any arbitral, judicial or other proceeding
evidence pertaining to any aspect of the mediation effort,
including but not limited to:
(a) views expressed or suggestions made by a party with
respect to a possible settlement of the dispute;
(b) the fact Ihat another party had or had not indicated
willingness to accept a proposal for settlement made by
the Mediator;
(c) proposals made or views expressed by the Mediator;
(d) statements or admissions made by a party in the course
of mediation; and
(e) documents prepared for the purpose of, in the course of
or pursuant to the mediation.
In addition, without limiting the foregoing, Rule 408 of the
Federal Rules of Evidence, and any applicable federal or state
statute, rule, common law or judicial precedent relating to the
privileged nature of settlement discussions, mediation or other
alternative dispute resolution procedures shall apply.
Information otherwise discoverable or admissible in evidence,
however, does not become exempt from discovery, or inadmissible
in evidence, merely by being used by a party in the mediation.
(16) Discovery from Mediator
The Mediator shall not be compelled to disclose to the
Court or to any person outside the Mediation Conference any of
the records, reports, summaries, notes, communications or other
documents received or made by the Mediator while serving in such
capacity. The Mediator shall not testify or be compelled to
testify in regard to the mediation in connection with any
arbitral, judicial, or other proceeding. The Mediator shall not
be a necessary party in any proceedings relating to the
mediation.
(17) Preservation of Privileges
The disclosure by a party of privileged information to the
Mediator does not waive or otherwise adversely affect the
privileged nature of the information.
(18) Recommendations by Mediator
The Mediator is not required to prepare written comments or
recommendations to the parties. The Mediator may present a
written settlement recommendation memorandum to attorneys or pro
se litigants, but not to the Court. The Mediator may, in his
sole discretion and without disclosing the information protected
from disclosure as described above, submit reports to the Court
that would categorize unresolved Claims and make recommendations
to the Court with respect to the manner in which the legal
issues raised by the Claims should be resolved.
(19) Preparation of Orders
The Debtors shall have the authority to compromise and
settle Mediation Claims without further Court order in
accordance with the parameters set forth in the Court Order
Granting Debtors and Debtors in Possession Ongoing Authority to
Settle and Pay Certain Categories of Claims and Controversies,
dated December 28, 1999 (D.I. 3066). Beginning at the end of the
third calendar quarter of the year 2001, for all settlements
falling outside the parameters of the Settlement Order, the
Debtors shall submit on a quarterly basis fully executed
stipulations and orders to the Court with respect to all
settlements reached under the Mediation Procedures during the
calendar quarter, together with a motion for approval of
the settlements.
(20) Final Disposition of Claims
Claims not resolved through the Mediation Procedures shall
be resolved by the Court or another appropriate court or forum.
(21) Injunction
During the period that a Mediation Claim is subject to the
Mediation Procedures, the Debtors and the Claimant on which the
notice has been served will be enjoined from, among other
things, commencing or continuing any action or proceeding in any
manner or any place to resolve, reconcile, determine the nature,
priority or amount of or collect upon a Mediation Claim other
than through the Mediation Procedures described herein. This
injunction will commence:
(a) with respect to Claims held by Claimants identified on
the Preliminary Mediation Claims List or the Potential
Additional Mediation Claimants List, on the date that
the applicable Notice of Designation is filed and
served; and
(b) with respect to Non-Included Claims, if no objection to
inclusion in the Mediation Procedures is timely filed,
upon the expiration of the 20-day objection period
described above or, if an objection to inclusion in the
Mediation Procedures is filed, upon the entry of an
order of the Court overruling the objection.
The Mediation Injunction will expire with respect to a Mediation
Claim only when the Mediation Procedures have been completed
with respect to that Claim. In addition, Mediation Claims will
remain subject to the automatic stay under section 362 of the
Bankruptcy Code after expiration of the Mediation Injunction
through the date of confirmation of a plan or plans of
reorganization in the applicable Debtors chapter 11 cases,
unless the stay is or has been earlier terminated by an order of
the Court.
Request to Appoint the Mediator
The Debtors nominate Roger M. Whelan, outside counsel to Shaw
Pittman and former United States Bankruptcy Judge for the
District of Columbia, to serve as the Mediator. The Debtors are
aware of no relationship between them and Mr. Whelan. Mr. Whelan
has indicated that he does not represent any party in these
cases and has not been retained by or heard any matters
involving the Debtors, their creditors, their equity security
holders or any other parties in interest, or their respective
attorneys and accountants, the United States Trustee or any
person employed in the Office of the United States Trustee, in
any matter related to the Debtors or their estates.
As noted above, unless otherwise ordered by the Mediator, costs
of the mediation will be shared equally by the Debtors and the
nondebtor parties to the mediation. In accordance with precedent
in this District, the Debtors request authority to compensate
and reimburse the Mediator for the Debtors portion of his
services and expenses in connection with the Mediation
Procedures without further notice or Court approval.
The Debtors believe that the Mediation Procedures will assist in
resolving the Claims in an expeditious, cost-effective and fair
manner, given the nature of the Claims and the common issues
relating to many of them.
Accordingly, the Debtors request that the Court enter an Order:
(a) approving the Mediation Procedures as described in the
motion;
(b) appointing Mr. Whelan to serve as the Mediator and
authorizing the Debtors to compensate and reimburse the Mediator
for the Debtors portion of his services and expenses in
connection with the Mediation Procedures without further notice
or Court approval;
(c) authorizing the Debtors to take all steps that the
Debtors determine, in their sole discretion, are necessary or
appropriate to implement the Mediation Procedures; and
(d) granting such other and further relief as the Court may
deem proper.
The Debtors also request that the approval of the Mediation
Procedures will be without prejudice to the Debtors rights to
object to a Claim on any and all grounds prior to its inclusion
in the Mediation Procedures.
Objections
The proposed Mediation Procedures have drawn quite a number of
objections. Claimants indicate that they agree in principle to
resolving claims by means of mediation, but object to certain
procedures proposed in the motion. The following are some of
these:
-- Certain procedures proposed are onerous and
overreaching. The five-page written submission requirement may
result in claims receiving cursory treatment and is unfairly
restrictive. (See Del. Bankr. LR 9019-3(c)(ii)(submission
materials determined by mediator after speaking with
participants to determine what materials would be helpful.))
-- All parties should be required to rest on the pleadings
they have already filed, with the proviso that an additional
five-page written statement may be submitted at either party.
-- The Debtors should bear the fees, costs and expenses as
the Debtors would determine which claimants would be required to
participate in mediation.
-- It is ironic that the Debtors should propose to have the
Court compel claimants to bear half the costs of mediation,
given that the Mediation Procedures proposed are so heavily
loaded towards the Debtors. There is only one mediator in the
district, the cost to the Debtors should not be prohibitive.
