/raid1/www/Hosts/bankrupt/TCR_Public/010614.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, June 14, 2001, Vol. 5, No. 116
Headlines
AMCAST INDUSTRIAL: Enters Into New Financing Agreement
BIG V: Fleet Bank Objects To Extension Of Exclusive Period
BRIDGE INFORMATION: Thomson Presses For Decision On Contracts
CONVERSE INC.: Jack Boys Leads New Management Team
CYCLIX ENGINEERING: Texas Court Gives Go Ahead For Asset Sale
DAEWOO INTERNATIONAL: Seeks Approval of Disclosure Statement
DIGITAL FUSION: Reports Year End and First Quarter Results
E.SPIRE COMM.: Obtains Final Court Nod For $85MM DIP Financing
FINOVA GROUP: Committee Taps PwC As Financial Advisors
FRUIT OF THE LOOM: Auctioning Six Properties
GENESIS HEALTH: Classification & Treatment Of Claims Under Plan
GLENOIT CORP.: Extending Employment Agreement with CEO O'Gorman
HYBRID NETWORKS: Shares Subject To Nasdaq Delisting
IMPERIAL SUGAR: Summary Of Second Amended Disclosure Statement
INTEGRATED HEALTH: Rejecting Curative Arrangement Agreement
KEVCO INC.: Raises $9.5 Mil From Sale Of Better Bath Division
KMART CORP.: Fitch Rates Proposed $400MM Senior Notes At BB+
LECHTERS INC.: Bankruptcy Court Okays $86 Million DIP Financing
MADGE NETWORKS: Looking For Buyer Of Madge.web Unit
MEDIQ INC.: Effective Date Of Reorganization Plan Is Tomorrow
NETSOL: Reschedules Special Shareholders' Meeting to June 19
OUTSOURCE INT'L: Files For Chapter 11 To Restructure Debt
PAKISTAN INVESTMENT: Stockholders Approve Liquidation Plan
PILLOWTEX CORP.: Seeks Authority To Establish Claims Bar Dates
RELIANCE GROUP: Files Chapter 11 Petition in S.D. New York
RELIANCE GROUP: Case Summary & Lists Of Unsecured Creditors
SAFETY-KLEEN: Enters Into Settlement Agreement With ECDC
SENIOR HOUSING: S&P Assigns BB+ Corporate Credit Rating
STAFF BUILDERS: Stockholders To Meet On July 24 in New York
TECMAR TECHNOLOGIES: Emerges From Chapter 11 Bankruptcy
TELENETICS: Resolves Defaulted Notes & Sees Improved Q2 Results
THCG INC.: Nasdaq Delists Shares From Trading
TOM YOUNG'S: Albuquerque Gym Files For Chapter 7 Bankruptcy
UPRIGHT INC.: Files For Chapter 11 Protection in E.D. California
VLASIC FOODS: Committee Retains Kramer Levin As Lead Counsel
W.R. GRACE: Creditors Move To Amend Employee Obligations Order
WHEELING-PITTSBURGH: Wants To Reject Old ESM Pact & Ink New One
WHEELING-PITTSBURGH: Senior Note Rating Drops To C From Caa3
ZENITH ELECTRONICS: Posts First Quarter 2001 Results
*********
AMCAST INDUSTRIAL: Enters Into New Financing Agreement
------------------------------------------------------
Amcast Industrial Corporation (NYSE:AIZ) announced new financing
arrangements and key initiatives aimed at providing an improved
financial base for a return to profitable operations during the
second half of its next fiscal year, ending August 31, 2002.
Leo W. Ladehoff, Chairman of the Board, said, "Amcast has
entered into a new credit agreement, which provides additional
borrowing capacity for the company, with its bank lending group.
At the same time, the members of the bank lending group, as well
as the insurance company holders of the company's senior notes,
have waived, until the maturity of the new credit agreement, the
financial covenants which had caused the company to be out of
compliance under the terms of its existing loan agreements."
"We have been pleased by the cooperation from our lenders during
this trying period. The company can now concentrate on an
orderly completion of its strategic plan and reduction of debt,"
he said.
The new agreement, which matures April 15, 2002 (which may be
extended if Amcast meets certain conditions), provides for the
ability to make new borrowings initially up to $15 million,
increasing in stages to a maximum of $35 million (based on the
company meeting certain conditions), and provides a primary
security interest in the company's assets to the lenders, as
well as a subordinated security interest to the members of the
bank lending group under the existing agreement and to the
holders of the senior notes.
The new agreement provides for the payment by the company of
certain additional interest payments and fees and the issuance
to the insurance companies of warrants for the purchase of
200,000 shares of Amcast stock at current market value and
warrants for 255,000 shares to the bank lenders, also at market
value as of June 5, 2001.
The existing agreement, which has approximately $111 million
outstanding currently, matures in August of 2002. If the bank
group agrees to extend the maturity of the existing agreement to
September 2003, the bank group will receive additional fees and
255,000 additional warrants.
"The warrants provide members of the bank lending group and the
note holders with the opportunity to share in the company's
future success. We are confident that the new agreement provides
Amcast with more than adequate liquidity going forward," said
Mr. Ladehoff.
Byron O. Pond, President and Chief Executive Officer, stated
that the Company would recognize an after-tax charge of
approximately $15-$19 million during the third and fourth
quarters of its fiscal year 2001. The Company anticipates that
this unusual charge will consist of approximately 30% of a cash
component and approximately 70% of a non-cash component. During
the third quarter of fiscal 2001, the new management team
conducted a strategic review of its operations in light of the
weak manufacturing sector of our economy with a special emphasis
on the continuing weak automotive market. As a result of this
strategic review, management has decided to dispose of certain
underutilized machinery and equipment and scrap certain
inventory and tooling, which is slow moving or underutilized in
the current economic environment. As a result of the continuing
weak manufacturing sector of our economy, the Company will
increase its allowance for doubtful accounts for uncollectible
and disputed accounts receivable and will establish a valuation
allowance for foreign net operating losses that the Company
believes it may not use because of the weak economy and weakened
results of the Italian subsidiary, Speedline.
"The current actions which are resulting in these special
charges should strengthen Amcast for the future. Further, our
Board of Directors is signaling to investors that the new
management team is focused on making important decisions to help
achieve the major profit potential inherent in our businesses,"
Mr. Pond said.
Amcast also announced that it has purchased the 40 percent share
of Casting Technology Company (CTC of Franklin, Indiana) owned
by Izumi Industries of Japan. "The acquisition of the Izumi
partnership interest in CTC will enable Amcast to continue to
use proprietary squeeze casting technology as a part of its
overall strategy to serve the growing market for strong, lighter
weight, aluminum vehicle suspension components," Mr. Pond said.
The company now has in place a credible turnaround plan, with a
concentration on reducing working capital requirements,
controlling capital spending, and improving operating
performance. Mr. Pond added, "We are reeducating our workforces
in lean manufacturing concepts and focusing management on profit
drivers that will improve our performance. As these initiatives
unfold, operating losses will turn to profits. Further, we
anticipate that automotive production will improve in calendar
year 2002, which, together with new automotive component orders,
will assist Amcast's return to profitability."
There will be an Internet Webcast of the company's quarterly
conference call at 2 p.m., EDT, Wednesday, June 27, 2001, to
discuss fiscal 2001 third quarter results and the restructuring.
The Webcast can be accessed through www.amcast.com.
Amcast Industrial Corporation is a leading manufacturer of
technology-intensive metal products. Its two business segments
are brand name Flow Control Products marketed through national
distribution channels, and Engineered Components for original
equipment manufacturers. The company serves the automotive,
construction, and industrial sectors of the economy.
BIG V: Fleet Bank Objects To Extension Of Exclusive Period
----------------------------------------------------------
Fleet National Bank objects to Big V Supermarkets Inc.'s request
for a 60-day extension of its exclusive period to file a
reorganization plan and solicit plan acceptances. Fleet, the
administrative agent for Big V's pre-petition lenders, argues
that Big V should market and sell itself to a third party. In
its objection, filed with the U.S. Bankruptcy Court in
Wilmington, Del., on May 25, Fleet said such a sale represents
the most cost-effective, efficient and realistic means for
maximizing the value of Big V's estate for the benefit of its
creditors. (ABI World, June 12, 2001)
BRIDGE INFORMATION: Thomson Presses For Decision On Contracts
-------------------------------------------------------------
Thomson Global Markets and Worldscope/Disclosure, Thomson
Corporation subsidiaries, are party to over 20 different
contracts with Bridge Information Systems, Inc. The Thomson
Entities provide financial information and related services to
Bridge and Telerate, which they in turn distribute over their
networks to subscribers.
Under four of these contracts, Bridge and Telerate owe the
Thomson Entities at least $9,800,000 in pre-petition debt. The
Debtors also failed to pay their post-petition obligations, and
violated Thomson's contractual right to audit the records of
Bridge and Telerate. On top of that, the Debtors are also
accumulating over $200,000 per month in administrative expenses
to Thomson Entities.
By motion, the Thomson Entities want to know whether the Debtors
will assume or reject these four contracts:
Contract Expiry Date Due Pre-Petition Due Post-Petition
-------- ----------- ---------------- -----------------
WD/Bridge 2001 $1,235,560* $130,000 per month*
TGM/Telerate 2002 $8,000,000* (can't be determined)
WD/Telerate 2001 $ 668,000* $ 70,000 per month*
ADP 2002 $ 49,500* $ 5,500 per month*
* These are only estimated amounts. The actual obligations
are likely to be more than the conservative estimates.
Craig A. Smith, Esq., at Suelthaus & Walsh, in St. Louis,
Missouri, asks Judge McDonald to compel the Debtors to make the
decision as soon as possible or within 10 days after the court
grants this motion.
Thomson also seeks an order compelling Debtors to pay their
post-petition obligations pending the assumption or rejection of
the contracts; to provide the required royalty statements; and
to permit Thomson to audit the records of Bridge and Telerate to
determine the actual amounts due them under the contracts.
Mr. Smith noted it is important for Thomson to verify the exact
amount due pre-petition to enable Thomson to file accurate
proofs of claim by the June 29 bar date.
WD/Bridge Contract
Bridge entered into a Distributor License Agreement with WD in
November 1994. Under this agreement, Bridge agreed to provide
authorized customers to access WD's proprietary information
through Bridge's electronic delivery system.
Telerate/TGM Contract
Telerate entered into an Optional Service Agreement with TGM on
May 1998. Under the agreement, Telerate agreed to redistribute
TGM's proprietary information to authorized customers through
its electronic delivery system. Telerate billed customers for
the use of TGM's proprietary information directly and collected
the payments from those customers on TGM's behalf. Telerate was
authorized to deduct a royalty (30 percent in 2000, 25 percent
in 2001) on all charges it billed and collected. TGM was
required to remit the rest to TGM on a monthly basis. Telerate
enjoys a whopping $250,000 royalty per month based on the
revenues generated under this contract.
Telerate/WD
Telerate entered into an oral Distributor License Agreement with
WD under the same terms of the WD/Bridge Contract. Telerate
also earns significant monthly income by transmitting WD's
proprietary information, which cannot be obtained elsewhere.
ADP
ADP, a predecessor-in-interest to Bridge, entered into a Master
Data Base Agreement with a predecessor to WD on January 1985.
Under the agreement, ADP agreed to redistribute proprietary
information on a non-exclusive basis to authorized customers
through its electronic delivery system. Bridge assumed this
agreement in November 1998. Bridge bills for the use of WD's
proprietary information directly and collects the payments from
those customers on WD's behalf. Bridge is authorized to deduct
a 50 percent royalty on all charges it bills and collects, and
must remit the remaining 50 percent to WD on a monthly basis by
no later than 45 days after the end of the month during which
the applicable service was rendered.
Since the Debtors are still using Thomson's products, Mr. Smith
contended, it is only fair for Bridge and Telerate to pay for
it.
While the Debtors obtained a debtor-in-possession financing
order, Mr. Smith doubts if $30 million of the funds advanced to
the Debtors to continue operations will be sufficient to pay all
administrative expenses that will accumulate. Thomson also
anticipates that the proceeds of the sale of the Debtors' assets
will go to the Debtors' pre-petition lenders. So unless the
Debtors paid or committed to pay the substantial administrative
expenses accumulating under the contracts or elect to assume and
assign such agreements at the request of a prospective
purchaser, the obligations due to Thomson could remain unpaid.
(Bridge Bankruptcy News, Issue No. 8; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
CONVERSE INC.: Jack Boys Leads New Management Team
--------------------------------------------------
Some things are worth saving. When investor group Footwear
Acquisition, Inc., acquired the Converse athletic brand in late
April 2001 from a company in Chapter 11 bankruptcy, the new
owners bought a historical symbol deeply imbedded in American
popular culture. Determined to maintain the legendary Converse
spirit and to successfully compete in a global business economy,
new co-chairmen William Simon and Marsden Cason recently
announced the company's new all-star executive team and set a
plan in motion to re-ignite the brand.
The new team is led by chief executive officer Jack Boys, an
athletic shoe and sporting goods industry veteran, recognized
for his marketing leadership that put The North Face Inc. on the
map in the late 1990s. Boys, a one-time Converse employee,
created the successful line of basketball products that were
launched with the memorable "Grandma-ma" campaign in the early
1990's. He then led marketing at Avia Athletic Footwear before
being recruited by Simon and Cason to drive marketing at The
North Face. Boys intends to quickly develop new product
leadership and branding strategies and reconstruct Converse into
a new economy company by rebuilding its infrastructure from the
ground up. His priority is to uphold the brand's image and
quality by creating a worldwide product design and development
center that will provide footwear and related products for the
worldwide marketplace.
Founded in 1908, Converse gained notoriety among basketball
players and fans with its canvas All Star(R) basketball shoes
that took on the name of 1920s basketball hero Chuck Taylor. In
the past 93 years Chuck Taylor(R) shoes have become the world's
most popular athletic shoe, selling more than 750 million pairs.
The brand expanded into multiple sports categories and reached
cult status in the '70s, '80s and '90s through its association
with pop icons such as Happy Days, grunge band Nirvana, and
sports legends Magic Johnson, Jimmy Connors and Larry Bird.
"Converse is an icon that is revered and as much a part of the
cultural fabric as Coca-Cola and Levi's," Simon said. "It is
distinctly American and encompasses the individualistic American
spirit. The new executive team will capitalize on that
foundation and drive the brand to new levels."
In May, Boys, Simon and Cason assembled an MVP cast of
executives with more than a century's-worth of product
leadership and branding expertise to carry out the new vision,
including:
* Lisa Kempa, Vice President Finance -- a strategic
planning and financial leader, most recently with The North Face
Inc.
* Laura Kelley, Vice President Legal -- an eleven-year
Converse executive with responsibility for the corporation's
legal activities.
* Jim Stroesser, Vice President Sales -- recently director
of sales for Oakley Inc. and a successful sales leader for Nike,
LA Gear, Kaepa and New Balance.
* David Maddocks, Vice President Marketing and Product
Development - a big-picture marketing strategist formerly with
RealNetworks, K2 and Avia.
* Tim Ouellette, Vice President Licensing -- a long-time
international licensing, business development, sales and
marketing executive with past ties to Le Coq Sportif, Deckers
Outdoor Corp., Donnay and other prominent sports-related
marketing organizations.
* Lloyd Wallsten, Vice President Distribution -- a 24-year
distribution management expert who formerly developed systems
for major e-commerce start-ups and sporting goods companies such
as The North Face.
* Jerry Lan, Managing Director of Far East Operations -- a
former director for Pou Chen Manufacturing overseeing the
production of high-end, technical products for Timberland and
Nike, Inc. Mr. Lan has also led development for adidas, K-Swiss,
and Diadora.
* Ellen Garvey, Director of Information Technology, who
brought Converse corporate offices and distribution centers into
the digital age when she joined the company in 1987.
Immediately the management team intends to fully staff its
corporate offices and focus on delivering previously written
product orders. Once the systems are in place, product teams
will focus on expanding Converse's reach across several sports
categories.
"Consumers made Converse into a world-class brand. Nothing will
ever change that," Boys said. "Some of the greatest athletes in
the world performed legendary feats in Converse products. The
brand has a legitimacy that will continue to be validated
through premier performance products."
About Converse Inc.
Footwear Acquisition, Inc. was incorporated on February 22, 2001
and changed its name to, Converse Inc. on May 21, 2001. Converse
is led by Marsden Cason, William Simon and Perseus
Acquisition/Recapitalization Fund, L.L.C. Cason and Simon have
extensive experience owning and operating branded sporting goods
companies. Perseus Acquisition/ Recapitalization Fund, L.L.C. is
a private equity fund formed to back successful management teams
and make substantial investments in leveraged acquisitions and
recapitalizations of operating companies.
CYCLIX ENGINEERING: Texas Court Gives Go Ahead For Asset Sale
-------------------------------------------------------------
The Honorable Harold C. Abramson, US Bankruptcy Court, Northern
District of Texas entered an order on May 25, 2001 authorizing
and approving the motion of the debtors, Cyclix Engineering
Corp. and PC Service Source, Inc. to sell the assets of Cyclix
to Teleplan Services Texas, Inc., purchaser.
