/raid1/www/Hosts/bankrupt/TCR_Public/010608.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, June 8, 2001, Vol. 5, No. 112
Headlines
360NETWORKS INC.: Moody's Junks Senior Debt Ratings
BALDWIN PIANO: Reduces Workforce as First Step To Restructuring
CHILDRENS BEVERAGE: Looking For Funds To Sustain Operations
CRIIMI MAE: S&P Reinstates Unit To Select Servicer List
DAY RUNNER: Discloses Majority Stockholders
DIAMOND HOLDING: Creditors File Involuntary Chapter 7 Petition
DIAMOND HOLDING: Involuntary Case Summary
EMERITUS ASSISTED: Lender Agrees To Extend Debt Maturity
FASTCOMM: Wesley Clover & Terrence Matthews Own 25.8% Of Stock
FINOVA GROUP: Committee Retains Pachulski Stang As Local Counsel
FIRST VIRTUAL: Cuts Jobs to Reduce Cash Burn Rate
FMAC LOAN: Fitch Downgrades Ratings On Certain Securitizations
HOLLYWOOD ENTERTAINMENT: S&P Places Junked Ratings on Watch
INTEGRATED HEALTH: Seeks To Amend Officer Compensation Pacts
INTERNATIONAL KNIFE: Sells German Subsidiary To Pay Off Debt
JENNY CRAIG: Shares Face Delisting From NYSE
KOZ.COM: Court Approves Asset Sale to Community Software
LERNOUT & HAUSPIE: Etienne Davignon Resigns As Board Member
LERNOUT & HAUSPIE: Creditors Back Restructuring Plan
LOEWEN: Description Of Recovery Actions Under 2nd Amended Plan
MACDERMID INC.: Standard & Poor's Assigns Low-B Ratings
MARINE EXPEDITIONS: Adventure Travel Company Ceases Operations
MAXICARE: Proposed Examiner For Bankrupt Unit Is Mark Abernathy
NAMIBIAN MINERALS: Posts First Quarter 2001 Losses
PACIFIC GAS: Wants To Assume Collective Bargaining Agreements
PACIFIC GAS: Bankruptcy Judge To Rule On Bonus Plan On June 18
PILLOWTEX CORP.: Toyota Presses For Decision On Forklift Leases
PLAY-BY-PLAY TOYS: Says Funds Insufficient To Pay $15.7 Mil Debt
SAFETY-KLEEN: DMH Environmental & Hewitt Ask For Stay Relief
SEMICONDUCTOR LASER: BSB Bank Demands Immediate Payment of Debt
TITANIUM METALS: Issues Partial List Of Equity Holders
TITANIUM METALS: Incumbent Board Members Are Re-Elected
ULTRA MOTORCYCLE: Appoints Steven A. Saslow As New CEO
USG CORPORATION: S&P Cuts Credit Ratings to CCC+ From BB-
WASHINGTON GROUP: Raytheon Delivers Balance Sheets
WASHINGTON GROUP: Challenges Raytheon's Financial Statements
WHEELING-PITTSBURGH: Asks for Exclusivity Extension to Sept. 12
WORLDPORT COMMUNICATIONS: Appoints Kathleen Cote As New CEO
WORLD WIDE WIRELESS: Gives Update On Debt Restructuring
BOOK REVIEW: OIL & HONOR: The Texaco Pennzoil Wars
*********
360NETWORKS INC.: Moody's Junks Senior Debt Ratings
---------------------------------------------------
Moody's Investors Service has lowered 360networks Inc.'s senior
unsecured rating to Caa3 from B3, and its senior secured and
senior implied ratings to Caa2 from B1. All ratings remain on
review for possible further downgrade while approximately $2.5
billion of debt securities are affected.
Moody's said that the downgrades follow the company's recently
announced revised guidance, which prompted the rating agency's
concern regarding the company's liquidity status. 360networks
has said it will need additional working capital over the next
four months, which in combination with its revised business
plan, will fund the company through the attainment of positive
cash flow in 2002. However, Moody's stated that there can be no
assurance that 360networks will generate the level of EBITDA
indicated by its latest revised estimate or that it will be able
to raise sufficient amount for additional funding.
In addition, the rating agency considers it improbable that the
company can access the public debt or equity markets, given
present investor sentiment. The substantial level of assets
under construction distracts from the debt protection measures
available to cover debt-holder interests, Moody's stated.
360networks is based in Vancouver, Canada
BALDWIN PIANO: Reduces Workforce as First Step To Restructuring
---------------------------------------------------------------
Baldwin Piano & Organ Company (Nasdaq: BPAO) said that it will
implement a work reduction program immediately as the first step
of its restructuring program under Chapter 11 of the United
States Bankruptcy Code. The reduction will include 27 employees
at the Company's manufacturing facilities in Conway,
Fayetteville and Trumann, Arkansas, as well as the Company's
corporate headquarters in Mason, Ohio. The workforce reduction
will reduce the Company's annual payroll by an estimated
$1,625,780.
Chief Executive Officer Robert J. Jones said, "The reduction in
personnel follows an extensive review of our entire operation
initiated May 1 when the new management team arrived at Baldwin.
In our analysis we targeted areas of accountability, workflow,
duplication of efforts by personnel and consolidations to make
operations more efficient."
Jones added, "Our intent is to provide strong manufacturing
capabilities and to give our customers and dealers quality
service in an efficient, but effective manner. It is never easy
to see dedicated employees lose their jobs, but this move is a
necessary one in our effort to become profitable. Management
pledges to work diligently in its effort to reorganize under
Chapter 11 of the United States Bankruptcy Code. We anticipate
returning to our primary business, which is the profitable
manufacturing of the world's best pianos."
Kenneth W. Pavia, Chairman, stated that he had full confidence
in Jones' vision for the future of Baldwin. "Robert Jones and
his management team has undertaken an exhaustive analysis of the
legacy issues hindering the Company and has pledged a proactive,
diligent, and expeditious approach in attempting to resolve
them. Although it is one of the most difficult task management
has in returning the Company to profitability, reduction in the
workforce was where management needed to begin its work. I look
forward to working closely with this very capable management
team as they work through their restructuring program and return
Baldwin to profitability and the strong status the Company once
enjoyed."
Baldwin Piano & Organ Company, the maker of America's best
selling pianos, has marketed keyboard musical products for over
140 years.
CHILDRENS BEVERAGE: Looking For Funds To Sustain Operations
-----------------------------------------------------------
Childrens Beverage Group Inc. has experienced recurring losses
since inception and has negative working capital and cash flows
from operations. For the periods ended December 31, 1997, 1998,
1999 and 2000, the Company experienced a net loss of $404,972,
$1,985,420,$6,481,421 and $5,737,113, respectively. As of
December 31, 2000, and March 31, 2001, the Company has a working
capital deficit topping $9 million.
The Company's ability to continue as a going concern is
contingent upon its ability to secure additional financing, re-
initiate production and product sales and attain profitable
operations. Management is pursuing various sources of debt and
equity financing. Although the Company plans to pursue
additional financing, there can be no assurance that the Company
will be able to secure financing when needed or obtain financing
on terms satisfactory to the Company. Failure to secure such
financing may result in the Company continuing the depletion of
its available funds. Without such funds the Company would be
unable to comply with its payment obligations under its
obligations to Industrial Revenue Bond holders bank loans and
with its vendors and would continue noncompliance with its
payment obligations.
CRIIMI MAE: S&P Reinstates Unit To Select Servicer List
-------------------------------------------------------
Standard & Poor's reinstated CRIIMI MAE Services L.P. (CMSLP) to
its Select Servicer List as a Commercial Loan Servicer, Master
Servicer, and Special Servicer. Standard & Poor's had removed
the company from its Select Servicer List on Oct. 6, 1998 when
its parent, CRIIMI MAE Inc. filed for bankruptcy protection.
The reinstatement reflects the parent company's successful
completion of its bankruptcy reorganization plan in April 2001,
which provides for an expanded board of directors with five new
outside members, and a re-capitalization of the balance sheet to
attain financial health. In addition, CMSLP has continued to
operate and perform its duties in an acceptable manner
throughout the proceedings.
In addition, CMSLP's CMBS deals rated by Standard & Poor's have
been performing well. Standard & Poor's recently raised its
ratings on three classes of CRIIMI Mae Trust I's series 1996-C1,
and affirmed its ratings on three other classes of the same
series. Also, Standard & Poor's recently affirmed its ratings on
13 classes of Criimi Mae CMBS Corp.'s series 1998-1.
To its credit, the servicer has retained nearly all key staff,
maintained sound operating procedures, and has been able to
focus on technology improvements in the past two years. As of
March 31, 2001, CMSLP serviced a $21 billion portfolio
comprising approximately 4,411 assets, including assets within
32 CMBS pools, Standard & Poor's said.
DAY RUNNER: Discloses Majority Stockholders
-------------------------------------------
The following entities are holding shares of the common stock of
Day Runner Inc. in the amounts and with the rights as shown:
Arbco Associates, L.P., 23,200,000 shares with shared voting,
1,960,400 shares with shared dispositive powers.
Day Holdings LLC, 23,200,00 shares with shared voting, 6,275,600
shares with sole dispositive, 5,324,400 shares with shared
dispositive powers.
Kayne Anderson Diversified Cap, 23,200,000 shares with shared
voting, 3,364,000 shares with shared dispositive powers.
Osmond Acquisition Company LLC, 23,200,000 shares with shared
voting, 11,600,000 shares with sole dispositive powers.
The aggregate amount of common stock held by the Group
represents 90.6% of the outstanding common stock of the Company.
Osmond Acquisition Company LLC, is a limited liability company
organized under the laws of Delaware, Day Holdings LLC, a
limited liability company organized under the laws of Delaware,
Arbco Associates, L.P., a limited partnership organized under
the laws of California, and Kayne Anderson Diversified Capital
Partners, a limited partnership organized under the laws of
California.
DIAMOND HOLDING: Creditors File Involuntary Chapter 7 Petition
--------------------------------------------------------------
Three creditors of Diamond Holding Inc. are seeking to force the
company into a chapter 7 bankruptcy, according to The Salt Lake
Tribune. Associated Glass Products, RMS Enterprises and H. Brent
Sperry said in papers filed in the U.S. Bankruptcy Court in the
District of Utah that Diamond Holding owes them more than
$474,000. The creditors contend Diamond Holdings is not paying
its debts.
The company owes the Internal Revenue Service and Utah Tax
Commission about $3 million. And with few assets left, unsecured
creditors such as those now seeking to force Diamond Holding
into chapter 7, will end up with nothing. In March, Judge
William B. Bohling signed an order placing a hold on Diamond
Holding's assets, which consists of accounts receivable still
owed the company. He ordered the funds held in a trust account
for the benefits of the creditors (ABI World, June 6, 2001)
DIAMOND HOLDING: Involuntary Case Summary
-----------------------------------------
Alleged Debtor: Diamond Holding, Inc. a Nevada Corp
175 West 7065 South
Midvale, UT 84047
Involuntary Petition Date: May 31, 2001
Case Number: 01-27915 Chapter: 7
Court: District of Utah (Salt Lake)
Judge: Judith A. Boulden
Petitioners' Counsel: Douglas L. Stowell, Esq.
307 East Stanton Avenue
Salt Lake City, UT 84111
801-944-3459
Petitioners: RMS Enterprises
Associated Glass Products, LLC
H. Brent Sperry
EMERITUS ASSISTED: Lender Agrees To Extend Debt Maturity
--------------------------------------------------------
Emeritus Assisted Living (AMEX:ESC)(Emeritus Corporation), a
national provider of assisted living and related services to
senior citizens, announced that discussions with the lender on
the $73.3 million outstanding mortgage debt originally due April
29, 2001 have concluded with an extension of the debt.
The structure of the agreement provides for the ability to
extend the maturity under certain circumstances up to May 2003.
As part of the negotiated terms, Emeritus has agreed to reduce
the outstanding indebtedness by $30.0 million through
refinancing of three properties in the portfolio which the
lender has agreed to release. The remainder of the portfolio can
be released as the individual properties qualify for and are
refinanced. Ray Brandstrom, CFO commented "From a practical
standpoint, the terms of the original loan documents required
the entire portfolio to be financed in a single transaction,
which is difficult given today's capital markets. With this
ability to finance individual properties, we have much more
flexibility over the next two years." Emeritus is currently
evaluating multiple mechanisms to refinance the three facilities
by December 2001. This should also facilitate additional
refinances as properties mature.
"I am pleased that we were able to conclude our discussions in a
manner agreeable to all parties involved," Brandstrom continued.
"With capital markets remaining tight for the Assisted Living
industry, it is a positive sign that we are able to negotiate
solutions that will give us this flexibility to find more
permanent arrangements on our shorter term obligations."
About the Company
Emeritus Assisted Living is a national provider of assisted
living and related services to seniors. The Company is one of
the largest developers and operators of freestanding assisted
living communities throughout the United States. The Company
also participates in a joint venture to develop assisted living
communities in Japan. These communities provide a residential
housing alternative for senior citizens who need help with the
activities of daily living with an emphasis on assistance with
personal care services to provide residents with an opportunity
to age in place. The Company currently holds interests in 134
communities representing capacity for approximately 12,400
residents in 29 states and Japan. The Company's common stock is
traded on the American Stock Exchange under the symbol ESC, and
its home page can be found on the Internet at www.emeritus.com.
FASTCOMM: Wesley Clover & Terrence Matthews Own 25.8% Of Stock
--------------------------------------------------------------
Wesley Clover Corporation and Dr. Terence H. Matthews
beneficially own 10,089,687 shares of the common stock of
Fastcomm Communications Corporation with shared voting and
dispositive powers. This amount represents 25.88% of the
outstanding common stock of the Company.
Wesley Clover Corporation, is a Canadian corporation, and Dr.
Terence W. Matthews an individual residing in Kanata, Ontario,
Canada. Wesley Clover is a holding company.
Dr. Matthews is the sole stockholder and sole director of Wesley
Clover, and his principal occupation is Chairman and CEO of
March Networks Corporation. He is a citizen of Canada.