Here, unlike in prior cases, Debtors have already subjected
claimants to multiple, groundless motions directed at the same
issues that now, hopefully, will be resolved via mediation.
These creditors have already been forced to bear more than their
share of the costs of litigating these bankruptcy proceedings.
Under these circumstances the Debtors should pay for their
proposal.
-- The mediation costs are not listed in any detail.
-- All claimants should be permitted, at their election, to
participate in mediation pro se.
-- The claimant should not be forced to risk disallowance
of his claims. The Debtors seek too much in asking the Court to
authorize (i) their sole discretion over which claims may be
designated for mandatory mediation, (ii) their right of veto
over the claimant identification of a convenient location, (iii)
their power to permit telephonic participation only when
appropriate and (iv) the disallowance of claims if the claimant
fails to attend the mediation without first securing the Debtors
permission not to attend. The penalty for failing to attend
should be stricken in its entirety.
-- In-person Mediation Conferences should be held at a time
and place that is convenient to the claimant.
-- The motion is unclear as to whether claimants have the
right to appear by telephone for mediation proceedings. Where
claimants will be forced to travel great distances or their
circumstances raise concerns, they should have the right to
appear by phone, even if Debtors do not agree.
-- If the Debtors are given the right to decide on the
lists of claimants subject to mediation, that could work extreme
hardship upon claimants, many of whom lack the resources to
prepare their claim for a mediation session only to see the rug
pulled from under them at the last minute. Instead, claimants
should be allowed to opt in to the process.
-- Mediation should not provide the Debtors with an
opportunity to use the Estates' vast resources to overwhelm
individual creditors - there has been enough of that already in
this case.
-- The Debtors should not be allowed to remove claims from
the mediation process on a whim. If the mediation procedures are
really fair and more efficient than claims litigation, then the
more claims included the better.
-- The motion, if approved, would allow Debtors to object
to claims before they are mediated. Yet, claimants will be
enjoined from taking any actions to pursue their claims. In
order to make the process fair, Debtors and claimants must have
the same procedural options. Therefore, Debtors should be
enjoined from filing formal objections to any claim that is in
mediation.
-- The procedures proposed by Debtors give them the almost
unfettered right to control the order in which specific claims
will be mediated. The claimants themselves should be allowed to
have some input into the order in which claims are scheduled for
mediation. It is the mediator who should have the final say.
-- Mediation of disputed claims is generally a good idea
provided the process is fair and the parties approach mediation
in good faith. Mediation should be a means for serving the
interests of justice by resolving claims on the merits and
should not be another gauntlet of procedural hoops claimants
must jump through in order to avoid expungement of their claims.
-- The playing field should be level. If Debtors fail to
adhere to the requirements of the mediation process, then all
relevant claims should be allowed in full.
-- The Court envisioned a process whereby parties would
begin negotiations prior to the mediator's involvement. The
mediation procedure could easily be amended to allow the Debtors
to make an initial settlement proposal, followed after a
relatively short interval, say, two weeks, to (a) allow the
parties to avoid unnecessary expenses where they are already
close to settlement, (b) narrow the issues to be resolved via
mediation, and perhaps, (c) allow the mediator to make better-
informed determinations as to whether Debtors or claimants are
acting in good faith.
-- The motion does not clearly state whether notices and
other papers sent to parties in connection with mediation
proceedings must also be served on attorneys for those parties.
They should be.
-- Debtors purport to reserve the right to file a reply to
objections to the motion two days before the hearing. However,
the Court's new rules specifically prohibit reply papers unless
authorized by the Court. (Local Bankruptcy Rule 9006-1(d).
Moreover, replies filed just before hearing impose on the
Court's time and prejudice opposing parties unfairly. Therefore,
the Court should not consider any reply submitted by the
Debtors. (Loewen Bankruptcy News, Issue No. 37; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
LTV CORP.: Clarifies & Supplements Cash Management Order
--------------------------------------------------------
The LTV Corporation presented a Motion seeking Judge Bodoh's
order approving their clarification and supplement to their
previously approved cash management system, and his authority to
pay certain prepetition claims of certain joint ventures with
Columbus Coatings, railroads, and Copperweld Canada.
As described in their previous Motion seeking and obtaining
Judge Bodoh's approval of their cash management system, the
Debtors sought authority to continue their ordinary course
financial transactions with their nondebtor affiliates which
include, among others, joint venture entities in which LTV
holds, directly or indirectly, less than 100% ownership, and six
wholly-owned railroad subsidiaries. Incident to the intercompany
transactions, receipts from the nondebtor affiliates' operations
in some cases are swept into the LTV Master Concentration
Account. The Debtors manage this consolidated cash on behalf of
their nondebtor affiliates, and where necessary and appropriate,
transfer cash back to these entities through their cash
management systems to fund the operations of the nondebtor
affiliates. The Debtors also engage in a number of business
transactions, including transactions to fund the operations of
the nondebtor affiliates, in the ordinary course of their
businesses. Because the nature of the intercompany transactions
varies widely from entity to entity, the Debtors believe it
prudent to describe certain of their intercompany transactions
with more particularity than was originally included in the cash
management to clarify that the intercompany transactions
authorized by that Order include, among other types of
transactions, cash calls, tolling charges, service fees, LSE
transactions, CCC construction costs, railroad services, and
transactions with Trico.
The Debtors sought Judge Bodoh's authorization to process these
intercompany transactions through their centralized cash
management system in the ordinary course of their businesses.
The Debtors assured Judge Bodoh that they and their nondebtor
affiliates will continue to maintain strict records with respect
to all transfers of cash so that all transactions, including the
additional intercompany transactions described in this Motion,
may be readily ascertained, traced and recorded properly on
applicable intercompany accounts.
After review, Judge Bodoh granted the requested relief and
orders that, except as modified by these supplemental additions,
the cash management Order previously entered remains in full
force and effect. (LTV Bankruptcy News, Issue No. 8; Bankruptcy
Creditors' Service, Inc., 609/392-00900)
LTV CORP.: Cleveland-Cliffs & Minnesota Power Bid On Mine Assets
----------------------------------------------------------------
Cleveland-Cliffs Inc (NYSE: CLF) announced that it has submitted
a bid with Minnesota Power to acquire the assets of LTV Steel
Mining Company in northeastern Minnesota. The mining operation
was closed on January 5, 2001, after LTV Steel initiated a
Chapter 11 bankruptcy proceeding. The deadline for submitting
bids was 4 p.m. Thursday.
Under terms of the proposal, Cleveland-Cliffs would acquire all
of the processing facilities of LTV Steel Mining, including its
74-mile mainline railroad and dock operation at Taconite Harbor
on the north shore of Lake Superior. Minnesota Power would
acquire the LTV electric generating facility at Taconite Harbor,
transmission facilities, and non-mining property previously
owned by LTV.