The purchase price for the assets comprises $3.85 million
subject to certain adjustments; a promissory note in the amount
of $881,756, subject to adjustments; a promissory note in the
amount of $2.25 million maturing on the last day of the 39th
full calendar month following the Closing Date; and two warrants
for the purchase of 37,500 shares of Teleplan International N.V.
at an exercise price of 35.00 Euro, having a term of 4 years and
the assumption of certain Assumed Obligations.
DAEWOO INTERNATIONAL: Seeks Approval of Disclosure Statement
------------------------------------------------------------
Daewoo International (America) Corp., seeks entry of an order
approving its Disclosure Statement dated May 4, 2001 and
scheduling a hearing on September 6, 2001, to consider
confirmation of the plan.
DIGITAL FUSION: Reports Year End and First Quarter Results
----------------------------------------------------------
IBS Interactive, Inc. d/b/a Digital Fusion (Pink Sheets:IBSX),
an Information Technology and e-Business professional services
provider, announced its results for the quarter ended December
31, 2000 ("Fourth Quarter") and the quarter ended March 31, 2001
("First Quarter").
Revenues for the quarter ended December 31, 2000 and year ended
December 31, 2000 were $5,671,000 and $23,363,000 respectively.
Gross profit for the Fourth Quarter was $1,042,000 representing
18% of revenue. Selling, general and administrative costs for
the Fourth Quarter decreased $186,000 to $3,084,000 compared to
the quarter ended September 30, 2000. Net loss for the quarter
was $5,709,000 and loss from the Company's continuing operations
before interest, taxes, depreciation and amortization adjusted
to exclude merger, severance, and restructuring charges and loss
on sale of business ("Adjusted EBITDA") was $1,917,000. The net
loss for the quarter ended December 31, 2000 included $2,736,000
in restructuring costs, merger expenses and disposal of
discontinued operations.
Revenue for the quarter ended March 31, 2001 was $5,059,000, a
decrease of $612,000 from the Fourth Quarter. Gross profit for
the First Quarter was $1,051,000 representing 21% of revenue, an
increase in gross profit percent of 3% from the previous
quarter. The First Quarter's gross profit improvement was
primarily related to the restructuring efforts made in the
Fourth Quarter, including the closing of the Company's
Washington DC operation and New Jersey network services
division. Additionally, in April 2001, the Company sold its New
Jersey-based web hosting operation and closed its Detroit
operation. Selling, general and administrative costs for the
First Quarter decreased $1,005,000 to $2,079,000 compared to the
quarter ended December 31, 2000 primarily from the Fourth
Quarter restructuring. Net loss for the quarter ended March 31,
2001 was $1,916,000 and Adjusted EBITDA loss from the Company's
continuing operations was $845,000. Nicholas R. Loglisci, Jr.,
Digital Fusion's CEO commented, "Excluding one-time costs, our
EBITDA for the First Quarter of this year improved by almost $1
million as compared with the Fourth Quarter of 2000. We believe
this improvement in our performance was due to our intense
efforts to restructure our operations and realign our service
offerings to meet our prime goal of becoming cash-flow
positive."
Current assets on December 31, 2000 and March 31, 2001 were
$5,630,000 and $5,271,000 respectively. The Company has
continued to meet its ongoing working capital needs in 2001 from
a combination of approaches, namely, continued improvements in
the operational performance of ongoing business lines,
consistent collections of accounts receivable, cost savings
realized from prior restructurings, the sale of its web hosting
business and the curtailment of payments of certain debts
associated with discontinued business units, restructuring
efforts and the termination of the Infonautics merger. Karen
Surplus, Digital Fusion's Chief Financial Officer said "During
2001, the Company is focusing on reducing its non-essential
costs and accounts receivable days sales outstanding to optimize
its cash balances."
With the April 2001 restructuring, the Company believes it has
taken the steps necessary to become cash flow positive from its
continuing operations during the second half of 2001. However,
the Company expects to receive a going concern opinion because
of its previous losses and significant liabilities related to
its discontinued business units, restructuring efforts and the
termination of the Infonautics merger. The ability of the
Company to continue as a going concern is dependent upon
restructuring certain liabilities and obtaining cash flow from
external sources. In order for the Company to execute its
current plan to raise additional capital, it will have to
negotiate with certain creditors to reduce these liabilities and
this process has already begun. If the Company is successful in
obtaining agreements with its creditors to reduce these
liabilities, the Company believes it will be able to raise
capital to pay down the restructured liabilities as well as fund
the Company's ongoing capital needs. If the Company cannot
restructure the liabilities related to its discontinued
operations, restructuring and Infonautics merger termination, it
will be required to re-examine its current business and
capitalization plans.
April 2001 Adjusted EBITDA for the Company's continuing
operations was approximately breakeven. Additionally, the
percentage of time the Company's revenue generating consultants
billed (consultant utilization) for April and May 2000 were at
12-month highs. "The success of the aggressive moves we made
starting late last year are clear and obvious," said Roy
Crippen, President and Chief Operating Officer. "We have
successfully reduced cash burn from continued operations by over
a million dollars a month, we have successfully shifted the
revenue of the company to primarily professional services, we
have successfully moved our corporate headquarters and reduced
corporate overhead, we have successfully increased our pipeline
of new business, we have successfully maintained our high level
of customer satisfaction and we have successfully improved
employee morale." Mr. Crippen concluded, "We now have to work
very hard on achieving similar success in restructuring our
legacy debt."
About Digital Fusion
Digital Fusion provides comprehensive e-Business and information
technology (IT) solutions to businesses, organizations and
public sector institutions in the Eastern U.S. We have over 10
years of experience designing, developing, and integrating
complex business systems, providing a range of services,
including strategy, development, desktop support, network, and
education services. For additional information regarding Digital
Fusion's services, visit the Company web site at
http://www.digitalfusion.com
E.SPIRE COMM.: Obtains Final Court Nod For $85MM DIP Financing
--------------------------------------------------------------
e.spire Communications, Inc. (OTC Bulletin Board: ESPIQ)
announced that the Bankruptcy Court of the District of Delaware
approved the remaining $45 million of the $85 million debtor-in-
possession financing committed by a group led by Foothill
Capital and Ableco Finance, LLC. The group includes e.spire
Chairman George Schmitt, who personally invested $10 million in
the DIP financing. The Court previously approved $25 million of
the financing on April 10 and an additional $15 million on May
16.
"While we are pleased to have this DIP financing available to
us, we plan to use as little of it as possible while we continue
to negotiate for funding to take us out of Chapter 11," said
Schmitt. "We hope to have exit financing and a restructuring
plan in place soon and to have a Court-set emergence date as
soon as possible."
e.spire expects that the Court-ordered emergence date will occur
approximately two months after the restructuring plan is
submitted to the Court.
e.spire Communications, Inc. is a leading integrated
communications provider, offering traditional local and long
distance, dedicated Internet access, and advanced data
solutions, including ATM and frame relay. e.spire also provides
Web hosting, dedicated server, and colocation services through
its Internet subsidiary, CyberGate, Inc., and its subsidiary
ValueWeb. e.spire's subsidiary, ACSI Network Technologies, Inc.,
provides third parties, including other communications concerns,
municipalities, and corporations, with turnkey fiber-optic
design, construction, and project management expertise. More
information about e.spire is available at e.spire's Web site,
http://www.espire.net
FINOVA GROUP: Committee Taps PwC As Financial Advisors
------------------------------------------------------
The Official Committee of Unsecured Creditors in The FINOVA
Group, Inc.'s chapter 11 cases, moved the Court for entry of an
order under section 1103(a) of the Bankruptcy Code, authorizing
the employment and retention of the accounting and consulting
firm of PricewaterhouseCoopers LLP as financial advisors to the
Creditors' Committee nunc pro tunc March 7, 2001.
The Creditors' Committee told the Court it is familiar with the
professional standing and reputation of PricewaterhouseCoopers.
PricewaterhouseCoopers has a wealth of experience in providing
accounting, tax and financial advisory services in
restructurings and reorganizations and enjoys an excellent
reputation for services it has rendered in large and complex
chapter 11 cases on behalf of debtors and creditors throughout
the United States, the Committee represented.
Moreover, the firm has an extensive understanding of the Debtors
through its previous retention as financial advisors to the Bank
Steering Committee. PricewaterhouseCoopers was retained in this
capacity in June 2000 and has developed considerable knowledge
of the Debtors' internal financial operations, the Committee
notes.
The Committee represented that the services of
PricewaterhouseCoopers are necessary to enable the Creditors'
Committee to assess and monitor the efforts of the Debtors and
their professional advisors to maximize the value of their
estates and to reorganize successfully. The Committee believes
that the knowledge and experience developed by
PricewaterhouseCoopers will be invaluable to the successful
reorganization of the Debtors in connection with the proposed
employment and retention.
The Committee contemplates that PricewaterhouseCoopers will
provide such consulting and advisory services as the firm and
the Creditors' Committee, including its legal advisors, deem
appropriate and feasible, including assistance and/or advise to
the Committee in:
(1) the review of financial related disclosures required by the
Court, including the Schedules of Assets and Liabilities,
the Statement of Financial Affairs and Monthly Operating
Reports;
(2) a review of the Debtors' short-term cash management
procedures;
(3) a review of the Debtors' proposed key employee
retention and other critical employee benefit programs;
(4) the Debtors' identification of core business assets and the
disposition of assets or liquidation of unprofitable
operations;
(5) a review of the Debtors' performance of cost/benefit
evaluations with respect to the affirmation or rejection of
various executory contracts and leases;
(6) the valuation of the present level of operations and
identification of areas of potential cost savings, including
overhead and operating expense reductions and efficiency
improvements;
(7) the review of financial information distributed by the
Debtors to creditors and others, including, but not limited
to, cash flow projections and budgets, cash receipts and
disbursement analysis, analysis of various asset and
liability accounts, and analysis of proposed transactions
for which Court approval is sought;
(8) attendance at meetings and assistance in discussions with
the Debtors, the Official Bank Group Steering Committee,
potential investors, banks and other secured lenders in the
FINOVA chapter 11 case, the U.S. Trustee, other parties in
interest and professionals hired by the same, as requested;
(9) the review and/or preparation of information and analysis
necessary for the confirmation of a Plan of Reorganization;
(10) the evaluation and analysis of avoidance actions, including
fraudulent conveyances and preferential transfers;
(11) litigation advisory services with respect to accounting and
tax matters, along with expert witness testimony on case
related issues as required by the Creditors' Committee;
(12) such other general business consulting or such other
assistance as the Creditors' Committee or its counsel may
deem necessary;
(13) the review and analysis of the Berkadia, LLC transaction
and any alternatives; and
(14) updating of the Bank Steering Committee on financial or
operational matters of the Debtors to the extent approved
by the Creditors Committee.
Terms of Retention
The customary hourly rates, subject to periodic adjustments,
charged by PricewaterhouseCoopers' personnel anticipated to be
assigned to this case are:
Partners / Managing Directors $ 500 - $ 595
Directors 430 - 525
Managers 370 - 430
Senior Associates 265 - 375
Associates / Paraprofessionals 160 - 265
Administrative 70 - 100
The Creditors' Committee understands that PricewaterhouseCoopers
intends to apply to the Court for allowances of compensation and
reimbursement of expenses for its financial advisory support
services in accordance with the applicable provisions of the
Bankruptcy Code, the Bankruptcy Rules, corresponding local
rules, orders of this Court and guidelines established by the
United States Trustee.
Disinterestedness and Eligibility
PricewaterhouseCoopers has informed the Creditors' Committee
that, except as may be set forth in the Affidavit of David R.
Williams, a Partner in PricewaterhouseCoopers LPP, it does not
hold any interest adverse to the Creditors' Committee and
believes it is eligible to represent the Creditors' Committee
under Section 1103(b) of the Bankruptcy Code.
The Committee also noted that PricewaterhouseCoopers will
conduct an ongoing review of its files to ensure that no
conflicts or other disqualifying circumstances exist or arise
and will supplement its disclosure to the Court if any new facts
or circumstances are discovered. Other than with its own
partners and employees, PricewaterhouseCoopers has agreed not to
share with any person or firm the compensation to be paid for
professional services rendered in connection with these cases.
Mr. Williams, in his affidavit, advised that
PricewaterhouseCoopers has provided and likely will continue to
provide significant services unrelated to the Debtors' case to
Berkshire Hathaway, Inc., Leucadia National Corp., and Gibson,
Dunn & Crutcher LLP, attorneys to the Debtors. In addition,
PricewaterhouseCoopers has retained and will likely continue to
retain Gibson, Dunn & Crutcher LLP to represent
PricewaterhouseCoopers in matters unrelated to the Debtors'
case. PricewaterhouseCoopers, from time to time, has also
represented certain Debtors in the analysis of certain loan
workout situations. Specifically, PricewaterhouseCoopers Canada,
a Canadian affiliate, assisted FINOVA Canada, a subsidiary of
FINOVA Capital Corporation, with such analysis. This engagement
has been completed. The firm does not believe these matters
create a situation adverse to the creditors of the Debtors or
the Debtors themselves.
Mr. Williams also revealed that PricewaterhouseCoopers was
involved in a matter adverse to John W. Teets, a member of the
Debtors' Board of Directors but PricewaterhouseCoopers is no
longer involved in this matter.
In addition, PricewaterhouseCoopers has provided and likely will
continue to provide services unrelated to the Debtors' case for
the following entities, none of which represented more than 1%
of PricewaterhouseCoopers' United States annual revenue for the
prior fiscal year:
Audit Clients
-------------
Allfirst Bank, Bank of America, Bank of Montreal, Bank of Nova
Scotia, The Berkshire Hathaway, Inc., BNP-Paribas, Chase
Manhattan Bank, CIBC/CIBC Oppenheimer, Citibank N.A/Citicorp
Securities, Commerzbank AG, Credit Industriel et Commercial,
Dai-Ichi Kangyo Bank Ltd., Firstar Bank, N.A., Fuji Bank, Ltd.,
Goldman Sacks, KBC, Leucadia National Corp., Mitsubishi Trust
and Banking Corporation, Royal Bank of Canada, San Paolo Bank,
US Bank
Other Tax-Related Clients
-------------------------
ABN AMRO, Allfirst Bank, Bank of Amenca, Bank of Montreal, Bank
of Nova Scotia, The Bank One, BNP-Paribas, Chase Manhattan Bank,
CIBC/CIBC Oppenheimer, Citibank N.A/Citicorp Securities,
Comnerzbank AG, Credit Industriel et Commercial, CSFB, Den
Danske Bank Aktieselskab, Dresdner Bank AG, Goldman Sachs, KBC,
Leucadia National Corp., Mitsubishi Trust and Banking
Corporation, Royal Bank of Canada, US Bank, Yasuda Trust &
Banking
Consulting Support Clients
--------------------------
ABN AMRO, Allfirst Bank, Banca di Roma, Bank Hapoalim, B.M.,
Bank of America, Bank of Montreal, Bank of New York, Bank of
Nova Scotia, The Bank One, Banque Nationale de Paris, Banque
Paribas, Bayerische Landesbank, BNP-Paribas, Chase Manhattan
Bank, CIBC/CIBC Oppenheimer, Citibank N.A/Citicorp Securities,
Clifford Chance Rogers & Wells, Commerzbank AG, Credit Agricole
Indosuez, Credit Lyonnais, CSFB, Den Danske Bank Aktieselskab,
Deutsche Bank AG, Dresdner Bank AG, First Union Capital Markets,
Fuji Bank, Ltd., Gibson, Dunn & Crutcher LLP, Goldman Sachs
Imperial Bank, John W. Teets, KBC, Mayer Brown & Platt,
Mitsubishi Trust and Banking Corporation, Royal Bank of Canada,
San Paolo Bank, Sanwa Bank, Ltd., Societe Generale, US Bank,
Wells Fargo Bank, Yasuda Trust & Banking.
Furthermore, PricewaterhouseCoopers has in the past, may
currently and will likely in the future be working with or
against other professionals involved in the FINOVA cases in
matters unrelated to the Debtors and these cases. Mr. Williams
represents that, based on the firm's current knowledge of the
professionals involved, and to the best of his knowledge, none
of these business relationships create interests materially
adverse to the Debtors herein in matters upon which
PricewaterhouseCoopers is to be employed, and none are in
connection with this case.
Mr. Williams recognizes that it is likely that certain employees
of PricewaterhouseCoopers, including Partners, hold equity
securities. Mr. Williams believes this does not render
PricewaterhouseCoopers ineligible to represent the Committee
under section 1103 of the Bankruptcy Code.
Mr. Williams submitted that, based on the results of the
relationship search conducted to date, PricewaterhouseCoopers
insofar as he has been able to ascertain, is a "disinterested
person" as that term is defined in section 101(14) of the
Bankruptcy Code, as modified by section 1107(b) of the
Bankruptcy Code.
According to PricewaterhouseCoopers' books and records, during
the ninety-day period prior to the Debtors' petition date,
PricewaterhouseCoopers received $1,657,728.24 from the Debtors
for professional services performed and expenses incurred. There
are no outstanding prepetition invoices as of the petition date.