On May 23, 2001, Wesley Clover entered into a Debenture Purchase
and Security Agreement with FastComm pursuant to which Wesley
Clover agreed to purchase a $3,000,000 Convertible Debenture,
convertible into 6,726,458 shares of Common Stock. The
Debenture, when issued, will be immediately convertible.
Pursuant to the Purchase Agreement FastComm agreed to issue
Wesley Clover a warrant to purchase 3,363,229 shares of Common
Stock at a purchase price of $.5575 per share. When issued, the
Warrant will be immediately exercisable.
The source of $3,000,000 purchase price of the Convertible
Debenture is the working capital of Wesley Clover. Wesley
Clover's commitment to (1) convert its $1,000,000 promissory
note from FastComm on June 1, 2001; (2) fund $1,000,000 of the
Convertible Debenture on June 1, 2001; and (3) fund $1,000,000
on June 29, 2001, are all subject to the satisfaction by
FastComm of certain conditions and covenants set forth in the
Purchase Agreement, unless such conditions are waived by Wesley
Clover.
Under the terms of the Purchase Agreement, Wesley Clover will
have the right, but not the obligation to nominate a
representative to serve on the board of directors of FastComm,
such person will be nominated to serve as Chair of the Audit
Committee. If Wesley Clover exercises its right, FastComm's
board of directors will have six (6) members which will include
the following individuals: Peter C. Madsen, Mark H. Rafferty,
Michael Pascoe, Edward R. Olsen, Thomas G. Amon and Wesley
Clover's representative. FastComm and its Chief Executive
Officer have agreed to use their best efforts to cause the
Wesley Clover representative, if any, to be elected as a
director and nominated as Chair of the Audit Committee.
Dr. Matthews and Wesley Clover currently plan to hold any Common
Stock acquired pursuant to the Debenture or the Warrant for
investment purposes.
FINOVA GROUP: Committee Retains Pachulski Stang As Local Counsel
----------------------------------------------------------------
The Official Committee of Unsecured Creditors of The FINOVA
Group, Inc., moved the Court for entry of an order, authorizing
the employment and nunc pro tunc retention of Pachulski, Stang,
Ziehl, Young & Jones P.C. as its co-counsel in the FINOVA cases
effective as of March 21, 2001.
The Committee seeks to employ and retain PSZYJ as its bankruptcy
co-counsel pursuant to sections 1103 and 328 of the Bankruptcy
Code and Bankruptcy Rule 2014, to perform the legal services
that will be necessary during the Debtors' chapter 11 cases.
The Committee requested that the Court authorize the retention
of PSZYJ as of March 21, 2001, nunc pro tunc as PSZYJ commenced
work on several matters requiring immediate attention in
connection with the Debtors' chapter 11 cases, including
reviewing the first day orders and commenting on the Debtors'
ongoing bankruptcy proceedings, immediately upon its retention
on March 21, 2001.
The Committee seeks to retain PSZYJ as its attorneys because of
PSZYJ's extensive experience and knowledge in the field of
debtors' and creditors' rights and business reorganizations
under chapter 11 of the Bankruptcy Code and because of the
firm's expertise, experience, and knowledge practicing before
this Court. Moreover, in preparing for its representation of the
Committee in these cases, PSZYJ has become familiar with the
Debtors' businesses and financial affairs and many of the
potential legal issues which may arise in the context of these
proceedings.
The Committee believes that it is necessary to employ attorneys
to render the professional services described above to the
Committee, and that, without such professional assistance,
neither the Committee's evaluation of the activities of the
Debtors nor its meaningful participation in the negotiation,
promulgation, and evaluation of a plan or plans of
reorganization would be possible.
Subject to Court approval, the Committee has retained Wachtell,
Lipton, Rosen & Katz as their bankruptcy co-counsel in these
chapter 11 proceedings. PSZYJ and WLRK will coordinate their
efforts to avoid duplication of the services to be provided to
the Committee by their respective firms.
The Committee anticipates that PSZYJ, as co-counsel with WLRK,
will render services to the Committee as needed throughout the
course of these chapter 11 cases. In particular, the Committee
anticipates PSZYJ will perform, among others, the following
legal services:
(a) serving as Delaware counsel to the Committee;
(b) preparing necessary applications, motions, answers,
orders, reports and other legal papers on behalf of the
Committee;
(c) appearing in court to present necessary motions,
applications and pleadings and to otherwise protect the
interests of the Committee; and
(d) performing all other legal services for the Committee
which may be necessary and proper in these proceedings.
Subject to Court approval in accordance with section 330(a) of
the Bankruptcy Code, compensation will be payable to PSZYJ on an
hourly basis, plus reimbursement of actual, necessary expenses
and other charges incurred by PSZYJ. The principal attorneys and
paralegals presently designated to represent the Committee and
their current standard hourly rates are:
Laura Davis Jones $455.00 per hour
David W. Carickhoff, Jr. $245.00 per hour
Peter J. Duhig $195.O0 per hour
Kathe Finlayson $120.00 per hour
Cheryl Knotts $105.00 per hour
The hourly rates set forth above are subject to periodic
adjustments to reflect economic and other conditions. Other
attorneys and paralegals may from time to time serve the
Committee in connection with the matters described.
To the best of the Committee's knowledge, PSZYJ has had no other
prior connection with the Debtors, their creditors or any other
party in interest except as stated in the affidavit of Laura
Davis Jones, Esquire. Upon information and belief, the firm of
PSZYJ does not hold or represent any interest adverse to the
Debtors' estates or the Committee or the creditors the Committee
represents in the matters upon which it has been and is to be
engaged.
Laura Davis Jones, Esquire, shareholder in the firm of
Pachulski, relates in her affidavit that until December 31,
1999, she was a partner at the law firm of Young Conaway
Stargatt & Taylor, LLP. Young Conaway had a broad client list
and may, at some time, have represented one or more creditors of
or parties interested in the Debtors' bankruptcy estates. Ms.
Jones told the Court that she is not aware of any such
representation. However, she recognizes that as she does not
currently have access to Young Conaway's client or conflict
databases, it is possible that Young Conaway may have
represented a party with interests adverse to the Debtors'
bankruptcy estates while she was a partner at Young Conaway, and
that such representation is not known to her or specifically
disclosed in her affidavit. Ms. Jones covenants that, if, upon
access to Young Conaway's client and conflict databases, she
discovers that such an adverse representation exists, she will
disclose such representation in a supplementary affidavit to the
Court and all parties receiving copies of the current Affidavit.
Ms. Jones further advised that PSZYJ and certain of its
shareholders, counsel and associates may have in the past
represented, and may currently represent and likely in the
future will represent creditors of the Debtors in connection
with matters unrelated to the Debtors and these chapter 1l
cases. Nevertheless, PSZYJ, Ms. Jones said, is not currently
aware of such representations other than as disclosed the
affidavit and will make any further disclosures as may be
appropriate upon the discovery of a potential conflict.
Ms. Jones submitted that PSZYJ is a "disinterested person" as
that term is defined in section 101(14) of the Bankruptcy Code.
(Finova Bankruptcy News, Issue No. 8; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
FIRST VIRTUAL: Cuts Jobs to Reduce Cash Burn Rate
-------------------------------------------------
First Virtual Communications (NASDAQ:FVCX) has reorganized its
workforce to reduce costs and in anticipation of its impending
merger with CUseeMe Networks.
As a result of the reorganization, the Company is laying off 24
of its employees and has eliminated five additional positions
that were open due to attrition in the ordinary course of
business. The majority of lay-offs are effective immediately; a
small number of affected employees will be retained for a
transition period.
"We are recognizing operational efficiencies by streamlining the
organization," said Ralph Ungermann, president and CEO of First
Virtual Communications. "We believe this reorganization will
reduce our cash burn rate and better position us to take
advantage of the future growth opportunities we have defined for
the merged company."
The Company will be holding a special meeting on June 19, 2001
to allow shareholders to vote on the issuance of shares in
connection with the proposed merger with CUseeMe Networks
(NASDAQ:CUSM). In the event that the issuance of shares in
connection with the proposed merger is not approved, the Company
will take appropriate measures to ensure that the organization
is able to meet operational demands.
About First Virtual Communications
First Virtual Communications, Inc., is a leader in rich media
communications solutions, providing systems and services that
enable system integrators and service providers to deliver an
integrated suite of collaboration applications to its enterprise
customers. First Virtual Communications also delivers solutions
directly to corporate and public sector enterprises.
The Company's flagship product, Click to Meet(TM), is the
industry's communications platform for high quality, face-to-
face e-collaboration. It is designed to seamlessly integrate
video and audio telephony, data collaboration, and streaming
across IP, ISDN, DSL, and ATM networks.
Click to Meet(TM) provides the optimal platform for delivering a
new generation of video enabled B2B web applications, for
commerce, distance learning, telemedicine, federal and state
governments, and the judiciary.
FMAC LOAN: Fitch Downgrades Ratings On Certain Securitizations
--------------------------------------------------------------
Fitch downgrades FMAC Loan Receivables Trust 1996-A classes B-1
and B-2 from `BBB' to `BB,' class C-1 from `BB' to `C' and class
C-2 from `BB' to `D.'
Both the B classes and class C-1 will remain on Rating Watch
Negative, class C-2 is removed from Rating Watch. The downgrade
is direct result of a write down resulting from the liquidation
of the Tacala North loan. A total of $9.8 million dollars was
written off and was absorbed first by both the fixed and
floating holdback amounts (totaling $8.9 million) and second by
the class C-2 (approx. $800 million).
Fitch downgrades FMAC Loan Receivables Trust 1997-B class A from
`AAA' to `AA,' class B from `AA' to `A,' class C from `A- ` to
`BBB-,` class D from `BB' to `B,' class E from `B-` to `CCC' and
class F from `CCC' to `C.' All classes will remain on Rating
Watch Negative. The downgrade is a direct result of serious
deterioration in pool performance, with 40% of the pool
currently in default. Given the collateral mix of these loans
and Fitch's past recovery experience, significant losses can be
expected.
Fitch downgrades FMAC Loan Receivables Trust 1998-C class D from
`BBB' to `BBB-,` class E from `BB' to `BB-` and class F from `B'
to `B-.` All classes will remain on Rating Watch Negative. The
downgrade is a product of the recent write down resulting from
the liquidation of the Tacala North loan and the continuing
deterioration of the pools overall performance. Currently,
nearly 35% of the pool is in delinquent or default status.
Fitch is continuing to monitor the performance of all the FMAC
securitizations for any further impacts to credit enhancement.
HOLLYWOOD ENTERTAINMENT: S&P Places Junked Ratings on Watch
-----------------------------------------------------------
Standard & Poor's placed the following ratings on Hollywood
Entertainment Corp. on CreditWatch with positive implications:
* Corporate credit rating at CCC
* Senior secured bank loan at CCC
* Subordinated debt at CC
The CreditWatch placement follows the company's announcement
that it has amended its revolving credit facility. The new
agreement mitigates the company's near-term liquidity problems,
as the amortization schedule has been reduced and the maturity
date has been extended to Dec. 23, 2003, from Sept. 5, 2002.
Prior to the new bank agreement, the company was in violation of
covenants within the facility and faced significant near-term
financial pressures due to heavy debt repayment requirements.
The company had $144 million outstanding on the $255 million
facility at March 31, 2001.
Standard & Poor's will fully review Hollywood's financing and
operation strategies and the improvement in financial
flexibility from the new credit agreement with the company's
management.
INTEGRATED HEALTH: Seeks To Amend Officer Compensation Pacts
------------------------------------------------------------
Integrated Health Services, Inc. seeks the Court's entry of an
order, pursuant to section 363 of the Bankruptcy Code,
authorizing the Debtors to execute and perform obligations under
a letter agreement (the Amendment), amending and modifying
certain compensation terms of the Debtors' agreement with Joseph
A. Bondi, Guy Sansone and William Johnson, in light of revised
target dates for plan confirmation.
As previously reported, the Debtors were authorized to employ
Bondi as Chief Restructuring Officer of IHS until the
anticipated departure of IHS' then-Chief Executive Officer
Robert N. Elkins, and as Chief Executive Officer of IHS
thereafter. The Debtors were also authorized to employ two other
A&M personnel, Guy Sansone and William Johnsen.
The Agreement provided a compensation package for the Officers
collectively that included:
(a) a monthly fee of $275,000;
(b) an "Earnings Bonus" in the minimum amount of $2
million, subject to upward adjustment based upon the
Debtors' achievement of certain EBITDA thresholds
calculated at confirmation; and
(c) a "Plan Bonus' of up to $500,000 (contingent upon
achieving plan confirmation by September 1, 2001),
subject to a downward sliding scale of $83,333 per
month, which eliminates the Plan Bonus if confirmation
is not achieved by February 28, 2002.
In accordance with the Agreement, the Officers have been
providing and continue to provide the Debtors with restructuring
services, with Bondi now serving as Chief Executive Officer of
IHS. As represented by the Debtors' attorneys Young Conaway
Stargatt & Taylor, LLP, Bondi and the other Officers have been
instrumental in guiding the Debtors through the chapter 11
process during their tenure with the Debtors.
During the fourth quarter of 2000, the Debtors developed a long-
term business plan, which has been and continues to be refined
as the Debtors proceed with its implementation. The EBITDA
projections and goals emanating from this long-term business
plan differ materially from the expectations of the Debtors, the
Creditors' Committee and the Officers at the time the Agreement
was negotiated. In addition, with the passage of time, it has
become apparent that the confirmation of a plan or plans of
reorganization prior to September 1, 2001 is unrealistic and
never was realistic.
Accordingly, the Debtors and the Officers have determined that
the terms of the Officers' incentive compensation should be
modified to reflect the expectations of the Debtors and the
Creditors' Committee concerning the Debtors' earnings potential
and the timing of their emergence from these chapter 11
proceedings.
The parties have negotiated what the Debtors and the Creditors'
Committee consider to be a fair and reasonable modification to
the Officers' compensation package.
