/raid1/www/Hosts/bankrupt/TCR_Public/010703.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Tuesday, July 3, 2001, Vol. 5, No. 129
Headlines
360NETWORKS INC.: Case Summary & 30 Largest Unsecured Creditors
AARO BROADBAND: Shareholders May File Involuntary Petition
ASSISTED LIVING: Says Bankruptcy Filing Is Likely
COMDISCO INC.: Fitch Downgrades Senior Debt Rating To CCC
COEUR D'ALENE: Moody's Reviews Ratings for Possible Downgrade
DC DIAGNOSTICARE: Selling U.S. Subsidiaries For CDN $8.8 Million
DRYPERS CORP: Plan Confirmation Hearing Set For August 8
ELCOTEL INC.: Will Not Make Form 10-K Filing On Time
EPIC RESORTS: In Talks With Credit Suisse for Possible Funding
FACTORY CARD: Bankruptcy Court Approves Disclosure Statement
FOSTER & GALLAGHER: Cuts Jobs and Considers Bankruptcy
HOLMES GROUP: Moody's Places Low-B Ratings Under Review
ICG COMMUNICATIONS: Assumes Two California Hib Site Leases
INPRIMIS INC.: Receives Nasdaq's Delisting Notice
INTERDENT INC.: Appeals Nasdaq's Delisting Determination
ITC DELTACOM: S&P Cuts Ratings To Junk And Low-B Levels
LAIDLAW INC.: Case Summary & 20 Largest Unsecured Creditors
LEINER HEALTH: Reports Fourth Quarter and Year-end Results
LOEWEN GROUP: Cemex Demands $9MM Administrative Claim Payment
MALIBU ENTERTAINMENT: Extends and Amends Credit Facility
METAL MANAGEMENT: Emerges from Chapter 11 Bankruptcy
MICROCAP: Completes Liquidation of Investment Portfolio
MPOWER COMM.: S&P Cuts Senior Unsecured Rating To CCC+ From B-
PENN TRAFFIC: First Quarter 2002 Net Loss Amounts To $27.1 Mil
PENTACON INC.: Moody's Drops Senior Sub Note Rating to Caa1
PICCADILLY CAFETERIAS: Lenders Agree To Amend Credit Facility
PILLOWTEX: US Trustee Oppose Laguzza's Employment As Consultant
PINNACLE BRANDS: Delaware Court Confirms Plan of Liquidation
PSINET INC.: Retains PricewaterhouseCoopers LLP as Accountants
QUALITY STORES: Moody's Cuts Bank Debt Rating to Caa2 From B3
RSTAR CORPORATION: Shares Face Delisting From Nasdaq Market
SCAN-OPTICS: Restructures Debt With Patriarch Partners
STAFF BUILDERS: Stockholders' Meeting Scheduled For July 24
STARTEC GLOBAL: Shares Move To OTCBB After Nasdaq Delisting
SUN HEALTHCARE: Examiner Taps Rosenthal Monhait As Local Counsel
TANDYCRAFTS: Creditors' Meeting Set For July 12 in Wilmington
USG CORP.: Court Okays Continued Use Of Cash Management System
VLASIC FOODS: Court Allows Payoff Of Prepetition Debt
VODAVI TECHNOLOGY: Securities Subject To Nasdaq Delisting
WARNACO GROUP: Paying Postpetition Insurance Obligations
WHEELING-PITTSBURGH: John Testa Rejoins as Senior VP & CRO
WINSTAR: Asks Court To Approve Asset Sale To E&J Acquisition
*********
360NETWORKS INC.: Case Summary & 30 Largest Unsecured Creditors
---------------------------------------------------------------
Lead Debtor: 360networks (USA) Inc.
350 Park Avenue, 21st fl.
New York, NY 10022
Debtor affiliates filing separate chapter 11 petitions:
Telecom Central, L.P.
360networks holdings (USA) inc.
360fiber inc.
360fiber (USA 2) inc.
360fiber (USA 3) inc.
360networks (USA) of Virginia inc.
360networks LLC
360networks Illinois LLC
360networks Iowa LLC
360networks Kentucky LLC
360networks Louisiana LLC
360networks Michigan LLC
360networks Mississippi LLC
360networks Tennessee LLC
360carrier management inc.
