/raid1/www/Hosts/bankrupt/TCR_Public/010605.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Tuesday, June 5, 2001, Vol. 5, No. 109
Headlines
AMC ENTERTAINMENT: Theatre Operator Closes 249 More Screens
ARMSTRONG WORLD: Cuts $300 Million Credit Line to $200 Million
ARTIFICIAL LIFE: Shuts Down European Operations
AVADO BRANDS: Plans To Defer Certain Debt Service Payments
BLACKROCK 2001: Term Trust Set To Terminate On June 29, 2001
BRIDGE INFORMATION: Rejecting Executory Severance Contracts
CLARIDGE HOTEL & CASINO: Now Owned By Park Place Entertainment
CLARION COMMERCIAL: Shareholders Approve Plan of Liquidation
CONSECO FINANCE: Fitch Affirms B Ratings & Says Outlook Negative
COVAD COMMUNICATIONS: Shares Face Delisting From Nasdaq
ECHO BAY: S&P Lowers Corporate Debt Rating to B- From B+
eLOT INC.: Provides Update On Nasdaq Delisting Process
FEDERAL-MOGUL: Completes Sale of Aviation Ignition Business
GENESIS HEALTH: Agrees To Lift Stay For State Court Actions
GLOBAL TELESYSTEMS: Moody's Cuts Ratings Following Default
HEILIG-MEYERS: S&P Junks 2 Classes Of Asset-Backed Certificates
HOLT GROUP: Obtains Nod For $10MM DIP Loan From First Union Bank
HORIZON PHARMACIES: Group to Nominate Two Candidates to Board
LOEWEN: Overview of Second Amended Joint Reorganization Plan
LTV: 4049 Trust Moves To Compel Assumption/Rejection Of Contract
MORRIS MATERIAL: Plan Confirmation Hearing Set For July 25
NERDS4RENT, INC.: Web-based Computer School Files For Chapter 11
NX NETWORKS: Facing Cash-Flow Crunch & May File For Bankruptcy
PACIFIC GAS: Wants To Retain Heller Ehrman As Special Counsel
PACIFIC GAS: Court Denies Request for Stay re CPUC's Order
PACIFICARE: Commences Cash Tender Offer for Outstanding Notes
PSINET INC.: Files For Chapter 11 Protection in S.D. New York
PSINET INC.: Case Summary & 20 Largest Unsecured Creditors
PSINET INC.: Selling Canadian Operations To TELUS
PSINET: Wilmington Trust Clarifies Role In Bankruptcy Case
SAFETY-KLEEN: Royal Indemnity Moves For Protective Order
SAFLINK CORPORATION: Nasdaq Halts Trading of Shares
SCIENCE DYNAMICS: Receives Notice of Noncompliance From Nasdaq
SIERRA HEALTH: A.M. Best Lowers Insurance Units' Ratings To B
SPALDING HOLDINGS: S&P Places B- & CCC Debt Ratings on Watch
TEMPO ONE-STOP: Taps Universal Capital to Lead Turnaround Effort
U.S. INDUSTRIES: Receives Bank Waiver For Rexair Guarantee
VENCOR INC.: Agrees To Modify Stay For Insured Claim
WASHINGTON GROUP: Idaho Court Appoints Raytheon Arbitrator
WINSTAR COMMUNICATIONS: Engages PwC As Bankruptcy Consultants
*********
AMC ENTERTAINMENT: Theatre Operator Closes 249 More Screens
-----------------------------------------------------------
AMC Entertainment Inc., one of the largest publicly traded movie
theater operators in the United States, said it will close
another 249 screens after having cut 66 so far this year,
according to Reuters. The closures are part of an industry-wide
cutback following an overbuilding spree and a string of
bankruptcies. AMC, which is based in Kansas City, Mo., and runs
2,766 screens in about 180 theaters, said in January that it
planned to close 307 screens by early 2004, and had another 241
on "watch" for possible closure. AMC said it still plans to
close another 75 screens by next March even though it said the
summer 2001 box office looks promising. (ABI World, June 1,
2001)
ARMSTRONG WORLD: Cuts $300 Million Credit Line to $200 Million
--------------------------------------------------------------
Bankrupt Armstrong World Holdings Inc., a building materials
company, said it has cut the size of its debtor-in-possession
(DIP) credit facility from $300 million to $200 million,
according to Reuters. Leonard Campanaro, Armstrong World's chief
financial officer said the Lancaster, Pa.-based Armstrong World,
the main operating unit of Armstrong Holdings Inc., has not
tapped the facility since filing for chapter 11 protection and
sees no need to tap into it in the future. Chase Manhattan Bank
arranged the credit facility.
"We concluded that a $200 million facility is more than
sufficient to meet our foreseeable liquidity needs," Campanaro
said. "As we move through the reorganization process, we are
becoming increasingly confident of our ability to fund our
businesses with cash generated from operations." The company, he
said, had more than $150 million of cash on hand from operations
as of April 30, and by cutting the facility can save on loan
fees. (ABI World, June 1, 2001)
ARTIFICIAL LIFE: Shuts Down European Operations
-----------------------------------------------
Boston based Artificial Life, Inc. (Nasdaq: ALIF) announced that
it has shut down its operations in Russia and that its German
and Swiss subsidiaries will file for bankruptcy protection next
week. The Company has also laid off almost all of its global and
US staff. Global expenses have been cut back over 80%.
The Company also announced that it has entered into merger talks
with certain companies.
"We are in the process of a major corporate restructuring and
consolidation and are re-inventing the Company by adjusting to
the current circumstances in the financial and global Internet
markets. As it is still hard for us to raise sufficient funds
for operations, we are reducing our operations and expenses to a
bare minimum by drastic measures. We have closed and sold our
Russian entity and will file for bankruptcy protection in
Switzerland and Germany. The US office has been reduced to a
handful of key employees. However, the company has generated
award winning and very valuable technology over the last few
years representing development efforts of several hundred person
years. Therefore, we believe that these technology assets can
and should now be used to help us to recover by selling
nonexclusive source code licenses to interested partners and
clients around the world. This way we take advantage of our
valuable technology, but do not have to incur any longer the
expenses associated with a support infrastructure", said
Eberhard Schoeneburg, CEO of Artificial Life, Inc.
The Company also announced that Nasdaq has notified the Company
on May, 30, 2001, that it has determined that the Company is not
in compliance with the net tangible asset requirements for
continued listing on the National Market. The net tangible
assets requirement is $4,000,000. However, the Company will
request a hearing with Nasdaq and plans to submit and present an
explanation and turn around plan to Nasdaq. The hearing request
will stay the delisting (scheduled for June 7, 2001) pending a
final determination by Nasdaq.
Former CFO Robert Pantano has resigned. The new CFO of the
company is Chin Phaik Lim. Chin graduated from Curtin University
Perth, WA, in 1988. She worked as an accountant in a chartered
firm, Bourne Griffiths and for Barrington Partners thereafter.
After moving to Sydney she worked as a Financial Controller at
Frank Russell, Australia (headquartered in Tacoma, Washington
State). Chin had full finance, administration, statutory, legal
and hr responsibilities. She also set up the New Zealand branch
office for the company. In 1996 she joined ACEA, Association of
Consulting Engineers Australia as the company secretary,
financial and administration manager with full responsibilities.
Since 1997 Chin worked as a senior consultant for an executive
management-leasing firm in Hong Kong.
"It's a tough time for the company now, but also a good time for
a new business approach. I am ready to help out with my
international contacts and experience and I am very excited
about this opportunity as I believe in the company and its great
technology and the value of the assets generated by Artificial
Life over the past years as I have noticed personally the very
positive reception of the Artificial Life technology in Asia. I
am determined to help the company to turn around and to support
and improve the fundraising process and IP licensing. I also
intend to help the company evaluate all options in the current
situation such as a going private or mergers with potential
candidates around the globe. I am driven by optimization of
shareholder value", said Chin Lim, CFO of Artificial Life."
The Company is in negotiations with potential investors and
lenders to secure short term funding for operations, as
previously disclosed.
The company also announced that it plans to move its
headquarters from Boston, MA, to New York City, NY, in June/July
2001.
About Artificial Life
Founded in 1994, Artificial Life, Inc. (Nasdaq: ALIF) develops,
markets, and supports intelligent software robots for the
Internet. The company offers uniquely conversational bot-based
products for customer service, consultative selling, Web-based
learning, Web site navigation, automated e-mail response, and
financial portfolio management. Major customers of the
Artificial Life Group include, among others, Credit Suisse First
Boston, UBS, Advance Bank, Eagle Star, Pioneer Investments, and
MobilCom.
Artificial Life, Inc. is headquartered in Boston, Massachusetts,
U.S.A, and maintains subsidiaries in Hong Kong. Detailed
information about Artificial Life, Inc. and its products is
available at www.artificial-life.com
AVADO BRANDS: Plans To Defer Certain Debt Service Payments
----------------------------------------------------------
Avado Brands, Inc. (Nasdaq: AVDOC) announced that consolidated
same- store sales for the eight-week period ended May 27, 2001
decreased by 2.2%. This includes decreases of 1.3% at Don
Pablo's, 2.8% at Hops Restaurant - Bar - Brewery, 0.8% at
McCormick & Schmick's, and 12.4% at Canyon Cafe. Commenting on
the sales comparisons, Tom E. DuPree, Jr., Chairman and Chief
Executive Officer said, "Consistent with restaurant industry
trends, all of our brands have felt the impact of a slowing
economy and Hops has been particularly impacted by global
consumer concerns over European beef products. However, we are
very encouraged that Don Pablo's has shown marked improvement
during the quarter by posting positive same-store sales for the
four-week period ended May 27, 2001, a trend which we expect to
continue." As a result of lower-than-expected sales, the Company
now anticipates achieving EBITDA for the first half of fiscal
2001 in the mid-$30 million range as opposed to the high $30
million range previously anticipated.
Avado Brands also announced it has retained the services of
Credit Suisse First Boston Corporation (CSFB) to assist in
identifying and evaluating financial and capital structure
alternatives for the Company.
Additionally, the Company intends to delay the payment of the
semi-annual interest due June 1, 2001 to holders of its Senior
Notes, but plans to make the interest payment within the 30 day
no-default period provided for under the terms of the Senior
Notes' Indenture. Similarly, it does not intend to reinstate the
quarterly distributions payable to holders of its convertible
preferred securities (TECONS). The quarterly distribution due
June 1, 2001 as well as the previously extended quarterly
distributions due December 1, 2000 and March 1, 2001, have been
extended to March 1, 2003 which is consistent with the terms of
the TECONS' Indenture. The Company has the right to further
extend these distributions as well as future distributions and
currently believes that it will likely do so. Separately, Avado
Brands' senior secured lenders are currently allowing the
temporary deferral of the $10 million principal amortization
payment due May 31, 2001 with respect to its revolving credit
facility pursuant to an understanding between the Company and
the senior lenders regarding financing alternatives currently
under consideration.
A decision is also expected within the next two weeks as to
whether or not the Company's Board of Directors will vote to
enact the one-for-four reverse stock split which was approved by
shareholders at its annual meeting held on May 2, 2001. Avado
Brands common stock continues to be listed on the Nasdaq
SmallCap Market via an exception, which was recently extended
until June 7, 2001, from the minimum bid price requirement of
$1.00.
Avado Brands owns four decentralized brands, operating 14 Canyon
Cafe restaurants, 131 Don Pablo's Mexican Kitchens, 74 Hops
Restaurant - Bar - Breweries and 34 McCormick & Schmick's
seafood dinner houses.
BLACKROCK 2001: Term Trust Set To Terminate On June 29, 2001
------------------------------------------------------------
BlackRock Advisors, Inc. and the Board of Directors of The
BlackRock 2001 Term Trust Inc. (NYSE: BTM) (CUSIP: 092477108)
disclosed that BTM will terminate on June 29, 2001. In
connection with the Trust's scheduled plan of liquidation
adopted by the Board of Directors, the Common Stock will
continue to trade the "Regular Way" on the New York Stock
Exchange through June 12, 2001 and will be suspended from
trading before the opening on June 13, 2001.
Shareholders of record on June 15, 2001 are expected to receive
a distribution payable June 29, 2001 representing the June
monthly dividend of $0.0041667 per share. Additionally, all
shareholders of record on June 15, 2001 will receive a
distribution on June 29, 2001 representing a liquidating
distribution in an amount equal to the net asset value of the
Trust.
BlackRock, BTM's investment advisor, created the first term
trust in 1988 to provide investors in fixed-income securities
one investment which would provide monthly income while having a
final maturity date to retrieve their principal. This feature is
especially valuable to investors who need their assets at a
specific time, like those who need to pay a child's college
tuition or make a down payment on a car or home. BlackRock's
first maturing term trust, BBT, which matured on December 23,
1998 distributed $10.02 per share, while BlackRock's second term
trust, BNN, matured on December 16, 1999 and distributed $10.15
per share. BlackRock's third term trust, BTT, matured on
December 29, 2000 and distributed $10 per share.
BlackRock has 4 remaining taxable and 6 tax-exempt term trusts
with maturities from 2002 to 2010 and believes that all are
currently on schedule to return their original offering price.
BlackRock, Inc. is one of the largest publicly traded investment
management firms in the United States with $201.6 billion of
assets under management as of March 31, 2001. BlackRock manages
assets on behalf of more than 3,300 institutions and 200,000
individuals worldwide through a variety of equity, fixed income,
liquidity and alternative investment separate accounts and
mutual funds, including BlackRock's flagship fund families,
BlackRock Funds and BlackRock Provident Institutional Funds. In
addition, BlackRock provides risk management and investment
system services to a growing number of institutional investors
under the BlackRock Solutions name. Clients are served from
BlackRock's headquarters in New York City, as well as offices in
Wilmington, DE, Edinburgh, Scotland, Tokyo, Japan and Hong Kong.
BlackRock is a member of The PNC Financial Services Group, Inc.
(NYSE: PNC) (http://www.pnc.com),one of the largest diversified
financial services organizations in the United States, and is
majority-owned by PNC and by BlackRock employees. For more
information on BlackRock, see http://www.blackrock.com.
BRIDGE INFORMATION: Rejecting Executory Severance Contracts
-----------------------------------------------------------
Bridge Information Systems, Inc. sought and obtained permission
to repudiate prepetition severance payment-related contracts
with:
* Timothy A. Cox of St. Louis, Missouri;
* Paul Lowe of Dobbs Ferry, New York;
* Richard MacWilliams of Chappaqua, New York;
* Thomas M. Wendel of Clayton, Missouri; and
* William E. Holmberg of Laurel Hollow, New York.
To the extent that those severance agreements are part of
another agreement, the parties reserve all of their rights to
argue at a later date about whether those agreements can be
splintered or constitute one indivisible contract. (Bridge
Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
CLARIDGE HOTEL & CASINO: Now Owned By Park Place Entertainment
--------------------------------------------------------------
Park Place Entertainment Corp. (NYSE:PPE) announced the
completion of the Claridge Hotel and Casino acquisition in
Atlantic City, N.J., effective at 6 a.m. June 1, 2001.
The announcement was made following the May 30 approval of the
acquisition by the New Jersey Casino Control Commission.
The Claridge, adjacent to Bally's Atlantic City, adds 500 rooms,
59,000 square feet of gaming space, a 600-seat theater and 1,200
parking spaces to the company's center-Boardwalk complex, which
includes Bally's, Caesars and the Wild Wild West casinos. The
company is currently designing an elevated "connector" between
Bally's and the Claridge, which will include retail and meeting
space.
The company paid a net purchase price of approximately $65
million, representing a purchase multiple of 5.4x adjusted
EBITDA (earnings before interest, taxes, depreciation and
amortization, bankruptcy court costs and other non-recurring
charges) of approximately $12 million for the year 2000.
"This strategic transaction gives us an additional asset at the
center of the Boardwalk, the best real estate in Atlantic City.
It's instantly accretive to earnings and adds more critical mass
to our operating infrastructure in Atlantic City," said Thomas
E. Gallagher, president and chief executive officer of Park
Place Entertainment. "The Claridge will be warmly welcomed into
the Park Place family. We appreciate the efforts of the Claridge
team; they have worked hard through difficult times."
Park Place intends to keep the Claridge name and will fold the
property into its maintenance capital program, investing five
percent of revenues in maintenance projects that help assure
assets will produce maximum revenues.
Park Place Entertainment is the world's largest gaming company
and owns, manages or has an interest in 29 gaming properties
operating under the Bally's, Caesars, Flamingo, Grand and Hilton
brand names with a total of approximately two million square
feet of gaming space, over 28,000 hotel rooms and approximately
60,000 employees worldwide.
Additional information about Park Place Entertainment can be
accessed through the company's 24-hour investor relations
service. Individuals may call toll-free 877/PPE-NYSE (877/773-
6973) or visit www.parkplace.com to obtain the latest company
news and stock price information, or to request information by
e-mail, fax or postal mail delivery.