With respect to the calculation of the Earnings Bonus, the
Amendment retains the formula set forth in the Agreement,
providing that the Earnings Bonus will be the greater of
(i) a specified minimum amount, or
(ii) the sum of the product of four and IHS' Operating
EBITDA (as defined in the Amendment) for IHS' last
complete fiscal quarter preceding the confirmation of
its plan of reorganization ("POR EBITDA").
However, the Amendment
(a) increases the minimum Earnings Bonus from $2 million
to $2.5 million; and
(b) modifies the POR EBITDA thresholds forming the basis
for the maximum Earnings Bonus as follows:
Original Letter Agreement
-------------------------
POR EBITDA Percentage
---------- ----------
first $267,000,000 .7491%
next $33,000,000 1.5152%
next $50,000,000 4.0%
next $50,000,000 2.0%
amount in excess of $400,000,000 1.0%
Amendment
---------
POR EBITDA Percentage
---------- ----------
first $229,000,000 1.0917%
next $50,000,000 4.0%
next $50,000,000 2.0%
amount in excess of $329,000,000 1.0%
As is similarly provided under the Agreement, the Amendment
provides that in the event assets are sold prior to
confirmation, portions of the Earnings Bonus will become payable
upon such sales based upon the EBITDA of the assets sold.
The Amendment also modifies the Plan Bonus by extending the
target dates for plan confirmation. Accordingly, the Officers
will be entitled to a Plan Bonus of $500,000 if a plan is
confirmed prior to January 31, 2002 (extended from September 1,
2001 under the Agreement), or a lesser amount reduced by $83,333
per month, pro rated on a daily basis, with no Plan Bonus
payable if plan confirmation first occurs after July 31, 2002
(extended from February 28, 2002 under the Agreement).
By Application, the Debtors respectfully requested the issuance
and entry of an order, pursuant to section 363 of the Bankruptcy
Code, authorizing the Debtors to modify the Agreement pursuant
to the terms set forth in the Amendment.
During their tenure with the Debtors, Bondi and the other
Officers have been instrumental in guiding the Debtors through
the chapter 11 process and focusing the attention of IHS' senior
management and professionals on the myriad tasks necessary to
the confirmation of a plan or plans of reorganization for the
Debtors.
The Debtors believe that the modifications to the Agreement set
forth in the Amendment are necessary and appropriate to provide
the Officers with meaningful incentive compensation. The
incentive compensation originally contemplated by the parties
was based upon mutual expectations of EBITDA thresholds that
would be aggressive but attainable, such that the Officers would
be given a meaningful incentive to work toward the maximization
of the value of the Debtors' estates. However, upon the Debtors'
and the Creditors' Committee's subsequent analysis of the
business and financial affairs and the development of the
Debtors' long-term business plan, it became apparent that the
Earnings Bonus, if based on the EBITDA thresholds set forth in
the Agreement, would not provide the meaningful incentive
originally intended.
Moreover, the vast complexity of these chapter 11 cases and the
myriad tasks arising in connection with the reorganization
process have rendered the original target dates for the Plan
Bonus wholly impracticable. Further, Bondi was not able to
assume the role of Chief Executive Officer until January 2001,
more than three months later than the parties originally
anticipated.
Notwithstanding these difficulties and delays, under the
direction of Bondi and the other Officers, the Debtors have made
and continue to make substantial progress toward the
reorganization effort, the Debtors' attorneys told the Court.
The Debtors told the Court that, in addition to the development
and implementation of their long-term business plan, they are
working toward many other goals that must be achieved before
they can propose a meaningful plan or plans of reorganization,
including, without limitation:
(1) the analysis of chapter 11 strategic alternatives, both from
the perspective of available options for the Debtors'
respective business segments and toward the end of
formulating optimal plan of reorganization alternatives;
(2) the negotiation of a global settlement with the United
States Department of Health and Human Services ("HHS") and
the Health Care Financing Administration ("HCFA") of
potential claims by and against the United States; and
(3) the reconciliation of the more than ten thousand other
claims filed in the Debtors' chapter 11 cases.
Nevertheless, it has become apparent that the amount of work
left to be done before a plan or plans of reorganization may be
confirmed will render the Plan Bonus meaningless absent an
extension of the target dates. The Debtors believe that the
extension set forth in the Amendment proposes a more realistic
time frame for this process and is an appropriate incentive for
the Officers to continue in their diligent and effective efforts
toward plan confirmation.
The Creditors' Committee has actively participated in
negotiating the terms of the Amendment and supports the relief
requested. (Integrated Health Bankruptcy News, Issue No. 17;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
INTERNATIONAL KNIFE: Sells German Subsidiary To Pay Off Debt
------------------------------------------------------------
International Knife & Saw, Inc. has sold its wholly owned German
subsidiary, IKS Klingelnberg GmbH to TKM GmbH, a group of
investors consisting of the Klingelnberg family and the
management of the German subsidiary. IKS Klingelnberg GmbH, with
headquarters in Remscheid, Germany, is the parent company of
subsidiaries in Europe and Asia.
The proceeds of the transaction were used to pay off all of the
bank debt of International Knife & Saw, Inc. Additional terms of
the deal were not disclosed.
Commenting on the transaction, William M. Schult, Executive Vice
President and CFO of International Knife & Saw, Inc. noted:
"This is the completion of the first phase of the previously
announced restructuring of IKS. The Company and its bondholders
are currently involved in negotiations with TKM GmbH concerning
the North American operations of International Knife & Saw, Inc.
and the second phase of the restructuring."
JENNY CRAIG: Shares Face Delisting From NYSE
--------------------------------------------
Jenny Craig, Inc. (NYSE: JC) said it intends to seek a review of
the determination by the New York Stock Exchange (NYSE) that the
Company's stock should be delisted.
Jenny Craig anticipates that its shares will continue to trade
on the New York Stock Exchange pending a decision on the review
by a Committee of the Board of Directors of the NYSE.
The Exchange has informed the Company that the delisting is due
to the fact that Jenny Craig currently does not meet the NYSE
rule requiring a minimum total stockholders' equity and a
minimum market capitalization of $50 million for continued
listing.
On May 14, 2001, the Company announced that it had retained the
Los Angeles based investment-banking firm of Koffler & Company
to advise the Company on strategic alternatives to maximize
shareholder value.
About Jenny Craig
Founded in 1983, Jenny Craig, Inc. is one of the largest weight
management service companies in the world. The Company offers a
comprehensive weight management program that helps clients learn
how to eat the foods they want, increase their energy level
through simple activity, and builds more balance in their lives
for optimal weight loss and well-being. The program includes
personal, one-on-one consultations at Jenny Craig centres, with
menu plans that are nutritionally balanced according to the
recommendations of the USDA Food Guide Pyramid and the U.S.
Dietary Guidelines. Jenny Craig centres are located in the
United States, Canada, Australia, New Zealand, and Puerto Rico.
At March 31, 2001, the Company owned 547 centres with an
additional 109 centres owned by franchisees, bringing the total
number of centres in operation to 656.
KOZ.COM: Court Approves Asset Sale to Community Software
--------------------------------------------------------
KOZ.com, the Research Triangle, N.C.-based company that provided
online newspapers with community publishing tools, received
bankruptcy court approval on Thursday to sell its assets to
Community Software Acquisition Corp. (CSAC) for about $712,000,
according to Yahoo!News. The process will take about three
weeks. Koz.com filed for chapter 11 bankruptcy protection last
month. (ABI World, June 6, 2001)
LERNOUT & HAUSPIE: Etienne Davignon Resigns As Board Member
-----------------------------------------------------------
Lernout & Hauspie Speech Products NV (OTC:LHSPQ), a world leader
in speech and language technology, products and services,
announced the resignation of board member Etienne Davignon.
Mr. Davignon, who is a director and vice-chairman of Fortis N.V.
resigned to avoid any appearance of a conflict of interest as
Fortis Bank N.V., a subsidiary of Fortis N.V., is a large
creditor of L&H. Although Mr. Davignon would be precluded, under
applicable Belgian banking regulations, from having any
involvement in Fortis Bank's lending relationship with L&H, he
nevertheless decided to resign because parties in interest in
L&H and its affiliates' chapter 11 cases might attempt to gain
undue leverage out of Mr. Davignon's involvement in L&H.
Philippe Bodson, L&H's president and CEO and member of the
Company's Board of Directors said: "We are obviously
disappointed that Etienne was unable to remain on L&H's board.
We are delighted, however, that he has chosen to remain a member
of our company's board nomination committee, which will continue
to benefit from his extensive corporate as well as public sector
experience."
About Lernout & Hauspie
Lernout & Hauspie Speech Products N.V. is a global leader in
advanced speech and language solutions for vertical markets,
computers, automobiles, telecommunications, embedded products,
consumer goods and the Internet. L&H is making the speech user
interface (SUI) the keystone of simple, convenient interaction
between humans and technology, and is using advanced translation
technology to break down language barriers. L&H provides a wide
range of offerings, including: customized solutions for
corporations; core speech technologies marketed to OEMs; end
user and retail applications for continuous speech products in
horizontal and vertical markets; and document creation, human
and machine translation services, Internet translation
offerings, and linguistic tools. L&H's products and services
originate in four basic areas: automatic speech recognition
(ASR), text-to-speech (TTS), digital speech and music
compression (SMC) and text-to-text (translation). For more
information, please visit Lernout & Hauspie on the World Wide
Web at www.lhsl.com.
LERNOUT & HAUSPIE: Creditors Back Restructuring Plan
----------------------------------------------------
Creditors approved a restructuring plan by Lernout & Hauspie
Speech Products NV (L&H) designed to save the high-tech company,
according to the Associated Press. "If the plan is not
approved... it would be the worst decision for the company,"
L&H's chief executive Philippe Bodson told creditors before the
vote. Bodson also told shareholders and creditors that the plan
was likely the company's last chance. Creditor approval for the
restructuring plan was a prerequisite for bankruptcy protection,
but the judge postponed a formal decision on bankruptcy
protection until June 20.
The plan says that L&H should sell its speech and language unit
and use the proceeds to pay back creditors. Failing that, it
said a new company should be formed from these assets. It also
proposes selling off a division of Dictaphone Corp. unless
investors cannot be found to salvage the operation. The company
said it plans to submit a restructuring plan to a U.S. court in
August or September. The speech technology company filed for
bankruptcy protection last year amid an accounting scandal that
prompted government investigations in the United States and
Belgium. (ABI World, June 6, 2001)
LOEWEN: Description Of Recovery Actions Under 2nd Amended Plan
--------------------------------------------------------------
A number of transactions occurred prior to the Petition Date
that The Loewen Group, Inc. believes may have given rise to
claims (collectively, "Recovery Actions"), including preference
actions, fraudulent conveyance actions, rights of setoff and
other claims or causes of action under sections 510, 544, 547,
548, 549, 550 and 553 of the Bankruptcy Code and other
applicable bankruptcy or non-bankruptcy law. The Debtors advised
of the following.
(A) Preference Claims
(1) Overview
Under sections 547 and 550 of the Bankruptcy Code, a debtor
may seek to avoid and recover certain prepetition payments
and other transfers made by the debtor to or for the
benefit of a creditor in respect of an antecedent debt, if
such transfer:
(a) was made when the debtor was insolvent and
(b) enabled the creditor to receive more than it would
receive in a hypothetical liquidation of the debtor in
a chapter 7 where the transfer had not been made.
Transfers made to a creditor that was not an "insider" of
the debtor are subject to these provisions generally only
if the payment was made within 90 days prior to the
debtor's filing of a petition under chapter 11.
Under section 547, certain defenses, in addition to the
solvency of the debtor at the time of the transfer and the
lack of preferential effect of the transfer, are available
to a creditor from which a preference recovery is sought.
Among other defenses, a debtor may not recover a payment to
the extent such creditor subsequently gave new value to the
debtor on account of which the debtor did not, among other
things, make an otherwise unavoidable transfer to or for
the benefit of the creditor. A debtor may not recover a
payment to the extent such payment was part of a
substantially contemporaneous exchange between the debtor
and the creditor for new value given to the debtor (the
"Contemporaneous Exchange Defense"). Further, a debtor may
not recover a payment if such payment was made, and the
related obligation was incurred, in the ordinary course of
business of both the debtor and the creditor.
The debtor has the initial burden of proof in demonstrating
the existence of all the elements of a preference,
including its insolvency, at the time of the payment. The
creditor has the initial burden of proof as to the
aforementioned defenses.
(2) The Northeast Disposition
On March 31, 1999, less than 90 days prior to the Petition
Date, the Debtors consummated the Northeast Disposition,
pursuant to which they sold 124 cemeteries and three
funeral homes for a gross amount of approximately $193
million. In connection with the consummation of the
Northeast Disposition, LGII caused to be made from the
proceeds at closing and other available funds of the
Debtors, in addition to regularly scheduled interest
payments on certain notes, payments to certain creditors in
respect of indebtedness under the CTA. The aggregate amount
of these payments was approximately $110.3 million,
including:
* A payment of approximately $15.2 million to Wachovia
Bank, N.A., as agent under the MEIP Credit Agreement.
* A payment of approximately $82.4 million to Bank of
Montreal, as agent under the BMO Revolving Credit
Agreement. In connection with receiving this payment,
Bank of Montreal agreed to issue up to $26.0 million in
aggregate face amount of new letters of credit under the
BMO Revolving Credit Agreement.
* Payments aggregating approximately $6.9 million to
holders of the Series D Notes, including a payment of
approximately $4.5 million to TIAA in respect of its
holding of Series D Notes.
* A payment of approximately $5.8 million to TIAA in
respect of its holding of Series E Notes.
A portion of each of these payments was made in reduction
of the outstanding principal balance under the respective
debt instruments. In addition, in certain instances,
portions of the payments were designated as interest, fees,
attorneys' fees, make-whole amounts and other non-principal
items. In addition, TIAA, as a holder of an O'Keefe Note
Claim (which are not secured by the CTA or any other
collateral), received a $2.0 million payment from the
Debtors' general funds on account of such claims as part of
the Northeast Disposition and a $103,278 "waiver fee."
At the time of the Northeast Disposition, the Debtors were
in breach of certain financial covenants in respect of
TIAA's O'Keefe Note Claims and each of the series of CTA
Note Claims that received payments of principal from the
proceeds of the Northeast Disposition.