TRES Management LLC
Meet Me Room LLC
Carrier Centers Georgia, inc.
Carrier Center LA, Inc.
Texas Carrier Centers Inc.
360pacific (USA) inc.
360networks sub inc.
Chapter 11 Petition Date: June 28, 2001
Court: Southern District of New York (Manhattan)
Bankruptcy Case Nos.: 01-13721, 01-13722, 01-13724, 01-13726,
01-13727, 01-13729, 01-13730, 01-13733,
01-13734, 01-13736, 01-13738, 01-13740,
01-13742 to 01-13751
Judge: Allan L. Gropper
Debtors' Counsel: Alan Jay Lipkin, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
Tel: (212) 728-8000
Fax: (212) 728-8111
Email: mao@willkie.com
Total Assets: $6,326,000,000
Total Liabilities: $3,597,000,000
Varbatim copy of 360's List of
the 30 Largest Unsecured Creditors:
Pirelli Cables - Dept. CH 14058
Dept. CH 14058
Kajima Construction Services, Inc. - CA
901 Corporate Center Drive
3RD FLOOR
Howard S. Wright Construction Co.
Pier 9 Suite 111
Pilchuck Diversified Services, Inc.
11711 Northcreek, Parkway
South St. D 103
Mastec - Purcell OK
PO BOX 266
Wagner Equipment Co.
18091 East 22nd Avenue
Encompass Electrical Technologies
2911 West Fairmount Avenue
Big-D Fastrack Corp.
420 East South Temple Suite 550
Kajima Construction Services Inc.
800 E. Northwest HWY, IL
Carrier Corporation
3936 Pendleton Way
Emerson Telecom Systems
610 Execute Campus Drive
Suite 120
C & S Network Construction
P.O. Box 266
J-TEC Inc.
PO Box 477
Fibernet Telecom Group Inc.
570 Lexington Avenue
Kajima Construction Services Inc.
3445 Peachtree Road Suite 200, GA
Tishman Construction Corporation of DC
5335 Wisconsin Ave. NW Suite 750
Spartan Building Corp.
PO Box 490
NKF Kabel
Zuibelijk Halfrond #11
P.O. Box 325 2800 Wooldrige
Construction Co. LLC
1010 June Road
Manuel Bros-908 Taylorville Grass Valley
908 Taylorville Road Suite 104
Rohn Inc.
1100 Industrial Blvd.
PO Box 1740
Cros-am Industries Ltd.
21 South Main Street #204
Cisco Systems Canada Co.
PO Box/ B.P. 2669 Station A
Toronto
Imperial Pipe Corporation
P.O. Box 1178
573 Neal Drive
Batson Cook Company
801 - 4th Avenue
Kiewit Construction
1000 Kiewit PL Omaha
1000 Kiewit Plaza
Turner Construction
2 Seaport Lane
DPR Construction Inc.
3020 East Camelback Suite 100
Fiberwave Corp.
125 - T
2nd Street
Adolfson & Peterson Construction
15938 Midway Road
ADC
PO Box 1101
Minneapolis
AARO BROADBAND: Shareholders May File Involuntary Petition
----------------------------------------------------------
Three lawsuits recently filed over allegations of securities
fraud by AARO Broadband Wireless Communications, Inc., (OTCBB
Symbol AARW) have resulted in judgments exceeding $530,000
against the company according to Rogers, Arkansas based attorney
John Dodge who represents AARO shareholders Jim Steele, Mel
Robinson and Paul Bryan.
Dodge said the judgments stem from three separate cases heard in
two different Arkansas Courts earlier this month. Court records
show the company refused to answer allegations of violation of
state and federal securities fraud statutes.
The court judgments cite AARO for concealing materially adverse
information in its SEC reports filed during the past year,
preparing and filing false or misleading financial statements
and violating federal anti-fraud provisions of federal
securities regulations in connection with its operations in the
last 13-months.
As word of the judgments began to circulate among shareholders,
Dodge said his office became inundated with phone calls from
AARO shareholders. AARO was based in Springdale, Arkansas until
last May when it moved to Oklahoma City and tried to become a
wireless internet service provider.
"We have been unsuccessful in our attempts to communicate with
AARO management. Their phones remain unanswered for over a week
now, except by an answering machine. Our inability to engage
them in any dialog about their intentions regarding satisfying
the judgments forces us to now execute on the judgments," Dodge
said.