CLARION COMMERCIAL: Shareholders Approve Plan of Liquidation
------------------------------------------------------------
Clarion Commercial Holdings, Inc. (NYSE: CLR) related that, at
its meeting of shareholders held on May 31, 2001, shareholders
approved the Company's Plan of Complete Liquidation and
Dissolution. The plan had previously been approved by the
Company's Board of Directors. The liquidation proposal received
the affirmative vote of 99.27% of the votes cast and 78.20% of
the outstanding shares of the Company's common stock. Also, at
the meeting, shareholders approved the reelection of Steven N.
Fayne and Frank L. Sullivan, Jr. to serve as Directors for a
three-year term, or until the Company files articles of
dissolution.
CONSECO FINANCE: Fitch Affirms B Ratings & Says Outlook Negative
----------------------------------------------------------------
Fitch affirms its `B' long-term counterparty rating and `B'
short-term rating of Conseco Finance Corp.(CFC), and removes the
ratings from Rating Watch Negative where they were initially
placed on April 18, 2000. The Rating Outlook for Conseco Finance
is Negative.
The ratings for CFC reflect the company's improved near- term
financial flexibility resulting from its ability to access
short-term secured warehouse borrowings to fund on- going loan
originations, coupled with the execution of various asset and
business line sales. CFC remains the dominant manufactured
housing lender in the U.S., and recently its position in the
market has resulted in more favorable spreads on new loan
originations as competitors exit the business. Covenant
restrictions within the company's secured warehouse facilities
generally limit CFC's ability to grow its loan portfolio, which
Fitch believes will ultimately result in more profitable loans
being underwritten over the intermediate term. Also, the company
has been able to execute the sale of non-core or unprofitable
business lines, which should help operating profitability over
the intermediate term.
CFC's ratings also reflect the company's poor operating track
record, high-risk credit profile, low capitalization, and
reliance on secured funding facilities, which effectively
encumbers most of the company's asset base at the present time.
Also, Fitch does not believe that CFC's parent, Conseco, Inc.
(Conseco), is capable of providing material financial support as
a result of covenant restrictions in its existing bank credit
agreements. Consequently, Fitch views the ratings of CFC on a
stand- alone basis.
CFC anticipates an improved operating performance during the
next few quarters, which will allow the company to generate
higher free operating cash flow. After utilizing a portion of
these proceeds to fund new business, CFC plans to use the
remaining free cash flow to pay down existing unsecured debt,
including $512.3 million of an intercompany loan that is due to
Conseco. Part of CFC's free cash flow is generated through its
securitization program, namely the securitization of up-front
points that are financed by a borrower for a manufactured
housing or home equity loan. This practice is in effect a
secured up-front borrowing that must be repaid to investors in
the securitization transaction over the life of the deal,
effectively subordinating existing unsecured creditors.
Notwithstanding, if CFC effectively executes on its business
reorganization plan, current unsecured debt could be completely
paid off by early 2003 through both operating and non-operating
cash flow. Fitch notes, however, that the company's
reorganization has only been in place a couple of quarters, and
the ultimate success of CFC's turnaround has yet to be
determined. Future rating actions will focus on the success of
new loan originations as they season, as well as the ultimate
performance of loans originated from the late-1998 to early-2000
time frame, most of which have yet to fully reflect their
expected true loss peaks. Also, CFC incurs further risk through
the $2.4 billion guarantee of payments related to subordinated
pieces in its securitization structures. A significant portion
of these guaranteed tranches remain on CFC's balance sheet.
COVAD COMMUNICATIONS: Shares Face Delisting From Nasdaq
-------------------------------------------------------
Covad Communications (Nasdaq:COVD), the leading national
broadband services provider utilizing DSL (Digital Subscriber
Line) technology, announced that it has received a Nasdaq Staff
Determination indicating that the company does not meet the net
tangible assets/shareholder equity requirement for continued
listing set forth in Standard 1 under Nasdaq Marketplace Rule
4450 (a)(03) and that its securities are subject to delisting
from the Nasdaq National Market.
Covad intends to request a hearing before a Nasdaq Listing
Qualifications Panel to review the Staff Determination on the
notice of deficiency regarding the net tangible
asset/shareholder equity test and the company's plan to achieve
compliance with the listing requirements. However, there can be
no assurance that the Nasdaq Listing Qualifications Panel will
grant the company's request for continued listing.
"Nasdaq has acknowledged that we rectified our deficiency
regarding the filing of our Form 10-K for the year ending
December 31, 2000. We currently expect to file our Form 10-Q for
the quarter ending March 31, 2001, during the week of June 18,
if not sooner. We are aware of this issue, as identified in our
recently filed Form 10-K," said Chuck McMinn, Covad chairman.
"We are examining all options to maintain our listing. We will
seek to convince NASDAQ that, with our first quarter results and
additional funding we are seeking, Covad expects to satisfy the
NASDAQ National Market listing requirements in a reasonable
period of time."
About Covad Communications
Covad is the leading national broadband services provider of
high-speed Internet and network access utilizing Digital
Subscriber Line (DSL) technology. It offers DSL, IP and dial-up
services through Internet Service Providers, telecommunications
carriers, enterprises, affinity groups, PC OEMs and ASPs to
small and medium-sized businesses and home users. Covad services
are currently available across the United States in 109 of the
top Metropolitan Statistical Areas (MSAs). Covad's network
currently covers more than 40 million homes and business and
reaches approximately 40 to 45 percent of all U.S. homes and
businesses. Corporate headquarters is located at 4250 Burton
Drive, Santa Clara, CA 95054. Telephone: 1-888-GO-COVAD. Web
Site: www.covad.com.
ECHO BAY: S&P Lowers Corporate Debt Rating to B- From B+
--------------------------------------------------------
Standard & Poor's lowered its corporate credit rating on Echo
Bay Mines Ltd. to single-'B'-minus from single-'B'-plus. At the
same time, the rating was placed on CreditWatch with negative
implications.
On Oct. 31, 2000, Standard & Poor's and the Canadian Bond Rating
Service (CBRS) announced that they have combined operations in
Canada. A process is underway to harmonize all ratings assigned
by CBRS with the Standard & Poor's framework, which includes the
translation of all ratings onto the Standard & Poor's global
ratings scale. Going forward, all new debt issue ratings on Echo
Bay will be based on the harmonized corporate credit rating.
Ratings harmonization announcements do not constitute upgrades
or downgrades of ratings assigned by CBRS, nor do they signify
any changes in an issuer's underlying credit quality, unless
explicitly indicated. In this case, the ratings reflect the
expectation of a weaker financial profile as the company's
mature mines approach depletion and the gold price remains low,
as well as the outcome of the harmonization process. The CBRS
debt ratings on Echo Bay have been withdrawn and are superseded
by the harmonized Standard & Poor's ratings. This action
resolves the pending harmonization of the CBRS ratings on the
company.
The downgrade anticipates that, in this low gold price
environment, Echo Bay's financial profile will be further
strained as its mature mines approach depletion in the next one
to two years. Production is expected to decline and cash
operating costs will rise.
In addition, the company is currently deferring interest on its
capital securities, which it can continue to do until April
2003. It must then pay the deferred interest, which would total
about US$80 million. If the gold price does not improve, the
likelihood that the capital securities will need to be
restructured increases. Should the company opt to restructure
its capital securities, Standard & Poor's considers it a default
if the securities holder receives an amount that is clearly less
than par.
The CreditWatch placement recognizes that the company's bank
credit facility, on which US$19 million is drawn, expires in
August 2001. Echo Bay expects that the facility will be renewed,
but if it is not, it would be difficult for the company to
continue operating.
The rating on Echo Bay reflects the company's well below-average
business position as a North America-based midsize gold producer
that must contend with the challenges of operating in a
difficult gold pricing environment.
Echo Bay has four operating mines, having restarted operations
at its Lupin mine in Nunavut, Canada in April 2000. Annual
production for 2000 was 694,663 ounces of gold and 12.3 million
ounces of silver. Ore reserves as of year-end 2000 stood at 4.5
million ounces of gold and 10.9 million ounces of silver. In
2001, however, the company expects annual gold production to
decline to around 570,000 ounces as its two mature mines begin
to deplete. As a result, average total cash operating costs are
expected to rise to around US$225 per ounce. Given the low gold
price, the company continues to limit its exploration and
development expenditures, which dampens prospects for future
production and reserve growth.
Echo Bay's financial profile improved in 2000, reflecting
positive annual net income for the first year since 1994. This
return to profitability, which continued through the first
quarter of 2001, was largely due to increased production from
Round Mountain, McCoy/Cove, and the restarted Lupin mine. Cash
flow protection measures are adequate, although the company is
currently deferring interest on its capital securities. Cash
flow and earnings also benefit modestly from the company's small
gold hedge position. Echo Bay has reduced its debt to below
US$20 million (treating capital securities as equity), but
financial flexibility is very limited. As of March 31, 2001, the
company had US$14.3 million in cash and cash equivalents on its
balance sheet and minimal borrowing capacity under its bank
facility, Standard & Poor's said.
eLOT INC.: Provides Update On Nasdaq Delisting Process
------------------------------------------------------
eLOT, Inc. (NASDAQ:ELOT), a provider of web-based retailing and
Internet marketing services to governmental lotteries, announced
that it received a Nasdaq staff determination on May 25, 2001,
indicating that as of March 31, 2001, the Company failed to
comply with the net tangible assets requirement for continued
listing set forth in Marketplace Rule 4450(a)(3).
The Company has previously been notified that it is no longer in
compliance with the $1.00 minimum bid price per share
requirement of Marketplace Rule 4450(a)(5) and that its Common
Stock is therefore subject to delisting from the Nasdaq National
Market. At a hearing before a Nasdaq Listing Qualifications
Panel held on May 17, 2001, the Company acknowledged the issue
with the net tangible assets requirement, and presented its
plans to return to compliance with both the minimum bid price
and the net tangible assets requirements for continued listing
on the Nasdaq National Market. The Listing Panel has not yet
issued a decision on the Company's request for an exception from
the listing requirements pending completion of the planned
transactions. Pending a decision, eLOT will continue to be
listed on the Nasdaq National Market.
Edwin McGuinn commented, "We are in the process of executing a
comprehensive plan designed to bring the company into NASDAQ
National Market compliance. Although these transactions are not
yet sufficiently definitive to be publicly disclosed, the plan
we presented to the Nasdaq Panel, when and if completed, should
result in returning eLOT to full compliance with Nasdaq listing
requirements."
About eLOT, Inc.
eLOT, Inc. is committed to leading the governmental lottery
industry into the e-commerce market. The Company's subsidiary,
eLottery, Inc., is a leading web-based retailer of governmental
lottery tickets and has developed, installed and operated
systems that have processed e-commerce lottery ticket sales and
transactions. It has operated Internet, Intranet, telephone,
communications, accounting, banking, database and other
applications and services that can facilitate the electronic
sale of new and existing lottery products worldwide. eLottery is
also an application service provider of Internet marketing and
advertising technology for lotteries. The Company's IMARCS
(Internet Marketing Analysis Research and Communications System)
database marketing solution enables government lotteries to
attract, register and communicate with lottery players through
advanced Internet technology.
eLOT also owns DM360 (formerly Network60), an Internet
promotions and permission-based direct marketing company, which
offers a flexible, cost effective direct marketing medium to
traditional corporations, advertising agencies, and online
companies. DM360's web sites www.EasyWinning.com,
www.CoolWinning.com and www.RadioStakes.com are client-sponsored
sweepstakes sites that function as lead generation vehicles.
www.PrizeChest.com is a prize fulfillment site. The Company also
maintains a reward-entertainment web site located at
www.eLotteryFreeWay.com. In addition, eLottery offers a free
daily lottery email notification service (LENS) of state lottery
results and other information and services at www.eLottoNet.com.
eLottery's corporate web site is located at www.eLottery.com.
FEDERAL-MOGUL: Completes Sale of Aviation Ignition Business
-----------------------------------------------------------
Federal-Mogul Corporation (NYSE: FMO) announced that its
subsidiary, Federal-Mogul Ignition Company, completed the
previously announced sale of its Champion(R) aviation ignition
products division in Liberty, South Carolina, to TransDigm Inc.
for $160 million. The corporation will also realize
approximately $11 million as it collects trade receivables that
were retained as a part of the transaction. The proceeds
obtained from the sale will be used for previously announced
restructuring programs and other general purposes.
The aviation division is the world's largest manufacturer of
igniters for turbine engines and spark plugs for piston engines.
It provides products for all major commercial, military and
general aircraft applications. The division has 385 employees
and had net sales of approximately $70 million in 2000.
TransDigm Inc. is owned by Odyssey Investment Partners, LLC, and
is a leading supplier of highly-engineered aircraft components
for use on nearly all commercial and military aircraft.
Headquartered in Southfield, Michigan, Federal-Mogul is an
automotive parts manufacturer providing innovative solutions and
systems to global customers in the automotive, small engine,
heavy-duty and industrial markets. The company was founded in
1899. Visit the company's web site at http://www.federal-
mogul.com for more information.
GENESIS HEALTH: Agrees To Lift Stay For State Court Actions
-----------------------------------------------------------
Genesis Health Ventures, Inc. & The Multicare Companies, Inc.
have consented to and obtained Judge Wizmur's stamp of approval
to lift the automatic stay to permit the prosecution and defense
of the State Court Action, as well as appropriate actionsto
exercise the parties' rights of appeal with respect to:
-- Margaret Dellinger's allegations of personal injuries
against Genesis Health Ventures, In. and any of its debtor
subsidiaries;
-- Andrew S. Meros' allegations in Case No. 24-C-99-004688
in the Circuit Court of Maryland for Baltimore City against
Genesis Health Ventures, In. and any of its debtor subsidiaries;
-- James E. Mullins, Sr.'s allegations contained in At Law
No. 9978 in the Circuit Court of the Commonwealth of Virginia in
and for the County of Spotsylvania against Woodmont Health Care
Center, Inc. and/or any of its debtor subsidiaries;
-- Lorraine Takacs' allegations contained in Docket No.
WRN-L-145-00 in the state of New Jersey, in and for the County
of Warren against Genesis Health Ventures, and/or any of its
debtor subsidiaries;
-- Duanne J. Eddy and Richard F. Eddy, her husband who have
made allegations contained in Case No. OOC-03-033 (RRC) in the
Superior Court of Delaware in and for New Castle against Genesis
Health Ventures, and/or any of its debtor subsidiaries;
-- Bernie Greenberg who has made allegations in the Health
Claims Arbitration Office of Maryland against Genesis Health
Ventures, and/or any of its debtor subsidiaries;
-- Charles F. Reeder, as the executor for the Estate of
Esther G. Reeder, who has made allegations contained in No.
32120c of 1996, in the Court of Common Pleas of Luzerne County,
Pennsylvania against Genesis Health Ventures, and/or any of its
debtor subsidiaries.
As set forth in the Stipulation by the parties, Claimant may
enforce or execute upon any (a) settlement, (b) judgment entered
by a court of competent jurisdiction or (c) other disposition of
the underlying claims in the State Court Action only to the
extent such claims are covered by proceeds from any applicable
GHV liability insurance policies, and only to the extent
permitted by such settlement, judgment or other disposition.
Except as specifically provided, Claimant shall not engage in
any efforts to collect any amount from GHV or any of GHV's
current and former employees, current and former officers and
directors, or any person or entity indemnified by GHV or listed
as an additional insured under any of GHV's liability policies,
and neither GHV nor any of GHV's current and former employees,
current and former officers and directors, or any person or
entity indemnified by GHV or listed as an additional insured
under any of GHV's liability policies shall be required to make
any distribution of property to Claimant on account of any proof
of claim that Claimant has filed, or may file, against GHV's
estate in its chapter 11 case.
Claimant waives any and all claims for attorneys' fee and
punitive damages against GHV, GVH's current and former
employees, current and former officers and directors, any person
or entity indemnified by GHV or listed as an additional insured
under any of GHV's liability policies, and GHV's insurers,
whether or not such claims are currently asserted.
Claimant also waives any and all claims for recovery against
GHV, its current and former employees, current and former
officers and directors, any person or entity indemnified by GHV
or listed as an additional insured under any of GHV's liability
policies, other than its claim against the insurance proceeds.
Claimant further specifically agrees that any settlement of the
State Court Action will include a general release of all claims
against GHV, its current and former employees, its current and
former officers and directors, its insurers and any person or
entity indemnified by GHV or listed as an additional insured
under any of GHV's liability policies.
GHV agrees that any settlement of the State Court Action will
include a general release of the Claimant.
Claimant agrees to dismiss any of GHV's current and former
employees, officers and directors currently named as a defendant
in the Complaint and waives any right to amend the Complaint to
name any of GHV's current and former employees, officers and
directors as defendants in the State Court Action.
Nevertheless, it is also specified in the Stipulation that
nothing stated therein shall affect: (a) the rights of the
parties to prosecute or defend against the merits of the
allegations asserted in the State Court Action and any
subsequent appellate proceedings with respect to the State Court
Action; and (b) the rights of GHV to seek contribution or
indemnification from any other codefendants.
Multicare Stipulations
The Multicare Debtors have sought and obtained the Court's
approval of similar stipulations with respect to:
* State Court Action filed by Shirley J. McNamera, Case No.