As a result, the consent of TIAA and the holders of each
such series was required to consummate the Northeast
Disposition.
Also in connection with the consummation of the Northeast
Disposition, LGII caused to be made directly from the
proceeds of the disposition at closing:
(a) a payment of interest in the approximate amount of
$27.7 million to Harris Trust and Savings Bank, as
escrow agent for the holders of the Series 1 Notes
($8.4 million), Series 2 Notes ($5.2 million), Series 3
Notes ($4.8 million) and Series 4 Notes ($9.3 million);
(b) a payment of interest in the amount of $10.05 million
to State Street Bank and Trust Company, as trustee for
the holders of the PATS Notes.
The payments to Harris Trust and State Street were made in
respect of regularly scheduled interest payments under
these notes.
As a result of the payments described above, proceeds of
the Northeast Disposition paid in respect of indebtedness
secured by the CTA were not paid pro rata to all of the
holders of CTA Note Claims secured by the CTA. Pursuant to
the CTA, the CTA Trustee was not required to make pro rata
payments to each holder of a CTA Note Claim prior to the
occurrence of an "Enforcement Event" (as defined in the
CTA). As of the time of consummation of the Northeast
Disposition, an Enforcement Event under the CTA had not
occurred.
The Northeast Disposition gives rise to at least two types
of potential preference claims.
First, holders of CTA Note Claims that received more than
their pro rata share of the proceeds of the Northeast
Disposition may have received a preference under section
547(b) of the Bankruptcy Code since the non-pro rata
portion of such payments may have permitted the holders of
such Claims to receive more than they would receive in a
hypothetical liquidation of the Debtors had the payments
not been made. Nonetheless, the fact that the non-pro rata
portion of such payments constituted collateral for other
CTA Note Claims arguably may either
(a) render such payments not preferential since the
payments may not have depleted the Debtors' bankruptcy
Estates or
(b) make any recovery of such payments available only to
other holders of CTA Note Claims, thereby precluding
the Debtors' unsecured creditors from benefiting from
such recovery.
The relative proposed distributions under the Plan to
holders of CTA Note Claims take into account these
preference claims and any preference claims against such
holders of CTA Note Claims in respect of such payments will
be released on the Effective Date.
In addition, the payments that TIAA received on account of
its unsecured O'Keefe Note Claims as part of the Northeast
Disposition from the Debtors' general funds, other than
potentially the $103,278 "waiver fee," may be argued to
have constituted preferences TIAA may assert the
Contemporaneous Exchange Defense to such preference
liability since, in connection with the Northeast
Disposition, TIAA released certain of its collateral to the
Debtors, which secured CTA Note Claims held by TIAA. As a
result of the settlement reached in December 2000 among the
Debtors, the Creditors' Committee, TIAA and certain holders
of significant CTA Claims, such preference will be released
on the Effective Date.
(3) Other Preference Claims
As described above on March 31, 1999, less than 90 days
prior to the Petition Date, the Loewen Companies completed
the Northeast Disposition. Cornerstone Family Services,
Inc., then known as Newco Cemetery, Inc. was the purchaser.
The principals backing Cornerstone were Lawrence Miller and
William R. Shane, two former executives employed in
connection with TLGI's cemetery businesses ("Miller and
Shane"), and McCown, De Leeuw & Co., Inc. ("MCD").
It is believed that each of Miller and Shane and various
funds affiliated with MCD were to provide capital to
Cornerstone to allow it to obtain the financing to pay the
purchase price in connection with the Northeast
Disposition. It is further believed that Miller and Shane
anticipated obtaining all or a portion of their capital
contributions from approximately $13.9 million of payments
to be made by LGII (the "Osiris Payments") under a Share
Purchase Agreement, dated March 17, 1995, among LGII,
Miller and Shane and certain other parties (the "Osiris
Purchase Agreement") in an unrelated transaction.
As the Northeast Disposition was being negotiated, LGII, on
March 15, 1999, paid Miller and Shane a total of $6.8
million of the Osiris Payments when due. In addition, it
was agreed that rather than LGII making the remaining
Osiris Payments to Miller and Shane who would then
contribute those monies to Cornerstone to be used to pay
part of the purchase price in respect to the Northeast
Disposition, the obligations of LGII under the Osiris
Purchase Agreement instead would be assigned to one of the
entities to be purchased by Cornerstone in the Northeast
Disposition and the purchase price in respect of the
Northeast Disposition would be correspondingly reduced by
$6.7 million (an amount agreed to be the net present value
of the remaining Osiris Payments).
The Debtors believe that these transactions may have
constituted preferences. The claims in respect thereof
against Miller and Shane are Retained Claims under the
Plan, and the Debtors reserve the right to pursue recovery
of such claims. Debtors' Intention to Commence Preference
Avoidance Actions.
Pursuant to section 546(a) of the Bankruptcy Code, absent
the appointment of a trustee in the Debtors' chapter 11
cases, the statute of limitations with respect to the
commencement of avoidance or recovery actions under
sections 544, 545, 547, 548 and 553 of the Bankruptcy Code
will expire on June 1, 2001, i.e., two years after the
Petition Date.
On or before June 1, 2001, the Debtors intend to commence
avoidance actions in respect of the payments and other
transfers described above against:
(a) Wachovia Bank, N.A., as agent under the MEIP Credit
Facility;
(b) Bank of Montreal, as agent under the BMO Revolving
Credit Facility;
(c) holders of the Series D Notes that received payments in
connection with the Northeast Disposition;
(d) TIAA, in respect of, in addition to the payment it
received on its holding of the Series D Notes, the
payments it received on its holdings of the Series E
Notes and the O'Keefe Notes;
(e) Miller and Shane; and (f) Harris Trust.
The Debtors intend to commence these avoidance actions to
preserve the causes of action for the benefit of the
Debtors' chapter 11 Estates. As described above, if the
Plan is confirmed certain of these claims will be released
on the Effective Date.
(B) Fraudulent Conveyance Actions
(1) Overview
Generally, a conveyance or transfer is fraudulent if:
(a) it was made with the actual intent to hinder, delay or
defraud a creditor (i.e., an intentional fraudulent
conveyance); or
(b)(i) reasonably equivalent value DL-1169425v5 55 was not
received by the transferee in exchange for the
transfer; and
(ii) the debtor was insolvent at the time of the
transfer, was rendered insolvent as a result of the
transfer or was left with insufficient
capitalization as a result of the transfer (i.e., a
constructive fraudulent conveyance).
Two primary sources of fraudulent conveyance law exist in a
chapter 11 case. The first is section 548 of the Bankruptcy
Code, under which a debtor in possession or bankruptcy
trustee may avoid fraudulent transfers that were made or
incurred on or within one year before the date that a
bankruptcy case is filed. The second source is section 544
of the Bankruptcy Code - the so-called "strong-arm
provision" - under which the debtor in possession (or
creditors with bankruptcy court permission) may look to
state law to avoid transfers as fraudulent.
State fraudulent conveyance laws generally have statutes of
limitations longer than one year and are applicable in a
bankruptcy proceeding pursuant to section 544 of the
Bankruptcy Code if the statute of limitations with respect
to a transfer has not expired prior to the filing of the
bankruptcy case. If such statute of limitation has not
expired, the debtor in possession (or creditors with
bankruptcy court permission) may bring the fraudulent
conveyance claim within the time period permitted by
section 546 of the Bankruptcy Code notwithstanding whether
the state limitations period expires prior thereto.
Generally, section 546 of the Bankruptcy Code permits a
state fraudulent conveyance action to be brought within the
later of
(a) two years after the commencement of the bankruptcy
proceeding or
(b) one year after the appointment or election of a trustee
for the debtor if such appointment or election occurs
within such two-year period.
The primary sources of applicable state fraudulent
conveyance law are state enactments of the Uniform
Fraudulent Conveyance Act ("UFCA") and the Uniform
Fraudulent Transfer Act ("UFTA"). As of June 2000,
enactments of the UFCA were effective in four states, and
enactments of the UFTA were effective in 39 states and the
District of Columbia. Other states, including certain
states whose fraudulent conveyance law could be applicable
to fraudulent conveyance claims described below, have
enacted neither the UFCA or UFTA, but instead operate under
either a derivation of the English Statute of Elizabeth or
some other fraudulent conveyance statute.
Like section 548 of the Bankruptcy Code, under both the
UFCA and the UFTA a conveyance or transfer is generally
fraudulent if:
(a) it was made with the actual intent to hinder, delay or
defraud a creditor (i.e., an intentional fraudulent
conveyance); or
(b)(i) reasonably equivalent value was not received by the
transferee in exchange for the transfer and
(ii) the debtor was insolvent at the time of the
transfer, was rendered insolvent as a result of the
transfer or was left with insufficient
capitalization as a result of the transfer (i.e., a
constructive fraudulent conveyance).
(2) The Collateral Trust Agreement
Although the Debtors have not performed a detailed factual
and legal analysis of potential fraudulent conveyance
claims related to the CTA, the Debtors have considered
whether certain transactions associated with the CTA could
be deemed to be fraudulent conveyances.
In particular, the Debtors have considered:
(a) whether since the CTA was executed soon after the
O'Keefe judgment and constituted a pledge of a
substantial portion of the Debtors' assets, the CTA
could be deemed an intentional fraudulent conveyance;
(b) whether the TLGI or LGII subsidiaries that, pursuant to
the CTA, guaranteed debt of TLGI and LGII existing at
the time of the execution of the CTA and pledged assets
to secure such debt could be deemed to have made
fraudulent transfers; and
(c) whether such subsidiaries who, pursuant to the CTA,
guaranteed debt of TLGI and LGII arising at the time of
or after the execution of the CTA and who pledged
assets to secure such debt could be deemed to have made
fraudulent transfers to the extent that such
subsidiaries did not, directly or indirectly, receive
the proceeds of such debt.
The Debtors note that a detailed factual and legal analysis
of potential fraudulent conveyance claims related to the
CTA would be time consuming and costly because, among other
things, the issues raised by such an investigation and by
the CTA are quite complex. However, in the Debtors' view,
the need for such an investigation of potential fraudulent
conveyance claims related to the CTA is mitigated by
limitations on the extent of guaranties issued under the
CTA by subsidiaries of TLGI and LGII. Pursuant to the CTA,
any such guaranties, and any pledge of collateral to secure
such guaranties, are limited to an amount that is $1.00
less than the maximum amount for which such subsidiary may
be liable without rendering its guaranty obligations void
or invalid. As a result, the Debtors believe it would be
unlikely that guaranties given by subsidiaries of TLGI or
LGII under the CTA could be deemed fraudulent conveyances.
In light of the foregoing, including the complexity of the
factual and legal issues involved and the limitation on
subsidiary guaranties under the CTA, the Plan also
constitutes a settlement of any CTA related fraudulent
conveyance claims as part of the Plan's treatment of CTA
Note Claims. This settlement will result in such claims
being released as part of the Plan.
(Loewen Bankruptcy News, Issue No. 40; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
MACDERMID INC.: Standard & Poor's Assigns Low-B Ratings
-------------------------------------------------------
Standard & Poor's assigned its double-'B'-plus corporate credit
rating to MacDermid Inc. and its double-'B'-minus rating to the
company's proposed $300 million senior subordinated notes due
2011. The notes will be sold under Rule 144A with registration
rights. At the same time, Standard & Poor's assigned its double-
'B'-plus rating to the company's $215 million revolving credit
facility. The outlook is stable.
Proceeds of the offering will be used to refinance outstanding
bank term debt.
The initial ratings on MacDermid Inc. reflect a good business
position, offset by a somewhat aggressive financial profile.
MacDermid manufactures and markets specialty chemicals to a
variety of industries, including graphic arts, electronic
materials (primarily printed circuit boards), and metal
finishing. Graphic arts include liquid and solid sheet
photopolymer plates for flexographic printing, and offset
blankets for the offset printing segment. Electronic materials
focuses on chemicals used in the fabrication of printed circuit
boards. Metal finishing products include decorative and
functional metal and plastic plating, and surface treatment
chemicals used in a variety of end markets, including
automotive, electronic equipment, and appliances.
MacDermid benefits from solid business positions, with leading
market shares in products that make up a majority of sales. The
firm's diverse product line and end markets lend stability to
earnings and cash flow generation. Still, some of the company's
products are used in electronic, automotive, and other
industrial applications, which could result in pressure during
industry downturns-as the company is currently experiencing.
Nevertheless, longer term favorable business fundamentals should
aid satisfactory cash flow generation. Credit quality is
supported by a diverse geographic mix, with more than 50% of
sales made outside North America, and a broad customer base.
Good customer relationships are supported by a global
infrastructure, especially in electronic materials.
MacDermid's operations are generally not energy intensive. In
addition, the company utilizes a broad mix of raw materials,
which limits exposure to petrochemical feedstock cost volatility
and helps stabilize profitability and cash flows. Competitive
cost positions, value-added pricing, and R&D expenditures of
about 3% support better-than-average operating margins that
average about 20%.
Debt leverage is somewhat aggressive, with debt to EBITDA near
3.5 times (x) and funds from operations to total debt in the
high teens percent area following an aggressive growth campaign
over the last several years. Management is now expected to apply
free cash flow to debt reduction, so that debt to EBITDA and
FFO/debt are maintained at less than 3.0x and at 25%,
respectively, on average. Large acquisitions are not
anticipated, but if completed, are expected to be funded with a
mix of debt and equity that maintains balance sheet integrity.
Return on capital approximates a healthy 20%. Stable
profitability and moderate capital spending should support free
cash flow generation. Ratings anticipate that share repurchases
and dividends will be limited in the near term. Financial
flexibility is provided by availability under the revolving
credit facility and extended debt maturities.
The bank loan rating is the same as the corporate credit rating,
based on preliminary terms and conditions. The revolving credit
facility matures in 2005. MacDermid's obligations are guaranteed
by its domestic subsidiaries. The credit facility is secured by
the stock of domestic subsidiaries and 65% of the stock of
foreign subsidiaries, which is likely to provide only limited
protection to lenders in a default scenario.