John S. Brinzo, Cleveland-Cliffs chairman and chief executive
officer, said, "We're excited to work with Minnesota Power in
making this bid. If Cliffs and Minnesota Power are the
successful bidders, we believe this is the best way to promote
future economic activity on the East Range. While Cliffs does
not have a specific project in mind at this point, as previously
announced, we will look at a number of alternatives."
Brinzo said further, "We look forward to working with all key
constituents in the state to make this venture successful.
Should we be successful, the real winners will be the residents
of the Mesabi Range and the communities where they live."
LTV has solicited bids from interested parties and is expected
to enter into negotiations after reviewing the bids.
Cleveland-Cliffs is the largest supplier of iron ore products to
the North American steel industry and is developing a
significant ferrous metallics business. Subsidiaries of the
Company manage and hold equity interests in five iron ore mines
in Michigan, Minnesota, and Eastern Canada. Cliffs has a major
iron ore reserve position in the United States and is a
substantial iron ore merchant. References in this news release
to "Cliffs" and "Company" include subsidiaries and affiliates as
appropriate in the context.
MARINER HEALTH: Assumes And Assigns TN Lease To Branham & Day
-------------------------------------------------------------
Pursuant to an Office Lease Agreement with WRC Properties, Inc.,
now known as 485 Properties, LLC, a Delaware Limited liability
company (the landlord), Mariner Health Group, Inc. leased a
total of approximately 7,179 square feet of space in suites 1080
and 1950 located on the 10th and 19th floors, respectively, of
the First Union Tower Building, at 150 Fourth Avenue North,
Nashville, Tennessee, 37219-2417. Health subleased Suite 1950 to
Branham & Day, P.C. The lease is for a term of approximately 60
months, with a remaining term through October 14, 2001. The
current monthly lease payment under the lease is $10,123 while
that under the sublease is $6,703.99.
The Debtor previously moved the Court for authority to reject
both the lease and the sublease because it does not require the
use of the premises, but merely act as a conduit of rent from
the subtenant to the landlord without receiving any premium.
Moreover, the Debtor believes that the current lease rent is not
below market.
Sublessee's Objection
Branham, however, would rather that the Debtor assign the
sublease to it than reject it. Branham notes that as a condition
of the sublease, MHG and sublessee requested and accepted the
Consent of the landlord, which was prepared by the landlord with
no input from the sublessee. The Consent states in part that:
"Sublessee shall assume liability on the Lease for the entire
Sublease term and shall be responsible for the full and complete
performance of all the terms, conditions covenants and
agreements contained therein."
Branham told the Court that the landlord has taken the position
that upon the rejection of the lease there will be no lease to
assume because it will be terminated by operation of bankruptcy
law. In Branham's view, the landlord wanted to have the
sublessee "on the hook" for the lease when it drafted and
executed the Consent, but when it has decided that it can make
a better deal for itself, it is trying to take advantage of the
Debtor's proposed rejection of the lease to dispossess the
subleassee. Since learning of the Debtor's intention to reject
the lease, the sublessee has offered to become the assignee of
the lease in accordance with 11 U.S.C. Section 365 and to
provide adequate assurance of future performance, based on its
understanding that the lease is current and there is no cure
required.
Branham reminded the Court that the assignment of the lease to
the sublessee will have no adverse effect but if it is rejected,
the sublessee will have a claim for breach of the convenant of
quiet enjoyment and damages for all losses suffered, including
without limitation any increase in rent for comparable space.
Assumption and Assignment of Lease
In light of Branham's objection and a further review of options
open to them, the Debtor determined that it is in the best
interest of the estate and creditors to assume and assign the
lease to the subtenant because:
(a) the Debtor is current under the lease, so assumption
will not require the Debtor to cure any defaults;
(b) assumption of the lease will serve to avoid significant
rejection damages under both the lease and the sublease;
(c) the subtenant is willing to provide adequate assurance
of its future performance under the lease through the funding of
a deposit.
The Debtor notes that the subtenant is a very well respected and
highly successful law firm specializing in the representation of
plaintiffs in litigation. The Subtenant's continuous and
uninterrupted performance under the sublease is a primary
indication of its ability to perform under the lease, the Debtor
tells the Court. The Debtor also considers itself exceptionally
fortunate to have the subtenant willing to assume the entire
lease so that MHG can both terminate its legal obligations under
the lease and sublease, and at the same time avoid rejection
damages claims under both.
Accordingly, the Debtor withdrew the previous motion of
rejection and asked the Court to authorize their assumption of
the lease and assignment of it to the subtenant.
The Court's Order
Upon review and consideration, the Court authorized the
assumption of the lease and the assignment of it to Branham.
The Court ordered that within ten business days after entry of
the order, the subtenant will pay to the landlord the sum of
$3,222,23 on account of an existing prepetition arrearages under
the lease, in full, final and complete satisfaction of any
prepetition and postpetition claims relating to the lease,
including the unsecured nonpriority claim in the amount of
$2,656.90 filed by the landlord against the Debtor, and the
Debtor is to pay to the landlord $10,123.00 which the Debtor
received from the subtenant and has been holding for the benefit
of the landlord pending assignment of the lease, and this amount
will serve as a security deposit under the lease. The Sublease
is deemed terminated as of the date of entry of the order upon
the Subtenant's satisfaction of all amounts then owing to the
Debtor. (Mariner Bankruptcy News, Issue No. 14; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
NVID INTERNATIONAL: Recurring Losses Raise Going Concern Doubts
---------------------------------------------------------------
NVID International, Inc. is a holding company the sole material
asset of which is the stock of its subsidiary, Aqua Bio
Technologies, Inc. References to the Company include the
activities of its subsidiary. The Company is in the business of
researching, developing and marketing water purification and
disinfection products using a technology known as ionization.
NVID voluntarily filed Form 10-SB with the SEC because it would
like to increase the availability of public information with
respect to its operations and improve its ability to access the
capital markets to fund expansion. The Company intends to apply
for reinstatement of the eligibility of its common stock to be
quoted on the over-the-counter bulletin board.
NVID has a small asset base of $724,093, the majority of which
are intangible assets. Although the Company has been in
existence for a number of years, management's efforts to develop
the Company's business have not yet resulted in generation of
significant revenues. Indeed, the Company has experienced net
losses of $578,500 in 1998, $793,137 in 1999 and $872,932 in
2000. It has an accumulated deficit of $6,818,381 as of December
31, 2000. As noted in the report of its independent certified
public accountants, the Company's operating losses raise
substantial doubt about its ability to continue as a going
concern.
OXIS INTERNATIONAL: Nasdaq Denies Appeal And Delists Shares
-----------------------------------------------------------
OXIS International, Inc. (Nasdaq:OXIS) (Noveau Marche:OXIS) was
notified that its appeal of the Nasdaq staff's decision to
delist OXIS' common stock from the National Market System has
been denied by the Nasdaq Listing Qualification Panel.