98 L 95 in the State of Illinois in and for the County of
LaSalle, against Multicare AMC, Inc. The Multicare Companies,
Inc. and/or any of their debtor affiliates. (Genesis/Multicare
Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
GLOBAL TELESYSTEMS: Moody's Cuts Ratings Following Default
----------------------------------------------------------
Due to the company's announcement that its subsidiary, GTS
Europe, has defaulted on cash interest payments totaling
approximately ?26.9 million on its ?275.0 million 11.0% senior
notes due 2009 and ?225.0 million 10.5% senior notes due 2006,
Moody's Investors Services lowered the ratings of Global
TeleSystems Group, Inc. and of said subsidiary.
The rating has been reviewed for possible downgrade starting
November 2000. The ratings outlook is negative while
approximately 2.2 billion Euros of debt securities are affected.
Moody's related that the company's pronouncement not to meet
these cash interest payments comes as part of their
restructuring plan, to re-focus the business on the company's
core European IP and broadband services business (Ebone), as
well as reducing outstanding debt obligations. The rating agency
added that the downgrade and the negative outlook reflect its
expectation of further non-payment in the context of the
company's recapitalization efforts, as well as the limited
recovery prospects for bondholders.
Ratings downgraded are as follows:
GTS:
* Senior implied rating from Caa2 to C
* Unsecured issuer rating from Caa3 to C
* $105.0 million 9.875% senior notes due 2005 from Caa3 to C
* $362.0 million (reduced from $466.0 million through a debt-
for-equity swap) 5.75% senior subordinated debentures due
2010 from Ca to C
* $500.0 million 7.25% convertible preferred stock at "c"
GTS Europe:
* Unsecured issuer rating from Caa1 to Ca
* $265.0 million 11.5% senior notes due 2007 from Caa1 to Ca
* $200.0 million 10.375% senior notes due 2009 from Caa1 to
Ca
* ?85.0 million 11.5% senior notes due 2006 from Caa1 to Ca
* ?275.0 million 11.0% senior notes due 2009 from Caa1 to Ca
* ?225.0 million 10.5% senior notes due 2006 from Caa1 to Ca
GTS is the parent company of Ebone, which controls one of the
largest fiber and IP networks in Europe. The company's
headquarters is in London, UK.
HEILIG-MEYERS: S&P Junks 2 Classes Of Asset-Backed Certificates
---------------------------------------------------------------
Standard & Poor's lowered its ratings on two classes of Heilig-
Meyers Master Trust's floating-rate asset-backed certificates
series 1998-2. In addition, both classes were removed from
CreditWatch with negative implications where they were placed on
Aug. 31, 2000. The rating on class A was lowered to triple-'C'
from double-'B'-minus, and the rating on class B was lowered to
double-'C' from triple-'C'. As of the May 2001 payment date, the
outstanding principal balance for class A is $126,288,788.19
(class factor rate of 57.59%) and $50,000,000 (class factor rate
of 100%) for class B.
The ratings actions reflect the continuous deterioration in
collateral performance since Heilig-Meyers Co. filed for
bankruptcy in August 2000. According to OSI Portfolio Services
Inc. (OSI), the successor servicer, the percentage of the
collateral pool that consists of receivables that is 181 or more
days delinquent continue to increase. On a recency basis, 181-
plus-days delinquencies are approximately 45%, with 76% of the
pool currently delinquent. Roll rates over the past few months
have not improved, especially in late-stage delinquencies.
Although subordination levels have been growing, as the senior
class is being paid down, charge-offs are expected to
significantly deplete the current level of credit support
available to classes A and B. Other performance trends for the
trust have also deteriorated. The payment rate and portfolio
yield are significantly lower, relative to pre-bankruptcy rates,
dropping to 4% and 9%, respectively. This compares to payment-
rate levels of 9% on average and yield numbers of 25% prior to
Heilig-Meyer Co.'s insolvency. Given the deterioration in
performance and the large number of accounts that are 181 or
more days delinquent, Standard & Poor's believes that there will
be insufficient credit enhancement to pay the class A and B
certificates at maturity.
On Aug. 31, 2000, classes A and B were placed on CreditWatch
with negative implications following Heilig-Meyers Co.'s
bankruptcy filing on Aug. 16, 2000, and the announcement that
the company was exiting the credit business as an originator and
servicer of installment credit. On Aug. 10, 2000, Heilig-Meyers
Co. announced that it would no longer service the loans. In the
intermediate period, the trustee went to court to order Heilig-
Meyers Co. to continue servicing until a successor could be
appointed. Then in October, the trustee appointed OSI as the
successor servicer. On March 8, 2001, Standard & Poor's lowered
the rating assigned to the class A certificates to double-'B'-
minus from triple-'A', and lowered the rating on the class B to
triple-'C' from single-'A'.
Subsequently, Standard & Poor's has been reviewing OSI's
collection efforts and progress in turning around the
performance of the underlying collateral pool by monitoring the
success of its outbound dialing campaign, as well as other key
risk indicators. Despite achieving an average daily penetration
rate (percentage of accounts downloaded into OSI's dialer for
which call attempts were made) of 52% or 128,714 call attempts
on average per day in April 2001, only 379 calls (22%) of right
party contacts (collector spoke to obligor) resulted in a
promise-to-pay by the obligor on average per day.
The percentage of right party contacts and the resulting
promises-to-pay have not improved, despite OSI's efforts to
increase the number of collectors working these accounts to 168
in April 2001 from 50 in February 2001. Additionally, as good
accounts payoff in the trust, the percentage of accounts with
bad addresses and bad phone numbers continues to increase.
Currently, 13.40% (versus 10.67% in March) of the accounts have
bad addresses and 22.29% (versus 16.76% in March) of the
accounts are flagged with having incorrect phone numbers,
Standard & Poor's said.
HOLT GROUP: Obtains Nod For $10MM DIP Loan From First Union Bank
----------------------------------------------------------------
The Holt Group Inc. won court approval for a $10 million debtor-
in-possession (DIP) financing agreement with First Union Bank
after a hearing before the U.S. Bankruptcy Court in Wilmington,
Del., on Wednesday. The loan will be used to cover operating
expenses. A carve-out is included to pay for any expenses
incurred during the chapter 11 proceedings. In exchange for the
loan, First Union receives a first-priority lien on all
unencumbered assets and a junior lien on all encumbered assets.
First Union was also a pre-petition lender to Holt. (ABI World,
June 1, 2001)
HORIZON PHARMACIES: Group to Nominate Two Candidates to Board
-------------------------------------------------------------
Andrew W. May, a Dallas-based investor and shareholder of
Horizon Pharmacies, Inc. (AMEX: HZP), announced the formation of
the Horizon Pharmacies, Inc. Shareholder Protection Committee.
Mr. May further stated that he had submitted a notice to Horizon
indicating his intention to nominate himself and M. David
Bryant, Jr., a Dallas-based attorney and also a Horizon
shareholder, as candidates for directors at the forthcoming 2001
Annual Meeting of Shareholders of Horizon. Although the date for
the Annual Meeting has not yet been announced, it is expected
that three seats will be up for election, and Mr. May intends to
solicit proxies for seats for himself and Mr. Bryant in
opposition to two of management's expected candidates for
reelection, Messrs. John N. Stogner and Philip H. Yielding. Mr.
May seeks to obtain representation on the Board to seek the
immediate removal of Ricky D. McCord as President, Chief
Executive Officer and director of Horizon.
Mr. May said, "Horizon must go in new directions with new
leadership and fresh thinking immediately to restore shareholder
value. Since February 2000, Horizon's stock price has fallen
from over $6 per share to a low of $.10 per share and a major
dispute continues with McKesson HBOC, Inc., which Horizon has
described as its senior creditor and former supplier and which
is owed approximately $36 million by Horizon. Moreover, Horizon
has reported continual net losses since 1997. For the year ended
December 31, 1998, the company had net losses of ($2,179,000);
for the year ended December 31, 1999, the company had net losses
of ($7,548,000); and for the year ended December 31, 2000, the
company had net losses of ($14,936,000)."
Mr. May added, "We note Horizon's May 31, 2001 announcement of a
short-term standstill agreement with McKesson HBOC.
Unfortunately, history gives us no basis for confidence that,
under Mr. McCord's management, Horizon will be able to
successfully implement or execute any acceptable restructuring
plan. The fact is that it was Mr. McCord's leadership that
brought Horizon to the point of announcing on May 2, 2001, that
it was considering a bankruptcy filing. We believe that the
long-term solution to Horizon's problems must include a change
in the company's present top management."
Mr. May was the principal owner and president of ComVest
Partners, Inc., a co-underwriter of Horizon's initial public
offering in 1997.
Mr. May also said that he filed a demand for a shareholder's
list with Horizon.
For further information, contact Andrew W. May at (214) 987-
3822.
In connection with its solicitation of proxies with respect to
the Horizon Pharmacies, Inc. 2001 Annual Meeting of
Shareholders, the Committee will file with the Securities and
Exchange Commission and will furnish to security holders of
Horizon Pharmacies a proxy statement, which security holders are
advised to read as it will contain important information.
Security holders may obtain a copy of such proxy statement (when
available) and any other relevant documents filed with the SEC,
for free from the website of the SEC at www.sec.gov . Copies of
any proxy soliciting materials filed by the Committee with the
SEC may also be obtained for free from the Committee by calling
(214) 987-3822.
The Committee, Andrew W. May and David Bryant will be
participants in the solicitation by the Committee of proxies
with respect to the Horizon Pharmacies, Inc. 2001 Annual Meeting
of Shareholders. None of such persons has any direct or indirect
interests in the matters to be acted upon at such Annual Meeting
other than as a security holder or a nominee for election as a
director of Horizon Pharmacies. Mr. May currently beneficially
owns 70,000 shares of Horizon's common stock. Mr. May may be
deemed to be the beneficial owner of an additional 30,000 shares
of common stock beneficially owned by his mother-in-law (over
which he has shared voting and shared investment authority) as
well as 150 shares of common stock beneficially owned by Mr.
May's wife. Mr. May disclaims beneficial ownership of such
30,150 shares. In addition, Mr. May owns warrants to purchase
51,000 shares of Horizon common stock. Mr. Bryant currently owns
33,400 shares of Horizon common stock.
LOEWEN: Overview of Second Amended Joint Reorganization Plan
------------------------------------------------------------
The Effective Date of The Loewen Group, Inc.'s chapter 11 plan
is assumed to occur on September 30, 2001 for purposes of
computations of Claim amounts, administrative and other expenses
and for similar computational purposes, but the Debtors give no
assurance, however, as to if or when the Effective Date will
actually occur.
Reorganization Value
The midpoint of the reorganization equity value range, which
includes the Loewen Companies' operating businesses, the
expected present value of certain nonoperating assets and the
estimated debt balances at and beyond the Effective Date, was
estimated by the Debtors' financial advisors, Wasserstein
Perella & Co., Inc. to be approximately $683.5 million as of the
assumed Effective Date of September 30, 2001.
This reorganization equity value reflects, among other factors,
current financial market conditions and the inherent uncertainty
as to the achievement of the Projections. Based on the assumed
reorganization equity value, the midpoint value of the
approximately 40,000,000 shares of New Common Stock to be issued
to the holders of Allowed Claims under the Plan is estimated to
be approximately $16.94 per share, based on a number of
assumptions, including a successful reorganization of the
Debtors' businesses and finances in a timely manner, the
forecasts reflected in the Projections, the amount of available
cash, market conditions and the Plan becoming effective in
accordance with its terms on a basis consistent with the
estimates and other assumptions discussed herein.
Summary of Classes and Treatment
of Claims and Interests
The estimated aggregate amounts of Claims are based on the
Debtors' estimates of the aggregate amounts of such Claims that
the Debtors believe will be asserted upon resolution of all such
Claims that the Debtors believe will be Disputed Claims. Certain
of these Disputed Claims are likely to be material, and the
total amount of all such Claims, including Disputed Claims, may
be materially in excess of the total amount of Allowed Claims
assumed in the development of the Plan.
Moreover, because the Claims reconciliation process is ongoing,
in estimating the amount of Claims in each Class of Claims and,
in the case of Class 11, each Division, the Debtors have
included certain reserve amounts (the "Reserves") to account
for:
(a) potential unfavorable variations between the Debtors'
current estimates of Allowed Claims and the amounts that
ultimately will be allowed; and
(b) Claims that may be Filed in the future, including
rejection damage claims, where the applicable Bar Date has not
yet expired or been established.
The ultimate amount of Allowed Claims may be in excess of the
Debtors' current estimates plus the Reserves and, thus, the
ultimate amount of Allowed Claims may be in excess of that
assumed in the development of the Plan. The amounts shown as
"Estimated Aggregate Claims Amounts" in the classification and
treatment of claims are based upon the Debtors' review of Claims
Filed by the Bar Date and the Debtors' books and records and may
be substantially revised in the course of the ongoing Claims
reconciliation process. Further, the amount of any Disputed
Claim that ultimately is allowed by the Bankruptcy Court may be
significantly more or less than the estimated amount of such
Claim. As a consequence, the actual ultimate aggregate amount of
Allowed Unsecured Claims in a Division of Class 11 may differ
significantly from the estimate set forth below.
Accordingly, the amount of the Pro Rata distributions of New
Common Stock, New Warrants and interests in the Liquidating
Trust that ultimately will be received by a holder of an Allowed
Unsecured Claim in a particular Division of Class 11 may be
adversely or favorably affected by the aggregate amount of
Claims ultimately allowed in such Division.
Distributions of New Common Stock, New Warrants and interests in
the Liquidating Trust to holders of Allowed Unsecured Claims in
each Division of Class 11 will be made on an incremental basis
until all Disputed Claims in such Division have been resolved.
Each amount designated in the table "Estimated Percentage
Recovery" regarding the treatment of claims is the quotient of,
(a) the cash or the assumed value of the New Five-Year
Secured Notes, if issued, New Two-Year Unsecured Notes, if
issued, New Seven-Year Unsecured Notes, New Common Stock or New
Warrants to be distributed to all holders of Allowed Claims or
Allowed Interests in such Class or Division,
divided by
(b) the estimated aggregate amount of Allowed Claims or
Allowed Interests in such Class or Division.
For purposes of this calculation, it is assumed that:
(a) the New Five-Year Secured Notes, if issued, the New
Two-Year Unsecured Notes, if issued, and the New Seven-Year
Unsecured Notes will each have a value equal to the principal
amount thereof;
(b) the New Common Stock to be distributed to holders of
Claims under the Plan will have an estimated aggregate value of
approximately $677.7 million, or $16.94 per share, as of the
Effective Date, based on the midpoint of the range for assumed
reorganization equity value of Reorganized LGII; and
(c) the New Warrants to be distributed to holders of
Allowed Claims or Allowed Interests under the Plan will have an
estimated aggregate value of approximately $5.8 million, or
$1.82 per New Warrant, as of the Effective Date.
For purposes of the table showing the treatment of claims,
because of the nature of the Liquidating Trust Assets, no value
has been assigned to interests in the Liquidating Trust.
The Debtors specify that there is no assurance that the New
Five-Year Secured Notes, if issued, the New Two-Year Unsecured
Notes, if issued, the New Seven-Year Unsecured Notes, the New
Common Stock or the New Warrants will have the value assumed.
The valuation assumptions are not a prediction or reflection of
post-Effective Date trading prices of the New Five-Year Secured
Notes, if issued, the New Two-Year Unsecured Notes, if issued,
the New Seven-Year Unsecured Notes, the New Common Stock or the
New Warrants. The New Five-Year Secured Notes, if issued, the
New Two- Year Unsecured Notes, if issued, the New Seven-Year
Unsecured Notes, the New Common Stock and the New Warrants may
trade at substantially higher or lower prices because of a
number of other factors.
The trading price of equity securities and debt securities, such
as the New Five-Year Secured Notes, the New Two-Year Unsecured
Notes, the New Seven-Year Unsecured Notes, the New Common Stock
and the New Warrants, issued under a plan of reorganization is
subject to many unforeseeable circumstances and therefore cannot
be predicted. Moreover, there is no assurance that the actual
amounts of Allowed Unsecured Claims in certain Divisions of
Class 11 will not materially exceed the estimated aggregate
amounts shown in the table below. Accordingly, no representation
can be or is being made with respect to whether the percentage
recoveries shown in the table below actually will be realized by
a holder of an Allowed Unsecured Claim in any Division of Class
11.
Funding of CTA Issue Litigation
If Class 7 accepts the Plan, in addition to the distributions to
holders of Group III CTA Note Claims described above, pursuant
to the Plan and subject to the conditions described therein,
Reorganized LGII will reimburse up to an aggregate amount of
$1,500,000 of legal fees and expenses incurred by attorneys
representing holders of Group III CTA Note Claims in certain
litigation against certain parties potentially responsible for
the failure to file Additional Secured Indebtedness Registration
Statements with the CTA Trustee in respect of the Series 6
notes, the Series 7 Notes and the PATS Notes.
Allowed Secondary Liability Claims
The classification and treatment of Allowed Claims under the
Plan take into consideration all Secondary Liability Claims, and
no distributions in respect of any Secondary Liability Claims
will be made.