Dispute Resolution Provisions
The Creditors' Committee and PricewaterhouseCoopers have agreed,
subject to the Court's approval, that:
(1) Any controversy or claim with respect to, in connection
with, arising out of, or in any way related to this
Application or the services provided by
PricewaterhouseCoopers to the Creditors' Committee as
outlined in this Application, including any matter involving
a successor in interest or agent of the Creditors' Committee
or of PricewaterhouseCoopers, shall be brought in the
Bankruptcy Court or the District Court for the District of
Delaware if such District Court withdraws the reference;
(2) PricewaterhouseCoopers and the Creditors' Committee and any
and all successors and assigns thereof, consent to the
jurisdiction and venue of such court as the sole and
exclusive forum (unless such court does not have or retain
jurisdiction over such claims or controversies) for the
resolution of such claims, causes of actions or lawsuits;
(3) PricewaterhouseCoopers and the Creditors' Committee, and any
and all successors and assigns thereof, waive trial by jury,
such waiver being informed and freely made;
(4) If the Bankruptcy Court, or the District Court if the
reference is withdrawn, does not have or retain jurisdiction
over the claims and controversies in question,
PricewaterhouseCoopers and the Creditors' Committee, and any
and all successors and assigns thereof, will submit first to
non-binding mediation, and if mediation is not successful,
then to binding arbitration, in accordance with the dispute
resolution procedures; and
(5) Judgment on any arbitration award may be entered in any
court having proper jurisdiction.
Further, PricewaterhouseCoopers has agreed not to raise or
assert any defense based upon jurisdiction, venue, abstention or
otherwise to the jurisdiction and venue of the Bankruptcy Court
or the District Court for the District of Delaware (is such
District Court withdraws the reference) to hear or determine any
controversy or claims with respect to, in connection with,
arising out of, or in any way related to the Application or the
services provided under it. (Finova Bankruptcy News, Issue No.
8; Bankruptcy Creditors' Service, Inc., 609/392-0900)
FRUIT OF THE LOOM: Auctioning Six Properties
--------------------------------------------
Pursuant to Judge Walsh's order, under 11 U.S.C. 105(a), 363 and
1146(c), Fruit of the Loom, Ltd. and its affiliated debtors are
authorized to consummate an auction of non-operating real
property without further Court approval. Debtor gives notice of
the proposed auction dates and locations for the following
assets:
(A) June 11, 2001, 10 a.m., property located at
#7 Cannon Street, York, South Carolina;
(B) June 12, 2001, 10a.m., property located at
135 Mallard Road, Winfield, Alabama;
(C) June 13, 2001, 10 a.m., property located at
One Fruit of the Loom Drive, Greenville, Mississippi;
(D) June 14, 2001, 10 a.m., property located at
1425 Ohlendorf Road, Osceola, Arkansas;
(E) June 19, 2001, 9 a.m., property located at
1101 Greenburg Road, Campbellsville, Kentucky; and
(F) June 19, 2001, 3 p.m., property located at
U.S. 421 South, Frankfurt, Kentucky.
For further information regarding the assets, directions or a
copy of the bidding and auction procedures, contact the
auctioneer at (410) 653-4000 or (800) 722-3334. (Fruit of the
Loom Bankruptcy News, Issue No. 30; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
GENESIS HEALTH: Classification & Treatment Of Claims Under Plan
---------------------------------------------------------------
Unless otherwise specified, the information in the following
tables and in the sections below are based on calculations as of
June 30, 2001.
The estimation of recoveries makes the following assumptions:
-- The new debt instruments to be issued under Genesis Health
Ventures, Inc. & The Multicare Companies, Inc.'s Plan of
Reorganization have a value equal to their face amounts.
-- The enterprise value for the Debtors is $1,525,000,000
(including cash on hand). This amount, less cash on hand of
$25,000,000, is the mid-point of the range of valuations for
the Genesis Debtors and the Multicare Debtors.
-- The aggregate amount of allowed secured claims against the
Genesis Debtors (excluding the Genesis Senior Lender Claims)
is $115,077,000 and against the Multicare Debtors (excluding
the Multicare Senior Lender Claims) is $26,318,000.
-- The aggregate amount of Genesis Senior Lender Claims is
$1,198,460,000 (excluding postpetition interest and before
giving effect to postpetition payments) and the aggregate
amount of the Multicare Senior Lender Claims is $443,400,000
(excluding postpetition interest).
-- The aggregate amount of general unsecured claims against the
Genesis Debtors is $467,494,000 (excluding the claims of the
Multicare Debtors against the Genesis Debtors) and the
aggregate amount of the general unsecured claims against the
Multicare Debtors is $284,256,000 (excluding the claims of
the Genesis Debtors against the Multicare Debtors).
-- For purposes of the recovery estimate, no current value is
included for the New Warrants because they are priced at the
approximate projected value of the New Common Stock. However,
under a Black-Scholes analysis, the New Warrants would have a
value between $8,500,000 and $12,100,000.
Treatment of Genesis Creditors and Shareholders
Class/ Estimated
Voting Description Treatment Recovery
------ ----------- --------- ---------
-- Debtor in Possession Payment of all amounts 100%
No Credit Agreement outstanding, and cash
Claims collateralization or
replacement of
outstanding L/Cs by
L/Cs issued under
the exit facility.
-- Other Administrative Paid in full. 100%
No Expense Claims
-- Priority Tax Paid in full or with 100%
No Claims interest over a period
not to exceed 6 years
from the date of
assessment of the tax.
G1 Other Secured See separate descriptions See
See Claims below. below
Below
G2 Senior Lender $195,979,000 in cash* 79.14%
Yes Claims $99,923,000 in New
Senior Notes
$31,000,000 in New
Conv Preferred Stock
74.58% of New Common
Stock.
*cash payments through
June 30, 2001
G3 Priority Non-Tax Paid in full. 100%
No Claims
G4 General Unsecured Uninsured claims: 67% 6.94%
Yes Claims of the New Common Stock (exclusive
17.25% of New Warrants. of value
of New
Insured claims: Paid in Warrants)
ordinary course of
business from and to
the extent of insurance
proceeds; any portion
not covered by insurance
will be treated in same
manner as uninsured claims.
G5 Senior Subordinated 3.22% of New Common Stock 6.94%
Yes Note Claims 82.75% of New Warrants. (exclusive
of value
of New
Warrants)
G6 Intercompany Claims Unimpaired. 100%
No
G7 Punitive Damage No distribution (except None
No Claims to the extent covered
by insurance).
G8 Series G Preferred No distribution. None
No Stock Interests
G9 Series H Preferred No distribution. None
No Stock Interests
G10 Series I Preferred No distribution. None
No Stock Interests
G11 Common Stock No distribution. None
No Interests
Treatment of Subclasses
Class/ Estimated
Voting Description Treatment Recovery
------ ----------- --------- ---------
G1-1 Broad Street Office $1,600,000 mortgage 100%
No Building reinstated
148 West State Street,
Kennett Square, Pa.
(Pa. IDA)
G1-2 Broad Street Office $985,039 mortgage 100%
No Building reinstated
148 West State Street,
Kennett Square, Pa.
(Pa. IDA)
G1-3 Pleasant View Center $8,864,446 mortgage 100%
No (HUD) reinstated
G1-4 Country Village $1,810,259 mortgage 100%
No Center (HUD) reinstated
G1-5 Abington Manor $3,475,000 mortgage 100%
No (Lackawanna County reinstated
IDA)
G1-6 Silver Lake Center $2,155,000 mortgage 100%
No (Del. EDA Bonds) reinstated
G1-7 River Street Center $2,430,000 mortgage 100%
No (Luzerne County IDA) reinstated
G1-8 Kresson View Center $5,535,000 mortgage 100%
No (NJEDA Refunding reinstated
Bonds)
G1-9 Mifflin Court $2,474,000 mortgage 100%
No (ElderTrust) reinstated (as previously
reduced and approved by
the Bankruptcy Court)
G1-10 Oaks Center $3,500,086 mortgage 100%
No (ElderTrust) reinstated (as previously
reduced and approved by
the Bankruptcy Court)
G1-11 Coquina Assisted $1,400,000 mortgage 100%
No Living (ElderTrust) reinstated (as previously
reduced and approved by
the Bankruptcy Court)
G1-12 Homestead Center $19,325,829 mortgage 100%
No Kimberly Hall South reinstated
Center
Kimberly Hall North
Center
Seaford Center
Milford Center
Windsor Center
(U.S. Bank, N.A., as
trustee for the
"Bradford Bonds")
G1-13 Brakeley Park New secured note maturing 100%*
Yes Center (HUD) on January 1, 2033, in
$7,985,079 principal
amount with annual interest
at 8.5% and level monthly
payments of principal and
interest
G1-14 North Cape Center New secured note maturing 100%*
Yes (HUD) on March 1, 2036, in
$5,573,020 principal amount
with annual interest at
8.0% and level monthly
payments of principal and
interest
G1-15 Oak Hill Center Return the collateral 100%*
Yes (HUD)
G1-16 Rittenhouse Pine New secured 10 year note 100%*
Yes Center (Meditrust) in $5,000,000 principal
amount with annual interest
at 8% and level monthly
payments of principal and
interest based on a 25-year
amortization schedule
(unsecured deficiency of
$1,690,441)
G1-17 Atlantis Center New secured 5-1/2 year 100%*
Yes Bowmans Center note in $45,000,000
Fairway Center principal amount with annual
Oakwood Center interest at LIBOR plus 5%
Riverwood Center and no amortization before
Tierra Center maturity (secured deficiency
Willimsburg Center of $33,236,000)
Windham Center
Woodmont Center
(synthetic lease lenders)
* Based on a valuation of the collateral securing these
claims. Section 506(a) of the Bankruptcy Code provides that a
claim is secured only to the extent of the value of the
underlying collateral. The deficiency claims of the holders of
claims in Class G1-16 are part of Class G4 (Genesis General
Unsecured Claims). The obligations of the Genesis Debtors under
the synthetic lease (Class G1-17) are secured by the property
identified above and by all the property of the Genesis Debtors
that secures the claims in Class G2. Therefore the deficiency
claims of the holders of claims in Class G1-17 are part of Class
G2 (Genesis Senior Lender Claims).
In addition to subclasses G1-1 through G1-17,
there are other subclasses of miscellaneous secured claims of
approximately $3,536,000 against the Genesis Debtors, each of
which will be treated as a separate class. This class also
includes certain contingent claims of Bank of America, N.A. in
connection with a guaranty by Genesis of the obligations of the
Age Institute. Under the Plan of Reorganization, either these
claims will be reinstated or the Reorganized Debtors will return
the property securing such claim. These claims are not impaired
and the holders are not entitled to vote to accept or reject the
Plan of Reorganization.
Treatment of Multicare Creditors and Shareholders
Class/ Estimated
Voting Description Treatment Recovery
------ ----------- --------- ---------
-- Debtor in Payment of all amounts 100%
No Possession outstanding, and cash
Credit Agreement collateralization or
Claims replacement of
outstanding L/Cs by
L/Cs issued under the
exit facility.
-- Other Administrative Paid in full. 100%
Expense Claims
-- Priority Tax Claims Paid in full or with 100%
No interest over a period
not to exceed 6 years
from the date of
assessment of the tax.
M1 Other Secured See separate See
See Claims descriptions below. below
below
M2 Senior Lender $25,000,000 in cash 81.68%
Yes Claims $147,682,000 in New
Senior Notes
$11,600,000 in New
Conv Preferred Stock
21.35% of New Common Stock.
M3 Priority Non-Tax Paid in full. 100%
No Claims
M4 General Unsecured Uninsured: 0.18% of 5.67%
Yes Claims New Common Stock.
Insured: Paid in
ordinary course of
business from and to the
extent of insurance
proceeds; any portion of
not covered by insurance
will be treated in same
manner as uninsured claims.
M5 Senior Subordinated No distribution. 0.00%
No Note Claims
M6 Intercompany Claims Unimpaired. 100%
No
M7 Punitive Damage No distribution (except None
No Claims to the extent covered by
insurance).
M8 Common Stock No distribution. None
No Interests
(Genesis/Multicare Bankruptcy News, Issue No. 10; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
GLENOIT CORP.: Extending Employment Agreement with CEO O'Gorman
---------------------------------------------------------------
Glenoit Corporation and its debtor affiliates seek to extend the
services of Thomas O'Gorman as President and CEO from June 29,
2001 through December 31, 2001, at a base salary of $200,000
for the extended period. O'Gorman has already received a
$300,000 severance payment.
The debtors requested that the court authorize and approve the
terms of O'Gorman's continued employment. The debtors are
represented by Neal Batson, Matthew W. Levin and Mark I. Duedall
of Alston & Bird LLP, Atlanta Georgia and Joel A. Waite and
Edmon Morton of Young Conaway Stargatt & Taylor LLP, Wilmington,
DE.
A hearing on the motion will be held on June 15, 2001 at 11:30
AM, US Bankruptcy Court, District of Delaware.
HYBRID NETWORKS: Shares Subject To Nasdaq Delisting
---------------------------------------------------
Hybrid Networks Inc. (Nasdaq: HYBR), the worldwide leader in
high-capacity MMDS fixed broadband wireless Internet access
systems, has received a Staff Determination letter dated June 7,
2001, from the Nasdaq National Market stating that Hybrid has
failed to comply with the minimum market capitalization
requirement for continued listing set forth in Marketplace Rule
4450(b)(1)(A) and that Hybrid's application for transfer to the
Nasdaq SmallCap Market has been denied.
Hybrid will request a hearing before the Nasdaq Listing
Qualifications Panel to review the Staff Determination. This
hearing will defer the delisting of Hybrid's securities pending
the Listing Qualification Panel's decision.
About Hybrid Networks
Headquartered in San Jose, Calif., Hybrid Networks Inc. designs,
develops, manufactures and markets fixed broadband wireless
systems that enable telecommunications companies, wireless
systems operators and network providers to offer high-speed
Internet access to businesses and residences. Hybrid was first
to market with patented two-way wireless products that focus on
the MMDS and WCS spectrum in the United States. Hybrid's
customers include Sprint, WorldCom, Look Communications,
Thomcast Communications and Andrew Corp. With systems in use in
75 markets across six continents, Hybrid is part of more fixed
broadband wireless deployments than all of its competitors
combined.
IMPERIAL SUGAR: Summary Of Second Amended Disclosure Statement
--------------------------------------------------------------
Headed by Jack L. Kinzie and Brenda T. Rhoades of the Dallas
office of Baker Botts LLP, together with Tony M. Davis of the
Houston office of that firm, and with James L. Patton, Jr., and
Brenda Linehan Shannon as local counsel of the firm of Young
Conaway Stargatt & Taylor, LLP, Imperial Sugar Company has moved
beyond the stage of "talking drafts" of a Disclosure Statement
into one which has been approved by Judge Robinson. Although
the final form of the Disclosure Statement is not yet available
as amendments were made in the course of the recent hearing, the
broad outlines of the Disclosure Statement have not been
modified to any significant extent as a result of the outcome of
the hearing on its adequacy. This Plan is promoted by Mark Q.
Huggins, Managing Director and Chief Financial Officer of
Imperial Sugar Company, and by William F. Schwer in his
capacities of President of Imperial Distributing Co., Senior
Vice President of Imperial Holly Corp., Senior Vice President of
Savannah Molasses & Specialty Company, the general partner of
Imperial-Savannah LP, Senior Vice President of Imperial
Sweeteners, and similar capacities for the other debtor
subsidiaries.
With the recent approval of the Disclosure Statement, Imperial
Sugar Company and its debtor subsidiaries announced they are now
beginning to soliciting acceptances, and have begun procedural
steps to that end. This solicitation is conducted in order to
obtain sufficient acceptances to enable the Plan to be confirmed
by the Bankruptcy Court under the terms of the Bankruptcy Code.
Mr. Kinzie reminded Judge Robinson that the purpose of a
Disclosure Statement is to set forth (i) the history of the
Debtors, their businesses, and their reorganization cases; (ii)
information concerning the Plan and alternatives to the Plan;
(iii) information for the holders of Claims and Interests
regarding their rights under the Plan; (iv) information to
assist the holders of Claims and Interests in making an informed
judgment regarding whether they should vote to accept or reject
the Plan; and (v) information to assist the Bankruptcy Court in
determining whether the Plan complies with the provisions of
the Bankruptcy Code and should be confirmed.
Voting in General
Under the Bankruptcy Code only classes of claims or interests
which are (i) impaired by the Plan, and entitled to receive a
distribution under the Plan are entitled to vote on the Plan.
Any holder of a claim or interest in an impaired class whose
claim or interest has not been disallowed by order of the
Bankruptcy court and whose claim or interest is not disputed is
entitled to vote to accept or reject the Plan if either (i) the
holder's claim or interest has been scheduled by the Debtors
(and the claim or interest is not scheduled as disputed,
contingent, or unliquidated), or (ii) the holder has filed a
Proof of Claim by the bar date of April 23, 2001, and provided
that no objection has been filed to the Proof of Claim. Unless
otherwise permitted by the terms of the Plan, any holder of a
disputed claim is not entitled to vote with respect to the
disputed claim, unless the Bankruptcy court, upon application by
the holder, temporarily allows the disputed claim for the
limited purpose of voting to accept or reject the Plan. Any such
application must be heard and determined by the Bankruptcy court
fifteen days before the confirmation haring. A vote on the Plan
may be disregarded if the Bankruptcy Court determines, after
notice and a hearing, that the vote was not solicited or
procured in good faith or in accordance with the provisions of
the Bankruptcy Code.