Outlook: Stable
Ratings stability is provided by leading market shares and solid
profitability, as well as management's commitment to modestly
improve leverage statistics, Standard & Poor's said.
MARINE EXPEDITIONS: Adventure Travel Company Ceases Operations
--------------------------------------------------------------
1414847 Ontario Inc., also known as Marine Expeditions, a leader
in adventure travel to the Arctic and Antarctica, has ceased
operations. The company said that last year's management buyout
has been unsuccessful in its bid to turn the company around.
Dugald Wells, Chief Executive Officer of Marine Expeditions,
said that the company is currently contacting all customers who
have booked travel to inform them of the situation and provide
details on the handling of claims.
Customer deposits of approximately US$1.2 million, out of a
total of US$1.8 million, are protected through a combination of
travel agency trust accounts and the compensation fund of the
Travel Industry Council of Ontario (TICO). The latter protects
customer deposits up to a maximum of $3,500 per person. All
recent customer deposits have been held in trust since May 25,
when the company identified the seriousness of the situation.
1414847 Ontario was established in July, 2000 and had been on
target for budgeted profit since inception. In recent months,
the company had also received approximately US$2 million from
private investors to fund operating costs. However, a 50% drop
in bookings over the past four weeks resulted in the need for
significant working capital to continue operations.
The company preferred to seek new investment to fund the
significant shipping costs associated with this summer's Arctic
cruises, rather than use customer deposits from next winter's
Antarctic cruises. The lack of certainty over receiving this new
investment prevented the company's in-house travel agency from
booking new passengers, forcing the closure of the company.
Marine Expeditions was established by former managers of Marine
Expeditions Inc., which went bankrupt following the collapse of
a related company. The new company assumed liabilities of US$3.3
million in customer deposits and approximately US$1 million in
payables, in order to protect the good will of the well-
established brand.
At the time of purchase, less than 10% of customer deposits were
protected by the TICO compensation fund. In February, 2001, a
TICO-approved in- house travel agency was formed at Marine
Expeditions, ensuring customer protection through the fund for
all subsequent customer deposits. Approximately US$600,000 of
customer deposits, which were made before February 12, are not
protected.
"The company made considerable progress during its brief
operation. Despite a heavy debt load, we operated successfully,
providing a high quality product to our clientele. We were also
able to deliver trips to all customers who had booked through
the old company, at no additional cost to them," Mr. Wells said.
"In particular, we are very pleased with the company's progress
in reducing total customer liability from US$3.3 million to
US$1.8 million, of which $1.2 million is protected through a
combination of trust accounts and the TICO fund."
"We fought very hard for the company and its passengers over the
past nine months. However, given the concern over a possible
North American recession, it became very difficult to sustain
booking levels and to attract further investment in a short
period of time."
MAXICARE: Proposed Examiner For Bankrupt Unit Is Mark Abernathy
---------------------------------------------------------------
Maxicare Health Plans Inc. (MHP) (Nasdaq:MAXI) announced that
its California managed health care subsidiary, Maxicare, has
reached an agreement with the California Department of Managed
Health Care (DMHC) regarding the Chapter 11 petition filed by
Maxicare (California) on May 25, 2001.
MHP is the parent company of Maxicare, a health maintenance
organization serving approximately 254,000 members in the state
of California. Maxicare (California) filed for Chapter 11 with
the Federal Bankruptcy Court in Los Angeles following the DMHC's
appointment of Mark Abernathy as conservator of Maxicare
(California) earlier that same day. MHP is not subject to
bankruptcy proceedings.
Under the stipulation that was submitted for the approval of the
Honorable Vincent P. Zurzolo, U.S. Bankruptcy Court Judge, on
May 31, 2001, Mr. Abernathy will be appointed as Examiner of the
Debtor in the bankruptcy case.
The stipulation specifies that Maxicare (California) shall
continue to actively pursue negotiations to sell all or part of
its group member contracts and operations to prospective
purchasers with whom it is currently in discussions and any
additional prospective purchasers identified by the Examiner or
the DMHC.
The agreement also provides that Maxicare (California)'s
existing management shall remain in place and shall be
responsible for conducting day-to-day business operations, which
will be monitored and overseen by Mr. Abernathy as Examiner. The
Examiner and Maxicare have agreed to allow the Bankruptcy Court
to resolve any disputes which might arise.
"We now have a road map in place for Maxicare (California) to
move forward in a cooperative manner with the DMHC and Mr.
Abernathy so as to resolve the status of MHP's California
subsidiary. Maxicare (California)'s operations continue to be
fully functional and its staff is committed to avoiding any
disruption in service to our members," said Paul Dupee, chairman
and CEO of Maxicare Health Plans, Inc.
"This framework will enable Maxicare (California) to pursue
ongoing, advanced negotiations with potential acquirers in the
managed health care field, in coordination with Mr. Abernathy
and subject to the approval of the DMHC. While there can be no
assurance that such a transaction will be consummated, we are
working to assure continuity of care for our members,
compensation for health care providers and an orderly transition
of Maxicare enrollees to appropriate health care plans."
Trading in Maxicare Health Plan's stock on the Nasdaq National
Market was halted at the request of the Company on May 25, 2001
and has been suspended by Nasdaq subject to the provision of
additional information regarding the parent company's financial
condition.
NAMIBIAN MINERALS: Posts First Quarter 2001 Losses
--------------------------------------------------
Namibian Minerals Corporation (Nasdaq: NMCOF; TSE: NMR; NSX:
NMC) reported a loss for the first quarter ended 31 March 2001
and minimal diamond production due to the impacts of the NamSSol
accident in January and the provisional liquidation of certain
operating subsidiaries.
Financial results
A loss of US$12.2 million, US$0.26 per share, on revenues of
US$4.7 million, compared with first quarter 2000 earnings of
US$2.2 million, US$0.05 per share, on revenues of US$12.2
million. Lower revenues in 2001 reflected the interruption to
production as a result of the NamSSol accident and the
subsequent suspension of all operations at the end of February.
Direct production costs increased to US$11.3 million, compared
with US$5.9 million a year earlier. This cost includes US$2.4
million of year end 2000 diamond stocks which were expensed
during the quarter. The Company had no diamond stocks at quarter
end. All operational costs incurred in the first quarter of 2001
were fully expensed, including the costs of MV Ya Toivo and MV
Zacharias. The average diamond price from the sale of 28 100
carats (2000: 66,500 carats) was US$168 per carat, compared to
US$182 per carat in the first quarter of 2000.
As previously announced, the Company's financial position was
severely weakened as a result of the accident and after a year
of considerable capital expenditure and debt-build up in 2000.
Despite an advanced fund raising effort in February, moratorium
terms could not be agreed with senior lenders and the fund
raising could not be completed. Nine subsidiary companies filed
for provisional liquidation in late February 2001 and all mining
operations ceased while the Company pursued financing
initiatives. The Company reached accord with its senior lenders
and raised US$9.4 million from a private placement of securities
in late March. By May 2001, further fund raisings were completed
for aggregate gross proceeds of US$27.0 million, including a
US$15.0 million investment from the Leviev Group, which has
become the Company's new major shareholder. At the end of the
first quarter, the Company had US$5.6 million in cash and
US$56.6 million in long-term debt, compared with cash of US$4.4
million and debt of US$54.2 million at the end of 2000.
Operating results
Diamond production during the quarter was 10,700 carats (2000:
52,900 carats). MV Kovambo did not produce after 7 January 2001
while MV Ya Toivo's commissioning was interrupted at the end of
February when the operating subsidiaries were placed in
provisional liquidation. All mining operations ceased for
approximately two months.
MV Ivan Prinsep was withdrawn from operation at the end of
January and was sold as a term of the banking moratorium for
approximately US$4.1 million to reduce the Company's debt
position.
Corporate developments
Following completion of the financings and after the end of the
first quarter, the Namibian subsidiaries and one South African
subsidiary were discharged from provisional liquidation.
During the quarter, a group of trade creditor representatives
who had initially agreed to a 12 months moratorium on repayment,
withdrew their moratorium agreement.
The Company intends to discharge the remaining subsidiaries
through a court sanctioned, creditor approved compromise, which
may be completed in the third quarter of 2001.
As previously disclosed, the Company entered into an exclusive
marketing agreement with the Leviev Group during the quarter.
Progress on Insurance Claim
Following the NamSSol accident, the Company progressed two
insurance claims. The Company was advised this week that its
claim under the all risks policy in respect of damage to NamSSol
has been accepted and that costs associated with the repair of
NamSSol will be covered under the policy. These costs are
estimated to be US$1.5 million.
Cover under the business interruption policy is dependent on
acceptance of the all risks policy claim. The Company is
continuing to progress its discussions with the underwriters of
the business interruption policy and although there can be no
certainty of payment, the Company believes its claim is soundly
based.
Outlook
The Company has experienced a loss of skilled personnel, lack of
access to spares and services and general uncertainty arising
from the provisional liquidation process which has led to delays
in restarting work and which continue to affect operations.
Commissioning resumed onboard MV Ya Toivo in April 2001 once the
Namibian companies were discharged from provisional liquidation
and MV Namibian Gem is expected to return to operation by the
third quarter 2001. The Company has commenced the rebuilding of
the damaged NamSSol with anticipated completion in the fourth
quarter of 2001.
Exploration resumed using the airlift equipment onboard MV
Zacharias in May 2001 and is focused on testing extensions of
known resource areas in Mining Licence 51 and Mining Licence 36.
It is anticipated that the drilling system will resume
exploration in the third quarter following completion of repairs
to its hydraulic levelling system.
The Company continues to focus on the many challenges it is
facing to recover from the impact of the accident to the
NamSSol, deterioration of its financial position and the
provisional liquidation.
PACIFIC GAS: Wants To Assume Collective Bargaining Agreements
-------------------------------------------------------------
Pacific Gas and Electric Company seeks the Court's authority for
assumption of its collective bargaining agreements with the
three unions that represent almost 70% of PG&E's employees,
pursuant to Section 365(a) of the Bankruptcy Code.
Pursuant to this, PG&E will cure all outstanding arrearages
which total approximately $20.9 million which include amounts
owed pursuant to grievance awards and settlements (approximately
$1.2 million) and amounts owed to employees for severance and
displacement payments related to power plant divestiture
(approximately $19.7 million).
PG&E is a party to four collective bargaining agreements: two
with the international Brotherhood of Electrical Workers, Local
1245, AFL-CIO ("IBEW"), and one each with the Engineers and
Scientists of California, IFPTE Local 20, AFL-CIO and CLC
("ESC"), and the International Union of Security Officers
("IUSO").
PG&E has been a party to a series of collective bargaining
agreements with the IBEW and ESC for almost a half a century. It
has been a party to the IUSO collective bargaining agreement for
almost 15 years.
In the aggregate, the four collective bargaining agreements to
which PG&E is a party govern the wages, hours and working
conditions of over 69% of PG&E's workforce.
The current IBEW and ESC collective bargaining agreements went
into effect on January 1, 2000 and will expire on December 31,
2002. The collective bargaining agreement with the IUSO became
effective on January 1, 2000 and will expire on February 28,
2003. The collective bargaining agreements govern the wages,
hours and working conditions of approximately 13,830 employees.
Specifically, those collective bargaining agreements include
provisions specifying employee wages and benefits, bidding and
transfer rights, overtime work allocation protocol, and
displacement and severance procedures. The collective bargaining
agreements also contain a multi-step grievance process for the
resolution of disputes that arise under the agreements. The
final step of the respective grievance processes is arbitration
before a neutral fact finder. The majority of disputes are
settled at a grievance step below arbitration. Typically, cases
that reach the arbitration level for resolution involve employee
termination or disputes over the interpretation of key
provisions of the collective bargaining agreements.
Overview of the Three Labor Unions
The three labor unions that are parties to collective bargaining
agreements with PG&E are:
(A) The International Brotherhood Of Electrical Workers
Approximately 12,200 PG&E employees are represented by the
IBEW under two separate bargaining agreements. These employees
provide a wide variety of essential services to PG&E and its
customers. The majority of IBEW-represented employees are highly
skilled craft personnel, many of whom have completed at least
one month training program to perfect their trade.
The IBEW represents employees in key areas such as electric and
gas transmission and distribution, electric operations, steam
and nuclear power generation, general capital construction,
meter reading and maintenance, customer service, materials and
fleet. IBEW classifications include lineman, gas service
representative, electric crew foreman, materials handler, heavy
equipment operator, water system repairman, radiation
technician, welder, meter reader, computer operator and customer
service representative.
(B) The Engineers And Scientists Of California
The ESC represents approximately 1,530 engineers and
technical employees of PG&E. These employees perform various
functions such as engineering design and other estimating,
planning, drafting and technology positions. Typical
classifications include design engineers, engineering
estimators, distribution engineers, engineering technicians and
land agents. Many of the ESC engineering positions require an
engineering degree, and in some cases professional registration.
Technologists and land positions require college degrees (AA or
BA/ES) in the appropriate area. These positions typically
require two to five years of experience before the employees are
able to perform the full duties of the Job.
(C) The international Union Of Security Officers
The IUSO represents approximately 100 employees who provide
physical security to PG&E's Diablo Canyon Nuclear Power Plant.
These employees must meet all PG&E and Nuclear Regulatory
Commission requirements and pass a background check.
Grievance Awards And Settlements
The majority (in number) of the outstanding arrearages under the
collective bargaining agreements consists of payments due
pursuant to grievance settlements reached by PG&E and the unions
over compensation issues regarding the allocation and payment of
overtime and the backpay (less interim earnings) of reinstated
unionized employees, and other compensation-related issues, such
as temporary classification upgrade pay.
PG&E estimates that approximately $158,410 is owed to 202
unionized employees ($784 per grievant, on average) for pre-
petition settlements based on overtime awards. PG&E further
estimates that approximately 12 unionized employees are or will
be owed $781,800 for backpay awards related to reinstatement of
their positions, including estimated arbitration awards for
those discharged prior to PG&E's Chapter 11 filing.