Accordingly, OXIS International's common stock was moved to the
NASD Over-the-Counter Bulletin Board effective Thursday, May 17,
2001.
OXIS was notified by the Nasdaq staff in March that it did not
meet Nasdaq's minimum bid price requirement of $1.00 or the
minimum market value of public float of $5,000,000 for continued
listing. The Company's appeal hearing with the Nasdaq Panel was
held on April 26, 2001.
OXIS, headquartered in Portland, Oregon, focuses on developing
technologies and products to research, diagnose, treat and
prevent diseases associated with damage from free radical and
reactive oxygen species -- diseases of oxidative stress. The
Company holds the rights to three therapeutic classes of
compounds in the area of oxidative stress and, through its
Health Products division, develops, manufactures and markets
products and technologies to diagnose and treat diseases caused
by oxidative stress.
PACIFIC GAS: Files Comments On Ratepayers' Committee Formation
--------------------------------------------------------------
Pacific Gas and Electric Company has filed reply comments with
the U.S. Bankruptcy Court on the appointment of a Ratepayers'
Committee by the United States Trustee (UST).
In its comments, the utility reiterated its position that the
formation of the Ratepayers' Committee is not part of the
process established by the Bankruptcy Code. The utility does not
object to ratepayers having a voice in the process, when issues
arise where the court determines they have standing, but does
object to procedures that are outside of the existing Bankruptcy
Code.
In the filing, the company noted several inaccuracies in the
UST's comments on the need for a Ratepayers' Committee.
Ratepayers are not official creditors of the company and under
the Bankruptcy Code, only creditors are represented in the
proceedings. The examples cited by the UST are ratemaking and
ratesetting proceedings at the California Public Utilities
Commission, and the outcome of these actions would not give
ratepayers potential claims against the company.
The California Attorney General or other state official can
represent ratepayers in the proceedings. The UST cites the need
to create a Ratepayers' Committee because the State has not
chosen to participate in the process because they want to
preserve their sovereign immunity. The UST should not go outside
the Bankruptcy Code to create a Ratepayers' Committee just
because the Attorney General has decided not to appear for
apparently purely tactical reasons.
PACIFIC GAS: Shareholders Call For CEO Bob Glynn to Resign
----------------------------------------------------------
At the PG&E annual shareholders meeting held on May 16, certain
shareholders voiced their opinion to force the Company's CEO Bob
Glynn to resign his position. ``There has been a litany of
disasters under your leadership and the board of directors...you
should step back and get new people up there,'' said John
Findley, a 28-year gas system employee of PG&E's Pacific Gas &
Electric unit. His remarks were greeted by applause at the two-
hour meeting in San Francisco, which was closely watched by a
large police contingent. Throughout the meeting, Glynn
repeatedly sought to reassure the sometimes hostile audience of
nearly 500 people that the Company remained a solid long-term
investment despite the bankruptcy of its main revenue source,
Pacific Gas and Electric. (New Generation Research, May 17,
2001)
PARAGON CORPORATE: S&P Affirms Corporate & Senior Ratings At CC
---------------------------------------------------------------
Standard & Poor's affirmed its double-'C' corporate credit and
senior unsecured ratings on Paragon Corporate Holdings Inc. and
removed them from CreditWatch, where they were placed on April
12, 2000. Total rated debt as of March 31, 2001, was about $115
million. The ratings outlook is negative.
The rating actions follow the expiration of the company's offer
to exchange a payment of cash and the issuance of new promissory
notes for all of its outstanding 9 5/8% senior notes due 2008.
Paragon did not purchase any of the senior notes pursuant to the
exchange offer because certain conditions of the offer were not
satisfied.
Paragon is a manufacturer and distributor of printing equipment
and supplies. The company has reported very weak operating
results during the past two years, including a $22.9 million
loss from continuing operations and negative EBITDA of $1.3
million for fiscal 2000. The poor results were due to a number
of factors, including weak equipment and supplies sales in
domestic and international markets, unabsorbed manufacturing
costs, the negative impact of discontinued product lines, and
increased corporate expenses related to an acquisition. No
significant improvement in operating performance is expected in
the near term. The company maintains adequate liquidity, with
$54 million of cash on its balance sheet as of March 31, 2001.
Paragon has only $6 million available under its $37 million bank
credit facility. The company was in violation of financial
covenants under the terms of its credit agreement in the first
quarter of fiscal 2001. The violations were waived through March
31, 2001, and the covenants have been amended. Nevertheless, the
weak domestic economic environment will likely lead to continued
poor operating performance and cash flow generation, and could
result in future covenant violations.
Outlook: Negative
Failure to improve operating results and increase cash flow
generation could lead to a default on the company's debt
obligations, Standard & Poor's said.
PATHNET: Seeks Court Approval For Employee Retention Plan
---------------------------------------------------------
In an effort to keep its workforce intact, bankrupt Pathnet
Telecommunications Inc. is seeking court approval to fund a key
employee retention plan. Court papers filed with the U.S
Bankruptcy Court in Wilmington, Del., said the Reston, Va.,
company is besieged by competitors seeking to steal employees.
"Our employees are more attractive then most because of their
experience," a Pathnet attorney told DBR Tuesday. "Other
companies can offer stock compensation, and just the fact that
working for a company that is not in bankruptcy is an
advantage." (ABI World, May 17, 2001)
SABLE INSURANCE: S&P Assigns 'R' Financial Rating
-------------------------------------------------
Standard & Poor's assigned its 'R' financial strength rating to
Sable Insurance Co.
Sable was placed into conservation on May 11, 2001, by
California's Department of Insurance owing to its insolvency of
more than $12.9 million. Sable, a subsidiary of Reliance
National Indemnity Co. and a member of Reliance Group Holdings
Inc. (Reliance; NYSE: REL), underwrote workers' compensation and
commercial lines mainly in California; however, it also operated
in Delaware, Georgia, Illinois, Indiana, Maryland, Michigan,
Missouri, Montana, Nebraska, Nevada, North Dakota, Ohio,
Pennsylvania, and West Virginia.
Standard & Poor's had lowered the senior debt and subordinated
debt ratings on Reliance to 'D' from double-'C' following the
announcement that Reliance missed principal payments of $291.7
million on debt due Nov. 15, 2000 because of insufficient cash
resources. At the same time, Reliance defaulted on the $237.5
million of bank debt. Previously, on June 20, 2000, Standard &
Poor's had lowered its ratings on Reliance to double-'B'-minus
from triple-'B'-minusover concerns that the franchise value of
the company was significantly diminished as its specialty lines
of business were being sold.
California Insurance Commissioner Harry W. Low stated that
during the conservation period all claims will be paid in full
and on time without interruption in policyholder coverage.