Under the Plan, only claims and interests in Classes 2A, 2B, 2C,
2D, 5A, 5B and 9 are impaired, and, accordingly the holders of
claims and interests in those classes are the only holders of
claims or interests entitled to vote to accept or reject the
Plan. Claims in Classes 1, 3, 4, 6A, 6B, 7A, 7B and 8 are
unimpaired by the Plan, and the holders of Claims or Interests
in such Classes are conclusively presumed by operation of the
Bankruptcy Code to have accepted the Plan.
The Debtors have provided questions and answers to certain
matters in the Disclosure Statement as a guide to voting
creditors and interest holders. For example, the Debtors
explain that under the Trust Indenture Act and the documents
governing Imperial Senior Subordinated Notes, the Indenture
Trustee for holders of Imperial Senior Subordinated Notes is not
permitted to vote on behalf of the holders of such securities.
All holders must submit their own Ballot in accordance with the
voting instructions accompanying the Ballot if their vote is to
be counted. The Debtors further reminded the holders that
ballots are not to be sent to the Indenture Trustee.
Return of Ballots
The person to whom ballots are sent depends on each voting
party's class and, for holders of public securities, Imperial
Senior Subordinated Notes and existing common stock, on whether
the holder receives a copy of solicitation materials through a
broker, bank, nominee or other proxy intermediary holding
securities in the holder's behalf in its name. Other than
persons who are the beneficial holders of Imperial Senior
Subordinated Notes and/or existing common stock whose securities
are held in the name of a broker, bank, nominee, or other proxy
intermediary, or in common parlance, in a "street name", all
holders of claims of the Bank Group (Classes 2A, 2B, 2C and 2D)
are to return their signed and completed ballot to:
Chapman & Butler
Attn: James E. Spiottio
111 West Monroe Street
Chicago, Illinois 60603-4080
Tel: (312) 845-3000
For all (i) holders of Claims and Interests in Classes 5A, 5B
and 9 (other than persons whose securities are hold in a street
name), and (ii) brokers, banks, nominees, and other proxy
intermediaries casting master ballots on behalf of beneficial
owners of Imperial Senior Subordinated Notes and/or existing
common stock, signed and completed ballots are to be returned
to:
D. F. King & Co., Inc.
Attn: Tom Long
77 Water Street
20th Floor
New York, New York 10005
Tel: 800-628-8510 (toll-free within US)
212-269-5550 (toll-free collect
(i.e., reverse charge) from outside
US)
If a party holds a claim or interest entitled to vote on the
Plan, or is a bank, broker, nominee or other proxy intermediary
responsible for casting a master ballot on behalf of beneficial
owners of Imperial Senior Subordinated Notes, and does not
receive a ballot, receives a damaged Ballot, or loses the
Ballot, the Balloting Agent for that party's class should be
contacted.
The beneficial holders of Imperial Senior Subordinated Notes
and/or existing common stock held in a street name must return
the ballots to the broker, bank, nominee, or other proxy
intermediary holding legal title to the securities, and that
party is then to complete a master ballot and submit it to the
Balloting Agent.
If a party receives more than one Ballot, the party may hold
claims and/or interests in different classes and may be entitled
to vote in more than one class.
Deadline for Voting
In order to be counted for voting purposes Ballots accepting or
rejecting the Plan, including master ballots, must be received
by the appropriate balloting agent no later than 5:00 p.m. on
the date set by the Court in its Order, not yet available. If
solicitation materials are received through an intermediary such
as a broker, bank, nominee, or proxy, the claim or interest
holder must ensure that the Ballot is returned to the
intermediary sufficiently far in advance of the voting deadline
so that a master ballot may be prepared and submitted timely.
To ensure what the Debtors describe as the integrity of the
voting process, the Bankruptcy Court has ordered that ballots
may not be submitted by fax or by email. All ballots must be
submitted as originals and bear an original signature in order
to be counted.
New Common Stock
Prior to the Petition Date, Imperial's existing common stock was
listed and traded on the American Stock Exchange. However, in
December 2000, AMEX notified Imperial that trading in Imperial's
existing common stock was being halted until further notice from
AMEX, and in February 2001, Imperial received notice from AMEX
that AMEX had filed an application with the SEC to strike the
listing and registration of Imperial's existing common stock on
the grounds that he company no longer net listing guidelines.
Imperial has notified AMEX that it would not object to the
delisting of its existing common stock, and that stock since has
been delisted.
Under the Plan, the existing common stock and warrants, options
and rights to acquire existing common stock will be cancelled,
with need for any corporate or shareholder action, on the
Effective Date. The Plan provides, however, that holders of
existing common stock may elect, as a Class, to receive a
distribution of new common stock and Reorganized Imperial
warrants by voting, as a Class, to accept the Plan; provided
that such election will be effective only if impaired unsecured
creditors under Classes 5A and 5B of the Plan also vote, as a
Class, to accept the Plan. No distributions will be made to
holders of existing common stock if either the holders of
existing common stock or impaired unsecured creditors treated
under Classes 5A or 5B vote, as a Class, to reject the Plan.
Current Board of Directors & Relationships
The Board of Directors of Imperial currently consists of 10
members serving staggered three-year terms:
John D. Curtin, Jr.
David D. Dilger
Edward O. Gaylord
Gerald Grinstein
Ann O. Hamilton
Robert L. Harrison
James C. Kempner
Harris L. Kempner, Jr.
I. H. Kempner III
Daniel K. Thorne
The terms of Mr. Curtin, I. H. Kempner, James Kempner, and Mr.
Thorne run through the 2001 annual meeting, while the terms of
Mr. Dilger, Mr. Gaylord, Mr. Grinstein, and Mr. Harrison run
through 2002, and the terms of Ms. Hamilton and Harris Kempner
expire in 2003.
James Kempner also serves as President and Chief Executive
Officer of Imperial. In addition, James Kempner, Harris
Kempner, Jr., I. H. Kempner III, Ms. Hamilton, and Mr. Thorne
are each descendants of H. Kempner, a Galveston entrepreneur who
died in 1984. Prior to Imperial becoming a publicly traded
company in 1988, the Kempner family collectively owned
substantially all of the equity of Imperial.
I. H. Kempner and Imperial also are parties to a renewable one-
year Independent Consulting Agreement providing Mr. Kempner will
provide consulting services to Imperial concerning sugar
industry-related matters, and that for such services Imperial
will pay Mr. Kempner a monthly retainer of $3,500 and a per diem
amount for each day of travel on company business.
Mr. Dilger is chief executive officer and a director of
Greencore Group plc, Imperial's single largest shareholder.
Each of the directors of the wholly-owned subsidiaries is an
employee of Imperial or one of its subsidiaries.
In addition to other compensation, non-employee directors of
Imperial are eligible to participate in the Imperial Sugar
Company Retirement Plan for Non-employee Directors, which
provides monthly retirement benefits to retired directors of
Imperial who never served as employees of any of the Debtors.
Under this retirement plan, former non-employee directors
receive payments, commencing at age 65 or retirement, equal to
the annual retainer received by the director (or the cash
equivalent thereof) at the date of the director's retirement for
up to ten years after retirement (based on years of service),
provided that a director has completed at least three years of
service. Death benefits equal to 50% of the retirement benefit
are paid to a surviving spouse.
Imperial's obligations under this retirement plan to current
directors are executory obligations and will be assumed by
Reorganized Imperial under the Plan. Claims of former directors
of Imperial under this plan are unsecured claims and will be
treated as Inactive Non-Qualified Benefits Convenience Claims.
Current Executive Officers
James C. Kempner President and Chief Executive Officer
Douglas W. Ehrendranz Executive Vice President
William F. Schwer Executive Vice President & General
Counsel
Roger W. Hill Managing Director, President & CEO of
Holly
Benjamin A. Oxnard, Jr. Managing Director, President & CEO of
Savannah Foods
Peter C. Carrothers Managing Director
Mark Q. Huggins Managing Director and CFO
John A. Richmond Managing Director & VE-Operations
W. J. "Duffy" Smith Managing Director
Mark S. Flegenheimer Vice President & President of Michigan
Sugar
H. P. Mechler Vice President - Accounting
Karen L. Mercer Vice President and Treasurer
Alan K. Lebsock Controller
Roy L. Cordes, Jr. Secretary & Deputy General Counsel
In March 2000 Imperial entered into employment agreements with
11 executive officers which, as currently in effect, provide for
the following annual salaries: Mr. Kempner - $530,000; Mr.
Ehrendranz - $315,000; Mr. Schwer - $305,000; Mr. Smith -
$300,000; Mr. Flegenheimer - $205,000; Mr. Carrothers -
$280,000; Mr. Huggins - $275,000; Mr. Oxnard - $280,000; Mr.
Richmond - $206,000; and Ms. Mercer - $158,400, and Walter
Lehneis - $225,000. Separately, in February 1998, Imperial
entered into an employment agreement with Mr. Hill which, as
amended, provides for an annual salary of $150,000. Each of
these agreements provided for an initial term of one year, and
automatically renew for additional one-year periods unless
Imperial or the respective executive notifies the other party of
its intention not to extend the term at least 60 days prior to
the end of the then current term.
In addition to providing for compensation, all of the employment
contracts except for the contracts of Mr. Hill, Mr.
Flegenheimer, Mr. Richmond, and Ms. Mercer, originally provided
for each executive to receive change-of-control payments equal
to two or three times the employee's salary in the event the
executive ceased to be employed by the company after a change-
of-control. However, as a condition to the Debtors' assumption
of the executive employment contracts under the Bankruptcy Code
after the commencement of these cases, the executive have been
required, as a condition of assumption, to enter into a written
agreement waiving all change-of-control payments and otherwise
limiting severance payments to a maximum of two years' base
salary. All of the executives subject to this requirement have
executed such agreements. Change-of-control agreements with Mr.
H. P. Mechler and Alan Lebsock are being rejected under the
Plan.
Imperial has also agreed to provide lump sum supplemental
retirement and death benefits to participants in a salary
continuation plan implemented by Imperial (Mr. James Kempner,
Jr. Hill, Mr. Schwer, Mr. Richmond, and Mr. Carrothers). If the
employment of an executive in he salary continuation plan is
terminated prior to retirement for any reason other than death,
disability or cause, the participant would be entitled to
receive, upon attainment of age 55, if his termination was
before that birth date, the actuarial equivalent of the payment
he would have received had he retired at age 62; provided,
however, that no amounts will be due under the salary
continuation plan to a participant who is terminated for cause.
Mr. Hill received payments of $255,784 in fiscal 2000, and
$515,713 in fiscal 2001 under the plan. AS of the Petition Date,
the estimated amounts which would be payable upon retirement at
or after age 62 is $1,562,818 for Mr. James Kempner, $598,349
for Mr. Schwer, $254,942 for Mr. Richmond, and $157,731 for
Mr. Carrothers (assuming in Mr. Carrothers' case a retirement at
or after age 65).
Finally, Imperial also has established an executive benefits
trust which may be used to fund its obligations under certain
otherwise unfounded benefit, retirement and deferred
compensation plans providing benefits to executive officers of
Imperial in the event of a change of control.
The Ad Hoc SERP/DC Committee
86 of the Debtors' former executives, employees or survivors
holding Inactive Non-qualified Benefits Claims participated in
the Debtors' bankruptcy cases as an informal committee in the
Debtors' cases and through their counsel, James L. Paul of
Chamberlain, Hrdlicka, White, Williams & Martin, and Neil B.
Glassman of The Bayard Firm, negotiated with the Debtors, the Ad
Hoc Bondholder Committee, and various other constituencies over
the treatment of inactive non-qualified benefits claims. These
negotiations resulted in the treated described under the Plan.
The Debtors believe that the work performed by the Ad Hoc
SERP/DC Committee and its counsel resulted in a substantial
contribution to the Debtors' reorganization efforts, and
accordingly the Plan provides for allowance of reasonable
attorneys' fees and expenses incurred by this Committee.
Operational Status of Processing Plants
As of the date of the Disclosure Statement, the Debtors' three
sugar cane refineries in Georgia, Louisiana and Texas are
operating at or above levels anticipated in the Debtors'
business plan and are sufficiently supplied with raw material
inputs to permit them to continue operating at this level for
the foreseeable future.
The Debtors' sugar beet factories in Michigan and in Sidney,
Montana, Worland, Wyoming, Torrington, Wyoming, Mendota,
California, and Brawley California also generally are operating
on schedule. The Debtors do not anticipate any raw material
supply issues at these factories, although all of the Debtors'
factories and in particular, factories in California, have been
adversely affected by the cost of energy and related increases
in the costs of other essential inputs, such as transportation.
To date, the Debtors have entered into contracts with beet
growers to supply beets for the Debtors' beet factories during
the 2001 growing season:
Target Current Contracted
Refinery Acreage Acreage
-------- ------- ------------------
Brawley California 26,700 Fully contracted
Mendota, California 28,607 Fully contracted
Michigan (aggregate) 115,000 Fully contracted
Sidney, Montana 47,500 47,000
Torrington, Wyoming 21,000 21,200
Worland, Wyoming 19,500 18,944
The Debtors expect that the remaining acreage required to bring
the Sidney, Worland, Torrington and Michigan factories to full
targeted acreage will be contracted shortly.
Results of Operations - Second Quarter/Fiscal 2001
Net sales decreased $55.6 million or 13.2% for the three months,
and $96.7 million, or 10.8%, fort the six months ending March
31, 2001, compared to 2000 due to lower sales prices for refined
sugar, as well as a decline in refined sugar volumes. Such
decreases, which affected both the sugar and foodservice
segment, were partially offset by higher non-sugar prices in he
foodservice segment.
Cost of sales decreased $42.8 million, or 10.9%, for the three
months, and $69.8 million, or 8.6%, for the six months ending
March 31, 2001, resulting in a decrease in gross margin as a
percent of sales from 8.5% to 6.1% for the three months and from
9.0% to 6.7% for the six months periods. By segment for the
quarter, sugar gross margin as a percent of sales decreased from
8.0% to 3.2% and the foodservice gross margin as a percent of
sales increased from 10.2% to 14.7%. The increase in gross
margin for the foodservice segment was primarily due to higher
non-sugar sales prices and a decrease in raw sugar costs. The
decrease in gross margin for the sugar segment is primarily due
to higher energy and other manufacturing costs, as well as
significantly lower sales prices for refined sugar,, which more
than offset the benefits from lower raw sugar costs. Higher
energy costs accounted for approximately $4.6 million of the
decline in the sugar segment for the quarter. The Decline in
refined sugar prices reduced margins significantly in the
Debtors' sugarbeet processing operations, where the Debtors
share in the net revenues from refined sugar with the growers.
The effect on the California sugarbeet factories of extended
campaign operations in the first quarter, resulting from large,
but low quality sugarbeet crop, also increased manufacturing
costs. Additionally, the California operations experienced
interruptions in processing as a result of rain delays and one
factory was temporarily shut down a number of days due to high
energy costs.
Selling, general and administrative costs decreased $3.2
million, or 14.3%, for the three months, and $1 million, or 2.4%
for the six months ending March 31, 2001, compared to 2000 due
to cost savings initiatives. The six months ended March 31,
2001, also included $3.2 million of costs incurred prior to
January 16, 2001, relating to the Debtors' preparation to file
the reorganized cases.
Interest expense decreased $4.8 million for the three months,
and $7.2 million for the six months ending march 31, 2001,
compared to 2000. However, interest on imperial Senior
Subordinated Notes since January 16m 2001, totaling $5.1
million, has not been accrued. Contractual interest cost
increased $0.2 million for the three months and decreased $2.1
million for the six months ending March 31, 2001, as a result of
higher interest rates and lower overall borrowing levels
resulting from the sale of marketable securities and lower
inventory levels. The DIP Facility and modified Receivables
Purchase Agreement provide for increase in interest rate basis
during the bankruptcy period. Accordingly, interest cost in he
future may continue to be higher.
The Debtors adopted SFAS 133 on October 1, 2000. In accordance
with the transition provisions of SFAS 133, the Debtors recorded
a cumulative effect of an accounting change, net of tax, to net
income of approximately $2.4 million to recognize the fair value
of the Debtors' interest rate swaps which are not eligible for
hedge accounting under SFAS 133. The fair value of the interest
rate swaps declined $4.0 million for the three months and $7.2
million for the six months ending March 31, 2001.
Other income increased $2.6 million for the three months and
$4.5 million for the six months ending March 31, 2001, compared
to 2000 primarily due to realized gains on the settlement of
certain trade liabilities in the second quarter, and gains from
selling certain emissions reduction creditors from non-operating
facilities in California in the first quarter.
Corporate Governance
On and after the Effective Date, the corporate affairs of
Reorganized Imperial will occur in accordance with and under the
Amended and Restated Articles of Incorporation of Reorganized
Imperial, and the Amended and Restated Bylaws of Reorganized
Imperial. The Amended and Restates Articles will provide that
the board of directors of Reorganized Imperial will consist of
seven members. The initial board of directors will consist of
James C. Kempner and those six individuals selected by the
Creditors Committee and individuals identified in a document to
be filed by the Debtors not later than 15 days before the date
of the confirmation hearing.
Approval of the Plan will constitute ratification of the
directors of Reorganized Imperial without need for any further
corporate action.
Reorganized Imperial's executive positions on the Effective Date
will be filled by the current executive officers of Imperial
under the terms of their existing employment contracts, unless
the Debtors have rejected such employment contract, at or before
the confirmation hearing and terminated the employment of such
executive or the employment of such executive otherwise
terminates by agreement or applicable nonbankruptcy law.