Notwithstanding any provision of the Plan to the contrary, a
creditor holding multiple Allowed Claims against more than one
Debtor that do not constitute Secondary Liability Claims and
that arise from the contractual joint, joint and several or
several liability of such Debtors, the guaranty by one Debtor of
another Debtor's obligation or other similar circumstances may
not receive in the aggregate from all Debtors more than 100% of
the amount of the underlying Claim giving rise to such multiple
Claims.
Formation of Liquidating Trust
In connection with the Plan, on the Effective Date, Reorganized
LGII and a trustee to be selected by the Creditors' Committee
(the "Liquidating Trust Trustee") will enter into the
Liquidating Trust Agreement and the Liquidating Trust will be
established pursuant to the terms of the Plan and the
Liquidating Trust Agreement.
Pursuant to the Plan and the Liquidating Trust Agreement,
Reorganized LGII will transfer or cause to be transferred,
immediately following completion of the Reinvestment
Transactions, to the Liquidating Trust Trustee:
(a) the Prime Succession Warrants and
(b) an undivided 25% interest in the NAFTA Net Proceeds,
i.e., the proceeds, if any, of the NAFTA Claims as such proceeds
may be adjusted as a result of the arbitration contemplated by
the NAFTA Arbitration Agreement, less (i) amounts payable under
paragraph 3 of the NAFTA Arbitration Agreement and (ii) amounts
payable pursuant to the NAFTA Contingency Fee Agreement.
The Liquidating Trust Agreement will provide that holders of
Allowed Claims in Class 8 and in Divisions A, B, F, G and H of
Class 11 will have beneficial interests in such assets and the
proceeds thereof.
Exit Financing Revolving Credit Facility
On the Effective Date, Reorganized LGII and the Exit Financing
Facility Agent Bank will enter into the Exit Financing Revolving
Credit Facility. The commitment of the Exit Financing Facility
Agent Bank to provide the Exit Financing Revolving Credit
Facility on terms satisfactory to the Debtors is a condition to
Confirmation, and the execution and delivery of the documents
effectuating the Exit Financing Revolving Credit Facility by
Reorganized LGII and the Exit Financing Facility Agent Bank are
conditions to the Effective Date. The Debtors currently
contemplate that such Exit Financing Revolving Credit Facility
will be a secured $100 million revolving credit facility, $30
million of which will also be available in the form of letters
of credit.
Borrowings under the Exit Financing Revolving Credit Facility
will bear interest at a floating rate based on the London
Interbank Borrowing Rate plus a specified margin to be
determined based on certain financial ratios achieved by
Reorganized LGII. Borrowings under the Exit Financing Revolving
Credit Facility will be secured by the capital stock of certain
subsidiaries of Reorganized LGII and personal property of
Reorganized LGII. The Projections assume that there will be no
borrowings under the Exit Financing Revolving Credit Facility as
of the Effective Date.
The Debtors also will seek to obtain from the Exit Financing
Facility Agent Bank a $250 million Exit Financing Term Loan as
of the Effective Date. It is currently contemplated that such
Exit Financing Term Loan would bear interest at a floating rate
based on the London Interbank Borrowing Rate plus a specified
margin to be determined based on certain financial ratios
achieved by Reorganized LGII and would be secured by the capital
stock of certain subsidiaries of Reorganized LGII and personal
property of Reorganized LGII. It is also currently anticipated
that the principal amount of the Exit Financing Term Loan would
be repaid in accordance with the following amortization
schedule:
Date Principal Repayment
1st anniversary of Effective Date ........... $ 10 million
2nd anniversary of Effective Date ........... $ 20 million
3rd anniversary of Effective Date ........... $ 30 million
4th anniversary of Effective Date ........... $ 40 million
5th anniversary of Effective Date ........... $150 million
Rose Hills Indebtedness
Upon consummation of the transactions contemplated by the
Blackstone Settlement, Reorganized LGII will own all or
substantially all of the outstanding capital stock of Rose
Hills. Rose Hills has a senior secured amortization extended
term loan facility (the "Rose Hills Term Facility") in an
aggregate principal amount of $75 million and a senior secured
revolving credit facility (the "Rose Hills Revolving Facility")
in an aggregate principal amount of up to $25 million.
The Rose Hills Term Facility and the Rose Hills Revolving
Facility mature on November 1, 2003 and 2001, respectively. The
Rose Hills Term Facility is subject to amortization, subject to
certain conditions, in semi-annual installments in the amounts
of
* $ 1 million in each of the first three years after the
anniversary of the closing date of the Rose Hills Term
Facility (the "Bank Closing"), which occurred in November
1996;
* $ 3 million in the fourth year after the Bank Closing;
* $ 7 million in the fifth year after the Bank Closing;
* $ 9 million in the sixth year after the Bank Closing and
* $53 million upon maturity of the Bank Term Facility.
The Rose Hills Revolving Credit Facility is payable in full at
maturity, with no prior amortization.
As of December 31, 2000, the outstanding principal amount under
the Rose Hills Term Facility was approximately $69 million and
there were no outstanding borrowings under the Rose Hills
Revolving Facility. Rose Hills also issued $80 million aggregate
principal amount of 9 1/2% Senior Subordinated Notes due 2004
(the "Rose Hill Notes"). The Rose Hills Notes mature on November
15, 2004 and bear interest at the rate of 9 1/2% per annum,
payable semiannually on May 15 and November 15 of each year. The
Rose Hills Notes are redeemable from and after November 15,
2000, at the option of Rose Hills, in whole or in part. The
initial price of any such redemption is 104.75% of stated
principal amount (subject to annual reduction reaching 100% in
2003), plus accrued and unpaid interest to the applicable
redemption date.
Other Indebtedness
Pursuant to the treatment of holders of Class 4 Claims under the
Plan, certain secured indebtedness of the Debtors incurred or
assumed primarily in connection with TLGI's acquisition of
funeral home and cemetery business will be Reinstated on the
Effective Date. Generally, this indebtedness is secured by liens
on certain specific properties that were the subject of such
acquisition and contains favorable interest and payment terms.
The Debtors estimate that approximately $55 million of such
indebtedness will be paid in full or Reinstated on the Effective
Date.
Securities To Be Issued
The Plan provides that, as of the Effective Date, Reorganized
LGII will be authorized to issue 100,000,000 shares of New
Common Stock, par value $0.01 per share of which:
(a) an aggregate of approximately 40,000,000 shares of New
Common Stock will be issued by Reorganized LGII will issue to
holders of Allowed Claims in Classes 5, 6, 7, 8 and 11 and
certain holders of Allowed Administrative Claims as contemplated
by the Blackstone Settlement Agreement, plus, if applicable, to
certain holders of Allowed Interests in Class 17. The Debtors
believe that none of the Debtors treated in Class 17 is solvent,
and, accordingly, that no shares will be issued in respect of
Class 17.
(b) 4,500,000 shares of New Common Stock will be reserved
for issuance under the Equity Incentive Plan, including
2,475,000 shares underlying options expected to be granted to
certain employees. The options will have a per share exercise
price equal to the average of the daily closing sales price per
share of the New Common Stock as reported on The Nasdaq Stock
Market or the national securities exchange on which it is
listed, as applicable, for the 30 consecutive trading days
immediately following the Effective Date and will become
exercisable in cumulative installments with respect to 25% of
the shares on the first and second anniversaries of the date
of grant and with respect to the remaining 50% of the shares
on the third anniversary of the date of grant.
* New Warrants
On the Effective Date, Reorganized LGII will issue New Warrants
exercisable to purchase an aggregate of 3,174,300 shares of New
Common Stock to holders of Allowed Claims in Class 8 and
Divisions A, D, F, G and H of Class 11 and, if Class 19 accepts
the Plan, to holders of Allowed Class 9 Claims and Allowed Class
19 Interests and Claims. Each New Warrant, when exercised, will
entitle the holder to acquire one share of New Common Stock at
an exercise price of $25.41 per share. The New Warrants will
expire on the fifth anniversary of the Effective Date. The New
Warrants will be issued under a warrant agreement with a warrant
agent to be selected by Reorganized LGII (the "New Warrant
Agreement").
* New Common Stock
Holders of New Common Stock will be entitled to receive ratably
such dividends as declared by Reorganized LGII's Board of
Directors and will have no preemptive, subscription, redemption
or conversion rights.
The declaration of dividends and other payments on the New
Common Stock will be restricted pursuant to certain provisions
of the respective indentures governing the New Five-Year Secured
Notes, if issued, the New Two-Year Unsecured Notes, if issued,
and the New Seven-Year Unsecured Notes (collectively, the "New
Senior Notes"), the indenture governing the New Unsecured
Subordinated Convertible Notes and the documents governing the
Exit Financing Revolving Credit Facility and the Exit Financing
Term Loan (collectively, the "Exit Financing").
Reorganized LGII is not expected to pay any dividends on the New
Common Stock in the foreseeable future. Subject to the terms and
conditions set forth in Reorganized LGII's Share Purchase Rights
Agreement, each share of New Common Stock issued pursuant to the
Plan will be accompanied by a Share Purchase Right.
The Plan also provides that, as of the Effective Date,
Reorganized LGII will be authorized to issue 10,000,000 shares
of preferred stock, par value $0.01 per share, of Reorganized
LGII ("New Preferred Stock").
Reorganized LGII's Board of Directors will have the authority to
issue shares of New Preferred Stock from time to time in one or
more classes or series and to determine the various rights and
privileges thereof. The Reorganized LGII Board of Directors will
also have the authority to issue additional shares of New Common
Stock from time to time following the Effective Date under the
provisions of the Certificate of Incorporation of Reorganized
LGII and applicable law.
On the Effective Date,
(a) holders of Allowed CTA Note Claims in Classes 5, 6 and
7 will receive, in addition to New Common Stock and certain cash
payments, (i) New Five-Year Secured Notes, if issued, (ii) New
Two-Year Unsecured Notes, if issued, and (iii) New Seven-Year
Unsecured Notes and
(b) certain holders of Allowed Administrative Claims will
receive, in addition to New Common Stock, New Unsecured
Subordinated Convertible Notes as contemplated by the Blackstone
Settlement Agreement.
* New Five-Year Secured Notes
The aggregate principal amount of New Five-Year Secured Notes to
be issued by Reorganized LGII will be $250 million. The New
Five-Year Secured Notes will bear interest at 11% per annum,
payable semiannually in arrears, will be secured by the capital
stock of certain wholly owned subsidiaries of Reorganized LGII
and will mature on the fifth anniversary of the Effective Date.
The New Five-Year Secured Notes will be issued pursuant to a
trust indenture with an indenture trustee to be selected by
Reorganized LGII (the "New Five-Year Secured Notes Indenture").
No New Five-Year Secured Notes will be issued pursuant to the
Plan if the Exit Financing Term Loan Closing occurs. Reorganized
LGII will pay the amount of the principal of the New Five-Year
Secured Notes on:
1st anniversary of Effective Date $ 10 mil
2nd anniversary of Effective Date $ 20 mil
3rd anniversary of Effective Date $ 30 mil
4th anniversary of Effective Date $ 40 mil
5th anniversary of Effective Date $150 mil
* New Two-Year Unsecured Notes
The aggregate principal amount of New Two-Year Unsecured Notes
to be issued by Reorganized LGII will be in an amount equal to
$165 million less the Realized Asset Disposition Proceeds
Amount. The New Two-Year Unsecured Notes will bear interest at
12 1/4% per annum, payable semiannually in arrears, and will
mature on the second anniversary of the Effective Date. The New
Two-Year Unsecured Notes will be issued pursuant to a trust
indenture with an indenture trustee to be selected by
Reorganized LGII (the "New Two-Year Unsecured Notes Indenture").
Reorganized LGII will be required to apply Net Proceeds received
by the Reorganized Debtors following the Effective Date in
respect of the sale of any Disposition Properties to the
redemption of the New Two-Year Unsecured Notes. No New Two-Year
Unsecured Notes will be issued pursuant to the Plan if the
Realized Asset Disposition Proceeds Amount equals or exceeds
$165 million.
* New Seven-Year Unsecured Notes
The aggregate principal amount of New Seven-Year Unsecured Notes
to be issued by Reorganized LGII will be $325 million. The New
Seven-Year Unsecured Notes will bear interest at 12 1/4% per
annum, payable semiannually in arrears, and will mature on the
seventh anniversary of the Effective Date. The New Seven-Year
Unsecured Notes will be issued pursuant to a trust indenture
with an indenture trustee to be selected by Reorganized LGII
(the "New Seven-Year Unsecured Notes Indenture").
* New Unsecured Subordinated Convertible Notes
The aggregate principal amount of New Unsecured Subordinated
Convertible Notes to be issued by Reorganized LGII will be
$24,679,000. The New Unsecured Subordinated Convertible Notes
will bear interest at 12 1/4% per annum, payable semiannually in
arrears, and will mature on the tenth anniversary of the
Effective Date. The New Unsecured Subordinated Convertible Notes
will be expressly subordinated to all senior debt of Reorganized
LGII and will be convertible into New Common Stock at an initial
conversion rate equal to $16.94 per share. Thus, the New
Unsecured Subordinated Convertible Notes initially will be
convertible into an aggregate of 1,456,847 shares of New Common
Stock. The New Unsecured Subordinated Convertible Notes will be
issued pursuant to a trust indenture with an indenture trustee
to be selected by Reorganized LGII (the "New Unsecured
Subordinated Convertible Notes Indenture").
Pursuant to the Blackstone Settlement Agreement, on the
Effective Date, Reorganized LGII will become the owner of all of
the outstanding capital stock of Rose Hills Holding Corp.
Conditions to Confirmation and Effective Date
The Bankruptcy Court will not enter the Confirmation Order
unless and until the following conditions have been satisfied or
duly waived pursuant to Section IX.C of the Plan:
(a) The Confirmation Order shall be reasonably acceptable
in form and substance to the Debtors.
(b) The Debtors shall have received a commitment for the
Exit Financing Revolving Credit Facility from the Exit Financing
Facility Agent Bank on terms and conditions satisfactory to
the Debtors.
(c) The Plan shall not have been amended, altered or
modified from the Plan as Filed on May 18, 2001, unless such
amendment, alteration or modification is in form and substance
reasonably satisfactory to the Debtors.
(d) The Bankruptcy Court shall have entered an order
providing for the dismissal of all claims in the CTA Proceeding.
(e) Confirmation requirements under the Bankruptcy Code are
satisfied.
(f) The Confirmation Order shall provide that:
(1) the treatment in the Plan of CTA Note Claims is
fair, reasonable, and adequate in light of the
litigation risks confronting Indenture Trustees and
holders of CTA Note Claims in the CTA Proceeding;
(2) the decisions of certain holders of CTA Note Claims
to accept the Plan under which their CTA Note
Claims are not treated on a pari passu basis with
the CTA Note Claims of certain other holders of
such CTA Note Claims were appropriate and
reasonable in light of the litigation risks that
they faced in the CTA Proceeding; and
(3) no actions taken by any holder of CTA Note Claims
before the Bankruptcy Court, including voting in
favor of the Plan, not challenging the treatment of
its Claim or its recovery under the Plan, and not
pursuing to conclusion its claims or defenses in
the CTA Proceeding, shall in any way prejudice or
adversely affect that holder's Reserved CTA Claims.
The Effective Date
The Effective Date will not occur and the Plan will not be
consummated unless and until each of the following conditions
has been satisfied or duly waived pursuant to Section IX.C of
the Plan:
(a) The documents effectuating the Exit Financing Revolving
Credit Facility shall have been executed and delivered by
Reorganized LGII and the Exit Financing Facility Agent Bank.
(b) The Plan shall not have been amended, altered or
modified from the Plan as Filed on May 18, 2001, unless such
amendment, alteration or modification is, and all Exhibits to
the Plan are, in form and substance reasonably satisfactory to
the Debtors.
(c) Each of the New Five-Year Secured Notes Indenture (if
any New Five-Year Secured Notes will be issued pursuant to the
Plan), the New Two-Year Unsecured Notes Indenture (if any New
Two- Year Unsecured Notes will be issued pursuant to the Plan),
the New Seven-Year Unsecured Notes Indenture and the New
Unsecured Subordinated Convertible Notes Indenture shall have
been qualified under the Trust Indenture Act of 1939, as
amended.
(d) The New Common Stock shall have been registered under
the Exchange Act pursuant to either a Form 8-A Registration
Statement or a Form 10 Registration Statement that has become
effective under the Exchange Act.
(e) The shares of New Common Stock to be issued pursuant to
the Plan shall have been designated as Nasdaq National Market
securities by The Nasdaq Stock Market, Inc. or authorized for
listing on or accepted for quotation through a National
Securities Exchange subject to official notice of issuance.
(f) The Bankruptcy Court shall have entered an order
(contemplated to be part of the Confirmation Order) approving
and authorizing the Debtors and the Reorganized Debtors to take
all actions necessary or appropriate to implement the Plan in
form and substance acceptable to the Debtors, including
completion of the Restructuring Transactions and the other
transactions contemplated by the Plan and the implementation
and consummation of the contracts, instruments, releases and
other agreements or documents entered into or delivered in
connection with the Plan.
(g) The CCAA Order shall be reasonably acceptable in form
and substance to the Debtors and shall have been entered and
become a Final Order.