Collectively, all unpaid wage-related grievances awards (and
pending awards or settlements) total approximately $1,087,442,
with an average payment of $3,305 per grievant. In addition,
there are approximately 115 employees owed approximately
$147,200 in miscellaneous payments for moving expenses,
scheduling violations, upgrade pay and benefit reinstatement.
Severance Displacement Payments
The other arrearages that PG&E will cure in connection with its
assumption of the collective bargaining agreements consist of
amounts owed for severance and displacement payments to 276
IBEW-represented employees, totaling $19.7 million. These
employees are entitled to such payments because they fulfilled
their contractual obligations to complete up to three years of
operations and maintenance work at former PG&E plants that were
sold to third parties.
Pursuant to the enactment of the California Legislature Assembly
Bill 1890 ("AB 1890") in August 1996, which mandated that
electric services be unbundled, and that wholesale markets be
opened up to competition by January 1, 1998 and following the
1995 Policy Decision of CPUC, which provided PG&E strong
financial disincentives for remaining in the power generation
business, PG&E divested many of its electric generation power
plants upon CPUC approval.
Recognizing that the sale of its fossil-fueled generation plants
could take several years, and that it needed to retain highly
skilled personnel who were knowledgeable about the operation of
these plants, PG&E negotiated an employee severance and
displacement program with the IBEW. The program provided for
lump sum payments during the three-year sale period and a
$50,000 payment when the two-year operations and maintenance
obligation was completed, or if the employee was displaced from
his/her position at the sold facility.
The severance and displacement program which PG&E is
contractually obligated to implement under its letter agreement
with the IBEW, and all reasonable costs resulting from
implementation of that program, have already passed regulatory
muster before the California Public Utilities Commission (the
"CPUC"). In its Decision issued on February 17,2000, the CPUC
reviewed the basic parameters of the severance and displacement
program in a contested proceeding, and concluded that such
program implementation costs reasonably incurred by PG&E are
recoverable as customer rates in accordance with AB 1890.
Shortly after PG&E filed its Chapter 11 petition, the final
payment under the negotiated severance/displacement program
became due to 276 union operations and maintenance employees. It
is undisputed, PG&E notes, that the union employees eligible for
the payment fulfilled all of their obligations under the
collective bargaining agreement. However, PG&E did not pay those
employees their negotiated severance/displacement pay due to the
Bankruptcy Code's prohibition against the payment of pre-
petition debts by Chapter 11 debtors. The IBEW has filed a
grievance challenging the Company's failure to honor its
obligation under the collective bargaining agreement to pay the
severance/displacement payments to the affected employees.
PG&E told Judge Montali that PG&E's unionized workforce plays a
crucial role in the continued success of PG&E's core business,
and assumption of the collective bargaining agreements is vital
to preserving PG&E's positive working relationships with the
IBEW, ESC and IUSO and the PG&E employees they represent during
the post-petition period. The Debtor notes that PG&E's
affirmation of the collective bargaining agreements will
reassure its unionized workers that their wages, hours and
working conditions, as codified in the collective bargaining
agreements, remain intact and that PG&E will continue to bargain
with their union representatives in good faith.
The Collective Bargaining Agreements are executory contracts. In
compliance with Section 365(b)(1), PG&E intends to cure all
arrearages, which total approximately $20.9 million promptly
following entry of the Court's order authorizing assumption of
the collective bargaining agreements. Russell M. Jackson, Vice
President of Human Resources for PG&E, advises that the utility
has adequate cash reserves to cure these arrearages. In
addition, and as required under Section 365(b), PG&E has
sufficient operating revenue to provide adequate assurance of
future performance under the collective bargaining agreements.
The payments due under those agreements represent only a small
amount of PG&E's historical and projected revenues, the Debtor
says. The Debtor further noted that, under AB 1890, these costs
should be recoverable in rates as "reasonable costs" associated
with severance and related benefits due to plant sales.
PG&E believes that assumption of the Collective Bargaining
Agreements is based on sound business judgment. For the reasons
presented in the motion and pursuant to 11 U.S.C. Section 365,
PG&E requested that the Court enter an order authorizing it to
assume the collective bargaining agreements. (Pacific Gas
Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
PACIFIC GAS: Bankruptcy Judge To Rule On Bonus Plan On June 18
--------------------------------------------------------------
The executives who steered Pacific Gas & Electric (PG&E) into
bankruptcy on April 6 are expected to be granted huge bonuses
under a plan to earmark $17.5 million in payouts to corporate
leaders, according to Reuters. The bonus plan - fiercely
criticized by consumer groups and dubbed a "management retention
program" - has been provisionally approved by creditors of the
bankrupt utility.
Creditor attorney Alan Marks told the San Francisco Chronicle
that the proposed bonuses were an effective way of keeping
someone at the helm of the utility as it negotiates bankruptcy
proceedings. The bonus plan earmarks at total of $17.5 million
for payments to 226 top PG&E executives. Some of the most
lavishly rewarded, including PG&E Chairman Robert Glynn, would
see their salaries doubled under the plan. Federal bankruptcy
Judge Dennis Montali will make a ruling on the PG&E proposal on
June 18. (ABI World, June 6, 2001)
PILLOWTEX CORP.: Toyota Presses For Decision On Forklift Leases
---------------------------------------------------------------
Robert T. Aulgur, Jr., Esq., at Whittington & Aulgur, in
Delaware, asked Judge Robinson to enter an order compelling
Pillowtex Corporation to decide whether they want to assume or
reject 17 forklift lease agreements entered into with Toyota
Credit Corporation. Toyota asked the Debtors what they wanted to
do earlier this year. Pillowtex responded with silence, Mr.
Aulgur related.
In the alternative, Toyota requested that the Court issue an
order relieving Toyota from the Automatic Stay because the
Debtor failed to stay current with post-petition payments. Mr.
Aulgur contended that the Debtor has failed to provide Toyota
with any kind of adequate protection and has failed to maintain
the forklifts or provide Toyota with evidence of continuing
insurance. On top of that, Mr. Aulgur suggested, the Debtors
have no equity in the forklifts and that equipment is not
necessary to an effective reorganization.
The leases call for $5,539 monthly payments.
Toyota needs a decision and Toyota needs it now, Mr. Aulgur
said, because the potential injury to Toyota outweighs the
Debtor's interests in utilizing the Forklifts. Mr. Aulgur
explained that Forklifts are maintenance-sensitive. If regular
maintenance is not performed in accordance with Toyota's
schedule of hourly usage and daily and monthly maintenance, the
Forklifts quickly depreciate in real value and are subject to
ruin. (Pillowtex Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
PLAY-BY-PLAY TOYS: Says Funds Insufficient To Pay $15.7 Mil Debt
----------------------------------------------------------------
Play-By-Play Toys & Novelties, Inc. (OTC Bulletin Board: PBYP)
received notification from the holders of its existing
Convertible Debentures of demand for immediate payment of all
amounts outstanding under its Convertible Debentures.
The unpaid principal and interest due and payable under the
Debentures, which matured on December 31, 2000, totals
approximately $15.7 million. The Company currently does not have
sufficient funds to satisfy such obligations. The Company's
failure to satisfy these obligations may result in the exercise
by the Debenture holders of their rights and remedies under the
Loan Agreement and Loan Documents, including, but not limited
to, the contractual right to control the Company's Board and the
right to convert their debt to the Company's common stock at the
average closing stock price for the month of December 2000,
which would give the holders majority ownership of the Company's
stock.
However, the Convertible Debenture holders are precluded from
taking legal action against the Company or its assets to satisfy
the amounts due under the Debentures for a period of up to 180
days from the date of receipt of the notification without the
consent of the Company's senior lender.
The Company previously secured a standstill agreement until
April 30, 2001 from the Debenture holders in which they
refrained from pursuing any actions or rights under the loan
agreement. In addition, the Company previously announced that it
had reached an agreement in the form of a non-binding term sheet
with the holders of its Convertible Debentures to restructure
and extend the final maturity of the Debentures until December
31, 2002, subject to, among other things, the payment by the
Company of past due principal and interest due under the
Debentures.
The Company remains in negotiations with the holders of the
Debentures relative to a discounted buyout of the debt and
Debentures through a third party private investment group, or
restructuring the terms of the Debentures, including an
additional extension of the final maturity date. The Company
also continues in its efforts to secure the senior lender's
consent to certain arrangements between the Company and the
holders of the Convertible Debentures to restructure and extend
the final maturity of the Debentures.
As a result of defaults outstanding under the Company's senior
credit facility, the Company is prohibited from making payments
of principal or interest to subordinated creditors without the
consent of its senior lender. For the recently reported quarter
ended January 31, 2001, the Company violated net worth covenants
of its senior credit facility. The Company is also in default in
the payment of principal and interest due under the Debentures
which has resulted in the violation by the Company of certain
cross-default covenants of its senior credit facility.
The Company, the holders of the Debentures and the senior lender
remain in discussions relative to the principal and interest
payment provisions of the agreement. There can be no assurance
that the senior lender will consent to payment by the Company of
past due principal and interest due under the Debentures, or
that the Company will be able to satisfactorily restructure the
Debentures. Also, the Company is in negotiations with current
and prospective lenders relative to additional financing for the
Company. There can be no assurance that the Company will be able
to satisfactorily restructure its Credit Facility to provide
additional financing to the Company.
Play-By-Play Toys & Novelties, Inc. designs, develops, markets
and distributes a broad line of quality stuffed toys, novelties
based on its licenses for popular children's entertainment
characters, professional sports team logos and corporate
trademarks. The Company also designs, develops and distributes
electronic toys and non-licensed stuffed toys, and markets and
distributes a broad line of non-licensed novelty items. Play-By-
Play has license agreements with major corporations engaged in
the children's entertainment character business, including
Warner Bros., Paws, Incorporated, Nintendo, and many others, for
properties such as Looney Tunes(TM), Batman(TM), Superman(TM),
Garfield(TM) and Pokemon(TM).
SAFETY-KLEEN: DMH Environmental & Hewitt Ask For Stay Relief
------------------------------------------------------------
Mr. Dennis Hewitt and DMH Environmental, Inc., alleged that they
had entered into an agency agreement with USPCI Clive
Incineration Facility Co., Inc., and Laidlaw Environmental
Services, Inc., predecessor to the Debtor Safety-Kleen Inc.
Under the Agreement, Laidlaw Environmental agreed with Mr.
Hewitt and DMH to dispose of waste in Mexico at a fixed rate of
$.55 per pound. Mr. Hewitt and DMH Environmental claimed that
the Debtor was aware of their negotiations with the Mexican
government to carry out that agreement by disposing of the waste
in that country, and that the Debtor breached its agreement with
DMH Environmental and Hewitt by raising prices in excess of
$.755 per pound in the fall of 1997, which caused DMH
Environmental and Mr. Hewitt to lose their bid to dispose waste
in Mexico.
DMH Environmental and Mr. Hewitt filed a complaint in the 152nd
Judicial District Court of Harris County in the State of Texas,
styled "Dennis Hewitt and DMH Environmental, Inc. vs. Safety-
Kleen (Clive) Inc., and Safety-Kleen, Inc.," seeking
compensatory damages for breach of contract, and punitive
damages for fraud, against Safety-Kleen, Inc. The prosecution of
this suit was stayed as a result of the Debtors' bankruptcy
filing.
John C. Phillips, Jr., at Phillips, Goldman & Spence, P.A., in
Delaware, reasoned that the automatic stay provided by
bankruptcy law is not meant to be indefinite or absolute. He
requested that Judge Walsh modify the automatic stay for the
limited purpose of enabling Mr. Hewitt and DMH Environmental to
liquidate their Texas claim against the Debtors and their
insurance companies, as may be appropriate.
No Prejudice to Estate
Mr. Phillips argued that neither the bankruptcy estate nor
Safety-Kleen Inc. will suffer any prejudice if DMH Environmental
and Mr. Hewitt are permitted to pursue their claims in the Texas
action. The purpose of the stay is to enable the Bankruptcy
Court to prevent certain creditors from gaining a preference for
their claims against the Debtor, to forestall the depletion of
the Debtor's assets due to the legal costs in defending
proceedings against it, and in general, to avoid interference
with the orderly liquidation or rehabilitation of the Debtor.
Mr. Phillips contends that DMH Environmental and Mr. Hewitt are
not attempting to gain any unfair advantage over other creditors
of Safety-Kleen, but are merely attempting to resolve their
claims to the extent of the Debtor's applicable liability
insurance coverage or, in the alternative, to liquidate their
valid claims against the Debtor, before a court that has
jurisdiction over their claims, and before which they can obtain
a jury of their peers.
Limited Purpose of Relief Requested
Mr. Hewitt and DMH Environmental assured the Court that they are
only seeking relief to resolve or liquidate their claims against
Safety-Kleen, and not to collect on these claims with respect to
the Debtor, outside of the bankruptcy proceedings. If they
succeed in obtaining a judgment or settlement of their claims
against the Debtor, they will not attempt to collect that
judgment or settlement without first obtaining Court approval.
They would first attempt to collect any insurance proceeds that
may be available for their claims. Only in the event that there
are no available insurance proceeds or that the insurance
proceeds do not fully satisfy the judgment or settlement, will
they seek to collect on a judgment or settlement against the
Debtor, but only as prepetition, unsecured creditors. They admit
that they would only be entitled to collect against Safety-Kleen
by bringing their liquidated claims to the bankruptcy court and
obtaining a distribution on their claims through the Debtor's
bankruptcy estate.
No Hardship upon the Debtor
Mr. Hewitt and DMH Environmental claimed that the hardships upon
them, by the maintenance of the stay, outweigh any possible harm
that the Debtor might suffer. The Texas action is based upon
alleged fraud and breach of contract, the prosecution of which
will neither be connected to nor interfere with the bankruptcy
proceedings. Mr. Hewitt and DMH Environmental insist that they
have valid tort claims against the Debtor, are entitled to have
those claims resolved in some reasonable manner, and if they
were forced to litigate their unliquidated claims in Delaware,
would be forced to incur a great financial burden.
Probability of Recovery in Texas Action
Mr. Phillips and Mr. Scott submitted that Mr. Hewitt and DMH
Environmental are entitled to the requested relief, given that
there is probability of recovery for them in the Texas action.