Although decisions about management after the Effective Date
will be made by the board of directors of Reorganized Imperial,
it is the expectation of the Debtors that substantially all of
their prepetition management team will remain in place after the
Effective Date. Such decisions, however, will be in the
discretion of the board of directors of Reorganized Imperial.
The business plan currently developed and adopted by the
Debtors' management anticipates that the reorganized Debtors
will continue to conduct their businesses, after the Effective
Date, in substantially the same manner as is presently being
conducted except with an improved balance sheet as a result of
the restructuring being implemented by the Plan. The Debtors'
management anticipates that the business of the Debtors will
continue to focus on their core competency of refining,
distributing, and marketing refined sugar and sugar products,
with a continuation of the shift that has occurred in recent
years toward more value-added functions, such as marketing and
distributing. As a part of this focus, the Debtors may explore
the sale of non-core assets which do not fit as well as others
with the sugar-focused and value- added plan. Management will
also continue to consider, and if appropriate, to implement,
other steps to ensure that the reorganized Debtors are able to
respond to a competitive environment.
Substantive Consolidation
The Plan is premised upon substantive consolidation of the
Debtors' estates for purposes of confirmation, voting on the
Plan, and distributions to creditors impaired under the Plan.
Under this consolidation, all obligations of the Debtors created
under the Plan will be joint and several obligations of all of
the Debtors. The Plan will not substantively consolidate the
Debtors with respect to unimpaired Classes and creditors in
those Classes will continue to be able to look only for
repayment from those entities who would have been obligated on
such debt as of the Petition Date. (Imperial Sugar Bankruptcy
News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
INTEGRATED HEALTH: Rejecting Curative Arrangement Agreement
-----------------------------------------------------------
The Integrated Health Services, Inc. Debtors including IHS
Acquisition No. 172 Inc. d/b/a IHS Hospital of Lubbock moved the
Court for authority, pursuant to sections 105(a), 365(a) and
(g)(1) and 502(g) of the Bankruptcy Code, and rule 6006 of the
Bankruptcy Rules, to reject an executory contract, by and
between the Hospital and Curative Health Services, Inc. nunc pro
tunc as of February 1, 2000.
Under the Contract, dated as of July 15, 1999, Curative manages
and staffs the Wound Center on behalf of the Hospital. The
Hospital pays Curative in accordance with the fee schedule set
forth in the Contract and then submits requests primarily to
Medicare, for reimbursement in the amount of such payments.
Nearly all of the Hospital's Wound Center related reimbursement
emanates from Medicare, which, prior to the Petition Date,
implemented the Outpatient Prospective Payment System (the
"OPPS"). Under OPPS the Hospital's aggregate annual
reimbursement for Wound Center services is significantly less
than the aggregate annual fees it pays to Curative under the
Contract, which was negotiated prior to the implementation of
OPPS.
The Hospital proposed a fee reduction sufficient to allow the
Hospital to realize a modest profit, but Curative was
unreceptive to such proposal.
The Debtors submitted that the Hospital is capable of operating
the Wound Center without Curative. Eliminating the outsourcing
costs associated with Curative will significantly reduce the
cost of operating the Wound Center. Accordingly. the Debtors
submit that it is in the best interests of their estates to
continue operating the Wound Center without the assistance of
Curative.
The Debtors also requested that the Rejection Deadline be thirty
days from the date of the notice of entry of an order granting
the instant motion. The Debtors proposed that a holder of a
claim allegedly arising from the rejection of the Contract who
fails to timely file a proof of claim on or prior to the
expiration of the Rejection Claims Deadline be: (a) forever
barred from asserting such claim against any of the Debtors or
their estates; (b) forever barred from sharing in any
distribution of the Debtors' estates or assets under any plan or
reorganization confirmed in the IHS chapter 11 cases or order of
the Court authorizing distributions from the Debtors' estates;
and (c) bound by the terms of any such plan of reorganization.
(Integrated Health Bankruptcy News, Issue No. 17; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
KEVCO INC.: Raises $9.5 Mil From Sale Of Better Bath Division
-------------------------------------------------------------
Kevco, Inc. announced that its subsidiary, Kevco Manufacturing,
L.P., has sold its Better Bath division to Kinro Texas Limited
Partnership and to BBD Realty Texas Limited Partnership,
assignees of Drew Industries Incorporated. The sale closed
effective June 1, 2001. Kevco received gross proceeds of
approximately $9.5 million for the sale of the division.
In addition, Kevco announced that its subsidiary, Kevco
Manufacturing, L.P., has sold its Duo-Form division to Duo-Form
Acquisition Corp. The sale closed effective June 1, 2001. Kevco
received gross proceeds of approximately $5.3 million for the
sale of the division.
Kevco also announced that its subsidiary, Kevco Distribution,
L.P., has sold certain assets to Alliance Investment &
Management Company, Inc. The transaction involved the sale of
inventory of certain of Kevco's distribution operations located
in Elkhart, IN, Lancaster, PA, Salisbury, MD, Fort Worth, TX,
Newton KS, Aurora, NE, Fort Morgan, CO, Phoenix, AZ,
Albuquerque, NM, Riverside, CA, Woodland, CA, Wilsonville, OR,
Caldwell, ID, Redwood Falls, MN, and Marshfield, WI. The sale
closed effective June 5, 2001. Kevco received proceeds of
approximately $400,000 for the sale of the inventory items.
These closings finalize the sale of all of Kevco's operating
divisions.
Kevco and its subsidiaries filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy
Code. The petitions were filed in the United States Bankruptcy
Court for the Northern District of Texas on February 5, 2001.
Kevco, headquartered in Fort Worth, Texas, was prior to filing
its Chapter 11 petition a wholesale distributor and manufacturer
of building products for the manufactured housing and
recreational vehicle industries.
KMART CORP.: Fitch Rates Proposed $400MM Senior Notes At BB+
------------------------------------------------------------
Fitch has rated Kmart Corporation's proposed $400 million issue
of senior notes `BB+'.
The proceeds will be used to prepay $260 million of commercial
mortgage pass-through certificates, and the balance to repay
borrowings under its credit facilities. The Rating Outlook is
Stable.
Fitch recently affirmed its ratings on Kmart Corporation. The
rating reflects the company's weakened operations and
competitive position balanced against the expectation for
improvement as the company makes continued progress in
implementing its strategic initiatives. The rating recognizes
the competitive and over-stored nature of the retail industry
and, in particular, the rapid growth of Wal-Mart and Target.
Maintenance of the Stable Rating Outlook will depend upon steady
improvement in Kmart's operations and credit measures in the
face of this competition.
LECHTERS INC.: Bankruptcy Court Okays $86 Million DIP Financing
---------------------------------------------------------------
Lechters, Inc. announced that the U.S. Bankruptcy Court for the
Southern District of New York has granted full approval of the
terms of its $86 million debtor-in-possession bank facility from
its existing lenders, Fleet Retail Finance, Inc. and Back Bay
Capital Funding. With this approval, the $86 million of
financing will be available to Lechters to execute its strategic
plan and meet its working capital needs, including the payment
of all post-petition invoices and other obligations associated
with the operation and repositioning of its business. On May
22, 2001, the Court had granted an interim order authorizing
a portion of the facility.
David Cully, President and Chief Executive Officer, said, "The
$86 million in financing provides us with the funding necessary
to continue with our assortment and store migration process,
allowing us to move ahead with implementation of our strategic
plan. We are encouraged by the support we have received from
the vendor community and look forward to introducing our new
kitchen-focused Lechters concept to a growing number of
customers."
Lechters' strategic repositioning plan is designed to enable the
Company to focus its attention and resources on the
repositioning of its core business, while streamlining its
organization and closing underperforming operations. As part of
its strategy, it is migrating its brand to focus more closely on
the kitchen and is upgrading its merchandise assortment to offer
higher quality products, with a good-better-best merchandising
approach.
Lechters voluntarily filed for Chapter 11 of the U.S. Bankruptcy
Code on May 21, 2001.
Lechters is a retail chain specializing in housewares and items
for the kitchen. The Company operates 323 stores, including 239
Lechters stores and 84 Famous Brands Housewares Outlet stores,
in 36 states and the District of Columbia.
MADGE NETWORKS: Looking For Buyer Of Madge.web Unit
---------------------------------------------------
Madge Networks N.V. (NASDAQ NM: MADGF), a global network
solutions provider, announced that the Administrators of
Madge.web Ltd., one of its Madge.web subsidiary companies, which
entered into Administration on April 27, 2001, have reported
that a letter of intent has been signed for the sale of
Madge.web's global Trader Voice business.
Although the Administrators, Partners of PricewaterhouseCoopers,
had sought a purchaser for Madge.web as a whole, it has become
apparent that market conditions would not enable a sale of the
entire Madge.web business as a going concern.
The Administrators are working towards a sale of the Trader
Voice business and it is hoped that this may conclude around the
end of June 2001. The sale as planned will have the benefit of
providing continuity of employment for a significant number of
employees; continuity of network supplier relationships; and the
ongoing provision of services to customers. There can be no
assurance that a sale of the Trader Voice business will be
concluded.
The Administrators continue to seek buyers for Madge.web's IP
business and assets. While it is believed that certain customer
contracts and associated assets can be sold to third parties,
there are certain elements of the IP network for which no
purchaser is anticipated and Madge.web will have no alternative
but to cease to support these operations.
There are no current plans to seek a Chapter 11 reorganization
for Madge.web Inc., Madge.web's U.S. subsidiary company, and the
intention is that this entity will continue to operate, albeit
on a reduced scale. It is also intended that the U.S. Trader
Voice business will continue to operate pending the sale of
Madge.web's global Trader Voice business outlined above.
Madge Networks N.V. also announced that one of its Madge.web
subsidiary companies, Madge.web B.V., a Dutch registered
European sales subsidiary with branches in France, Germany,
Italy, Spain and Sweden, has successfully applied to the Dutch
Courts for an insolvent liquidation and the court will soon
appoint a bankruptcy trustee.
As a result of this situation, the financial outcome for Madge
Networks (which is a creditor of Madge.web as well as a
guarantor of certain Madge.web liabilities), will be less
favorable, than if a going concern sale of the whole of the
Madge.web business had been achieved.
About Madge Networks N.V.
Madge Networks N.V. (NASDAQ NM: MADGF) is a global provider of
advanced Internet-centric network services and products, and
mission-critical enterprise solutions. The company operates
through two primary subsidiaries: Madge.connect(TM), a global
supplier of Token Ring product solutions for mission-critical
enterprise networks and Madge.web(TM), a global provider of rich
content applications, content distribution and managed network
services. Madge Networks also has an associate company: Red-
M(TM), a pioneering developer of Bluetooth networking solutions
that enable access to a range of voice, video and data from a
range of mobile devices. The company's main business centers are
located in Wexham Springs, United Kingdom; Milpitas, California
and New York City. Information about Madge's complete range of
products and services can be accessed at www.madge.com.
About Madge.web
Madge.web is a global provider of rich content applications,
content distribution and managed network services. These
services are delivered via the company's Overnet, by-passing the
public Internet, to more than 30 countries around the world.
Rich content services from Madge.web - architected to handle on-
line video, audio, images and interactive media - include
encoding services, virtual private networking, managed hosting,
storage, streaming media distribution, marketing services and
workflow management. Further information about Madge.web can be
accessed at http://www.madgeweb.com
MEDIQ INC.: Effective Date Of Reorganization Plan Is Tomorrow
-------------------------------------------------------------
The U.S. Bankruptcy Court confirmed Mediq, Inc.'s First Amended
Joint Plan of Reorganization, dated March 20, 2001, and ruled
that the effective date would be no later than June 15, 2001.
Among other things, the Plan of Reorganization calls for senior
subordinated noteholders to receive 35% of the reorganized
Company's equity. The Company stated that it has already reached
agreement for a two-year $240 million exit facility with BNP
Paribas as agent. (New Generation Research, June 12, 2001)
NETSOL: Reschedules Special Shareholders' Meeting to June 19
------------------------------------------------------------
NetSol International, Inc. (NASDAQ: NTWK, WWW.NETSOL-INTL.COM)
has filed its definitive proxy materials with the SEC in
connection with the special meeting to be held in response to
NetSol Shareholder Group LLC's proxy solicitation. NetSol
International and the shareholder group agreed that the meeting
date would be changed from June 11, 2001, to June 19, 2001.
The Company urges its stockholders to read the entire proxy
statement because it contains important information. Additional
copies of the Company's definitive proxy statement will be
available free of charge from MacKenzie Partners, Inc. at (800)
322-2885 or proxy@mackenziepartners.com.
NetSol International Inc. is an ISO-9001 certified software
developer in the global information technology industry. With an
international workforce of more than 400 employees, NetSol
specializes in software development, proprietary and asset-based
leasing and finance programs, IT consulting, and creation of
eBusiness and Web-based solutions for a growing list of blue-
chip customers worldwide. Clients include Daimler Chrysler
Taiwan; Mercedes Benz Financing, Australia; Mercedes Benz
Leasing, Thailand; CFS Groups U.K., St. George Bank,
Australia; GMAC in Australia, and Debis Porfolio Systems, U.K.
For more information about NetSol and its subsidiaries, visit
the company's web site at http://www.netsol-intl.com
OUTSOURCE INT'L: Files For Chapter 11 To Restructure Debt
---------------------------------------------------------
Outsource International, Inc. (OTC Bulletin Board: OSIX)
announced that the Company has filed a voluntary petition under
chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy
Court for the Central District of California to restructure the
Company's debt as a next step in a successful turnaround effort
begun 19 months ago. Outsource is a leading national provider
of human resources services, with approximately 3,000 clients in
24 states. Outsource places 20,000 service workers in jobs daily
and provides meaningful employment to 150,000 people annually.
The Company will continue to conduct business as usual,
supplying service and industrial employees to commercial
employers with labor-intensive needs. Customers nationwide will
continue to receive superior service without interruption. The
Company expects that all post-petition obligations to vendors,
employees and others will be satisfied in the normal course of
business. The Company does not anticipate any layoffs of
employees in connection with the restructuring.
Outsource intends to restructure its balance sheet to reduce the
burden of the Company's debts incurred in operating years prior
to 1999. This would improve the Company's liquidity and position
Outsource for continued growth and increased profitability.
Garry E. Meier, who became Chairman and CEO of Outsource in
February 2000, said, This action builds further on the successes
of the turnaround effort we began just 19 months ago. Our
efforts have already resulted in greatly improved customer
satisfaction, increased customer and worker retention and a
strong EBITDA performance. When we complete the proceedings with
a new capital structure and the commitment of our management
team and employees to execute on our strategy, we believe we
will finally be able to unlock the tremendous potential that
Outsource has been unable to realize due to its excessive debt
burden and the related interest payments.
Mr. Meier continued, "This is an industry with remarkable growth
opportunities in a more robust economy. At the same time, the
debt burden incurred in the past has seriously limited
Outsource's ability to move forward to capture the growing
opportunities in our industry. We have worked for almost two
years to find a solution to satisfy all of our debts. After
careful consideration of the strategic alternatives available to
the Company, we have determined that the decision to pursue a
restructuring of our debt through the chapter 11 process is the
optimal solution, given current economic conditions and the
current state of equity and debt markets. Restructuring our debt
burden will provide:
* The resources to continue to rapidly improve market share
and customer count;
* The means to further enhance our services to customers;
* The ability to add more temporary employees and more
revenue; and
* Access to the operating capital to complete all phases of
the turnaround."
Mr. Meier noted that despite the current downturn in the
industrial sector of the staffing industry, the demand for
workers is expected to exceed the supply by nearly 10% in 2002,
and temporary and contingent/variable workers have become an
integral part of the labor resource landscape. The human
resources services industry is poised for high growth as demand
increases over the next few years.
Outsource is operationally and strategically well positioned to
take full advantage of this business opportunity, Mr. Meier
said, with a solid, scalable operating platform, knowledgeable
and motivated employees, and a strong, experienced management
team committed to staying with the Company through this process
and executing the strategic plan. We believe our plan will
provide for a significantly better capitalized Company that will
allow us to further improve our customer service, franchise
system and branch operations, while systematically growing the
business.
Senior management, including Mr. Meier, is committed to building
on the progress the Company has achieved thus far and will
remain in place to lead Outsource through the chapter 11
proceedings and beyond. Management will continue with its
efforts to: streamline operations, continue to institute strict
financial controls, improve the Company's revenue performance
and provide the superior customer service that has become a
hallmark of the Company.
Mr. Meier concluded, I look forward to the coming months,
working closely with the management team and our talented and
dedicated employees to realize the goals we have set for
ourselves and complete the turnaround.
Outsource is currently in advanced stages of talks with a number
of potential investors in the Company, all of which are
qualified and have expressed a high interest in continuing to
build the operating platform. There can be no assurance that a
transaction involving the Company will in fact be consummated.
If there were an investment in the Company, it would take place
under the supervision of the Court as part of the chapter 11
reorganization process. Outsource's senior management is
committed to obtaining the highest and best value for the
Company through the chapter 11 process.
The Company's corporate counsel is Donn Beloff of Akerman,
Senterfitt & Eidson, P.A. The Company is represented in its
chapter 11 case by Michael Tuchin of Klee, Tuchin, Bogdanoff &
Stern LLP.