Waiver of Conditions to Confirmation/Effective Date
The conditions to Confirmation and the conditions to the
Effective Date may be waived in whole or part by the Debtors at
any time without an order of the Bankruptcy Court.
If each condition to the Effective Date provided in the Plan is
not satisfied or duly waived in accordance with Section IX.C of
the Plan, then upon motion by the Debtors made before the time
that each of such conditions has been satisfied or duly waived
and upon notice to such parties in interest as the Bankruptcy
Court may direct, the Confirmation Order will be vacated by the
Bankruptcy Court; provided, however, that, notwithstanding the
filing of such motion, the Confirmation Order may not be vacated
if each of the conditions to the Effective Date is either
satisfied or duly waived before the Bankruptcy Court enters an
order granting such motion.
If the Confirmation Order is vacated pursuant to Section IX.D of
the Plan:
(a) the Plan will be null and void in all respects,
including with respect to (i) the discharge of Claims and
termination of Interests pursuant to section 1141 of the
Bankruptcy Code and (ii) the assumptions, assignments or
rejections of Executory Contracts and Unexpired Leases pursuant
to Sections V.A and V.C of the Plan; and
(b) nothing contained in the Plan will (i) constitute a
waiver or release of any claims by or against, or any Interest
in, the Debtors or (ii) prejudice in any manner the rights of
the Debtors or any other party in interest.
The CCAA Order
Concurrently with the commencement of the Reorganization Cases
by the Debtors, TLGI and 117 of its direct or indirect Canadian
incorporated subsidiaries (such subsidiaries being referred to
as the "CCAA Debtors") commenced proceedings (the "CCAA
Proceeding") under the Companies' Creditors Arrangement Act (the
"CCAA").
It is a condition to the Effective Date that the Ontario
Superior Court of Justice shall have entered an order, which
order shall be reasonably acceptable in form and substance to
the Debtors, providing that:
(a) a plan of arrangement pursuant to the terms of the
Business Corporations Act (Ontario) to effect the transactions
described on Exhibit I.A.28 to the Plan (the "CCAA Debtor
Restructuring Transactions") is approved;
(b) in consideration for LGII making the distributions to
TLGI's creditors as set forth in Article III of the Plan, TLGI
will assign, transfer and deliver (or, in the case of NAFTA
Claims arising under article 1117 of NAFTA, will cause its
wholly owned subsidiary, a Delaware limited liability company
created as contemplated by Section IV.B.2 of the Plan, to
assign, transfer and deliver), free and clear of all liens,
claims and encumbrances, including all Claims:
(i) to LGII, all of TLGI's right, title and interest to
and under all rights, properties and assets of
every kind, character and description, wherever
located and whether tangible or intangible, real or
personal or fixed or contingent then owned, held,
used, licensed, conceived, developed or offered for
sale with a license by TLGI in connection with or
otherwise arising out of the conduct of its
business other than (A) its rights in the NAFTA
Claims and (B) its membership interests in the
wholly owned Delaware limited liability company
referred to above; and
(ii) to a Nova Scotia entity designated by LGII, which
will be an unlimited liability company wholly owned
by LGII, all right, title and interest in and to
all proceeds of the NAFTA Claims arising under
article 1116 of NAFTA and to LGII all right, title
and interest in and to all proceeds of the NAFTA
Claims arising under article 1117 of NAFTA; and in
respect thereof, TLGI will irrevocably delegate to
such unlimited liability company all powers and
responsibilities of TLGI in respect of the pursuit
and prosecution of the NAFTA Claims, all in
accordance with the terms of Exhibit I.A.29 to the
Plan;
such consideration having a value equal to the fair market value
of such rights, property and assets, all without the need for
any further action by TLGI's directors or shareholders, but
subject to such other terms and conditions as may be imposed by
the Canadian Court; and
(c) on the Effective Date, no holder of a CTA Note Claim
will have any further claim against TLGI or any of the CCAA
Debtors.
In addition, pursuant to the Plan, on the Effective Date
immediately following completion of the Reinvestment
Transactions, an undivided 25% interest in the NAFTA Net
Proceeds will be transferred to the Liquidating Trust.
TLGI and the CCAA Debtors may seek additional orders of the
Canadian Court in connection with the implementation of the Plan
in Canada.
TLGI and the CCAA Debtors do not expect to file a separate plan
of reorganization under the CCAA because there should be no
significant claims against TLGI or the CCAA Debtors other than
those that will be settled or satisfied as provided in the Plan
and the CCAA Order. (Loewen Bankruptcy News, Issue No. 40;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
LTV: 4049 Trust Moves To Compel Assumption/Rejection Of Contract
----------------------------------------------------------------
The ERISA Section 4049 Trust of the now terminated Republic
Retirement Plan, formerly the Pension Plan of Republic Steel
Corporation for Eligible Salaried Employees Dated and Effective
as of January 1, 1970, for which trust LTV Steel Company, Inc.,
previously served as administrator and plan sponsor, and for
which trust Peter M. Panken is presently the designated ERISA
fiduciary, acting through each of Robert S. Balantzow and James
E. Burns of the Cleveland firm of McCarthy, Lebit, Crystal &
Haiman Co., LPA, and David B. Tatge of the Washington firm of
Epstein, Becker & Green, PC, ask Judge Bodoh to order LTV Steel,
and LTV Steel's parent company, The LTV Corporation, Debtors,
together with their affiliated co-debtors, to assume or reject,
within thirty days' of entry of an order granting this Motion,
their obligations under a Settlement Agreement dated May 25,
1993, between LTV, LTV Steel and other of the obligors, and the
Trust. Further, the Trust requested that Judge Bodoh order the
Debtors to pay all arrearages owed within 10 days of the date
they advise that they have assumed their obligations under the
Settlement Agreement. The Trust further asked Judge Bodoh to
order LTV and LTV Steel and their affiliates to immediately
provide the Trust with (i) all data necessary to calculate
projected future benefit payments due under the Trust, for the
purposes of filing proofs of claim; and (ii) full details
concerning the identity and assets of non-debtor corporations
and other persons who are members of LTV's control group and are
co-obligors to the Trust, under applicable law.
LTV Steel was the contributing sponsor of the Republic
Retirement Plan for salaried employees, which was terminated in
1986 shortly after the initial LTV bankruptcy was filed. By
applicable law, the contributing sponsor of the Plan, LTV Steel,
and each member of its control group, both debtors and non-
debtors, were liable for plan obligations. Ultimately, LTV
Steel's parent company, LTV, for itself and for the other
members of the control group, entered into the Settlement
Agreement with the Trust. LTV's associated Second Modified Joint
Plan of Reorganization dated February 26, 1993, confirmed May
27, 1993, states, clearly, that the claim of the Section 4049
Trustee against each of the five debtor-groups established by
that Plan is unimpaired.
The purpose of the Trust is collect the employer's liability for
the unfounded non-guaranteed benefit commitments and to
distribute the monies among a plan's qualified participants and
beneficiaries. The maximum liability of an employer to an ERISA
4049 Trust is the lesser of (i) 15% of the total value of the
plan's benefit commitments, or (ii) 75% of the amount by which
the plan's benefit commitments exceed benefit commitments
guaranteed by the Pension Benefit Guaranty Corporation. Section
4049 of ERISA provides that a Section 4049 Trust must be used
exclusively for receiving liability payments under ERISA from
persons who were, as of the termination date, contributing
sponsors of the terminated plan and members of their control
groups, and to pay participants and beneficiaries upon the
termination of a single-employer pension plan defined portions
of their outstanding benefit commitments from amounts that are
collected from the contributing sponsor of the plan, and from
members of the contributing sponsor's control group. A trustee
has been designed to assess and collect these liabilities, and
to make benefit payments from the trust.
LTV Steel, the contributing sponsor of the Plan, was the
combination of three previously separate steel companies: Jones
& Laughlin, Republic, and Youngtown Sheet & Tube. LTV Steel and
63 other members of its control group, including LTV, parent
company of LTV Steel, previously filed petitions for
reorganization under Chapter 11 in the United States Bankruptcy
Court for the Southern District of New York. There were two
later Chapter 11 filings by other affiliates, for a total of 66
then debtors. When the 1986 bankruptcy was filed, LTV was the
administrator of approximately 30 separate defined benefit
pension plans. Four of the largest plans were those of LTV's
subsidiary, LTV Steel: the Republic Retirement Plan, covering
salaried employees, together with LTV Steel's Republic hourly
pension plan, and Jones & Laughlin's salaried and hourly pension
plans. Postpetition, the Pension Benefit Guaranty Corporation
moved for the involuntary termination of these four plans
effective September 30, 1986. LTV, as plan administrator,
consented to each of these terminations. When it was terminated,
the Republic Retirement Plan for salaried employees lacked
sufficient assets to pay claims against it. Thereafter, the PBGC
sought to restore the Republic hourly pension plan and the Jones
& Laughlin's salaried and hourly pension plans. Ultimately, the
Supreme Court of the United States determined in a 1990 opinion
that the restoration should be allowed. The PBGC did not,
however, attempt to restore the Republic Plan for salaried
employees. After the Supreme Court's decision, litigation over
discount rates and other pension-related matters continued for
several years more.
By notice of appointed executed by the PBGC on September 24,
1992, the PBGC appointed Peter M. Panken as the Section 4049
Trustee to collect, for the benefit of the Plan's beneficiaries,
75% of the Plan's benefit commitments in excess of the PBGC's
guaranteed minimum benefits.
At the time the Plan was terminated, each of the then debtors
which filed for bankruptcy was either a contributing sponsor of
the Plan, or a member of the controlled group of a contributing
sponsor of the Plan, within the meaning of ERISA, and therefore
each was among those liable for Plan obligations. On February 5,
1993, Mr. Panken, on behalf of the 4049 Trust, filed claims of
$23,096,000 in the LTV bankruptcy proceedings then pending in
New York against each of the then debtor entities, seeking to
recover against LTV and its co-debtor affiliates on the Trust's
claims. LTV and its then co-debtors objected to these claims,
and to Mr. Panken's assertion that his claims were priority
claims, as opposed to general unsecured claims.
To avoid substantial risk of loss and delay of payment to Plan
beneficiaries, and to spare the expense and delay of complex
litigation, and ensure the maximum recovery for participants in
the Plan, Mr. Panken and LTV, for itself and its co-obligors,
conducted extensive settlement negotiations. These negotiations
were reflected in a Second Modified Joint Plan of Reorganization
of LTV, which incorporated plans for each of LTV's five business
groups: Parent, Steel, Aerospace, AM General, and Energy. Under
this Modified Plan, the claim of the Section 4049 Trustee, as
against each debtor group, was stated to be unimpaired under a
global settlement agreement to be signed with the Section 4049
Trustee. By this settlement, LTV and the other debtor-obligors
agreed to fund the Trust, monthly, an amount sufficient to allow
the Trust to distribute, monthly, checks equal to 75% of the
benefit commitments which beneficiaries would have received
under the Plan, in excess of the PBGC guaranteed benefit payment
for the particular month. LTV also agreed to fund, without
interest, an amount sufficient to fund what plan beneficiaries
would have received had the Settlement Agreement been in effect
from the date that the Republic Plan for salaried employees was
terminated, through the effective date of the Settlement (Jane
24, 1993). LTV also pays directly the Trust's reasonable
expenses which are netted against the amount due by LTV to the
Trust for benefit payments. The formal Settlement Agreement with
the Section 4049 Trustee was dated May 25, 1993. By order, the
Bankruptcy Court for the Southern District of New York confirmed
the Second Modified Joint Plan of Reorganization and approved
the associated settlement with the Section 4049 Trustee under
the Settlement Agreement.
In addition to LTV Steel and LTV, other debtors in the year 2000
LTV bankruptcies jointly administered under the LTV Steel case
who were parties to the Second Modified Joint Plan of
Reorganization and to its associated Settlement Agreement with
the Section 4049 Trustee, and are jointly and severally liable
to the Trust and which are Debtors in these cases, include:
Crystalane, Inc.
Dearborn Leasing Company
Erie B Corporation
Erie I Corporation
Georgia Tubing Corporation
Jalcite I, Inc.
Jalcite II, Inc.
The LTV Corporation
LTV Electro-Galvanizing, Inc.
Reomar, Inc.
Republic Technology Corporation
Youngtown Erie Corporation
YST Erie Corporation
The Trust advised Judge Bodoh it reserves the right to later
identify, after discovery and further review of the applicable
facts and governing law, other current debtors whose names do
not appear in this list as co-obligors to the Trust. The Trust
further reserves the right to identify as co-obligors some or
all of LTV's non-debtor affiliates who did not file for Chapter
11 in these proceedings.
The Trustee enjoyed good working relationships with LTV, LTV
Steel and their affiliates, during the interim period before
this most recent bankruptcy filing. With the exception of
certain unpaid administrative expenses, LTV and its co-debtors
were current on their monthly obligations to the Section 4049
Trust under the Settlement Agreement prior to these petitions.
The Section 4049 Trust does not, in stating that the Debtors
were substantially current in their monthly funding obligation
under the Settlement Agreement as of the Petition Date, except
for certain unfounded administrative expenses, mean to state or
imply that the Trust does not have a substantial unsecured
prepetition claim against the Debtors' bankruptcy estates for
the present value of future benefits not y et paid, for which an
appropriate claim, or claims, will be filed by the Section 4049
Trustee. Nor does the Section 4049 Trustee take a position, at
this point, whether any such claim is a general unsecured
prepetition claim or, at least in part, a priority unsecured
claim, for contributions due within 180 days prepetition,
including for administrative expenses not paid prepetition.
Appropriate proofs of claim will be filed by the Section 4049
Trustee at a later date, if the Debtors do not assume their
obligations under the Settlement Agreement. Similarly, the
Section 4049 Trustee does not concede or imply that he does not
have, at least to some extent, a postpetition administrative
claim for which an application for payment might later be filed.
As of December 31, 2000, LTV estimated that the current
unfounded obligations to the Section 4049 Trust were $13.2
million, based on the assumptions used by LTV for financial
reporting purposes. By the same letter in which these figures
were given, LTV indicated that the Trust had 2,293 beneficiaries
as of January 1, 2000, of whom 612 were in "pay" status, or
drawing benefits, and that there were 625 beneficiaries in "pay"
status as of December 15, 2000, shortly before the Petitions
were filed. LTV estimated that the total beneficiaries as of
that time would be somewhat less than 2,293 due to deaths during
the year 2000.
Postpetition, LTV and the other debtor-obligors have not met
their monthly obligations to the Trust, to the substantial
detriment of the Trust's beneficiaries. Originally LTV and the
other debtor/obligors led the Trust to understand, in several
conversations during January, February and March 2001, that LTV
and its co-obligors would walk arm- in-arm with the Trust to the
Bankruptcy Court in a consensual motion to assume the Settlement
Agreement, as soon as the Debtors' dispute with Abbey National
over cash collateral and DIP financing was resolved. Earlier,
LTV had advised the Section 4049 Trust's beneficiaries that it
was 'taking every step possible" to resolve the issue of their
benefit payments. LTV also gave similar indications to the PBGC
by indicating that once it has secured long-term financing
during its bankruptcy it will seek permission from the
bankruptcy court to continue funding the 4049 Trust and the
Supplemental Benefit Plan.
On March 20, 2001, the cash collateral litigation was resolved
when the Court entered the Order granting the Debtors' motion to
obtain post- petition financing and providing for the associated
repurchase of inventory and receivables under the terms of a
Revolving Credit and Guaranty Agreement. The Trust anticipated
that, shortly thereafter, it would receive word that LTV was
prepared to move forward and assume its obligations under the
Settlement Agreement. However, in early April the Trust learned
that the Debtors had, unexpectedly, declined the Trust's request
to waive conflicts of interest so that the Trust could obtain
local bankruptcy counsel of its choice in Ohio. Concerned that
this refusal to give this waiver was inconsistent with an "arm-
in-arm" approach to the Bankruptcy Court, the Trust immediately
made demand for further assurances by letter. The Trust has yet
to receive a response, one way or the other, to its April
inquiry about LTV's intentions about assuming the Settlement
Agreement. This continued delay causes concern both for the
Trust and for its beneficiaries. Retirees who depend on the
Trust have not been paid, and their hardship grows daily.
Moreover, current employees who are also beneficiaries of the
Trust show up to work at LTV every day, believing that the
Debtor/Obligors will ultimately honor their benefit commitments
under the Trust for benefits accrued as of the Plan's
termination in 1986.
As matters stand, the Trust's detriment grows, postpetition,
monthly as benefit commitments under the Settlement Agreement,
which remain unpaid, grow. The Trust receives approximately
$135,000 per month from LTV, and postpetition arrearages now
total approximately $540,000 through the end of April. The Trust
told Judge Bodoh it hopes it can continue to work with the
Debtors toward an appropriate resolution of the Trust's claims,
and encourages the Debtors to open communications toward that
end. (LTV Bankruptcy News, Issue No. 9; Bankruptcy Creditors'
Service, Inc., 609/392-00900)
MORRIS MATERIAL: Plan Confirmation Hearing Set For July 25
----------------------------------------------------------
On May 24, 2001 the Bankruptcy Court approved the Disclosure
Statement respecting the Second Amended Joint Plan of
Reorganization of Morris Material Handling, Inc. and its
affiliates, as containing adequate information. The Court also
authorized the Company to solicit votes from its creditors, and
scheduled a hearing for July 25, 2001 for confirmation of the
Amended Plan.