Counsel explained that the required showing of that probability
is only slight, and that from a perusal of the complaint in the
Texas Action, the Debtor's predecessor unilaterally changed its
pricing arrangements with DMH Environmental and did not give the
90-days notice, as required by the contract. The untimely change
in price is enough to support the showing of probability of
recovery. (Safety-Kleen Bankruptcy News, Issue No. 16;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
SEMICONDUCTOR LASER: BSB Bank Demands Immediate Payment of Debt
---------------------------------------------------------------
Semiconductor Laser International Corporation (OTC Bulletin
Board: SLIC) (SLI) disclosed that its senior lender, BSB Bank
and Trust had demanded immediate payment of the amounts due
under the Company's revolving line of credit and mortgage, which
in the aggregate represent approximately $1.7 million. The bank
has stated that if it is not paid immediately, it will commence
proceedings to realize upon its collateral. SLI has been and
continues to explore its options which include identifying
alternative sources of financing and/or a restructuring.
SLI also intends to explore claims it may have against BSB Bank
and Trust. SLI believes that the bank, which holds a first and
second mortgage on its real estate as well as a security
interest in its receivables and inventory, is holding collateral
that exceeds the value of the Company's loans from the bank. SLI
further believes that the bank has unreasonably withheld its
consent to one or more proposals with respect to third party
financing.
There can be no assurance that SLI can identify alternative
sources of financing and that its claims against BSB Bank and
Trust will prove to be meritorious or that it can avoid filing
for protection under the bankruptcy laws.
TITANIUM METALS: Issues Partial List Of Equity Holders
------------------------------------------------------
The following entities hold 38.6% of the outstanding common
stock of Titanium Metals Corporation by virtue of their shared
voting and dispositive ownership of 12,280,005 such shares:
Tremont Corporation
Tremont Group Inc.
Tremont Holdings LLC
NL Industries
Valhi, Inc.
Valhi Group, Inc.
National City Lines, Inc.
NOA Inc.
Dixie Holding Company
Contran Corporation
Dixie Rice Agricultural Holding Corporation, Inc.
Southwest Louisiana Land Company, Inc.
Harold Simmons Foundation, Inc.
The two following hold 14,441,905 shares, representing 45.4% of
the outstanding common stock of the Company:
The Combined Master Retirement Trust and Harold C. Simmons
Tremont and The Combines Master Retirement Trust are the direct
holders of approximately 38.6% and 6.8%, respectively, of the
31,817,801 Shares outstanding as of April 30, 2001 according to
the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2001. Tremont may be deemed to control the
Company.
TGI and TRE Holdings are the direct holders of approximately
80.0% and 0.1%, respectively, of the outstanding shares of
Tremont common stock and together may be deemed to control
Tremont. Valhi and TRE Holdings are the direct holders of 80.0%
and 20.0%, respectively of the outstanding common stock of TGI
and together may be deemed to control TGI. NL is the sole member
of TRE Holdings and may be deemed to control TRE Holdings.
Valhi and Tremont are the direct holders of approximately 60.4%
and 20.5%, respectively, of the outstanding common stock of NL
and together may be deemed to control NL. VGI, National,
Contran, the Foundation, the Contran Deferred Compensation Trust
No. 2 (the "CDCT No. 2") and the CMRT are the direct holders of
81.7%, 9.5%, 1.8%, 0.5%, 0.4% and 0.1%, respectively, of the
common stock of Valhi. Together, VGI, National and Contran may
be deemed to control Valhi. National, NOA and Dixie Holding
are the direct holders of approximately 73.3%, 11.4% and 15.3%,
respectively, of the outstanding common stock of VGI. Together,
National, NOA and Dixie Holding may be deemed to control VGI.
Contran and NOA are the direct holders of approximately 85.7%
and 14.3%, respectively, of the outstanding common stock of
National and together may be deemed to control National. Contran
and Southwest are the direct holders of approximately 49.9% and
50.1%, respectively, of the outstanding common stock of NOA and
together may be deemed to control NOA. Dixie Rice is the direct
holder of 100% of the outstanding common stock of Dixie Holding
and may be deemed to control Dixie Holding. Contran is the
holder of 100% of the outstanding common stock of Dixie Rice and
may be deemed to control Dixie Rice. Contran is the holder of
approximately 88.9% of the outstanding common stock of
Southwest and may be deemed to control Southwest.
Substantially all of Contran's outstanding voting stock is held
by trusts established for the benefit of certain children and
grandchildren of Harold C. Simmons, of which Mr. Simmons is the
sole trustee. As sole trustee of each of the Trusts, Mr.
Simmons has the power to vote and direct the disposition of the
shares of Contran stock held by each of the Trusts. Mr.
Simmons, however, disclaims beneficial ownership of any shares
of Contran stock that the Trusts hold.
The CMRT directly holds approximately 6.8% of the Outstanding
Shares and 0.1% of the outstanding shares of Valhi common stock.
Valhi established the CMRT as a trust to permit the collective
investment by master trusts that maintain the assets of certain
employee benefit plans Valhi and related companies adopt. Mr.
Simmons is the sole trustee of the CMRT and a member of the
trust investment committee for the CMRT. Mr. Simmons is a
participant in one or more of the employee benefit plans that
invest through the CMRT.
The Foundation directly holds approximately 0.5% of the
outstanding Valhi common stock. The Foundation is a tax-exempt
foundation organized for charitable purposes. Harold C. Simmons
is the chairman of the board and chief executive officer of the
Foundation and may be deemed to control the Foundation.
The CDCT No. 2 directly holds approximately 0.4% of the
outstanding Valhi common stock. U.S. Bank National Association
serves as the trustee of the CDCT No. 2. Contran established
the CDCT No. 2 as an irrevocable "rabbi trust" to assist
Contran in meeting certain deferred compensation obligations
that it owes to Harold C. Simmons. If the CDCT No. 2 assets are
insufficient to satisfy such obligations, Contran is obligated
to satisfy the balance of such obligations as they come due.
Pursuant to the terms of the CDCT No. 2, Contran (i) retains the
power to vote the shares of Valhi common stock held directly by
the CDCT No. 2, (ii) retains dispositive power over such shares
and (iii) may be deemed the indirect beneficial owner of such
shares.
Valmont Insurance Company and a subsidiary of NL directly own
1,000,000 shares and 1,186,200 shares, respectively, of Valhi
common stock. Valhi is the direct holder of 100% of the
outstanding common stock of Valmont and may be deemed to control
Valmont. Pursuant to Delaware law, Valhi treats the shares of
Valhi common stock that Valmont and the subsidiary of NL own as
treasury stock for voting purposes and for the purposes of this
report such shares are not deemed outstanding.
Mr. Harold C. Simmons is chairman of the board and chief
executive officer of TGI, Valhi, VGI, National, NOA, Dixie
Holding, Dixie Rice, Southwest and Contran. Mr. Simmons is also
chairman of the board of NL and a director of Tremont.
By virtue of the holding of the offices, the stock ownership and
his service as trustee, all as described above, (a) Mr. Simmons
may be deemed to control the entities described above and (b)
Mr. Simmons and certain of such entities may be deemed to
possess indirect beneficial ownership of Shares directly held by
certain of such other entities. However, Mr. Simmons disclaims
beneficial ownership of the Shares beneficially owned, directly
or indirectly, by any of such entities, except to the extent of
his vested beneficial interest in the Shares held by the CMRT.
Harold C. Simmons' spouse is the direct owner of 69,475 shares
of NL common stock and 77,000 shares of Valhi common stock. Mr.
Simmons may be deemed to share indirect beneficial ownership of
such shares. Mr. Simmons disclaims all such beneficial
ownership.
The principal office of Tremont is located in Denver, Colorado.
The principal offices of TRE Holdings and NL are located in
Houston, Texas. The principal offices of TGI, Valhi, VGI,
National, NOA, Dixie Holding, Contran, the CMRT and the
Foundation are located at, and the business address of Harold C.
Simmons is in Dallas, Texas. The principal office of Dixie Rice
is located in Gueydan, Louisiana. The principal office of
Southwest is in Houma, Louisiana.
Tremont is principally engaged through the Company in the
production of titanium metal products, through NL in the
production of titanium dioxide pigments and through other
companies in real estate development.
TGI is engaged in holding shares of Tremont common stock.
TRE Holdings is engaged in holding shares of TGI common stock.
NL is principally engaged in the production of titanium dioxide
pigments.
In addition to activities engaged in through Tremont, the
Company and NL, Valhi is engaged through other companies in the
ergonomic computer support systems, precision ball bearing
slides, security products and waste management industries.
In addition to activities engaged in through Valhi and the other
companies they may be deemed to control, as described above, and
in addition to holding the securities described above, (i) VGI
is engaged in holding notes receivable; (ii) National is engaged
in holding notes receivable and, directly or through other
companies, in real estate, oil and gas activities and the rental
and sales of compressors and related products; (iii) Dixie
Holding is engaged in holding preferred stock of Contran; (iv)
NOA is engaged in real estate and holding notes receivable; (v)
Dixie Rice is engaged in land management, agriculture and oil
and gas activities; (vi) Southwest is engaged in land
management, agriculture and oil and gas activities; and (vii)
Contran is engaged through other companies in the production of,
among other things, steel rod, wire and wire products.
The CMRT is a trust Valhi formed to permit the collective
investment by trusts that maintain the assets of certain
employee benefit plans Valhi and related companies adopt. The
employee benefit plans the trusts participating in the CMRT
fund are subject to certain provisions of the Employee
Retirement Income Security Act of 1974, as amended.
The Foundation is a tax-exempt foundation organized for
charitable purposes.
Contran, Dixie Holding, National, Valhi, TGI and Tremont are
Delaware corporations. TRE Holdings is a Delaware limited
liability company. NL is a New Jersey corporation. VGI is a
Nevada corporation. NOA is a Texas corporation and the
Foundation is a Texas non-profit corporation. Dixie Rice and
Southwest are Louisiana corporations. The CMRT is governed by
the laws of the state of Texas, except as those laws are
superseded by federal law. Harold C. Simmons and all the
persons named are citizens of the United States.
TITANIUM METALS: Incumbent Board Members Are Re-Elected
-------------------------------------------------------
Titanium Metals Corporation (NYSE: TIE) held its Annual
Shareholders' Meeting on May 22, 2001 at its corporate
headquarters in Denver, Colorado. The election of TIMET's Board
of Directors was held and all five incumbent Board Members were
re-elected to serve until the next Annual Shareholders' Meeting.
The Board of Directors is comprised of J. Landis Martin, who
also serves as President and Chief Executive Officer of TIMET,
Edward C. Hutcheson, Jr., Glenn R. Simmons, Gen. Thomas P.
Stafford and Steven L. Watson.
Titanium Metals Corporation, headquartered in Denver, Colorado,
is a leading worldwide integrated producer of titanium metal
products.
ULTRA MOTORCYCLE: Appoints Steven A. Saslow As New CEO
------------------------------------------------------
Ultra Motorcycle Co. (OTCBB:UMCC) announced the appointment of
Steven A. Saslow to CEO, effective May 30, 2001. Saslow's
appointment is subject to the approval of the bankruptcy court.
Saslow was chairman and CEO of SJS Entertainment Corp., and,
after its acquisition by SFX Entertainment, the executive vice
president of SFX Network Group. An avid enthusiast and collector
of motorcycles for more than 30 years, Saslow brings an
extensive background in innovative sales, marketing and
management to Ultra Motorcycle.
In making the announcement, company Chairman John Russell
remarked: "Mr. Saslow brings a fresh and new perspective to
every aspect of our business. As we work quickly to emerge from
our Chapter 11 filing, Mr. Saslow will help provide the
stability, direction and growth for Ultra Motorcycle Co. to
realize its leadership potential in the marketplace."
Saslow commented: "This is a tremendous opportunity for me to
apply my background and knowledge in sales and marketing in the
motorcycle industry. The fundamentals of quality, styling and
proper price positioning are already in place throughout the
entire lineup of Ultra Motorcycles.
"Growing the dealer network and brand awareness will be the next
step to increasing sales and return profits to this
organization. I look forward to some very exciting announcements
and product introductions in the near future."
Ultra Motorcycle is a leading designer, manufacturer and
distributor of high-quality, American-made heavyweight cruiser
motorcycles. Ultra Motorcycle models include the Sledgehammer,
Fat Pounder, Fat Pounder ST, Ground Pounder, Ground Pounder ST,
Avenger, Jackhammer ST, Wide One, Wide Two and Titanium Series 1
and 2.
All of the Ultra models are manufactured at the company's
corporate headquarters and manufacturing facility in Mira Loma.
Ultra Motorcycles are distributed through a nationwide dealer
network.
USG CORPORATION: S&P Cuts Credit Ratings to CCC+ From BB-
---------------------------------------------------------
Standard & Poor's lowered its ratings on USG Corp. and its
subsidiary, U.S. Gypsum Co. and placed them on CreditWatch with
negative implications. Said ratings are:
USG Corp. To From
Corporate credit rating CCC+ BB-
Senior unsecured debt CCC+ BB-
Senior unsecured bank loan rating CCC+ BB-
United States Gypsum Co.
Corporate credit rating CCC+ BB-
Senior unsecured debt CCC+ BB-
The rating actions follow the announcement that USG is exploring
various strategic options, including a possible Chapter 11
bankruptcy filing, because of rising asbestos-related payments
for personal injury claims. Alternatives being examined also
include new secured bank financing that would provide the
company with greater long-term liquidity.
Standard & Poor's will make a further ratings decision as
developments unfold.
WASHINGTON GROUP: Raytheon Delivers Balance Sheets
--------------------------------------------------
Raytheon Company (NYSE: RTN) announced that it delivered to
Washington Group International (WGI) two balance sheets in
connection with the final price adjustment for Raytheon's sale
of its former engineering and construction business. These
balance sheets reflect a final purchase price increase of
approximately $13.9 million.
Raytheon was required to produce an audited balance sheet under
an agreement selling the business to WGI, and more recently was
required by an Idaho District Court to produce either audited or
unaudited balance sheets as part of a post-closing process for
adjusting the purchase price of the business.