About Outsource International
Outsource International is a national provider of human
resources services focusing on the flexible staffing market. The
Company partners with its service workers and industrial
employers to provide flexible workforce solutions to maximize
client production and profitability. With 124 Company- owned and
franchise offices in 24 states nationwide, Outsource provides
temporary employees and human resources services to
approximately 3,000 clients
PAKISTAN INVESTMENT: Stockholders Approve Liquidation Plan
----------------------------------------------------------
The Pakistan Investment Fund, Inc. (NYSE: PKF) (the "Fund")
announced the results of voting at its Annual Meeting of
Stockholders. Stockholders approved the election of Ronald E.
Robison as a Class I Director of the Fund and Barton M. Biggs,
Gerard E. Jones, John A. Levin and William G. Morton, Jr. as
Class III Directors of the Fund.
The Fund also noted that stockholders approved the liquidation
and dissolution of the Fund pursuant to the Plan of Liquidation
and Dissolution previously approved by the Fund's Board of
Directors. The Fund expects to be in a position to distribute
substantially all of the Fund's liquidation proceeds to its
stockholders by late June 2001. Shortly before the time of such
distribution, the Fund intends to de-list the Fund's shares from
the New York Stock Exchange. Stockholders can ascertain the
weekly net asset value of the Fund and the Fund's weekly cash
position by calling (800) 221-6726.
PILLOWTEX CORP.: Seeks Authority To Establish Claims Bar Dates
--------------------------------------------------------------
In order for Pillowtex Corporation to complete the
reorganization process and make distributions under any plan or
plans of reorganization, the Debtors must obtain complete and
accurate information regarding the nature, validity and amount
of all claims that will be asserted.
By Motion, the Debtors sought the court's authority to establish
a General Bar Date by which all entities holding prepetition
claims must file proofs of claim against the Debtor with Logan &
Company, Inc., the claims and noticing agent in these cases.
The Debtors do not propose a specific deadline. Rather, William
H. Sudell, Esq., at Morris, Nichols, Arsht & Tunnell advised,
the Debtors request a General Bar Date no fewer than 60 days
from the time the Debtors actually serve the notice of the Bar
Dates and proof of claims.
All entities holding claims against the Debtors (whether
secured, unsecured priority or unsecured nonpriority) that arose
prior to the petition date are required to file proofs of claim
by the General Bar Date. This includes other entities generally
holding prepetition claims against one or more of the Debtors:
(i) Entities whose claims against a Debtor arise out of the
obligations of those entities under a contract for the provision
of liability insurance to the Debtor;
(ii) Governmental units with claims against a Debtor for
unpaid taxes, whether such claims arise from prepetition tax
years or periods, or prepetition transactions to which the
Debtor was a party.
Debtors also asked for authority to establish the Rejection Bar
Date. Within this period, any entity whose claims arise out of
the Court- approved rejection of an executory contract or
unexpired lease must file a proof of claim on or before the
later of: (i) the General Bar Date and (ii) 30 days after the
date of the order authorizing the Debtors' rejection of the
applicable contract or lease.
If the Debtors amend their schedules to reduce the undisputed,
noncontingent and liquidated amount or to change the nature or
classification of a claim against a Debtor reflected therein
before the mailing and publication of the Bar Date notice, the
affected claimant is required to file a proof of claim or amend
any previously filed proof of claim in respect of the amended
scheduled claim on or before the later of: (i) the General Bar
Date and (ii) 30 days after the date that notice of the
applicable amendment to the schedules is served on the claimant.
The following entities must file proofs of claim on or before
the General Bar Date:
(1) Any entity whose prepetition claim against a Debtor is
not listed in the applicable Debtor's Schedules or is listed as
disputed, contingent or unliquidated and that desires to
participate in any of these chapter 11 cases or share in any
distribution in any of these chapter 11 cases; and
(2) Any entity that believes that its prepetition claim is
improperly classified in the Schedules or is listed in an
incorrect amount and that desires to have its claim allowed in a
classification or amount other than that identified in the
Schedules.
Those entities that are not required to file proofs of claim by
the General Bar Date are:
(a) Any entity that already has properly filed a proof of
claim against one or more of the Debtors in accordance with the
procedures described herein;
(b) Any entity (i) whose claim against a Debtor is not
listed as disputed, contingent or unliquidated in the Schedules
and (ii) that agrees with the nature, classification and amount
of its claim as identified in the Schedules;
(c) Any entity whose claim against a Debtor previously has
been allowed by, or paid pursuant to, an order of the Court;
(d) Any of the Pillowtex Companies, including any Debtors
that hold claims against one or more of the other Debtors; and
(e) Any entity whose claim is limited exclusively to a
claim for the repayment by the applicable Debtor of principal,
interest and other applicable fees and charges on or under the
Debtors' Amended and Restated Credit Agreement and Term Credit
Agreement, each dated December 19, 1997, nine percent Senior
Subordinated Notes due 2007, ten percent Senior Subordinated
Notes Due 2006, six percent Convertible Subordinated Debentures
Due 2021, various issuances of industrial revenue bonds or the
indentures in respect of any of the foregoing (the Indentures
and, collectively with the nine percent notes, the ten percent
notes, the six percent Debentures and the Industrial Revenue
Bonds, the Debt Instruments); provided, however, that (i) the
administrative agent bank under the Prepetition Credit Agreement
will be required to file a proof of claim on account of Debt
Claims on or under the Prepetition Credit Agreement on or before
the General Bar Date, (ii) the indenture trustees under the
Indentures will be required to file proofs of claim on account
of Debt Claims on or under the applicable Debt Instruments on or
before the General Bar Date, (iii) holders of six percent
Debentures that prior to the Petition Date converted and
surrendered their six percent Debentures and did not
subsequently rescind their conversion and have their six percent
Debentures reinstated will be required to file proofs of claim
on account of any obligation owed in respect of conversion of
their six percent Debentures on or before the General Bar Date
and (iv) any holder of a Debt Claim under the Prepetition Credit
Agreement that wishes to assert a claim arising out of or
relating to the Prepetition Credit Agreement, other than a Debt
Claim, and any holder of nine percent notes, ten percent notes,
six percent Debentures or Industrial Revenue Bonds that wishes
to assert a claim arising out of or relating to a Debt
Instrument, other than a Debt Claim will be required to file a
proof of claim on or before the General Bar Date, unless another
exception applies.
Any entity with an interest based exclusively upon the ownership
of common or preferred stock in a corporation need not file a
proof of interest on or before the General Bar Date. But those
Interest Holders who wish to assert claims against any of the
Debtors that arise out of or relate to the ownership or purchase
of an interest must file proofs of claim on or before the
General Bar Date.
All entities asserting claims against more than one Debtor are
required to file a separate proof of claim for each Debtor to
expedite the Debtors' review of the claims. (Pillowtex
Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
RELIANCE GROUP: Files Chapter 11 Petition in S.D. New York
----------------------------------------------------------
Reliance Group Holdings, Inc. (RGH) announced that on June 11,
RGH and Reliance Financial Services Corporation (RFS), its
wholly-owned subsidiary, filed voluntary petitions for relief
under Chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the Southern District of New
York.
The Company said it elected to file for Chapter 11 relief in
order to implement a financial restructuring of the Company.
The Company said that it has reached an agreement in principle
with holders of the majority of RFS' bank debt, and an ad hoc
committee consisting of holders of approximately 50 percent of
the outstanding principal amount of RGH's 9 percent Senior Notes
and holders of approximately 50 percent of the outstanding
principal amount of RGH's 9 3/4 percent Senior Subordinated
Debentures, on the major economic terms of a plan of
reorganization.
Under the terms of the agreement, RFS' lenders will receive new
10-year notes issued by the reorganized RFS that will bear
interest in kind at RFS' sole option and be payable solely from
dividends or other distributions received by the reorganized RFS
from Reliance Insurance Company (RIC), a wholly-owned subsidiary
of RFS. All current common stock of RGH and RFS will be
extinguished. RFS' bank lenders will receive 86 percent of the
voting power of the reorganized RFS and be entitled to 100
percent of all cash recoveries of the reorganized RFS (other
than dividends or other distributions received from RIC) until
such time that the bank lenders shall have received from such
cash recoveries of the reorganized RFS an amount equal to the
portion of the RGH excess cash distributed to RIC under the
proposed restructuring, plus interest. After that point, RFS'
bank lenders will be entitled to 86 percent of all cash
recoveries of the reorganized RFS, excluding all distributions
from RIC.
The remaining interest in the reorganized RFS, including cash
recoveries from RIC after full repayment of the new notes, will
be distributed to RGH bondholders and holders of allowed general
unsecured claims against the Company on a pro rata basis based
on the claims of such creditors. In addition, the reorganized
RGH will issue 100 percent of its new common stock to RGH
bondholders and holders of allowed general unsecured claims
against the Company.
The proposed plan also provides for the distribution, following
payment of administrative expenses and priority claims, of
excess cash at RGH to the RGH bondholders, holders of allowed
general unsecured claims against the Company and RIC on a pro
rata basis based on the claims of the RGH bondholders and
holders of allowed general unsecured claims as of November 15,
2000 and the claims of RIC as of September 30, 2000 (less any
claims of the IRS paid by RGH on account of RIC). All
distributions made to the RGH bondholders under the proposed
plan will be divided among the holders of Senior Notes and the
holders of Senior Subordinated Debentures on a 85.4-14.6 percent
basis.
The Company said that the terms negotiated with the RFS lender
group and the RGH bondholder group will form the basis for a
plan of reorganization to be filed with the bankruptcy court at
a later date. Any plan of reorganization is subject to
bankruptcy court approval.
As previously announced, on May 29, RIC was placed in
rehabilitation by the Commonwealth Court of Pennsylvania upon
request of the Pennsylvania Department of Insurance, with the
consent of RIC. RIC, in rehabilitation under the Pennsylvania
Insurance Commissioner, is a major creditor of RGH. The Company
has been in discussions with the Pennsylvania Department of
Insurance regarding the terms negotiated with the RFS lender
group and the RGH bondholder group. The Department, however, has
not approved the terms of the agreement in principle. On June
11, the Department filed a complaint with the Commonwealth Court
of Pennsylvania seeking to impose a constructive or resulting
trust on RGH cash and to enjoin any disbursements of such cash.
The Company disputes the allegations contained in the complaint.
RELIANCE GROUP: Case Summary & Lists Of Unsecured Creditors
-----------------------------------------------------------
Lead Debtor: Reliance Group Holdings, Inc.
5 Hanover Square
New York, NY 10005
Debtor affiliate filing separate chapter 11 petition:
Reliance Financial Services Corporation
Type of Business: Insurance company
Chapter 11 Petition Date: June 12, 2001
Court: Southern District of New York (Manhattan)
Bankruptcy Case Nos.: 01-13403-ajg and 01-13404-ajg
Debtors' Counsel: Steven R. Gross, Esq.
Lorna G. Schofield, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022-6225
(212) 909-6000
Fax : (212) 909-6836
Total Assets: $12,598,054,000
Total Liabilities: $12,877,472,000
RELIANCE FINANCIAL'S KNOWN UNSECURED CREDITORS:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Chase Manhattan Bank Loan pursuant to $45,509,524
380 Madison Avenue, 9th Flr. the Credit Agreement
New York, NY 10017 dated as of November
Tom Dinneen 1, 1993 and amended
(212) 622-4864 from time to time,
among RFS and the
lenders thereto (the
"Credit Agreement")
Deutche Banc Alex. Brown Loan pursuant to the $23,795,238
130 Liberty St., 30th Floor Credit Agreement
New York, NY 10006
Ray Peters
(212) 250-8367
Credit Lyonnais Loan pursuant to the $20,176,190
1301 Avenue of the Americas Credit Agreement
New York, NY 10019
Linda Tulloch
(212) 261-7744
Bank of New York Loan pursuant to the $20,176,190
One Wall Street, 17th Floor Credit Agreement
New York, NY 10286
Albert Taylor
(212) 635-7284
Bank of America, N.A. Loan pursuant to the $20,176,190
335 Madison Avenue Credit Agreement
New York, NY 10017
Henry Yu
(212) 503-7211
Bank of Montreal Loan pursuant to the $17,190,476
115 South LaSalle Street Credit Agreement
Chicago, IL 60603
Geoffrey R. McConnell
(312) 750-8702
ABN Amro Bank N.V. Loan pursuant to the $17,190,476
10 East 53rd S., 37th Floor Credit Agreement
New York, NY 10022
Steven Wimpenny
(212) 891-0626
First Union National Bank Loan pursuant to the $17,190,476
PA 4819 Credit Agreement
1339 Chestnut St., 3rd Floor
Philadelphia, PA 19107
Tom Stitchberry
(215) 973-3246
Sanwa Bank Loan pursuant to the $17,190,476
601 S. Figueroa St., 8th Flr. Credit Agreement
Los Angeles, CA
Jerry McDermott
(213) 896-7067
Fleet Bank Loan pursuant to the $17,190,476
1133 Avenue of the Americas Credit Agreement
2nd Floor
New York, NY 10036
Donald Nicholson
(860) 986-6933
Union Bank of California N.A. Loan pursuant to the $12,666,667
Special Asset Division H-750 Credit Agreement
350 California Street
San Francisco, CA 94103
Nancy Perkins, V.P.
(415) 705-7692
RELIANCE GROUP'S KNOWN UNSECURED CREDITORS:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Wells Fargo Bank 9% Senior Notes $291,710,000
Gavin Wilkinson due Nov.15, 2000
Minnesota, N.A.
MAC N9303 120
Sixth & Marquette
Minneapolis, MN 55479
(612) 667 3777
HSBC Bank USA 9-3/4% Senior $171,770,000
Russ Paladino Subordinated
Corporate Trust Debentures
Administration due Nov.15, 2003
140 Broadway, 12th Floor
New York, NY 10005-1180
(800) 975 4722
Lowell Freiberg Accrued Benefit $5,478,708
115 Central Park West Under RGH Benefit
Apt. 11C Equalization Plan
New York, NY 10023
(212) 769 4353
David Woodward Accrued Benefit $225,020
Under RGH Benefit
Equalization Plan
Fred Schriever Accrued Benefit $225,020
Under RGH Benefit
Equalization Plan
David Noyes Severance Pay $200,000
Credit Suisse First Boston Professional Fees $25,000
Bear, Stearns & Co., Inc Professional Fees $25,000
FIS Sale of $18,105
Publications
Aetna U.S. Healthcare Insurance premiums, $8,103
service fee
New York State Estimated $3,510
Tax Payment
Oxford Health Plans Monthly medical $1,518
premium
New York City Dept. Estimated $1,400
of Finance tax payment
Saul Ewing LLP Restructuring $1,094
matters
Aetna Life Insurance Group universal $986
life premium
The Bank of New York Professional $855
services
First Unum Life Group insurance $250
premium
Intaboro Car services $250
Congressional Quarterly, Subscription fees $170
Inc.
Mitchell's Newspaper delivery $126
Safeco Life Insurance Co. Insurance premium $121
Joseph D'Emilio Flexible spending $99
reimbursement for
current employee
Unum Life Insurance Co. Insurance premiums $44
Federal Express Delivery fees $39
Avaya Financial Services Telephone Lease Unknown
Paul Minish, Verde Alleged violation Unknown
Investments, Inc. of securities laws
and Gary Kimmel
Donald and Bonnie Lee Alleged violation Unknown
Slok and Gary Kimmel of securities laws
SAFETY-KLEEN: Enters Into Settlement Agreement With ECDC
--------------------------------------------------------
SK Services (East), LC fka ECDC (East), LC, and Safety-Kleen
Corporation, have entered into an indemnification and settlement
agreement with ECDC Environmental LC and Allied Waste
Industries, Inc., under which the SK entities agreed to
indemnify, defend and hold each of ECDC and Allied harmless from
all claims asserted by any party in the action pending in the
United States District Court for the District of New Jersey
styled "United States ex rel The Dutra Group v. ECDC
Environmental", including any claims asserted in that action by
Dutra or American Home or by the United States in a suit brought
by SK Services in the United States Court of Claims styled "SK
Services v. United States", known as the Army Corp litigation.
The obligations, if any, of the Debtors will be treated as
allowed administrative expense priority claims in these
bankruptcy cases. ECDC and Allied agree that legal title to the
the contracts with Durta and the Army Corp giving rise to the
claims asserted by these entities in the two litigative actions
are in ECDC, but the equitable title to these claims is in SK
Services, and that SK Services may pursue those claims. SK
Services will retain counsel to defend ECDC in the Dutra
litigation, and to pursue the claims in the Army Corp action, at
its expense. SK Services has full authority to pursue or settle
these claims against ECDC, as it deems appropriate, will keep
ECDC fully informed of these actions, and will reimburse the
actual and necessary expenses incurred by ECDC and Allied in
engaging outside counsel to monitor these litigative matters.
However, this reimbursement may not exceed $75,000 in the
aggregate.
This reimbursement obligation is likewise treated as an allowed
administrative expense. The agreement also includes mutual
releases of liability, which releases include Henry H. Taylor,
an employee of the Debtors, and Blank Rome, other than those
obligations included in the settlement.
The Debtors claimed that entry into this indemnification and
settlement agreement rests within their sound business judgment.