The Amended Plan represents a fully consensual arrangement with
the creditors committee appointed in the Company's Chapter 11
proceeding and the Company's bank creditors. If confirmed, the
Amended Plan will provide for conversion of virtually all of the
Company's bank, bondholder, and other prefiling obligations into
equity of the reorganized Company. No distribution to Morris's
current shareholders is anticipated by the Amended Plan, and all
existing Morris shares will be canceled.
The virtually debt-free capital structure contemplated by the
Amended Plan will allow the Company the flexibility to respond
to and take advantage of the changing dynamics of its industry.
The Amended Plan should allow Morris to emerge from Chapter 11
as a leading North American supplier of through the air material
handling equipment and services to a broad base of customers in
manufacturing, paper and primary metal industries. In addition,
Morris has a network of company locations to distribute these
products and provide local service and support.
NERDS4RENT, INC.: Web-based Computer School Files For Chapter 11
----------------------------------------------------------------
Nerds4Rent, Inc. filed for Chapter 11 protection with the U.S.
Bankruptcy Court. "It's a black cloud on my silver lining,"
Chief Executive Officer, H. Mark Saunders, commented. "We could
be out of it at any moment." Saunders attributed the filing to
the Company's intensive Yellow Pages advertising, which
subsequently produced scant revenue. In addition, the Company
cited accounting errors discovered by the Internal Revenue
Service. The Company's on-line Nerd School offers more than 500
Web-based courses on topics including computer operating
systems, office applications, networking, and Web development.
(ABI World, June 1, 2001)
NX NETWORKS: Facing Cash-Flow Crunch & May File For Bankruptcy
--------------------------------------------------------------
Herndon, Va.-based Nx Network Inc., which makes technology to
help people place phone calls over Internet networks, is facing
a cash crunch and may seek bankruptcy protection if it doesn't
raise money by July, according to The Washington Post. The
company listed $2.9 million in cash and cash equivalents
available at the end of March 31, compared with $4.7 million at
the end of last year, according to Nx Networks' recent quarterly
filing with the Securities and Exchange Commission.
In a conference call on Wednesday, Nx Networks Chairman and
Chief Executive John DuBois said the firm would have to raise
its quarterly revenue to the "ballpark of $15 million to $16
million" before the business generates more cash than it spends.
The company also faces lawsuits by shareholders and some of its
creditors. This month, Nx Networks was served with two
complaints seeking payments totaling about $1 million. The firm
said it likely will settle the smaller claim, which seeks
$50,000, and dispute the other. In an April filing, Nx Networks'
auditors warned that the company's liquidity problems cast
"substantial doubt" on its ability to stay in business. (ABI
World, June 1, 2001)
PACIFIC GAS: Wants To Retain Heller Ehrman As Special Counsel
-------------------------------------------------------------
Further to Pacific Gas and Electric Company's initial
application to employ Heller Ehrman as Special Counsel to
perform a variety of legal services, primarily with regard to
regulatory, rate setting and rate recovery matters, and various
litigation matters related to these, to be compensated for its
services on an hourly fee basis, the Debtor sought authority, by
way of a Supplemental Application, to continue the pre-petition
employment of Heller Ehrman White & McAuliffe LLP to pursue the
recovery of amounts claimed by PG&E from a number of insurance
carriers for losses incurred by PG&E in respect of alleged
environmental liabilities of PG&E (the "Coverage Engagement"),
and to continue to compensate Heller Ehrman pursuant to the pre-
petition partial contingency fee arrangement between PG&E and
Heller Ehrman dated January 1, 1993.
In the course of the Coverage Engagement, Heller Ehrman has
pursued claims and prosecuted litigation against more than 100
insurance carriers. The Debtor notes that through Heller
Ehrman's efforts, PG&E has negotiated settlements which have
produced aggregate gross recoveries for PG&E of over
$180,000,000. The most recent such settlements occurred in
January 2001, and produced gross recoveries of approximately
$60,000,000. The Coverage Engagement is nearing its conclusion,
but some additional claims remain to be pursued. PG&E wishes to
continue Heller Ehrman's retention for this purpose due to
Heller Ehrman's expertise in the field of insurance coverage and
its more than eight years of experience in the Coverage
Engagement.
The Contingent Fee Agreement provides that Heller Ehrman will be
paid for its legal services:
(a) a "Basic Annual Fee" of $500,000, which the Contingent
Fee Agreement permits PG&E to pay in five monthly installments
on the first day of January through May of each year, but which
has in fact been consistently paid in a single payment in
December or January. PG&E paid Heller Ehrman the Basic Annual
Fee for 2001 on or about January 30, 2001.
(b) "Contingent Compensation" in the form of a specified
percentage of aggregate amounts recovered. The percentage
applicable to recoveries in excess of $35 million (and thus the
percentage applicable to all future recoveries) is 20%.
The Contingent Fee Agreement provides that Heller Ehrman's total
fees are "capped" at 150% of the total cumulative value of
Heller Ehrman's services calculated on the basis of Heller
Ehrman's normal undiscounted hourly billing rates in effect at
the time the services were performed. It also provides that if,
at the end of any year, the Basic Annual Fee is "substantially
disproportionate" to the total value of Heller Ehrman's services
for that year, calculated as described in the previous sentence
(i.e., 150% of current undiscounted hourly rates), the parties
will negotiate in good faith regarding a partial refund of the
Basic Annual Fee and, if they are unable to agree, the matter
will be submitted to arbitration.
PG&E has agreed that, from the inception of the Coverage
Engagement, Heller Ehrman has equitable rights in the recoveries
and proceeds of settlements received on PG&E's behalf in the
Coverage Engagement to assure payment of Heller Ehrman's
Contingent Compensation. This agreement was expressly confirmed
in writing by PG&E on December 13, 2000.
Heller Ehrman shareholders Wondie Russell, David B. Goodwin and
Robert S. Venning are expected to continue to have the primary
involvement in the Coverage Engagement. In addition, PG&E and
Heller Ehrman anticipate that shareholder Peter J. Benvenutti
will provide bankruptcy-related legal services as an adjunct to
Heller Ehrman's legal services in the Coverage Engagement.
The current regular hourly rates for these shareholders are:
Shareholder Rate
----------- ----
David B. Goodwin $440
Wondie Russell $440
Robert S. Venning $490
Peter J. Benvenutti $485
In addition, associates and paralegals will also be expected to
continue to provide services, at hourly rates ranging from $140
to $333 at present. PG&E is informed and believes that Heller
Ehrman's rates are consistent with the rates generally charged
by Heller counsel of comparable qualifications and experience in
the legal markets in which Heller Ehrman has offices. PG&E
understands that Heller Ehrman's rates are subject to periodic
adjustments to reflect economic and other changes, and that such
adjustments are typically made annually as a general matters and
upon changes in status as individual attorneys attain increased
experience and seniority levels. Heller Ehrman accordingly
reserves the right to adjust its hourly rates with respect to
this engagement.
Under Section 327(e) of the Bankruptcy Code, attorneys retained
to represent a debtor as special counsel for a specified matter
or matters are not required to be "disinterested persons" within
the meaning of Section 101(14) of the Bankruptcy Code.
Therefore, Heller Ehrman would only be disqualified from
representing PG&E as special counsel in this bankruptcy case if
Heller Ehrman represented or held any interest adverse to PG&E
or its bankruptcy estate with respect to the matters on which
Heller Ehrman is to be employed.
Based upon inquiry and Declarations of Russell, Fiala and
Benvenutti, PG&E asserts that Heller Ehrman neither has nor
represents any interest adverse to PG&E or its estate with
respect to the matters as to which Heller Ehrman is to be
retained. PG&E is informed that Heller Ehrman may have in the
past represented and may currently or in the future represent
creditors of PG&E in matters unrelated to PG&E's bankruptcy
case, the bankruptcy estate, and/or matters on which PG&E will
employ Heller Ehrman as special counsel. Accordingly, the Debtor
asserts that Heller Ehrman is eligible to represent PG&E as
special counsel.
PG&E understands that it is Heller Ehrman's policy to charge its
clients in all areas of practice for expenses incurred in
connection with the client's case and the Contingent Fee
Agreement provides for such charges. PG&E is informed that
Heller Ehrman is aware of and will abide by the guidelines of
this bankruptcy court as to the nature and amount of such
expense charges, and that, to the extent PG&E and Heller Ehrman
have negotiated limits on expenses which are lower than as those
set by the guidelines, the lower negotiated limits will apply.
(Pacific Gas Bankruptcy News, Issue No. 7; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
PACIFIC GAS: Court Denies Request for Stay re CPUC's Order
----------------------------------------------------------
Pacific Gas and Electric Company released the following
statement after the U.S. Bankruptcy Court issued its decision
denying the utility's request for a stay and an injunction on
the TURN accounting proposal:
On March 27, the California Public Utilities Commission (CPUC)
issued an order that attempts to force the company to restate
all its regulatory books and accounts retroactively back to
January 1, 1998. On April 9, the company had asked the court to
stay the CPUC's order, under the automatic stay provision of the
Bankruptcy Code. The court did not grant this request, citing
certain exceptions to the automatic stay:
"Pacific Gas and Electric Company is disappointed that the court
did not grant immediate relief from the unlawful and retroactive
CPUC order. However, today's decision was not on the overall
merits of the CPUC action.
Pacific Gas and Electric Company will continue to pursue all
legal challenges to this unlawful CPUC decision.
PACIFICARE: Commences Cash Tender Offer for Outstanding Notes
-------------------------------------------------------------
PacifiCare Health Systems Inc. (Nasdaq:PHSY) announced the
commencement of a cash tender offer for all of the outstanding
7% Senior Notes due 2003 of its wholly owned subsidiary
PacifiCare Health Plan Administrators Inc.
In connection with the cash tender offer, the company is also
soliciting from note holders consents and waivers to enable the
elimination of substantially all restrictive covenants and
certain event of default provisions in the indenture under which
the Notes were issued. The tender offer and the solicitation of
consents are described in the Offer to Purchase and Consent
Solicitation Statement dated June 1, 2001.
The consideration for each $1,000 principal amount of the Notes
tendered and accepted for payment pursuant to the tender offer
will be calculated as follows:
* a price intended to result in a yield to the maturity
date of Sept. 15, 2003 for the Notes equal to the sum of (i) the
yield to maturity of the applicable reference security -- the
5.25% U.S. Treasury Note due August 2003 -- based on the bid-
side price for such reference security as of 3 p.m., New York
time, on the price determination date (currently set at June 14,
2001) as reported on the Bloomberg Government Pricing Monitor
Page PX4 or the "Quotation Report" or any recognized quotation
source selected by the Dealer Manager in its sole discretion if
the Quotation Report is not available or is manifestly
erroneous, and (ii) a fixed spread of 50 basis points,
* minus an amount equal to the consent payment of $30 per
$1,000 principal amount of Notes, plus
* accrued interest payable to the settlement date of the
tender offer.
The company will pay the consent payment of $30 for each $1,000
principal amount of Notes tendered and consents delivered prior
to the consent time of 5 p.m., New York time, on Thursday, June
14, 2001, unless extended.
The tender offer will expire at noon, New York time, on Tuesday,
July 3, 2001, unless extended. Payment for Notes validly
tendered and not validly withdrawn will be made in same day
funds promptly following expiration of the offer, or as soon
thereafter as practical.
The tender offer and consent solicitation are subject to a
number of conditions which are set forth in the Offer to
Purchase, including without limitation:
* a price intended to result in a yield to the maturity
date of Sept. 15, 2003 for the Notes equal to the sum of (i) the
yield to maturity of the applicable reference security -- the
5.25% U.S. Treasury Note due August 2003 -- based on the bid-
side price for such reference security as of 3 p.m., New York
time, on the price determination date (currently set at June 14,
2001) as reported on the Bloomberg Government Pricing Monitor
Page PX4 or the "Quotation Report" or any recognized quotation
source selected by the Dealer Manager in its sole discretion if
the Quotation Report is not available or is manifestly
erroneous, and (ii) a fixed spread of 50 basis points,
* minus an amount equal to the consent payment of $30 per
$1,000 principal amount of Notes, plus
* accrued interest payable to the settlement date of the
tender offer.
* holders of the Notes having delivered (and not revoked)
by the consent time, consents representing not less than a
majority in aggregate principal amount of the Notes,
* holders of the Notes having tendered (and not withdrawn)
by the expiration time Notes representing not less than a
majority in aggregate principal amount of the Notes, and
* the company obtaining financing to pay the consideration,
costs and fees of the tender offer and consent solicitation on
terms acceptable to the company.
The company is currently exploring several alternatives to
obtain the financing to pay the consideration, costs and fees of
the tender offer and consent solicitation.
Morgan Stanley & Co. Inc. is acting as the Dealer Manager and
Solicitation Agent in connection with the tender offer and
consent solicitation, and can be reached at 877/445-0397.
Requests for assistance or additional copies of the tender offer
materials may be directed to Georgeson Shareholder
Communications Inc., the Information Agent, at 800/223-2064.
PacifiCare Health Systems is one of the nation's largest health-
care services companies with approximately $12 billion in annual
revenues. Primary operations include health insurance products
for employer groups and Medicare beneficiaries in eight states
and Guam, serving approximately 4 million members. Other
specialty products and operations include behavioral health
services, life and health insurance, dental and vision services
and pharmacy benefit management. More information on PacifiCare
Health Systems can be obtained at http://www.pacificare.com
PSINET INC.: Files For Chapter 11 Protection in S.D. New York
-------------------------------------------------------------
PSINet Inc. (OTC BB: PSIXE) announced that it and 24 of its
operating subsidiaries in the U.S. have voluntarily filed for
protection under Chapter 11 of the U.S. Bankruptcy Code in the
U.S. Bankruptcy Court for the Southern District of New York.
Four Canadian subsidiaries also have filed for protection under
the Companies' Creditors Arrangement Act ("CCAA") statutes,
enacted in Canada in 1985, in the Ontario Superior Court of
Justice.
Neither the businesses nor operations of PSINet's operating
subsidiaries in Asia, Europe, Latin America or the Company's
Metamor consulting business are involved in today's filings.
The Company expects that it and all of its subsidiaries will
continue to provide reliable service to customers. At the time
of the filing, the companies involved in the filings had
approximately $300 million of unrestricted cash, cash
equivalents, short-term investments and marketable securities on
hand. The Company believes this cash balance will provide
sufficient financial resources to fully fund operations during
the anticipated restructuring period. The Company received a
number of offers for debtor-in-possession (DIP) financing. In
light of its cash position, the Company declined these offers.
As previously announced, the Company has retained Dresdner
Kleinwort Wasserstein, Inc. as its investment banker and
restructuring advisor. This firm and the Company continue to
evaluate all of the Company's strategic alternatives, including
the sale of the Company as a going concern, as well as the
viability of a stand-alone reorganization.
"Our existing capital structure did not permit us to respond to
the rapid changes in our markets. We expect that the steps we
are taking today will provide us with the flexibility and time
to explore all strategic alternatives while we continue to
deliver the reliable service upon which our customers depend,"
said Harry G. Hobbs, president and chief executive officer of
PSINet.
"We are asking the Courts for permission to continue to pay
employees in the normal course and to continue their medical,
retirement and other benefits," Mr. Hobbs said. He added that
PSINet intends to work through the Courts to maximize the value
for creditor constituencies - and that PSINet and its
subsidiaries intend to pay vendors on a timely basis for goods
and services they deliver after the filing date.
Sales of Certain Non-U.S. PSINet Businesses
PSINet also announced that it has signed a letter of intent with
TELUS, pursuant to which TELUS has offered to purchase PSINet's
Canadian operations and facilities. Additionally, the Company
announced that it has entered into a definitive stock purchase
agreement for the sale of its operations in Panama to REE
Panama, S.A., and has closed on the sale of substantially all of
its business operations in Puerto Rico. Terms of these
transactions were not disclosed.
PSINet Businesses Not Affected by Actions
The European and Asian subsidiaries - which were not covered in
the filings - are expected to continue to operate independently,
as before the filings. The Company believes that these
subsidiaries have sufficient resources to meet their obligations
through the restructuring process. PSINet is considering all
strategic alternatives for its operations in Latin America, and
is in discussions with a potential purchaser group. No assurance
can be given that those discussions will result in a sale of the
Latin America business.
Metamor and its subsidiaries, which also were not included in
the filings, continues to operate as before. While Metamor is
currently in compliance with its financial obligations,
including its convertible subordinated notes, the Company is in
discussions with the Metamor note holders.
"We are extremely grateful to the customers, employees and other
stakeholders who have supported the Company through these
challenging times, and we look forward to continuing to serve
them during this period of reorganization," Mr. Hobbs said.
The law firm of Wilmer, Cutler & Pickering represents PSINet
Inc. in its Chapter 11 filings, and Osler Hoskin & Harcourt LLP
represents PSINet's Canadian subsidiaries in its CCAA filings.