The first balance sheet, unaudited and dated as of April 30,
2000, was prepared in accordance with generally accepted
accounting principles (GAAP) consistent with Raytheon's December
31, 1999, financial statements for the company's engineering and
construction business. This balance sheet reflects adjustments
required by GAAP for project developments over the past 13
months. It was submitted in unaudited form because of WGI's
continuing failure to provide information that is required by
the sales agreement and is necessary for completion of an audit
by Raytheon's independent accountants.
The second balance sheet, also dated April 30, 2000, implements
the specific adjustments and accounting methodologies agreed to
between Raytheon and WGI in the sales agreement. This document
is referred to in the agreement as the "cut-off date balance
sheet," and serves as the basis for any adjustment to the
purchase price.
With headquarters in Lexington, Mass., Raytheon Company is a
global technology leader in defense, government and commercial
electronics, and business and special mission aircraft.
WASHINGTON GROUP: Challenges Raytheon's Financial Statements
------------------------------------------------------------
Following a ruling on June 1, 2001 by the District Court of the
Fourth Judicial District of the State of Idaho ordering Raytheon
Company to produce an April 30, 2000 balance sheet of its former
subsidiary, Raytheon Engineers & Constructors (RE&C), by June 5,
2001 at 5:00 p.m., Washington Group International (NYSE:WNG)
disclosed that it received two unaudited balance sheets late
Tuesday afternoon from Raytheon Company.
The Raytheon documents, purported to be in compliance with
Generally Accepted Accounting Procedures (GAAP), are in fact,
unaudited and fail to account for hundreds of millions of
dollars of balance sheet adjustments recognized by Washington
Group and demonstrated in audit books provided to Raytheon
Company that were prepared by the internationally recognized
accounting firm, Deloitte & Touche.
In addition to providing 34 volumes of highly specific RE&C
project information confirming enormous balance sheet
adjustments, Deloitte & Touche and the Washington Group
accounting team have provided Raytheon Company with more than
20,000 pages in 70 volumes of detailed answers to questions from
Raytheon regarding a business that Raytheon owned on April 30,
2000 -- the balance sheet cutoff date -- and continued to own
for the next 67 days until the transaction closed on July 7,
2001.
"In submitting these blatantly erroneous balance sheets,
Raytheon has chosen to ignore the materials provided by
Washington Group and Deloitte & Touche, one of the country's
premier accounting firms: a choice that further undermines
Raytheon's credibility and leads us to continue to strongly
question the reliability of any financial statements provided by
Raytheon Company," said Hanks.
On March 8, 2001 Washington Group filed a Current Report Form 8-
K with the Securities Exchange Commission stating that the
company had "expressed concern" that historical financial
statements provided by Raytheon Company in conjunction with the
transaction "may not present fairly, in all material respects,
the financial position" of RE&C. Accordingly, Washington Group
withdrew reliance on financial statements provided by Raytheon
and stated to the SEC that the Company "believes that you should
not rely on the financial statements" of RE&C issued by Raytheon
Company in conjunction with the Company's acquisition of RE&C.
"One thing is absolutely clear. We have a dispute in the
hundreds of millions of dollars," said Stephen G. Hanks
Washington Group President. "Decisive action by the Court in
naming of an independent accounting firm to resolve this dispute
and ordering compliance with a strict schedule to reach
resolution will lead us to an outcome in the near term."
On June 1, 2001 in addition to ordering Raytheon to produce the
balance sheets, 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. In accordance
with the Judge's ruling, Washington Group has until June 30,
2001 to respond to Raytheon's balance sheet; Raytheon must then
respond to Washington's comments within 30 days. 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 confident it is entitled.
WHEELING-PITTSBURGH: Asks for Exclusivity Extension to Sept. 12
---------------------------------------------------------------
Wheeling-Pittsburgh Steel Corp., Pittsburgh-Canfield Corporation
and affiliated debtors, acting through Scott N. Opincar and
James M. Lawniczak of the Cleveland firm of Calfee, Halter &
Griswold LLP, together with Michael E. Wiles and Richard F. Hahn
of Debevoise & Plimpton of New York, asked Judge Bodoh to
further extend the time periods during which only the Debtors
may file a plan of reorganization to and including September 12,
2001, and the period during which acceptances of that plan may
be solicited to and including November 12, 2001.
Reminding Judge Bodoh that the exclusivity period gives the
debtor the ability to stabilize its operations and the
opportunity to retain control over the reorganization process,
Mr. Opincar said that since the Petition Date the Debtors have
been dealing with a multitude of complex supply, employee and
contract issues that typically arise in large and complicated
Chapter 11 cases. Simultaneously the Debtors have been
stabilizing operations and working toward the ultimate goal
of constructing a plan of reorganization by (i) working
diligently to determine whether any third parties have an
interest in acquiring all or a part of the Debtors or their
facilities, and (ii) investigating thoroughly various possible
reconfigurations of the Debtors' business that would support
continued operation as a stand-alone business. In addition, the
Debtors are in the process of reviewing and analyzing proofs of
claim which have been filed since the bar date for filing
claims. Furthermore, the Debtors have not had sufficient time to
negotiate and prepare an acceptable plan, but are making good
faith efforts toward reorganization and are paying their
postpetition debts as they become due. The Debtors continue to
negotiate in good faith with their creditors and have kept the
Official Committees fully apprised of their work and progress
towards reorganization. In no case are the Debtors seeking these
extensions to pressure creditors into accepting an
unsatisfactory plan. Furthermore, the Debtors have not had
sufficient time to negotiate and prepare an acceptable plan, but
are making a good faith effort towards reorganization and are
paying their postpetition debts as they become due. Ms.
Robertson assured Judge Bodoh that the debtors are negotiating
in good faith with their creditors and have kept the Official
Committees fully apprised of their work and progress towards
reorganization, and are not seeking the extension to pressure
creditors into accepting an unsatisfactory plan.
Based on the foregoing, the complicated and complex nature of
the Debtors' business, and the amount of work that still must be
completed in order to identify the proper plan of
reorganization, Mr. Opincar asked for the extensions for an
additional 90 days, as requested. (Wheeling-Pittsburgh
Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
WORLDPORT COMMUNICATIONS: Appoints Kathleen Cote As New CEO
-----------------------------------------------------------
Worldport Communications, Inc. (OTCBB: WRDP), a leading provider
of Internet infrastructure solutions announced that Kathleen
Cote has been appointed its Chief Executive Officer. Cote, who
has been a member of Worldport's Board of Directors since July
2000, succeeds Michael Heisley, who will continue as Chairman of
the Board. Cote brings more than 30 years of executive and
operational experience with international software and Internet
enterprises.
As chief executive officer of Worldport, Cote will be
responsible for executing Worldport's strategy to become a
leading provider of managed and scalable Internet infrastructure
solutions for global companies. Worldport recently strengthened
its position through the acquisition of hostmark, a U.K.-based
Web hosting provider, gaining Internet solution centers in the
U.K., Sweden and Germany. Worldport is ideally positioned to
take advantage of the emerging opportunity for Web hosting
services in Europe.
"I hand over the position of CEO of Worldport with complete
confidence that Kathleen Cote is the ideal person to leverage
the recent acquisition of hostmark and drive Worldport to the
next level of strategic growth," said Michael Heisley. "Her
invaluable international and operations experience coupled with
her experience in enterprise and Web-based applications and
services render her uniquely suited to establish Worldport as a
powerful competitor in the Internet solutions market."
Stated Cote, "Stepping into a key leadership position with
Worldport is a tremendous opportunity. Having served on
Worldport's Board of Directors since last July, I am well aware
that the key components are in place for Worldport to redefine
the managed hosting market in Europe." Cote continued, "I look
forward to using my experiences with international strategies
and emerging technologies to execute Worldport's strategic plans
and take advantage of the challenges and opportunities for
global Internet infrastructure companies."
Cote most recently served as president of Seagrass Partners, a
consulting firm providing strategic counsel to senior
executives. Prior to that, Cote held several positions at
Computervision Corporation, an international enterprise and data
management software services firm, most recently as president
and chief executive officer. Cote's previous positions at
Computervision included Chief Operating Officer and Vice
President of Operations. Prior to Computervision, Cote held
various management and operations positions at Wang
Laboratories, MFE Corporation and CTI Cryogenics.
About Worldport
Worldport is a premier provider of managed and scalable Internet
infrastructure solutions for global companies. Through a network
of eBusiness solution centers in Dublin, London, Stockholm and
Frankfurt, Worldport provides its clients with the
infrastructure necessary to conduct business through the
Internet. Worldport's portfolio of services includes a full
complement of managed Web hosting products and services.
Worldport maintains offices in six countries and has more than
3,800 customers worldwide. For more information on Worldport,
please visit www.wrdp.com
WORLD WIDE WIRELESS: Gives Update On Debt Restructuring
-------------------------------------------------------
World Wide Wireless Communications, Inc. (OTCBB:WLGS) announced
the successful completion of the first steps in its financial
and operational restructuring plan.
The Company has successfully negotiated and entered into a
series of Forbearance Agreements with all of its Debenture
holders and with its key equipment supplier. The Agreements
cover all of the approximately $9.5 million principal amount of
the Company's outstanding debt held by its Institutional
creditors and key equipment supplier. Under the terms of the
Agreements, the equipment supplier and the Company's
institutional creditors mutually agree not to take any action
with respect to the Company's debt for a period of no less than
six (6) months, subject to certain conditions, including
submission and approval of a revised strategic business plan and
similar forbearance by the holders of the Company's other trade
and related debt, currently totaling approximately $1 million
dollars.
The Company also announced the successful negotiation and
execution of a new bridge loan facility with certain of the
Company's current Debenture holders. The facility is intended to
provide the Company with operating funds until such time as the
Securities and Exchange Commission completes its review of the
Registration Statement with respect to the Equity Line of Credit
previously entered into by the Company and certain institutional
lenders. The bridge facility is due and payable on May 5, 2002.
Payments will be made from proceeds received from the Equity
Line when it becomes available.
The Company intends to proceed aggressively in the preparation
and implementation of a revised strategic business plan focused
on assets and businesses most likely to attract new investment
and yield the earliest possible positive cash flows. In this
regard, the Company is in negotiations with its key equipment
supplier for an equipment line of credit to support the
Company's active operations in Peru.
The Company will also continue in its ongoing efforts to
negotiate appropriate settlements and forbearances with its
other trade and related creditors to satisfy the terms of the
Agreements with its major creditors and to position the Company
to successfully execute its financial restructuring and revised
strategic plan. There can be no assurance that the Company will
succeed with these negotiations.
The Company announced that it has been granted two-way digital
licenses and construction permits for Vail, Colorado, Pierre,
South Dakota, Grand Rapids, Michigan and Ukiah, California.
BOOK REVIEW: OIL & HONOR: The Texaco Pennzoil Wars
--------------------------------------------------
Author: Thomas Petzinger, Jr.
Publisher: Beard Books
Softcover: 495 Pages
List Price: $34.95
Review by: Susan Ponnell
This is a fun read. Fun enough to take the beach, although at
500 pages it's a bit hefty to hold up while you lounge in the
sandy towel. It's got all the elements of great entertainment: a
trainload of money, courtroom melodrama, and a host of extremely
odd characters, including a couple of Texas state court judges
who could make California's Judge Ito look like Justice
Brandeis. You might even throw in a biblical analogy--many
pundits did--although for my money Pennzoil chair J. Hugh
Liedtke was a little too wily and a lot too flush to be David-
with-a-slingshot.
Everyone knows the story. In 1984 Texaco bought Getty Oil for
$9.98 billion, days after the Getty board had made a handshake
deal with Pennzoil to sell three-sevenths of its assets for a 10
percent lower price per share. Did Texaco tortiously interfere
with Pennzoil's oral contract, or was Getty free (and in fact
duty-bound) to accept Texaco's higher offer? I'll leave you
there on the edge of your seat.
Yes, the plot is familiar, but as they say, God is in the
details, and the Pulitzer Prize-winning author, a professional
journalist who covered the trial for the Wall Street Journal,
gives us details aplenty. He's sieved the most intriguing and
significant facts from a daunting amount of evidence: 50,000
pages of affidavits, hours of video testimony, 250 interviews.
You'll collect your favorite factoids as you go along. Mine have
to do with the succession of judges, the first of whom had a
close relationship with Pennzoil attorney Joe Jamail, while the
second hadn't read the trial record when he took over the gavel
and made his ignorance of the governing New York law seem almost
a point of pride.
The flamboyant Jamail (who collected $400 million fee for his
work, of which $50 million reportedly has been given to
charities) was known previously, the author tells us, for such
feats as convincing a jury that the City of Houston was
negligent for planting a tree that his client ran into while
drunk. Here, he won the verdict for his client, in part, by
exploiting that shopworn clich‚ of trial practice--the local
good ol' boys versus the big city pinstripes. Is an oral
agreement in principle a binding contract? Metaphorically
shrugging, Mr. Jamail told the jury, "Sure looks like a deal to
me." It worked like a charm.
Engrossing as the deal, trial, and verdict are, the author
offers more. His first 150 pages provide useful background on
the respective oil empires, and chronicles Getty's history in
detail.
But don't take my word that this book is worth the money. Read
what the white-shoe critics had to say when this book first came
out in 1987. "A riveting drama," said the New York Times Book
Review. "Pure excitement... More fun than flying on corporate
jet," per the Dallas Times Herald, with presumably more
experience in flying on corporate jets than I can claim. "A
real-life script fit for TV's Dallas... Harold Robbins and
Robert Ludlum let loose in the world of Texas good ol' boys and
New York takeover specialists," opined the Washington times.
So maybe you'll drop this one into your carry-on bag after all.
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
For copies of court documents filed in the District of
Delaware, please contact Vito at Parcels, Inc., at 302-658-
9911. For bankruptcy documents filed in cases pending outside
the District of Delaware, contact Ken Troubh at Nationwide
Research & Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L.
Metzler, Bernadette de Roda, Aileen Quijano and Peter A.
Chapman, Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
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