The Debtors cite the uncertain outcome of continued litigation,
the cost savings in time and money of settlement rather than
litigation, and the possibility of the emergence of a
substantial claim against these estates as good reasons for
approval of the settlement. (Safety-Kleen Bankruptcy News, Issue
No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900)
SENIOR HOUSING: S&P Assigns BB+ Corporate Credit Rating
-------------------------------------------------------
Standard & Poor's assigned its double-'B'-plus corporate credit
rating to Senior Housing Properties Trust. In addition, a
double-'B'-minus rating was assigned to the company's proposed
trust preferred securities to be issued off the company's
recently filed $500 million mixed shelf registration.
Preliminary ratings on the shelf are double-'B'/double-'B'-
minus. The outlook is stable.
The ratings reflect the company's conservative financial
profile, characterized by low leverage and strong coverage
measures as well as modest exposure to troubled
operators/properties. These strengths are offset by a highly
concentrated tenant base, limited financial flexibility, and
uncertainty regarding the ability of a recently established
affiliate to manage and improve the profitability of facilities
repossessed from formerly bankrupt tenants.
Senior Housing is an externally advised REIT that was formed in
1998 and became public in October 1999 when HRPT Properties
Trust (triple-'B'/stable) distributed 51% of its interest in the
company to HRPT shareholders. Senior Housing owns and acquires
skilled nursing, congregate care, assisted living, and senior
apartment facilities. The company is one of the smaller health
care REITs rated by Standard & Poor's, with an asset base under
$600 million, comprised of 85 health care investments located in
23 states.
The company's portfolio consists of four different senior
housing property types, but roughly 90% of real estate
investments are in congregate care and skilled nursing
facilities. In response to tenant bankruptcies that plagued the
skilled nursing industry, Senior Housing terminated leases with
its two largest financially troubled operators, Integrated
Health Services and Mariner Post-Acute, which combined
represented over one-third of the company's real estate
investments and nearly half of its revenues prior to the 2000
bankruptcy filings by these operators. The company successfully
negotiated settlements with these operators and took control of
57 facilities. In 1999 and 2000, Senior Housing took charges
totaling $40 million to write down these investments, which now
account for about 24% of the company's real estate investments.
The principals of the company's investment advisor, REIT
Management & Research Inc., set up a management company (Five
Star Quality Care Inc.) to manage the 57 facilities on an
interim basis. Improving the performance of these assets will be
challenging: The ability to find new third-party operators or
buyers for these assets and the timing of such transactions are
uncertain. Five Star appears to have appropriately staffed its
corporate and regional offices with experienced personnel and is
taking steps, such as more aggressive marketing, to improve
facility performance. Furthermore, Five Star operations on
behalf of Senior Housing have been modestly profitable to date.
The company's tenant base is highly concentrated, with its two
largest tenants, Marriott International Inc. (triple-'B'-
plus/stable) and HEALTHSOUTH Corp. (triple-'B'-minus/stable),
accounting for over 67% of real estate investments at March 31,
2001; mitigating this concentration risk is the credit quality
and long-term guaranteed leases with these entities. The
portfolio has an average occupancy of 88% and property-level
rent coverage, excluding the foreclosed properties, of about 1.4
times (x).
The company maintains a relatively conservative financial
position. The capital structure is moderately leveraged at 20%
debt-to-book capitalization, and the company expects to maintain
a modestly leveraged capital structure. Following the company's
proposed offering, Senior Housing's debt will be composed of
borrowings under its secured line of credit and the $50 million
of trust preferred securities. Fixed-charge coverage is
currently over 4x and is expected to remain above 4x. These
strong debt coverage measures are presently supported by the
stable income stream garnered from guaranteed, long-term leases
with Marriott and HEALTHSOUTH. The company has ample room on its
modestly used $270 million line of credit; however, the line is
collateralized by the company's most productive assets, which
account for 55% of real estate investments and encumber roughly
69% of the portfolio's net operating income. Low overall
leverage levels result in a more modest secured debt-to-
leverageable assets measure of 15% to 20%; as a consequence a
single notch between the company's corporate credit rating and
implied senior unsecured rating is warranted. The trust
preferred securities are rated two notches from the corporate
credit rating.
Outlook: Stable
The company's ratings are supported by the stable cash flow
currently generated by leases with its two largest tenants,
modest exposure to troubled operators/assets, and a conservative
financial profile. The outlook is based on the expectation that
the company will adhere to its conservative financial policies,
pursue reasonable exit strategies for properties currently
operated by Five Star, and pursue and finance new investment
activity prudently, Standard & Poor's said.
STAFF BUILDERS: Stockholders To Meet On July 24 in New York
-----------------------------------------------------------
The Annual Meeting of Stockholders of Staff Builders, Inc., a
Delaware corporation, will be held at the offices of Deloitte &
Touche, LLP, Third Floor, Two Jericho Plaza, Jericho, NY
11753, on Tuesday, July 24, 2001 at 10:00 a.m. (New York Time)
for the following purposes:
1) To consider and act upon a proposal to amend the
Certificate of Incorporation to change the Company's name to
"ATC Healthcare, Inc." or such other name as shall be proposed
at the Meeting;
2) To elect two Class B Directors to serve for a three-year
term and until their successors are elected and qualified; and
3) To transact such other business as may properly come
before the meeting or any adjournment thereof.
Only stockholders of record at the close of business on June 25,
2001 are entitled to notice of and to vote at the meeting.
TECMAR TECHNOLOGIES: Emerges From Chapter 11 Bankruptcy
-------------------------------------------------------
Tecmar Technologies International, Inc. has emerged from Chapter
11 protection, following the April 5, 2001 confirmation of its
Joint Liquidating Plan dated November 28, 2000 was by order
confirmed on April 5, 2001. The Company was represented by Laura
Davis Jones of Pachulski Stang, Ziehl, Young & Jones, PC. (New
Generation Research, June 12, 2001)
TELENETICS: Resolves Defaulted Notes & Sees Improved Q2 Results
---------------------------------------------------------------
Telenetics Corp. (Nasdaq:TLNT) announced it expects that
revenues for the second quarter ending June 30, 2001 to reach
approximately three times that of the previous quarter, to
approximately $5.7 million.
The losses from operations, excluding amortization and other
non-cash items will be significantly reduced to approximately
$0.05 per share, compared with $0.11 per share for the first
quarter of 2001. As an indication of the company's progress
towards achieving its stated goals of becoming profitable by
year end, the month of June is expected to be close to break-
even from operations, excluding amortization and other non-cash
items.
The company also announced that it has made positive steps in
curing its default position with its note holders either through
extensions, waivers or conversions into equity.
The expected results for the month of June and the second
quarter exclude an expected non-cash charge of approximately
$800,000 associated with the company's planned divestiture of
it's GDI division. The performance of this division has recently
been, and was expected to be, dilutive to earnings by $0.01 to
$0.02 per share for the balance of fiscal 2001. The transaction
is expected to close by June 30, 2001.
Commenting on Telenetics' expected revenue increase and improved
operating performance, Shala Shashani, Telenetics' chairman and
CEO stated: "We are pleased that we continue to make progress in
providing the Sunrise Series products on a timely manner to our
customers. We believe strongly in the growing demand for these
products and other products we manufacture.
"In addition, our Licensing Agreement with Motorola provides
access to world-class market channels developed and used by
Motorola for the distribution of these data transmission
products. The access to these channels represent a significant
opportunity to more effectively offer all of our products to
both domestic and international markets.
"To create distribution channels of this quality and scope would
normally be beyond the resources and stature of a company of our
size.
"The fact that some of our note-holders, whose notes were in
default as reported in our latest filing with the Securities and
Exchange Commission have now elected to either convert into
equity, waive the default or extend their notes, speaks
favorably about our investors' confidence in Telenetics' future.
"We believe that we will continue to move towards accomplishing
our stated goal of becoming profitable."
Based in Lake Forest, Telenetics(R) is a leader in the design,
production and distribution of wired and wireless data
transmission and network access products and customer-specific
communications products for customers worldwide. Telenetics
offers a wide range of industrial grade modems and wireless
products, systems and services for connecting its customers to
end-point devices such as meters, remote terminal units, traffic
and industrial controllers and remote sensors.
THCG INC.: Nasdaq Delists Shares From Trading
---------------------------------------------
THCG, Inc. (Nasdaq: THCG) announced that the Company's common
stock was delisted from the Nasdaq National Market as of the
open of business on June 13, 2001.
The Company is eligible for quotation on the OTC Bulletin Board
and its ticker symbol will continue to be THCG.
As previously announced, THCG continues to evaluate strategic
alternatives including establishing a liquidating trust to
liquidate THCG's investment securities for the benefit of THCG's
shareholders.
TOM YOUNG'S: Albuquerque Gym Files For Chapter 7 Bankruptcy
-----------------------------------------------------------
Albuquerque-based Tom Young's Health Club and Spa filed for
chapter 7 bankruptcy on Friday, owners told KOAT Action 7 News.
The club, which had about 2,300 members, filed for bankruptcy
protection in an effort to slow down its eviction from the
Wyoming Mall, KOAT reported. The club, which has been present in
Albuquerque for more than 30 years, hadn't been able to keep its
rent paid, KOAT reported. The rent was $12,000 per month, and an
eviction notice prepared by the mall asked for $47,000 in back
rent. (ABI World, June 12, 2001)
UPRIGHT INC.: Files For Chapter 11 Protection in E.D. California
----------------------------------------------------------------
W.R. Carpenter North America, Inc. announced that its wholly
owned subsidiary, UpRight, Inc., a manufacturer of aerial work
platforms and telescopic handlers, intends to reorganize under
chapter 11 of the U.S. Bankruptcy Code, and has filed a
voluntary chapter 11 petition with the U.S. Bankruptcy Court for
the Eastern District of California, Fresno Division.
Currently, UpRight has decided to temporarily suspend production
of new equipment in its U.S. manufacturing facilities located in
Madera, CA and Selma, CA, resulting in the unfortunate loss of
jobs. During the reorganization, UpRight will continue to ship
finished goods, and focus on servicing its customer base by
providing parts, training and technical support. UpRight's
international affiliates, including entities in Ireland, The
Netherlands, Singapore and Japan, are not part of the filing.
The combination of the sharp decline in recent customer orders,
an overall slowdown in customer payments and the burden of the
company's debt obligations all contributed to the need for the
filing - factors which along with a general economic downturn,
have been widespread within UpRight's industry. Upright's filing
also follows a demand for full repayment under a $20 million
revolving line of credit from Union Bank of California, N.A.,
UpRight's principal lending institution. The company had been in
discussions with Union Bank regarding an extension of its
revolving line of credit.
We regret our need to file for chapter 11 protection, but are
taking this opportunity to re-evaluate our manufacturing
strategies and restructure the business, said Ian Menzies,
president of UpRight. The management team is positive and
confident about the prospects for leading this company out of
bankruptcy and working diligently to restore our prominent
position in the aerial work platform business as well as our
valued relationships with our customers, dealers and vendors.
UpRight conducted a thorough and careful review of all of its
available options and concluded that reorganization under
chapter 11 is the best way to protect operating liquidity,
stabilize the company and maintain sufficient flexibility to
restructure its debt and focus on laying a foundation for
improved operations.
UpRight, Inc. is a manufacturer of aerial work platforms, which
are distributed through a network of domestic and international
dealers and industrial equipment rental companies. With over 50
years experience, UpRight produces aerial work platforms that
provide superior access to overhead construction and maintenance
tasks at new buildings, auditoriums, stadiums and arenas,
schools, churches, hospitals, airports, airplanes, warehouses,
retail shopping malls. The company manufactures and sells self-
propelled devices, such as scissor lifts, articulated arm lifts
and mast lifts. UpRight's products also include portable
personnel lifts, telescopic handlers, trailer-mounted boom lifts
and aluminum scaffolding.
UpRight, Inc. is a wholly owned subsidiary of W.R. Carpenter
North America, Inc., which is headquartered in Fresno,
California.
VLASIC FOODS: Committee Retains Kramer Levin As Lead Counsel
------------------------------------------------------------
The Official Committee of Unsecured Creditors in Vlasic Foods
International, Inc.'s chapter 11 cases, sought and obtained an
order authorizing it to retain and employ Kramer Levin Naftalis
& Frankel LLP as its lead counsel effective February 15, 2001.
The Committee selected Kramer Levin for its extensive experience
in the fields of bankruptcy and creditors' rights, and because
Kramer Levin has also represented other creditors' committees in
some of the largest and most complex chapter 11 reorganization
cases of recent years. These cases include Dow Corning
Corporation, SGL Carbon Corporation, London Fog Industries,
Inc., MMH Holdings, Inc., Big V Holdings, Edison Brothers,
Olympia & York, SLM International, Inc., Buddy L, Integrated
Resources, Inc., Financial News Network, Inc., INTERCO
Incorporated and Public Service Company of New Hampshire.
Because Kramer Levin has a broad-based practice, which includes
expertise in the areas of corporate and commercial law,
litigation, tax, intellectual property, employee benefits and
real estate, the Committee believes this will enable Kramer
Levin to represent their interests effectively. The Committee
also believes that Kramer Levin has developed a particular
expertise and sensitivity to the issues that arise in
supermarket and food industry bankruptcies and restructurings,
as a result of the significant roles they played in recent high-
profile retail and food industry cases such as Big V
Supermarkets, Bruno's, Jitney Jungle and Kash 'n Karry Stores.
Aside from acting as the primary spokesperson for the Committee,
Kramer Levin services will include representing the Committee in
connection with:
(a) The administration of these cases and the exercise of
oversight with respect to the Debtors' affairs including all
issues arising from the Debtors, the Committee or these Chapter
11 cases;
(b) The preparation on behalf of the Committee of
necessary applications, motions, memoranda, orders, reports and
other legal papers;
(c) Appearances in Court and at statutory meetings of
creditors to represent the interests of the Committee;
(d) The negotiation, formulation, drafting and
confirmation of a plan or plans of reorganization and matters
related thereto;
(e) Such investigation, if any, as the Committee may
desire concerning, among other things, the assets, liabilities,
financial condition and operating issues concerning the Debtors
that may be relevant to these Chapter 11 cases;
(f) Such communication with the Committee's constituents
and others as the Committee may consider desirable in
furtherance of its responsibilities; and
(g) The performance of all of the Committee's duties and
powers under the Bankruptcy Code and the Bankruptcy Rules and
the performance of such other services as are in the interests
of those represented by the Committee.
The principal attorneys expected to represent the Committee and
their hourly billing rates are:
Mitchell A. Seider $435 per hour
Robert T. Schmidt $425 per hour
Catherine Finnerty $325 per hour
Other attorneys and paraprofessionals may also, from time to
time, provide services to the Committee, at their customary
hourly rates:
Partners $400 - $575
Counsel $420 - $575
Associates $200 - $410
Legal Assistants $140 - $165
Kramer Levin's hourly billing rates are subject to periodic
adjustments to reflect economic and other conditions. But they
are not intended to cover out-of-pocket expenses and certain
elements of overhead that are typically billed separately.
Kramer Levin will also regularly charge its clients for the
expenses and disbursements incurred in connection with the
client's case, including word processing, secretarial time,
telecommunications, photocopying, postage and package delivery
charges, court fees, transcript costs, travel expenses, expenses
for "working meals" and computer-aided research.
Judge Walrath is satisfied that Kramer Levin does not have any
adverse interest to the estates of the Debtors, notwithstanding
many connections with parties-in-interest in the Debtors' cases
in matters unrelated to Vlasic's chapter 11 cases. The Court is
also convinced that Kramer Levin is a "disinterested person" and
agrees that Kramer Levin's employment is necessary and in the
best interest of the Committee. (Vlasic Foods Bankruptcy News,
Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900)
W.R. GRACE: Creditors Move To Amend Employee Obligations Order
--------------------------------------------------------------
The Official Committee of Unsecured Creditors in W. R. Grace &
Co.'s chapter 11 cases, appearing through Lewis Kruger at
Stroock Stroock & Lavin, asked Judge Farnan to reconsider and
amend his "first-day" order permitting the Debtors discretion in
paying prepetition wages, salaries, incentive pay, bonus plans,
and other compensation, medical, pension and other benefits,
severance pay, workers' compensation benefits, retiree health
benefits, and other employee-related obligations, to the extent
that the Order authorized the Debtors to pay (i) former or
terminated employees, executives, and directors nonqualified
benefits under five pension plan , and (ii) to fund certain
trusts with assets to pay two "Rabbi Trusts" nonqualified
benefit plans on the occurrence of a change of control with
respect to the Debtors' stock. The nonqualified benefits these
pension plans provided are not subject to the funding and trust
requirements of ERISA. Unlike benefits from qualified pension
plans that are paid from separately funded trusts, which are
continuing and not challenged by the Committee, nonqualified
benefits are paid from the Debtors' current assets. It is
essential to the tax deferral afforded to such vested
nonqualified benefits that the benefits remain assets of the
employer until distributed to a former employee. Thus, by their
very nature, Mr. Kruger assured Judge Farnan that nonqualified
benefits remain subject to the risk that the employer may become
insolvent. It is also an essential feature of such programs
that, in the case of the employer's insolvency, the former
employee would have the status of an unsecured creditor with a
claim for the value of his or her unpaid benefits.