Dresdner Kleinwort Wasserstein, Inc. serves as investment banker
and restructuring advisor. PricewaterhouseCoopers LLP serves as
financial advisors in the bankruptcy.
About PSINet
Headquartered in Ashburn, Virginia, PSINet is a leading provider
of Internet and IT solutions offering flex hosting solutions,
global eCommerce infrastructure, end-to-end IT solutions and a
full suite of retail and wholesale Internet services through
wholly-owned PSINet subsidiaries. Services are provided on
PSINet-owned and operated fiber, web hosting and switching
facilities, currently providing direct access in more than 900
metropolitan areas more than 20 countries on five continents.
The company employs approximately 720 people in the U.S., not
including 1,550 employees in Metamor and its subsidiaries, 315
people in Canada, 770 in Europe, 600 in Asia Pacific, and 525 in
Latin America. At the time of the filing, PSINet had total
assets of $2.2 billion and total liabilities of $4.3 billion, of
which $2.9 billion is bond debt.
PSINET Inc.: Case Summary & 20 Largest Unsecured Creditors
---------------------------------------------------------------
Lead Debtor: PSINet Inc.
44983 Knoll Square
Ashburn, VA 20147
703-726-7000
aka Performance Systems International Inc.
aka Internet Access Company Inc.
aka Zebra Net, Inc.
aka Alpha Dot Net Corp.
aka Lyceum Associates Inc.
aka IoNET, Inc.
aka Telepath Systems, Inc.
Debtor affiliates filing separate chapter 11 petitions:
PSINet New York Shelf, Inc.
PSINet Asia Holdings, Inc.
Telecom Licensing, Inc.
PSI Web Inc.
PSINet Security Services, Inc.
PSINet Europe, Inc.
PSINetworks Company
ioCOM, Inc.
PSINet Telecom Limited
Telecom Licensing of Virginia, Inc.
Sports ISP, Inc.
PSINet South America Holdings, Inc.
R.B. Investments Delaware, Inc.
PSINet Miami Management Inc.
R.G. Investments Delaware, Inc.
TelaLink Corporation
Internet Network Technologies, Inc.
PSINet Ventures Ltd.
PSINet IMEA Holdings Inc.
PSINet Realty Inc.
PSINet Strategic Investments, Inc.
PSINet Strategic Services, Inc.
UHF SPU, Inc.
International Distribution & Consulting, Inc.
Type of Business: The company is a provider of Internet and
eCommerce solutions to businesses. The Company
provides corporate Internet access and private
networks, including dedicated and dial-up
Internet access; Web hosting, colocation and
managed security; and voice, fax and other
audio-video products and applications.
Chapter 11 Petition Date: May 31, 2001
Court: Southern District of New York (Manhattan)
Bankruptcy Case Nos.: 01-13213 through 01-13215;
01-13217 through 01-13218;
01-13222 through 01-13240
Debtors' Counsel: William J. Perlstein, Esq.
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, DC 20037
(202) 663-6000
Fax : 202-663-6363
Email: bperlstein@wilmer.com
Total Assets: $2,155,100,000
Total Debts: $4,329,300,000
Consolidated List of Debtors' 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Wilmington Trust Company, 11% Senior Notes $1,050,000,000
Indenture Trustee due2009
Bruce L. Bisson
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
302-651-8584
Wilmington Trust Company, 10% Senior Notes $600,000,000
Indenture Trustee due 2005
Bruce L. Bisson
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
302-651-8584
Wilmington Trust Company, 10.5% Senior Notes $600,000,000
Indenture Trustee due 2006
Bruce L. Bisson
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
302-651-8584
Wilmington Trust Company, 11.5% Senior Notes $350,000,000
Indenture Trustee due 2008
Bruce L. Bisson
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
302-651-8584
Wilmington Trust Company, 10.5% Senior Notes $141,400,000
Indenture Trustee due 2006
Bruce L. Bisson (Euro 150.0)
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
302-651-8584
Wilmington Trust Company, 11% Senior Notes $141,400,000
Indenture Trustee due 2009
Bruce L. Bisson (Euro 150.0)
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
302-651-8584
Nortel Networks Inc. Trade Debt and $99,734,640
1200 Technology Park Drive Leases
Billerica, MA 01821
978-439-5800
or
2595 North Dallas Parkway
Suite 202
Frisco, TX 75034
Cisco Systems Capital Corp. Trade Debt and $81,013,139
1835 Alexander Bell Dr Leases
Suite 10
Reston, VA 22091
703-716-9540
or
170 W. Tasman Drive
San Jose, CA 95134-1706
Broadwing Communications Trade Debt $27,452,414
4350 Kennedy Blvd W
Tampa, FL 33609
813-289-4330
Leasetec Corporation Leases $26,253,040
1000 South McCaslin
Boulevard
Superior, CO 80027
Leasetec Corporation
720-304-1143
GE Capital Corporation Trade Debt and $21,287,201
4 N. Park Drive, Suite 500 Leases
Hunt Valley, MD 21030
410-527-9300
Lucent Technologies Trade Debt, $20,677,288
2 Gatehall Drive Note Payable
Parsippany, NJ 07054 and Leases
800-527-9876
Metromedia Fiber Trade Debt and $17,914,546
Networks Services Inc. Leases
360 Hamilton Avenue
White Plains, NY 10601
914-421-6700
Verizon Trade Debt $13,964,135
OC48 RING/PRI-Bell Atlantic
Network Services, Inc.,
Attn: Contracts Management
2980 Fairview Park Drive,
7th Floor
Falls Church VA 22042
ACCT-Chris Mogee
11750 Beltsville
Dr, FLR 2, Beltsville
MD 20705
301-595-2251 & 410-271-1183
Cable & Wireless Network Trade Debt $11,691,563
500 Edgewater Drive
Wakefield, MA 01880
(781) 245-5878
Hewlett-Packard Company Trade Debt and $11,509,920
20 Perimeter Summit Leases
Boulevard, Atlanta, GA
30319-1417
Dime Commercial Corp. Trade Debt and $9,444,324
1180 Avenue of Leases
the Americas, Suite 510
New York, NY 10036
Nissho Electronics Corp. Leases $7,231,849
3-1 Tsukiji 7-Chome
Chuo-ku, Tokyo 104-8444 Japan
81-3-3544-8301
EMC Corporation Trade Debt $6,380,933
200 Centreport Dr.
Greensboro, NC 27409
336-665-0445
FINOVA Capital Corp. Leases $6,149,718
115 West Century Road
Paramus, NJ 07652
201-634-3400
PSINET INC.: Selling Canadian Operations To TELUS
-------------------------------------------------
TELUS and Virginia-based PSINet Inc. have signed a letter of
intent (LOI) pursuant to which TELUS has offered to purchase
PSINet's Canadian operations and facilities. The LOI was signed
concurrently with PSINet Inc.'s announcement of filing for
bankruptcy protection.
In Canada, PSINet has approximately 275 employees and about 50
points-of- presence, or connection facilities. It serves most
major markets in the country, including Toronto, Montreal,
Ottawa, Edmonton, Calgary and Vancouver. The company provides
Internet access, Web hosting, security and e-commerce
application services to the Canadian business and ISP markets.
PSINet Canada also delivers consumer and small business Internet
services through its wholly- owned subsidiary, Calgary-based
CADVision.
The company recorded more than $74 million in revenue last year.
It has a state-of-the-art Internet data centre in Toronto.
PSINet has approximately 8,600 corporate accounts across the
country.
"The strong data and IP skills of the PSINet employees and the
company's impressive customer base are consistent with TELUS'
strategic growth initiatives," said Jim Peters, executive vice-
president of TELUS Corporate Development. "TELUS proposes to
retain PSINet's Canadian-based employees and ensure the service
PSINet customers expect, continues."
"The transaction would strengthen TELUS' position as one of the
leading Internet hosting providers in Canada by combining
PSINet's Internet hosting business and data centre with our
existing hosting business and newly constructed, national
Internet data centres," Peters added. "If we can acquire
PSINet's Canadian operations at a price that is cost effective
for us, we will accelerate our plans for national business
Internet services."
TELUS' proposed purchase is subject to a number of conditions,
including regulatory approval and approval under bankruptcy
proceedings, including the Companies Creditors Arrangement Act
in Canada. Decisions are expected by the end of July.
TELUS Corporation (TSE: T, T.A; NYSE: TU) is one of Canada's
leading telecommunications companies providing a full range of
telecommunications products and services that connect Canadians
to the world. The company is the leading service provider in
Western Canada and provides data, Internet, voice and wireless
services to Central and Eastern Canada. For more information
about TELUS, visit www.telus.com.
PSINET: Wilmington Trust Clarifies Role In Bankruptcy Case
----------------------------------------------------------
News reports issued on PSINet Inc.'s Chapter 11 bankruptcy
filing cited Wilmington Trust Company, a wholly owned subsidiary
of Wilmington Trust Corporation (NYSE: WL), as an unsecured
creditor for $2.9 billion in six bond issues. Wilmington Trust
said it is not an unsecured creditor. Wilmington Trust is the
indenture trustee for bonds issued by PSINet. As the indenture
trustee, Wilmington Trust expects to incur no financial loss
from PSINet's bankruptcy filing.
"We want to clarify that Wilmington Trust has no credit exposure
to PSINet," said Ted T. Cecala, Wilmington Trust's chairman and
chief executive officer. "We want to emphasize that PSINet's
bankruptcy filing does not affect our balance sheet or bottom
line. Wilmington Trust's financial strength, stability, and
integrity remain intact."
A trust indenture is a formal agreement between a bond issuer
and a trustee that covers such considerations as the size of the
issue, protective covenants, redemption rights, and default
provisions. The indenture trustee performs certain
administrative functions on behalf of the issuer. As indenture
trustee, Wilmington Trust extends no credit but is paid a fee
for its services. Wilmington Trust is a leading provider of
indenture trustee and other specialty corporate financial
services.
SAFETY-KLEEN: Royal Indemnity Moves For Protective Order
--------------------------------------------------------
Royal Indemnity Company and Royal Insurance Company asked Judge
Walsh to issue an order quashing 16 notices of deposition issued
by Safety-Kleen Corp. in connection with their stipulation
between Montiel and the other civil plaintiffs, and the Debtors.
The Royals appeared through Lawrence A. Tabb of the Los Angeles
firm of Musick, Peeler & Garrett, LP, without local counsel.
The Debtors have submitted a Stipulation and Agreed Order
between certain civil plaintiffs and the Debtors agreeing to
limited relief from the automatic stay. Central National
Insurance Company of Omaha objected to this Order, and to the
Motion of Montiel and others for relief from the stay. Other
parties have joined in the objection, including National Union
Fire Insurance Company of Pittsburgh, Pennsylvania, and
affiliates of the American International Group, Continental
Insurance Company and affiliates, and the moving parties in
this Motion.
Ten days after the objection was filed, the Debtor served
notices of 16 depositions via facsimile, followed by hand
delivery a day later, noticing the depositions to be held within
3-4 days. These depositions request the attendance of
representatives of 16 insurance companies having the most
knowledge of the basis for the objection. The Royals asked Judge
Walsh to bar the Debtors from proceeding with these depositions,
since the notices violate the Bankruptcy Rules and Federal Rules
of Civil Procedure in several respects. Specifically, the
Debtors fail to provide adequate notice of the depositions, seek
to take more depositions than are permitted without leave of the
Court, have noticed these depositions for purposes other than as
permitted by the Federal Rules, and have not issued these
notices by an appropriate officer of the court. Further, the
Royals object to having the depositions in Wilmington, Delaware.
The Royals complained that the Local Rule of the District Court
defines a "reasonable" time for a deposition to be on 5 days'
advance notice without a court order to the contrary.
Federal Rule of Civil Procedure 30 limits the number of
depositions which may be taken without a separate court order to
ten. The Debtors noticed 16 without leave of Court.
The Royals described the Debtors' motive in noticing these
depositions as "patently disingenuous". At various times during
the deposition day, the Debtors have noticed three to five
depositions simultaneously. These proceedings are "manifestly
oppressive, unduly burdensome and designed merely to annoy and
harass the Royals. Obviously, the Royals cannot attend each
deposition if multiple depositions are proceeding
simultaneously, so that the Debtors have violated the Federal
Rules by attempting to abuse the deposition process.
The Debtors have noticed these eleventh-hour depositions for
other than legitimate discovery purposes. If the Debtors
genuinely intended to take discovery on the objection, they
should have issued and scheduled the depositions promptly after
the objection was filed rather than 10 days later. Further, the
Debtors have been aware for some time of the Royals' objection
to the Montiel Motion since the Royals filed a response to that
Motion. Yet the Debtors still waited ten days after the
objection was filed to issue the notices of deposition. The
Debtors have no legitimate basis for seeking such
extraordinarily burdensome discovery at this late stage.
Finally, the Local Rules of the Delaware court requires that
local counsel must sign all papers filed with the Court, where
the signature of an attorney is required. The Debtors' notices
of deposition were not signed by Delaware counsel for the
Debtors. Therefore, the Royals conclude, the notices are
deficient and filed in derogation of the Rules of the Court.
(Safety-Kleen Bankruptcy News, Issue No. 16; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
SAFLINK CORPORATION: Nasdaq Halts Trading of Shares
---------------------------------------------------
SAFLINK Corporation (Nasdaq: ESAF) announced that it was
notified that The Nasdaq SmallCap Market halted trading in
SAFLINK's common stock, pursuant to Rule 4330(a)(2) of the
Nasdaq Marketplace Rules, due to the inclusion in SAFLINK's
Annual Report on Form 10-K of a disclaimer opinion by SAFLINK's
independent accountants with respect to financial statements
required to be certified by such accountants.
The Company is in the process of attempting to raise $8 million
through a private placement to accredited investors. If and when
such financing is concluded, the Company will endeavor to file
an amendment to its Form 10-K that will attempt to address a
failure to comply with the requirement that an opinion be
expressed. The Company expects that once such an amendment is
filed, Nasdaq will allow trading in SAFLINK's common stock to
recommence.
There can be no assurance, however, that the Company will
conclude such financing and that if and when concluded that
SAFLINK will satisfy the Nasdaq listing requirements so that
Nasdaq will permit trading in SAFLINK stock.
As previously announced, the Company is scheduled to have a
delisting hearing with Nasdaq on June 7, 2001.
The securities offered in the pending financing will not be or
have not been registered under the Securities Act of 1933, as
amended and may not be offered or sold in the United States
absent registration or an applicable exemption from registration
requirements.
SCIENCE DYNAMICS: Receives Notice of Noncompliance From Nasdaq
--------------------------------------------------------------
Science Dynamics "SciDyn" (Nasdaq: SIDY), a developer of
Internet Protocol-based (IP) telephony solutions and services,
announced that the NASDAQ SmallCap Market has informed the
Company that its common stock will be subject to delisting.
SciDyn needs to be in compliance with one of the following
minimum requirements, net tangible assets or market
capitalization or net income for continued listing, as set forth
in NASDAQ's Marketplace Rules.
As permitted by NASDAQ, the Company will provide the NASDAQ
Staff with a plan by June 15th, 2001, outlining how it intends
to comply with listing requirements. If after the NASDAQ Staff
review it is determined that the plan does not adequately
address the issues noted, written notification of delisting will
be provided. At that time, the Company may appeal the Staff's
decision to a NASDAQ Listing Qualifications Panel. There can be
no assurances the Panel will grant the Company's request for
continued listing. The Company's stock will continue to be
listed on NASDAQ SmallCap Market pending a final decision. In
the event Science Dynamics is delisted following the NASDAQ
hearing, the stock would likely trade on the OTC Bulletin Board.
About Science Dynamics Corporation
Headquartered in Cherry Hill, New Jersey, Science Dynamics
Corporation (SciDyn) is a leading developer of
telecommunications solutions. SciDyn's IP telephony products
enable the seamless connection between traditional circuit-
switch based networks and the next generation of packet-based
networks. Products include: The IntegratorC-2000(R) series of IP
Telephony Gateways; the Commander II Inmate Control phone system
(also based on the IntegratorC-2000(R) architecture) and the
VFX-200 series of Video over Frame Relay Access Devices (FRADs).
Visit Science Dynamics' Web site at http://www.SciDyn.com.
SIERRA HEALTH: A.M. Best Lowers Insurance Units' Ratings To B
-------------------------------------------------------------
A.M. Best Co. has downgraded the financial strength ratings of
all the operating insurance and HMO subsidiaries of Sierra
Health Services, Inc., Las Vegas, to B (Fair).
The rating actions reflect Sierra's weak capital position, its
high, though improving, financial leverage, and the diminished
operating earnings generated by Sierra's Texas managed care,
military health services and workers' compensation segments in
the last two years. A.M. Best does recognize the organization's
ongoing efforts to reduce debt and improve operating earnings.
However, A.M. Best believes Sierra's limited equity capital base
and still substantial outstanding debt severely limit its
financial flexibility, leaving Sierra's operating affiliates
potentially vulnerable to adverse underwriting and economic
conditions.
Sierra Health Services, Inc., is an integrated managed health
care organization that provides a broad array of health care and
workers' compensation products. Its primary health care
operating affiliates--Health Plan of Nevada, Inc. (HPN), Sierra
Health and Life Insurance Company (SHL) and Texas Health Choice,
L.C. (THC)--are direct wholly-owned subsidiaries.