An insurer rated 'R' is under regulatory supervision owing to
its financial condition. During the pendency of the regulatory
supervision, the regulators may have the power to favor one
class of obligations over others or pay some obligations and not
others. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations, Standard
& Poor's said.
SERVICE MERCHANDISE: Hires Jane Gilmartin As President and CMO
--------------------------------------------------------------
Service Merchandise Company, Inc. (OTCBB:SVCDQ) related that as
part of its strategic plan and in preparation for emergence from
Chapter 11, it has hired Jane Gilmartin as President, Chief
Merchandising Officer.
Ms. Gilmartin joins Service Merchandise Company with more than
20 years of home and gift retailing experience, working with
retailers Fortunoff, Lechter's, Linens `N Things, and most
recently Bed Bath & Beyond where she served as Vice President
and General Merchandise Manager.
Chairman and Chief Executive Officer Sam Cusano said, "Service
Merchandise has accomplished a lot in the last two years,
particularly from a business structure and operational
standpoint. We have exceeded our business plan benchmarks in
each of 1999 and 2000, and we are on track to meet the threshold
business plan benchmark for 2001 that we believe will lead to
our emergence from Chapter 11 following the Christmas holiday
season. As we proceed to finalize our emergence strategy and
five-year business plan, Jane Gilmartin brings proven
merchandising vision to help us strategically integrate our home
business with our strong jewelry business. Jane is perfect for
this role and her recruitment to Service Merchandise completes
our senior management team going forward," he continued.
Service Merchandise began its judicial restructuring two years
ago and since that time has closed underperforming stores,
exited unprofitable merchandising categories, rationalized its
expense structure and embarked on a real estate program that
includes reducing the size of its stores from 50,000 square feet
to 25,000 square feet and subleasing excess to third-party
retail tenants. In January 2001, the Company announced that
after successfully completing the Company's stabilization plan
during 1999 and the transition plan in 2000, the 2001 Business
Plan would provide the framework for a plan of reorganization to
be proposed later this year that should allow the Company to
emerge after Christmas 2001. As previously announced, the plan
or plans of reorganization to be proposed by the Company involve
a debt conversion of the Company's prepetition unsecured claims
into new common equity of the reorganized company. Under such
circumstances, the existing common stock of the Company would be
cancelled and existing shareholders would not receive any
distribution in connection with the reorganization.
Service Merchandise said Ms. Gilmartin's employment agreement
was approved, without objection, by the Bankruptcy Court on May
14, 2001 and would be filed in the ordinary course with the
Securities and Exchange Commission.
Service Merchandise and its subsidiaries filed voluntary
petitions for reorganization under Chapter 11 in the U.S.
Bankruptcy Court for the Middle District of Tennessee in
Nashville on March 27, 1999. Service Merchandise is a specialty
retailer focusing on fine jewelry, gifts and home decor
products. The Company currently operates 218 stores in 31
states.
SNTL CORPORATION: New Ticker Symbol Is SNLLQ
--------------------------------------------
SNTL Corporation, formerly Superior National Insurance Group,
Inc. (OTC:SNLLQ), a managing general agent and third party
claims administrator specializing in workers' compensation risks
and services, announced that its ticker symbol changed to
"SNLLQ" from "SNTLQ" effective as of the opening of business
Thursday, May 17. SNLLQ trades on the over-the- counter market.
The letter "Q" in a ticker symbol indicates that a company is
currently in bankruptcy proceedings. SNTL Corporation and
certain of its subsidiaries filed a Chapter 11 petition in the
United States Bankruptcy Court for the Central District of
California on April 26, 2000.
In a settlement agreement among the Company, the California
Department of Insurance and other parties reached in September
2000, the Company agreed to relinquish the trade name "Superior
National." The name change was subsequently approved by the
Bankruptcy Court and is now effective. The bankruptcy
proceedings are pending.
SNTL Corporation is the parent company of SN Insurance Services,
Inc. and SN Insurance Administrators, Inc., workers'
compensation insurance servicing organizations operating
throughout the United States. SNTL previously announced that it
sought Chapter 11 protection and that the California Department
of Insurance had seized the assets and operations of SNTL's five
California domiciled insurance subsidiaries. SNTL also
previously announced that it filed a lawsuit alleging that
Foundation Health Corporation, Foundation Health Systems, Inc.,
and Milliman & Robertson, Inc., defrauded SNTL when in 1998
Foundation Health Corporation sold Business Insurance Group,
Inc. to SNTL knowing at the time of the sale that Business
Insurance Group was insolvent, and further alleging that
Milliman & Robertson, Inc. conspired with FHC and FHS and
assisted in the execution of the fraud. The lawsuit is expected
to go to trial in mid-2002.
SSE TELECOM: Files for Chapter 11 Bankruptcy Protection
-------------------------------------------------------
SSE TELECOM, INC. (Nasdaq: SSET) has filed for protection under
Chapter 11 of the Federal bankruptcy statutes.
Lee Blachowicz, SSET's President and CEO, commented "as a result
of the current depressed state of the public equity and telecom
equipment markets, we have been unable to raise the additional
working capital we need to maintain our legacy transceiver and
modem business while going forward with the ramp-up of our new
iP3 Internet-over-satellite product line. Although we believe
that our iP3 offers a superior solution for satellite Internet
transport and our traditional business of satellite transceivers
and modems remains viable, we have decided to seek protection of
the Court to allow us to preserve the value inherent in these
product lines while we continue to pursue alternatives,
including sale of all or part of our assets."
About SSET
Headquartered in Fremont, California, SSE Telecom, Inc. is a
leading provider of digital satellite communications equipment
worldwide. The iP3 satellite gateway from SSET enables system
integrators, service providers and global enterprises to
leverage its unique high-speed two-way transport capabilities
and quickly deploy reliable, revenue-enhancing, mission-critical
IP-based services anywhere in the world. SSET can be contacted
at 510-657-7552 and the company's web site is at www.sset.com.
STELLEX TECHNOLOGY: Creditors to Recover Less Than Half of Debt
---------------------------------------------------------------
Creditors of bankrupt Stellex Technology Inc. will recover only
about 40 percent of what they are owed, thanks to a failed
auction of two of the company's divisions, according to
TheDeal.com. Recently, the buyout firm Veritas Capital
Management LLC decided to buy a majority stake in Raytheon
Aerospace Co. rather than Stellex's aerostructures unit. This
resulted in the early end of an auction that began last spring.
At the time, the Florham Park, N.J.-based Stellex had hopes of
raising $350 million and thus making its subordinated creditors
and lending banks whole.