Supplemental Executive Retirement Plan
The Supplemental Executive Retirement Plan provides excess
benefits to approximately 250 inactive or retired employees
whose pensions under the Debtors' qualified defined benefit
plans (i) are restricted by the limitations of the Internal
Revenue Code, or (ii) are impacted by the executive's voluntary
decision to defer compensation during his or her employment. The
SERP provides each covered executive with a payment equal to the
difference between (A) the pension that would have been payable
under the Debtors' qualified defined benefit pension plans (i)
without consideration of the limitation on covered compensation
for pension purposes in the Internal Revenue Code ($170,000 for
2001), (ii) without consideration of the limitation on defined
benefit pensions under another Code section ($140,000 for 2001),
and (iii) with the inclusion of amounts of deferred compensation
which are not includable in compensation for purposes of
calculation of pension payments under qualified pension plans,
and (B) the amount that the executive is actually entitled to
receive under the provisions of the Debtors' qualified defined
benefit pension plans. In the absence of a court order vacating
the Order granting payment under the first-day Motion, the
Debtors estimate that they will distribute approximately $3.3
million in SERP payments in 2001 to former employees, and
approximately the same amount in each year going forward.
The SERP is, by definition, a "top-hat" plan which covers only a
select group of highly compensated or management employees. The
former employees who currently receive payments under the SERP
were among the most highly compensated of the Debtors'
employees. Former employees also receive substantial pensions
from the Debtors' qualified pension plans, or received a
substantial lump- sum distribution from the Debtors' qualified
benefit plans on their retirement.
Voluntary Supplemental Pension Payments
The Voluntary Supplemental Pension Payments include amounts paid
approximately 110 former employees and are in addition to
pensions from qualified benefit plans and payments under the
SERP. The Debtors have informed the Committee that payments
under VSPP are made either under contract with former employees,
or because the Debtors determined that the qualified and other
nonqualified pension benefits for certain individuals were
insufficient. The contractual arrangements vary from executive
to executive. It is likely that the largest VSPP payments are
made to former senior executives who earned the greatest
compensation. In the absence of a court order vacating the prior
Order authorizing these payments, approximately $3.6 million in
payments will be made this year alone to former employees. Of
this amount, more than $2.8 million is payable to 17 former
executives who receive annually between $36,000 and $876,000
each from VSPP. Because the bulk of the VSPP payments are under
separate prepetition agreements, and because there may be one or
more senior executives not yet in current pay status, the
magnitude of payments under VSPP in subsequent years could be
even more.
Retirement Plan for Outside Directors
This plan provides payments of between $15,000 and $24,000 a
year to each of 16 former directors of the Debtors and
aggregates approximately $350,000 annually. Payments to each
former director continues for 15 years. The Creditors' Committee
has been informed that no similar plan is in place for present
directors.
International Retirement Benefits Plan
The W. R. Grace Retirement Plan for Outside Directors provides
pension supplements to the pensions of two current and 16 former
key executives who worked at least part of their careers outside
of their home countries. The Debtors state these payments are
intended to put those executives' retirement benefits on a par
with benefits paid to counterparts who were employed
continuously within a single country over the same period. In
the absence of an order vacating the previously granted
authorization to pay these amounts, the Debtors expect to pay
out approximately $300,000 in 2001.
Columbian Pension
The Columbian Pensions provide approximately $18,000 a year to 7
former employees who reside in Columbia, South America.
The Committee's Arguments
The Creditors' Committee is not objecting to the Order to the
extent it authorizes the Debtors to pay prepetition salaries,
wages, vacation and such other benefits to current employees,
which may be considered customary, but objects to authorization
sought and obtained by the Debtors to pay nonqualified benefits
to former employees and to fund the Rabbi trusts, which are not
customary.
The nonqualified benefits for former employees, which the
Debtors report aggregate approximately $7.5 million for the 2001
calendar year alone, differ dramatically in character from the
other obligations included in the category defined as employee
obligations in the benefits Motion, and are not entitled to
priority claim treatment except perhaps for a de minimus amount
which may arise to the extent the former employees were employed
by the Debtors within the 180-day period prior to the Petition
Date, and who were terminated or retired just prior to the
Petition Date. However, the Committee believes that any benefits
earned by such an employee could only be negligible in amount.
Further, while there may be some variations from year to year,
it is likely that at least the $7.5 million projected for 2001
will be payable annually in 2002, 2003, and in the foreseeable
years going forward, as more former employees come into pay
status.
The Committee asserted that the Debtors have not shown that the
continued payment of nonqualified benefits to these former
employees is critical to their reorganization so as to warrant
application of the "necessity of payment" doctrine to justify
the priority payment of what are merely general unsecured claims
held by former employees against the Debtors' estates. The
benefits Motion contains only conclusory statements that
performing their obligations under retirement programs is
"essential to maintaining" employee morale, and that any
disruption would call into question the Debtors' commitment to
their employees and retirees. The morale of current employees
may justify the payment of prepetition benefits to current
employees who retire or are terminated after the Petition Date,
but it cannot justify payment of prepetition benefits to former
employees outside the Bankruptcy Code's priority scheme and
ahead of general unsecured creditors.
The Committee noted it was not organized on the Petition Date,
and therefore did not have notice of the first-day Motion, or
any opportunity to consider and then object to the totality of
the relief sought before the Court's entry of its order. The
Local Rules of Court provide the Committee with a 30-day window
to review and object to such motions. This Rule clearly
contemplates that orders may be entered by the Court on first-
day motions which, on review, may be found to have been
improvidently granted and require amendment. In this
reconsideration, the rule states that the burden of proof as to
the appropriateness of the Order remains on the Debtors.
Joinder of Committee of Asbestos Claimants
The Official Committee of Asbestos Bodily Injury Claimants,
represented by William P. Bowden, Matthew G. Zaleski, and
Ricardo Palacio of Wilmington, and Elihu Inselbuch of the New
York firm of Caplin & Drysdale Chartered, joined in the
Creditors' Committee's Motion. (W.R. Grace Bankruptcy News,
Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900)
WHEELING-PITTSBURGH: Wants To Reject Old ESM Pact & Ink New One
---------------------------------------------------------------
Wheeling-Pittsburgh Steel Corporation wants to reject an
executory contract with ESM II, LP, enter into a new
Desulfurization Services Agreement with ESM, by which ESM will
continue to perform hot metal desulfurization services for WPSC
at reduced prices and to make available certain equipment
required to perform the desulfurization services to WPSC, and to
execute a U.C.C. Rep. Serv.-1 Financing Statement in favor of
ESM, as a precautionary matter, evidencing that the equipment
being made available to WPSC under the new Agreement is
nonetheless still owned by ESM.
Raw materials required to make steel contain certain levels of
sulfur. Sulfur is an impurity that must be extracted from molten
iron; otherwise, steel becomes brittle and the quality of the
steel is compromised. In order to attain certain levels of
quality and customer satisfaction, it is essential that WPSC
perform desulfurization services.
The Old Agreement
WPSC and ESM entered into a letter agreement in July 1998 under
which ESM agreed to provide hot metal desulfurization services
for WPSC. Although not specifically addressed in the Letter
Agreement, WPSC and ESM have been operating under a requirement
that ESM provide a minimum of 9 qualified technicians to perform
services under the Letter Agreement. These services personnel
are required to perform desulfurization services 24/7 per week.
In addition, under the Letter Agreement ESM was obligated to
install and provide WPSC with the necessary equipment required
to perform the desulfurization services, including PLC and MMI
screens and injection equipment. Under the Letter Agreement, ESM
retained ownership of the equipment, but WPSC had the right to
acquire the equipment for an initial buy-out price of $550,000,
reducing until the buy-out price reaches zero at the end of
the fifth year of the contract. Because of this term, it is
possible that this Letter Agreement would be viewed s a sale of
the equipment with a retained security interest, rather than a
lease of the equipment. This would allow WPSC to argue that it
actually owned the equipment, and that ESM has an unsecured
claim for any balance due on the equipment.
Interim Agreement
Before filing its Chapter 11 Petition, WPSC had negotiated with
ESM to attain cost savings under the Letter Agreement. WPSC told
Judge Bodoh it has reached a new agreement with ESM that will
provide for considerable cost savings. WPSC has estimated that
the cost savings should be in the range of $1.4 million over the
first year of the contract. In return for the cost savings, WPSC
has agreed that ESM can reduce the number of service personnel
from 9 to a minimum of 5, and that ESM's ownership interest in
the equipment will be reaffirmed. WPSC has determined that all
necessary services can be maintained with the reduction in the
number of service personnel at this rate.
In order to obtain immediate price savings, WPSC discloses it
entered into an interim letter agreement with ESM in April 2001,
under which ESM agreed to reduce the prices charged to WPSC
under the Letter Agreement, pending approval of a new agreement,
once the number of on- site services personnel was reduced from
9 to a minimum of 5. The interim agreement further provides that
the quality of ESM's desulfurization services cannot be
compromised as a result of the reduction in personnel. Either
WPSC or ESM can terminate this interim agreement with or without
cause upon two days' written notice. The Debtor assured Judge
Bodoh this interim agreement was based on the expectation that
WPSC and ESM would promptly enter into a new agreement. Once
Judge Bodoh approved the new agreement, WPSC and ESM will
execute the new agreement and the interim agreement will be
terminated.
Need for U.C.C.-1 Financing Statement
Under the terms of the new agreement, WPSC agrees that ESM does
indeed remain the owner of the equipment. However, WPSC and ESM
agree that negotiations to transfer the equipment from ESM to
WPSC may ensue. In the event that such transfer of the equipment
is agreed to in writing signed by ESM and WPSC, the purchase
price of the equipment shall in no event exceed the lesser of
the equipment's fair market value, or $460,000.
As a precautionary matter, and in order to ensure that ESM's
ownership right in the equipment will not be in question, ESM
has requested that WPSC execute a UCC-1 Financing Statement in
relation to the equipment located on site at WPSC. The purpose
of this Financing Statement will be to put all other third
parties on notice that the equipment provided to WPSC under the
new agreement is indeed actually owned by ESM.
Terms of the New Agreement
ESM will perform WPSC's hot metal desulfurization service
requirements, including service and equipment maintenance. The
parties agree that no minimum quantity of services will apply,
and none are guaranteed by ESM.
The term of the new agreement will be two years, effective on
the date on which the Bankruptcy Court approves the Motion. On
the effective date, the interim agreement will automatically
terminate; however, notwithstanding this termination, the time
periods and prices in that agreement begin running from the date
of personnel reduction from 9 to a minimum of 5, which occurred
on April 25, 2001. The parties agreed that this reduction will
not compromise the quality of ESM's desulfurization services.
Even if the new agreement is not approved, WPSC will nonetheless
be entitled to the reduced prices by the terms of the interim
agreement. These reduced prices are the prices in the Letter
Agreement, less the discount offered by ESM and accepted by WPSC
in earlier letters, less $0.10 for each shift in which ESM
provides or previously provided the reduced number of personnel.
The pricing schedule is not attached to the new agreement under
a confidentiality agreement between WPSC and ESM, and is not
otherwise disclosed in the Motion. The prices for
desulfurization services will be made available to the Court,
the United States Trustee, and the Official Committees, and even
then only upon request.
Rejection of the Old Agreement
WPSC asked that Judge Bodoh approve their rejection of the
Letter Agreement. Based on the negotiation of the new agreement,
and the substantial reduced prices provided by the new
agreement, estimated at $1.4 million over the first year of the
new agreement, as well as the more complete description of the
contractual relationship between WPSC and ESM provided for in
the new agreement, WPSC has determined that the Letter Agreement
is burdensome to the estate and does not provide benefits.
Although WPSC could argue that it is the owner of the equipment
under the legal theory that the Letter Agreement was a sale with
retained security interest and not a true lease, WPSC does not
believe that pursuing that argument would be in the best
interest of the estate because (i) costly litigation would be
required to establish WPSC's rights in the equipment, and there
is always the risk in litigation that a party may not prevail,
and (ii) the risk to WPSC's business operations if its
desulfurization process is interrupted is substantial. In order
to continue to operate the equipment, WPSC would have to train
its personnel to perform desulfurization services and obtain and
install necessary software. If WPSC were to litigate the issue
of ownership of the equipment and lose, there is substantial
risk that there could be disruption of WPSC's operations. Thus,
WPSC has determined that the better option is to accept the $1.4
million in first-year savings.
Allowance of Prepetition Claim
As set out in the new agreement, the parties have agreed that
WPSC owes ESM $214,942.98 for services actually performed under
the Letter Agreement prior to the Petition Date, for which WPSC
did not pay ESM. WPSC agreed that ESM has an allowed unsecured
claim for that amount. ESM will have no further prepetition
claim for rejection or other damages under the Letter Agreement
or otherwise.
Justifications
WPSC told Judge Bodoh these rates are competitive in the market
and reasonable, and represent substantial savings from the
pricing in the Letter Agreement. ESM has agreed that in the
event the new agreement is terminated because WPSC no longer
needs any desulfurization services, then the only amount that
ESM is entitled to be paid is payment for services already
actually rendered under the new agreement. Thus the new
agreement does not pose any burden on the estate of WPSC in
terms of potential administrative expense for future
expectations.
In addition, because WPSC is recognizing ESM's ownership rights
in the equipment, WPSC believes it is appropriate to sign the
Financing Statement so that parties will be on notice that WPSC
does not own the equipment that is on its property. Using its
best business judgment, WPSC has decided that, based on the
negotiation of the new agreement, the Letter Agreement is
unlikely to produce any future benefit to its estate, and the
assumption of that executory contract would be burdensome to
WPSC's estate. The rejection of the Letter Agreement would, on
the other hand, be advantageous to the estate of WPSC. The new
agreement will have an important positive impact on WPSC's
ability to continue its production operations. It is crucial to
WPSC's business operations that the desulfurization services be
performed. Based on these facts and on its reasonable business
judgment, WPSC assured Judge Bodoh that entering into the new
agreement is in the best interests of the estate. (Wheeling-
Pittsburgh Bankruptcy News, Issue No. 7; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
WHEELING-PITTSBURGH: Senior Note Rating Drops To C From Caa3
------------------------------------------------------------
Moody's Investors Service downgraded its ratings for WHX
Corporation and Wheeling-Pittsburgh Corporation as follows:
WHX Corporation:
* senior implied rating to Caa2 from B3,
* senior unsecured issuer rating to Caa3 from Caa1,
* $282 million of 10.5% senior notes due 2005 to Caa3 from
Caa1,
* 6.5% and 7.5% convertible preferred stock rating to "c"
from "caa".
Wheeling-Pittsburgh Corporation (WPC):
* $275 million of 9.25% guaranteed senior notes due 2007 to
C from Caa3,
* $75 million guaranteed senior term loan due 2006 to C
from Caa3.
The outlook for WHX's ratings remains negative while
approximately $930 million of debt securities affected.
Moody's said that the negative rating outlook reflects the
potential for ongoing low demand and pricing pressure at WHX's
principal businesses due to the slowdown of the US economy, as
well as its reduced liquidity, which may challenge its ability
to service its debt.
While Moody's still do not think WHX will be forced to file for
Chapter 11 as a result of WPC's bankruptcy, the November 2000
liquidity has diminished significantly. Reportedly, the
operating and financial performance at its Handy & Harman and
Unimast subsidiaries, the holding company's principal source of
funds, has declined.
Also, Moody's related that the downgrades for WPC, which filed
Chapter 11 on November 16, 2000, consider the impact of
depressed steel market conditions on the company's asset values
and recovery estimates for its senior debt.
Based in New York, WHX Corporation's primary subsidiaries
include Wheeling-Pittsburgh Corporation, a manufacturer of steel
products, and Handy & Harman, a diversified industrial
manufacturing company that makes a wide variety of specialty
precious and non-precious metal products.
ZENITH ELECTRONICS: Posts First Quarter 2001 Results
----------------------------------------------------
Zenith Electronic Corporation had net revenues of $ 64.7 million
in the three months ended March 31, 2001, as compared to net
revenues of $117.6 million in the same period of 2000. Net loss
for the 2001 quarter was $ (6.5) million, while net loss in the
quarter ended March 31, 2000 was $(20.8) million.
The Company has incurred net losses before extraordinary item of
$64.5 million, $64.1 million and $275.5 million for the years
ended December 31, 2000, 1999 and 1998, respectively, and
incurred the net loss of $6.5 million in the three months ended
March 31, 2001. In addition, the Company had a negative working
capital position of $7.0 million and $12.9 million as of
December 31, 2000 and March 31, 2001, respectively. The Company
believes that, given (i) the Citicorp senior bank credit
facility and the LG Electronics Inc. credit support facility and
(ii) the company's projected cash flow from operations, the
estimated levels of liquidity available to the company will be
sufficient to permit the company to satisfy its working capital,
debt service, capital expenditure and other requirements for the
year 2001. However, such belief is based upon various
assumptions, including those underlying the successful
implementation of its phase out of its analog consumer
electronics business and its focus on becoming a distributor of
digital electronics to the consumer market. The company's access
to available funds from the Citicorp senior bank credit facility
and the LGE credit support facility is conditioned upon
continued compliance with certain financial covenants in fiscal
year 2001. In addition to its $60.0 million credit support
facility, LGE is committed to provide its best efforts to
improve the company's performance and to maintain the company's
borrowings under the Citicorp credit facility as allowable under
Korean law.
*********
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Consulting at 207/791-2852.
*********
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