Sierra's workers' compensation operations are held by an
intermediate holding company, CII Financial, Inc. The
organization maintains a complex capital structure with
significant external debt obligations held at both Sierra and
CII Financial, as well as inter-company borrowings between the
two holding companies.
Over the past twelve months both Sierra and CII Financial have
managed through exceptional financial difficulty. During 2000,
Sierra's distressed health care operation in Texas quickly
deteriorated the organization's capital base, causing Sierra to
breach the financial covenants in its bank facility. At the same
time, cash flow constraints within CII Financial's operating
subsidiaries left the intermediate holding company without the
means to pay $47 million of convertible subordinated debentures
due September 15, 2001. As a result, Sierra was compelled to
sell non-core assets, including the sale/leaseback of its home
office, to raise cash and pay down its bank facility, as well as
extend a loan to CII Financial. Meanwhile, CII Financial
commenced an exchange offer to restructure its outstanding
obligations.
At December 31, 2000, Sierra's consolidated stockholders' equity
was $90 million, down from $278 million a year earlier, and its
debt-to-total capital ratio was 77%. Results have improved
somewhat in the first quarter of 2001. Sierra has used the
proceeds from the sale of non-core assets and the collection of
certain receivables to pay down its debt. Operating results in
its core managed care and workers' compensation businesses have
also shown improvement over the prior year. At March 31, 2001,
Sierra's equity has risen to $95 million and its debt-to-total
capital ratio was down to 66%.
However, the organization's current financial leverage is still
inappropriate for a secure rating, leaving the operating
affiliates with very limited financial flexibility to deal with
adverse underwriting or economic conditions. Overall, despite
the recent improvements, A.M. Best believes that given the
volatile nature of Sierra's core lines, its significantly
weakened capital position and its substantial debt service
requirements, the ratings of Sierra's affiliates are currently
vulnerable.
The following financial strength ratings have been downgraded:
* Sierra Insurance Group to B (Fair) from B++ (Very Good).
* Health Plan of Nevada to B (Fair) from B++ (Very Good),
and removed from under review.
* Sierra Health and Life to B (Fair) from B++ (Very Good),
and removed from under review.
* Texas Health Choice to B (Fair) from B+ (Very Good), and
removed from under review.
A.M. Best Co., established in 1899, is the world's oldest and
most authoritative insurance rating and information source. For
more information, visit A.M. Best's Web site at
http://www.ambest.com
SPALDING HOLDINGS: S&P Places B- & CCC Debt Ratings on Watch
------------------------------------------------------------
Standard & Poor's placed its single-'B'-minus corporate credit
and bank loan ratings of Spalding Holdings Corp. on CreditWatch
with negative implications. The triple-'C' subordinated debt
rating also was placed on CreditWatch with negative
implications.
The CreditWatch listing reflects Standard & Poor's concerns
about Spalding's continued high leverage, weak credit measures,
tight liquidity, as well as uncertainties about the potential
effects of the highly competitive golf ball market and recent
poor weather conditions on future operating results.
Spalding is a leading manufacturer and licensor of branded
consumer products in the global golf and sporting goods markets.
Standard & Poor's will meet with management to discuss the
company's operating and financial strategies.
TEMPO ONE-STOP: Taps Universal Capital to Lead Turnaround Effort
----------------------------------------------------------------
Tempo One-Stop Records, Inc., (dba Pacific Coast One-Stop),
confirmed that it has negotiated a deal with Universal Capital
Partners, LLC, a Minneapolis-based retail consulting and
liquidation firm, in which Universal has become Tempo's
operational partner and turnaround consultant.
Simi Valley, California-based Tempo One-Stop Records, Inc. (dba
Pacific Coast One-Stop), one of the nation's largest one-stop
distributors of music and video-based products said that as part
of its reorganization efforts it has appointed Michael Catain,
President and CEO of Universal Capital Partners, to its Board of
Directors.
Ralph Johnson, Pacific Coast One-Stop Chairman and CEO, said,
"We're excited to have Mr. Catain on board to lead our Chapter
11 reorganization efforts and assist us in developing a
turnaround strategy. Mr. Catain spent many years in the
entertainment industry holding executive level positions with
companies such as United Artists, A&R and Rocket Records. This
experience, coupled with the depth of his knowledge from leading
a retail consulting firm focused on asset valuations,
turnarounds and liquidations, will serve us well. Mr. Catain's
strong ties to the lending industry and his solid vendor
relationships in the entertainment industry will be of benefit
as we formulate a go forward business plan for the future of
Pacific Coast One-Stop. Mr. Catain will lead the Company's
turnaround efforts and I will continue as Chairman to oversee
strategic decisions regarding the company's long term plans."
Johnson continued, "For the past 18 years, Pacific Coast has
served over 2,500 retailers nationwide and 500 global
distributors, offering its customers music titles from over
4,800 major and independent record labels, giving us a strong
base from which to spur future growth. Since the acquisition of
Pacific Coast by Magic Media Makers earlier this year, we have
already made numerous improvements to our operations and look
forward to raising the bar even further with the help of
Universal Capital Partners."
Michael Catain, Universal Capital Partners President and CEO,
said, "This represents a great opportunity for Universal Capital
Partners to demonstrate the full range of our skills. We will be
evaluating every aspect of Pacific Coast's operations, from its
inventory base to its business model and will make
recommendations to the Board of Directors regarding the future
direction of the company."
Tempo One-Stop Records, Inc., dba Pacific Coast One-Stop, is one
of the nation's largest one-stop distributors of music and
video-based products. Serving over 2,500 retailers nationwide
and 500 global distributors for more than 18 years, the Company
operates from a 60,000 square foot facility in Simi Valley,
California and stocks more than 200,000 titles of music from
4,800 major and independent record labels, including 6,000 DVD
titles. The Company employs approximately 200 associates at its
California facility.
Universal Capital Partners, LLC is a full-service, retail
consultant serving both retail management and asset-based
lenders. Headquartered in Minneapolis, Universal Capital employs
75 people and has offices in New York and Greensboro, N.C.
Universal Capital provides a variety of services including
strategic store analyses, inventory evaluation, real estate
restructuring, collateral monitoring and inventory liquidations.
The company also maintains a credit facility in excess of $100
million to assist lenders and businesses with their funding and
liquidity needs. Universal Capital has been a retail consultant
to the entertainment industry for many years and has conducted
liquidations in hundreds of locations throughout the United
States, representing more than $400 million in retail inventory.
Having assisted many of the largest music wholesalers,
distributors and retailers in the past five years, Universal
Capital Partners continues to be one of the leading experts in
the evaluation and liquidation process for the music industry.
U.S. INDUSTRIES: Receives Bank Waiver For Rexair Guarantee
----------------------------------------------------------
U.S. Industries (NYSE-USI) said that the lenders to Rexair, Inc.
have extended a waiver of default regarding a credit facility
guaranteed by USI.
As previously announced, the Company guaranteed Rexair's
obligations under this facility when the Company sold a majority
interest in Rexair to Strategic Industries, LLC in March 2000.
As of March 31, 2001, $170.6 million was outstanding under the
facility. The waived event of default relates to USI's senior
unsecured credit ratings, and had previously been waived through
May 31, 2001. The stated term of the new waiver extends through
July 27, 2001.
U.S. Industries owns several major businesses selling branded,
consumer-oriented building products to leading home centers and
mass merchants. These brands include Jacuzzi, Ames True Temper,
Sundance Spas, and Zurn, among others.
VENCOR INC.: Agrees To Modify Stay For Insured Claim
----------------------------------------------------
Lela Killingsworth, as Administratrix for the Estate of Hazel
Simmons, Deceased (the plaintiff) has asserted claims against
Vencor, Inc. d/b/a Rehabilitation and Healthcare Center of
Birmingham alleging negligence and wrongful death.
The Debtors agreed to modify the automatic stay to allow the
plaintiff in the underlying action to prosecute her claims to
final judgment. The agreement and stipulation between the
parties expressly provides that any settlement of or recovery of
a judgment for damages in the underlying action will be limited
to applicable insurance proceeds, if any, and plaintiff will not
be entitled to any other distribution from the Debtors' estates
on account of any judgment that may be entered against the
Vencor Defendants in the underlying action.
The stipulation further provides that the plaintiff will not
engage in any efforts to collect any amount from the Debtors or
any of the Debtors' current or former employees, current or
former officers and directors, or any person or entity
indemnified by the Debtors. The parties also specifically agree
that any settlement of the underlying action will include a
mutual general release.
Judge Walrath has given her stamp of approval to the agreement
and stipulation. (Vencor Bankruptcy News, Issue No. 30;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
WASHINGTON GROUP: Idaho Court Appoints Raytheon Arbitrator
----------------------------------------------------------
Washington Group International (NYSE:WNG) announced that the
District Court of the Fourth Judicial District of the State of
Idaho has ruled decisively in its favor and issued an order
appointing an independent accountant and requiring that Raytheon
produce an April 30, 2000 balance sheet of its former
subsidiary, Raytheon Engineers & Constructors, by June 5, 2001
at 5:00 p.m.
Should Raytheon fail to produce the balance sheet, which is the
triggering document for a cash adjustment of Washington Group's
purchase of RE&C, the Honorable Deborah A. Bail further ordered
that Washington Group's proposed balance sheet of RE&C will be
used as the basis for the determination of the dispute.
The Court also appointed Washington Group's candidate, Bill
Palmer of William J. Palmer & Associates, to serve as the
independent accountant for the dispute and set strict milestones
for resolution of the matter. Washington Group has 30 days to
respond to Raytheon's balance sheet, if one is submitted.
Raytheon must then respond to Washington's comments within 30
days. If Raytheon fails to produce a balance sheet, then it must
respond to the balance sheet submitted by Washington within 30
days. In either case, William J. Palmer & Associates then has 30
days to make its determination and specify the amount of the
cash adjustment to which Washington Group is entitled.
"This is a clear and powerful rejection of Raytheon's `run out
the clock' tactics," said Stephen G. Hanks, Washington Group
President. "This victory for Washington Group further affirms
our position that Raytheon has misused the purchase price
adjustment process and sets the stage for an expeditious
resolution of the matter. I think it is fair to say that we are
pleased by this concise and unambiguous ruling by the Court."
The April Audited Balance sheet, originally due September 5,
2000 and later extended to January 14, 2001, is to be prepared
by PwC-Boston, the auditor for the RE&C companies prior to their
sale to Washington Group. Raytheon failed to produce this
document and has been in breach of contract since January 14,
2001.
On March 2, 2001, the Company announced that, due to Raytheon
Company's failure to comply with the terms of the April 2000
stock purchase agreement pursuant to which the Company acquired
Raytheon Engineers & Constructors (RE&C), the Company faced a
severe, near-term liquidity crisis. As a consequence, the
Company ceased certain activities on two power projects in
Massachusetts guaranteed by Raytheon Company. In addition, the
Company filed suit against Raytheon Company alleging fraud,
seeking rescission and, alternatively, unspecified damages for
breach of contract.
On May 14, 2001, Washington Group announced that it had reached
an agreement in principle with its bank group steering committee
on a Plan of Reorganization for the Company. To facilitate the
reorganization, the Company and certain of its subsidiaries
filed the Plan along with voluntary petitions to restructure
under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the District of Nevada in Reno.
WINSTAR COMMUNICATIONS: Engages PwC As Bankruptcy Consultants
-------------------------------------------------------------
Winstar Communications, Inc. and the related Debtors asked Judge
Farnan to authorize their employment of the firm of
PricewaterhouseCoopers LLP as bankruptcy consultants to the
Debtors in these Chapter 11 cases. The professional services PwC
is to provide include:
(a) Assisting in compliance with the financial reporting
requirements under the Guidelines issued by the United States
Trustee;
(b) Advise and assist company personnel in the development
and implementation of cash management reporting processes and
controls; advise and assist the Debtors in matters to improve
operating performance of their working capital management;
(c) Consulting with the Debtors' management in connection
with financial matters relating to the on-going activities of
the Debtors in relation to the bankruptcy proceedings;
(d) Working on behalf of the Debtors with any accountants
and other financial consultants for committees and other
creditor groups;
(e) providing assistance with the analysis and
reconciliation of claims;
(f) Confer with the Debtors on the preparation of financial
projections and submission of the same to parties in interest;
(g) Analyze cash flow projections and recommend ways to
increase cash flow;
(h) Review the Debtors' business plan and recommend
improvements, as appropriate;
(i) Assist with analysis of potential sales of various
assets of the Debtors, if any, including appraisals and/or
valuations of certain assets as requested; and
(j) Assisting with other matters as management or counsel
to the Debtors may request from time to time.
For these professional services, PwC will utilize its current
range of hourly billing, although these billing rates are
subject to adjustment from time to time:
Partners $475-$595
Directors and Principal Consultants $420-$525
Managers $300-$420
Senior Associates $190-$300
Associate Consultants $120-$250
Analysts $110-$150
Administrative/paraprofessional $ 50-$100
PwC assured Judge Farnan that personnel with lower billing rates
will be used whenever feasible. Moreover, PwC will utilize its
local services, to the extent possible, to reduce expenses. PwC
adjusts its hourly rates annually, and fee applications will
reflect the rates in effect at the time.
PwC assured Judge Farnan it does not hold or represent any
interests adverse to the Debtors or these estates in the matters
upon which its employment is sought, and is disinterested.
Elliot Fuhr, a PwC partner, further told Judge Farnan that he
caused a search to be initiated through the PwC client
engagement database and relationship master file to determine
the existence of any connection between PwC and parties
interested in these cases. As this search is ongoing, Mr. Fuhr
will supplement his affidavit as appropriate. Mr. Fuhr advised,
however, that PwC provides such services as ordinary-course
business assurance, accounting and tax advisory services,
computer information system and other consulting services, to
various parties with interests in these estates, such as Chase
Manhattan Bank, Verizon, P-Comm, Cisco Systems, Dell Computers,
MCI WorldCom, Microsoft, Oracle, Advanced Fiber Communications,
BEA Systems, Bank of New York, Compaq, Williams Communications,
and Level 8.
In particular, Mr. Fuhr advised that PwC provides assurance and
attestation, transaction support, tax advisory, and other
services to Lucent Technologies, Inc. and affiliated entities.
However, PwC's global earnings from the Lucent relationship in
the past year was less than 1% of PwC's annual revenues. Lucent
is a secured creditor of certain of the debtor subsidiaries, and
as of March 2001 was owed approximately $727 million. In
addition, the Debtors have commenced a breach of contract suit
against Lucent seeking $10 billion in damages. As a court-
approved bankruptcy consultant, PwC will not and has not
participated in any adversarial proceeding against Lucent during
the course of these cases, and has and will remain outside the
scope of services provided by PwC to these estates. In addition,
PwC will recuse itself from representing Lucent in any aspect of
Lucent's defense against the Debtors' lawsuits.
During the past year, PwC has provided due diligence services to
CS First Boston and to Welsh, Carson, Anderson & Stowe as a
prerequisite to making investments in the certain preferred
stock issues of the Debtors. WCAS holds one seat on the Debtors'
Board of Directors; CSFB has observer rights on the Debtors'
boards of directors. PwC is not currently engaged to perform any
other due diligence services on behalf of CSFB or WCAS in
connection with these Chapter 11 cases. PwC will seek prior
approval from the Court to provide additional services to CSFB
or WCAS in the event either wishes to make an investment in the
Debtors or purchase certain assets of the Debtors. PwC does
provide, and will continue to provide, due diligence services to
CSFB and WCAS on matters wholly unrelated to these cases.
Siemans Financial Services, Inc. holds $200 million of the
Debtors' prepetition senior secured obligations as part of the
facility agented by Bank of New York. PwC provides assurance and
attestation services, as well as certain other financial
advisory services, to Siemans, the parent of SFSI, on matters
unrelated to these cases.
J. P. Morgan Chase is participating in and serving as
syndication agent of the Debtors' secured superpriority DIP
revolving credit. PwC provides assurance and attestation
service, as well as certain other consulting services, to JPMC,
all on matters unrelated to these cases.
Additionally, PwC has represented parties in interest in other
cases wholly unrelated to this case in which various of the
Debtors' professionals have been involved, or such professionals
have retained PwC either representing the same or other parties
in interest. None of these relationships or services provided
have any relationship to these bankruptcy proceedings and PwC
will not represent any such creditor or party in interest in
matters related to these bankruptcy cases.
PwC is, at any point in time, involved as a party or witness in
numerous court and administrative proceedings and other general
matters requiring the retention of outside legal counsel. As a
result, PwC may have retained, may currently retain, or may in
the future retain, certain law firms involved in the proceedings
at hand, such as Shearman & Sterling; Weil Gotshal & Manges;
Young, Conaway, Stargatt & Taylor; and Wachtel Lipton Rosen &
Katz. In addition, PwC may presently, may have in the past, and
may in the future provide attestation or advisory services to
these firms. Any such retention will be wholly unrelated to
these Chapter 11 cases. (Winstar Bankruptcy News, Issue No. 4;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.
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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
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For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
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Copyright 2001. All rights reserved. ISSN: 1520-9474.
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