The subordinated creditors hold $100 million in notes due in
2007, while the banks possess $235 million in notes. But since
asset sales raised no more than $120 million, Stellex's
subordinated creditors and banks find themselves recovering only
36 cents on the dollar and in ownership of the aerostructures
unit. Dreyfus, Fidelity Investments, IDS Life Insurance Co.,
Nomura Corporate Research and Asset Management and Prudential
are among the company's creditors. (ABI World, May 17, 2001)
STERLING CHEMICALS: S&P Junks Debt Ratings
------------------------------------------
Standard & Poor's lowered its ratings for Sterling Chemicals
Holdings Inc. and 100%-owned Sterling Chemicals Inc., the
primary operating subsidiary (see list). All ratings were
removed from CreditWatch, where they were placed on Jan. 5,
2001. The outlook is negative.
The downgrade reflects substantially heightened concerns
regarding the ability of this commodity chemical producer to
meet near-term financial commitments. Continued weakness in the
company's key styrene business is likely to forestall any
meaningful recovery in operating performance. Given current
market conditions, the firm believes there is a significant risk
that it will be unable to make its July 15, 2001, interest
payment on the $295 million senior secured note issue, as well
as subsequent interest payments on other debt issues. In
addition, the company has hired a financial adviser to evaluate
strategic alternatives, including the development of a
consensual restructuring plan.
Profitability and cash flows have been very weak, but declined
precipitously in the company's second fiscal quarter. Operating
losses and cash flow deficits reflect a combination of lower
prices and dramatically lower styrene and acrylonitrile sales
volumes, mostly as a result of the economic slowdown in the U.S.
In addition, historically high raw material and energy costs
have had a meaningful negative impact on earnings. Sterling's
poor operating results are more pronounced given the company's
heavy debt load from its 1996 leveraged buyout, leading to a
squeeze on liquidity. The company's borrowing capacity under its
secured revolving credit facilities declined to $61 million at
March 31, 2001 (reflecting indebtedness limitations), from $101
million at Dec. 31, 2000.
Outlook: Negative
A ratings default would occur if the firm does not make an
interest and/or principal payment. In addition, a restructuring
that results in the completion of an exchange offer or tender
offer that Standard & Poor's deems coercive would result in a
ratings default, Standard & Poor's said.
Ratings Lowered And Removed From Credit Watch
To From
Sterling Chemicals Holdings Inc.
Corporate credit rating CC BB-
Senior secured notes C B
Sterling Chemicals Inc.
Corporate credit rating CC BB-
Senior secured notes CC BB-
Senior secured bank credit facility CC BB-
Subordinated notes C B
TCPI INC.: Losses & Cash Burn May Trigger Bankruptcy Filing
-----------------------------------------------------------
Since inception, TCPI, Inc. and Subsidiaries have experienced
recurring operating losses and negative cash flows from
operations. Operating losses have in large part been due to
insufficient revenues from the Company's current product
portfolio to support operating costs, including those related to
the development of future products. In addition, significant
costs were incurred during the three-year period ended December
31, 2000 relating to ongoing litigation. These conditions raise
substantial doubt about TCPI's ability to continue as a going
concern.
While the net loss for the year ended December 31, 2000 and
first quarter of 2001 was reduced from the net loss in the
corresponding prior year periods, TCPI has sustained significant
operating losses over the past several years that have resulted
in a substantial consumption of its cash reserves. The Company
dedicates a majority of its research, development and
engineering activities to the development of new products. As a
result, it is not generating sufficient revenue from the sales
of existing products to cover the expenses associated with the
development of new products. In addition, the Company expects to
continue to incur losses and have negative cash flow for the
immediate future. Based on its current rate of losses and cash
flow, it will not be able to continue operations unless the
Company secures additional financing and reduces operating
losses by reducing expenses and/or increasing sales of its
products, or sell assets. There can be no assurance that the
sales of certain of its products under development will ever
commence or that the Company will generate significant revenues
or achieve profitability.
TCPI has entered into investment agreements with Swartz Private
Equity, LLC for the purchase of up to $25 million in common
stock under a private equity line and also entered into an
agreement through the May Davis Group with GMF Holdings, Inc.
for the purchase of up to $10 million of its convertible
debentures and has achieved effective registration with the
Securities and Exchange Commission. These transactions are
subject to certain terms and market conditions related to
trading price and volume as well as other contingencies,
including the availability of sufficient authorized and unissued
common stock. However, the dilutive effect of prior funding
transactions has nearly exhausted TCPI's present number of
authorized shares of common stock and placed the Company in a
position of being unable to proceed with funding opportunities
to provide working capital necessary to implement its business
plan. In order for it to proceed in raising additional capital,
its Board of Directors has unanimously adopted, subject to
shareholder approval, a proposal to amend its Amended and
Restated Articles of Incorporation and in doing so increasing
the number of authorized common shares to 250,000,000. The
Company's Annual Meeting of Stockholders, convened in April,
2001, has been adjourned until August, 2001, in an attempt to
solicit sufficient proxies for a positive result concerning the
amendment of its Amended and Restated Articles of Incorporation.
TCPI says that if it is unable to successfully obtain funds
under these investment agreements due to unfavorable market
conditions, lack of authorized common stock, maintain the
effectiveness of its current registration statements, issue
common or preferred stock or sell debentures or otherwise obtain
additional capital from other sources on satisfactory terms, or
significantly reduce operating losses, TCPI would have to
consider selling some or all of its technologies, reduce or
terminate completely research and development activities, or
reduce or discontinue some or all of its operations, or apply
for protection from its creditors under the federal bankruptcy
laws.
TRANSTECHNOLOGY: Posts Fourth-Quarter and FY 2001 Losses
--------------------------------------------------------
TransTechnology Corporation (NYSE:TT) reported a net loss for
the fourth quarter of the fiscal year ended March 31, 2001 of
$69.2 million or $11.21 per diluted share, including a $78.1
million pretax or $11.24 per-share after tax charge associated
with its previously announced restructuring plan and other non-
recurring charges. For the prior fiscal year's fourth quarter
the Company reported net income of $2.4 million, or $.40 per
diluted share. Excluding the restructuring charges, pre-tax
income from operations for the fourth quarter of fiscal 2001 was
$324 thousand, or $.03 per-share after taxes (assuming a
normalized 38% tax rate). Net sales for the fiscal 2001 fourth
quarter declined 9% to $86.3 million from $95.1 million for the
corresponding period a year ago.
For the fiscal year ended March 31, 2001, the Company reported a
loss of $73 million, or $11.83 per share, which included the
$78.1 million pre-tax charge associated with the restructuring
plan and other non-recurring charges, or $11.24 per share after
taxes. The after tax loss from operations, before the
restructuring charge and other non-recurring items, was $3.6
million or $.59 per-share compared with after tax income from
operations for the prior year of $10.6 million or $1.72 per-
share before an extraordinary item and a plant consolidation
charge. Net sales for fiscal 2001 increased 9.6% to $328.1
million from $299.3 million last year.
The restructuring charges reported for the fourth quarter of
fiscal 2001 are associated with the company's previously
reported restructuring program and its planned divestiture of
several of its fastener units. As part of the anticipated losses
on the divestiture of its aerospace rivet, retaining ring, and
cold-headed products businesses, the company wrote off, on a
pre-tax basis, $67.9 million of fixed and intangible assets.
Additionally, the company recognized, on a pre-tax basis, non-
recurring fourth quarter charges of $10.2 million associated
with the write-down of real estate held for sale and equity
investments and notes receivable from a 1995 divestiture.
The Specialty Fasteners segment reported fiscal 2001 growth in
sales of 8%, primarily due to the inclusion of twelve months of
the results of the Ellison retaining ring business and the
Engineered Fasteners Division of Eaton Corporation whereas the
prior year results only included partial year results for these
1999 acquisitions. Excluding the effect of these acquisitions,
sales and operating income increases were reported in domestic,
German, and Brazilian retaining ring operations and the German
hose clamp business. Because of the sharp decline in the fiscal
year's second half automotive and heavy truck production, sales
and operating income declines were reported in domestic hose
clamps, cold-headed parts, and assembly fasteners. The aerospace
rivet business reported lower sales and a larger operating loss
for fiscal 2001. The consolidation of the Company's two UK
facilities resulted in a Fiscal 2001 operating loss of $8.6
million for the unit compared to breakeven in Fiscal 2000.
For the fiscal fourth quarter, the Brazilian retaining ring
operation and the German hose clamp business reported higher
sales, with all other fastener units reporting lower sales
volumes. Operating income increases were reported for the
domestic and German retaining ring operations and the German
hose clamp operation. Lower sales and operating profits were
reported for the domestic hose clamp business, cold-headed parts
business, and the assembly fastener business, primarily because
of declines in production volumes of 21% and 50% compared to the
prior year's fourth quarter for automobiles and heavy duty
trucks, respectively. The aerospace rivet business reported a
lower operating loss on flat sales for the fourth quarter of
fiscal 2001. Without regard to non-recurring items such as
goodwill impairment included in the restructuring charge, the UK
retaining ring operation reported a fiscal 2001 fourth quarter
operating loss of $1.9 million.
For fiscal 2001, the Aerospace Products segment reported a 15.9%
increase in sales and an 18.4% increase in operating income from
the prior fiscal year, with both the rescue hoist and hold-open
rod businesses reporting higher sales and operating income than
in the previous fiscal year. The backlog of Aerospace Products
orders at the end of fiscal 2001 stood at $40.1 million compared
with $44.2 million a year earlier. For the fourth quarter of
fiscal 2001, the Aerospace Products segment reported a 15.8%
increase in sales and a 19.3% increase in operating income, with
both business units reporting higher sales and operating profits
than in the fourth quarter of the prior year.
Michael J. Berthelot, TransTechnology's Chairman, President and
Chief Executive officer, commented: "Fiscal 2001 was a terrible
year for us. The financial effects of the failure of the UK
consolidation to be completed as planned were compounded by the
rapid decline in automobile and heavy truck production in the
second half of our fiscal year. In our efforts to stay ahead of
a continually deteriorating situation, during the course of the
fiscal year we reduced our company-wide headcount by 10% from
its mid-year peak, while at some units the cut-back ran to over
20%, reduced our inventories by $4.4 million or 7%, and limited
our capital expenditures to those that were absolutely
necessary. Although we ended the year in technical violation of
several financial covenants of our credit facilities, at no time
did we miss a payment of interest or principal on our
obligations."
Joseph F. Spanier, Vice President and Chief Financial Officer,
said: "We continue to work under a forbearance agreement with
our senior lenders with regard to the violation of certain
financial covenants in our credit agreement, primarily as the
result of the inability to calculate revised financial covenants
due to the uncertainty of the order of completion of the
proposed divestitures and the resultant impact upon those
covenants. As a result, we report all of our senior and
subordinated debt obligations as current liabilities on our
balance sheet. Long- and short- term debt at the end of the
fiscal year was $272 million, down $5.5 million from the end of
the third quarter. During the fourth quarter, we spent $1.2
million for capital equipment throughout the company. For the
fiscal year, total debt was reduced $4.9 million, non-UK
consolidation capital spending was $4.6 million and depreciation
and amortization was $21.2 million. Capital spending associated
with the UK consolidation amounted to $1.1 million in fiscal
2001."
Mr. Berthelot continued, "As the auto and truck markets
deteriorated, however, we took a longer, and deeper, look into
what their eventual recovery would mean, to our individual
business units and to our shareholders. As we went through this
process, assisted by our outside advisors and our Board, we
determined that our strategy of growing our fastener business
would no longer build shareholder value for a publicly traded
small-cap company. We believe that only the very large, multi-
billion dollar component and system suppliers or the small,
privately held ones will be able to match the demands for price
reductions, capital investment, and program initiatives of the
large auto and truck manufacturers. As a result, at the end of
the fourth quarter, we made the decision to completely divest
our fastener businesses and to focus our company's management
and financial resources on our highly successful and profitable
aerospace businesses."
"Our goal, Mr. Berthelot said, "is to complete the divestiture
process by the end of September of this year. We are currently
in various stages of negotiation and discussion with parties to
acquire each of the businesses we are divesting. We expect to
begin receiving the proceeds of these divestitures in June, and
estimate them to be sufficient to eliminate our senior and
substantially all our subordinated debt by the conclusion of the
process this fall. As the final selling prices and the timing of
the transactions are determined during the first and second
quarter of this new fiscal year, there may be additional non-
cash write-offs of goodwill resulting from the divestiture
process."
"Looking past the divestiture program, however," Mr. Berthelot
continued, "we will be a substantially stronger company. Our
debt will be at or near zero. Our two aerospace products
businesses reported sales of $70.5 million and an operating
income of $18.2 million, a 26% operating margin. Fiscal 2001
capital expenditures for these two businesses aggregated only
$230,000 against depreciation and amortization charges of almost
$1.2 million. With our corporate office downsized more than 50%
to $4 million on an annualized basis, we would have reported
pro-forma pre-tax operating income of $14.2 million for the 2001
fiscal year. Because of the income tax net operating loss carry-
forwards generated by the write-offs and divestitures, for cash
flow purposes, we do not expect to be in an income tax paying
position for the next several years. As a result, on a pro-
forma, debt free, aerospace only basis, our restructured company
would have reported $1.43 per share of fully taxed net income
for the fiscal year ended March 31, 2001, with after tax, after
capital expenditure cash flow of $2.46 per share. We believe
that, as the 2002 fiscal year progresses and we complete our
divestitures, the markets will recognize our inherent strengths
and shareholder value will be substantially increased as a
result of not only our improved fundamentals, but also the
higher valuation accorded aerospace companies as compared to
automotive component companies. As these strengths become more
evident in the second half of fiscal 2002, we will continue to
pursue our study of strategic alternatives towards enhancing
shareholder value with our advisors and our Board."
TRAVELERS: Finantra Capital Forecloses Investment After Default
---------------------------------------------------------------
Finantra Capital, Inc. (Nasdaq:FANTE) announced that on May 11,
2001 BHC Interim Funding L.P. foreclosed upon and sold at public
sale, pursuant to rights triggered upon the continuance of
events of default under its $3.65 million loan agreement with
Finantra and Finantra's affiliates, all of the issued and
outstanding capital stock of Travelers Investment Corporation.
The operations of TIC have recently accounted for a significant
portion of the consolidated operating revenue of Finantra. As a
consequence of the forgoing, Finantra is evaluating all of its
alternatives, including a potential liquidation of its remaining
assets.
About Finantra
Finantra Capital, Inc. is a consumer finance company
specializing in mortgage lending and servicing delivered through
traditional and online processing systems.
W.R. GRACE: Moves To Reject Four Unprofitable Subleases
-------------------------------------------------------
The W. R. Grace & Co. Debtors are party to four non-residential
real property sub-leases which are unprofitable to the Estates
and should be rejected:
Location Subtenant
-------- ---------
495 N. Semoran Blvd. Heilig-Meyers Furniture Company
Winter Park, Florida
4691 Transit Road Pier 1 Imports (US), Inc.
Williamsville, New York
23829 S. Banning Blvd. Solid Gold Distributing Co.,
Carson, California Inc.
14510 Memorial Drive Memorial Equities
Houston, Texas
The Debtors told Judge Farnan that the subleases are
unprofitable -- meaning they collect less rent than they pay to
their landlord. Accordingly, pursuant to 11 U.S.C. Sec. 365(a),
the Debtors sought authority to reject these subleases without
further delay. (W.R. Grace Bankruptcy News, Issue No. 5;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
WASHINGTON GROUP: Nevada Court Approves All First Day Motions
-------------------------------------------------------------
Washington Group International, Inc. (NYSE:WNG) received
approval from the U.S. Bankruptcy Court for the District of
Nevada in Reno of its first-day motions requesting among other
things, authorization to pay pre-petition and post-petition
employee wages, salaries, employee benefits and other employee
obligations.
The Court also approved Washington Group's request to pay
outstanding pre-petition critical vendor claims in accordance
with their normal terms during the pendency of its Chapter 11
case.
Additionally, the Company announced that the Court has approved
$150 million of the approximately $200 million in debtor-in-
possession (DIP) financing intended to support the Company's
operations. The Court has scheduled a hearing for final approval
of the DIP facility for June 13, 2001. Credit Suisse First
Boston is the agent for the DIP financing facility. This
facility may be increased to $350 million under certain terms,
conditions and lender commitments.
"The decisive actions by the Court on Monday, together with the
substantial financing facility that has been arranged, have
moved Washington Group further down the path towards a
successful reorganization," said Stephen G. Hanks, Washington
Group President. "Our clients have indicated they intend to
remain with us -- and we intend to reward that loyalty with a
determined commitment to provide the best engineering,
construction and program management service in the world, bar
none."
The Court also established September 6, 2001, as the
confirmation date for the Company's Plan of Reorganization. It
is anticipated that Washington Group will emerge from Chapter 11
protection shortly thereafter. The hearing of the Company's
Disclosure Statement is set for July 24, 2001. The Company's
Disclosure Statement will describe the business plan and
financial terms of the Company's Plan of Reorganization, and
include a pro forma balance sheet of the reorganized company.
Washington Group announced on May 14, 2001 that it had reached
an agreement in principle with its bank group steering committee
on a Plan of Reorganization for the Company. In order to
facilitate the reorganization the Company, and certain of its
subsidiaries, filed voluntary petitions to reorganize under
Chapter 11 of the U.S. Bankruptcy Code together with a Plan
of Reorganization, that describes the terms of the
restructuring.
Washington Group International, Inc. is a leading international
engineering and construction firm with more than 35,000
employees at work in 43 states and more than 35 countries. The
Company offers a full life-cycle of services as a preferred
provider of premier science, engineering, construction, program
management, and development in 14 major markets.
Markets Served
Energy, environmental, government, heavy-civil, infrastructure
and mining, nuclear-services, operations and maintenance,
petroleum and chemicals, industrial process, pulp and paper,
telecommunications, transportation, and water-resources.
ZANY BRAINY: Obtains Court Nod For $115 Million DIP Financing
-------------------------------------------------------------
Zany Brainy, Inc., (Nasdaq: ZANYQ) a leading specialty retailer
of high quality toys, games, books and multimedia products,
disclosed that the U.S. Bankruptcy Court for the District of
Delaware has approved the Company's Debtor-in-Possession (DIP)
financing agreement with Wells Fargo Retail Finance. The Court
granted interim approval of the $115 million DIP facility, which
made funds available today. The DIP facility will allow the
Company to normalize merchandise flow and quickly replenish all
of its 187 stores nationwide with fresh product.
"Having our DIP facility approved is the critical first step in
our restructuring. It provides the capital to ensure that our
shelves are stocked with fresh, new merchandise immediately and
for the months ahead," explained Tom Vellios, President and CEO
of Zany Brainy. "This credit facility gives us a fresh start
with our trade, as well as the ability to move forward with our
strategies to improve operations and financial performance. We
are very pleased with the support we are receiving from the
vendor community."
The $115 million credit facility was funded today and replaces
the Company's previous lending facility with Congress Financial.
The Company expects customers will begin to see new product on
the shelves as early as next week.
About Zany Brainy
Zany Brainy, Inc. is a leading specialty retailer of high
quality toys, games, books and multimedia products for kids. The
Company combines distinctive merchandise offering with superior
customer service and in-store events to create an interactive,
kid-friendly and exciting shopping experience for children and
adults. The Company presently operates 187 stores in 34 states.
BOND PRICING: For the week of May 21 - May 25, 2001
---------------------------------------------------
Following are indicated prices for selected issues:
Algoma Steel 12 3/4 '05 22 - 25 (f)
Amresco 9 7/8 '05 55 - 57
Arch Communicatins 12 3/4 '07 23 - 24
Asia Pulp & Paper 11 3/4 '05 21 - 25 (f)
Chiquita 9 5/8 '04 60 - 62
Friendly Ice Cream 10 1/2 '07 45 - 50
Globalstar 11 3/8 '04 4 - 5 (f)
Level 3 9 1/8 '04 61 - 63
PSINet 11 '09 10 - 12 (f)
Revlon 8 5/8 '08 51 - 53
Trump AC 11 1/4 '06 66 - 68
Weirton Steel 10 3/4 '05 36 - 38
Westpoint Stevens 7 7/8 '05 45 - 50
Xerox 5 1/4 '03 82 - 84
*********
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
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Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L.
Metzler, Bernadette de Roda, Aileen Quijano and Peter A.
Chapman, Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
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*** End of Transmission ***