"The judgment holders have reached an accord with other large
AARO shareholders and have developed a plan to assure continuity
of company operations. A planned involuntary bankruptcy on AARO
has been delayed to see if a restructuring plan can be
developed. We are prepared to file it, however, if we see
company assets being converted, wasted or jeopardized by
anyone," said Dodge.
Dodge said "An institutional investor has agreed to a
conditional plan that calls for it to infuse up to $750,000 into
AARO over a six-month period. That commitment is conditioned
upon a change of control while AARO restructures. The capital
infusion will be used to conduct a special mid-year audit to
determine the company's true financial condition and stabilize
operations."
"As a contingency, my clients have recruited an executive staff
and board to be led by a local university business professor.
They are prepared to try to return the corporation to a 'going
concern' status as quickly as possible, in the event of a change
of control," Dodge said.
ASSISTED LIVING: Says Bankruptcy Filing Is Likely
-------------------------------------------------
Assisted Living Concepts, Inc. (AMEX:ALF), a national provider
of assisted living services, announced that an unofficial
committee of the holders of 64% of the outstanding principal
amount of its two series of convertible subordinated debentures
had not accepted a proposal concerning a restructuring of the
Debentures that the Company first made to the committee's
advisors on April 12, 2001, nor had the committee reached a
consensus on any counteroffer.
A confidentiality agreement and agreement to restrict trading of
securities, dated May 24, 2001, between the Company and the
individual committee members, expired June 30, 2001. One member
of the committee has refused to execute a proposed extension of
that Confidentiality Agreement which would be necessary to allow
discussions between the parties to continue without the public
release of certain information provided to the committee that
has not heretofore been available to the public. That committee
member, Woodstead Associates LP, an affiliate of Smith
Management LLC, has demanded that the Company honor its
obligation under the expiring agreement to release such
information and has advised the Company that it "desires to sell
securities of the Company commencing Monday," July 2, 2001.
Accordingly, the Company has filed a Report on Form 8-K with the
Securities Exchange Commission this morning more fully
disclosing the materials previously provided to the committee.
By virtue of this filing, all members of the committee may now
decide that they are in a position to trade in the Company's
securities.
The Company anticipates it will continue its negotiations with
certain of the Debenture holders it believes to be key to a
solution. There can, however, be no assurance that these
negotiations will result in any agreement for a restructuring;
any agreement reached between the Company and its Debenture
holders would likely be implemented through a "pre-negotiated"
plan of reorganization under Chapter 11 of the U.S. Bankruptcy
Code. If the Company is unable to implement such a pre-
negotiated plan, the Company will still likely seek protection
under Chapter 11 of the Bankruptcy Code.
COMDISCO INC.: Fitch Downgrades Senior Debt Rating To CCC
---------------------------------------------------------
Fitch has lowered Comdisco, Inc.'s senior debt rating to `CCC`
and commercial paper rating to `C'. The ratings remain on Rating
Watch Negative. Bonds rated in the `CCC' category indicate that
default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon sustained, favorable business
or economic developments.
The rating actions are based on Fitch's continued concern that
cash flows from Comdisco's businesses will not be sufficient to
meet contractual debt maturities, and the absence of any formal
announcements regarding progress on generating liquidity through
alternative means.
The majority of contractual maturities come due during the
second half of fiscal year 2001, ending Sept. 30, 2001. To help
meet remaining contractual debt maturities of approximately $900
million in fiscal 2001, Comdisco has been actively seeking to
sell discrete business units or the entire company. On April 3,
2001, Comdisco announced that it had hired Goldman Sachs & Co.
and McKinsey & Co. to advise management on strategic
alternatives. Given the lack of market interest in commercial
finance company assets since 1999, the ultimate success of this
initiative is not certain.
Based in Rosemont, IL, Comdisco, Inc. is a worldwide company
engaged in information technology leasing, technology services,
and venture loans and leases.
COEUR D'ALENE: Moody's Reviews Ratings for Possible Downgrade
-------------------------------------------------------------
Moody's Investors Service placed its ratings for Coeur d'Alene
Mines Corporation under review for possible downgrade.
Reportedly, Coeur d'Alene filed a proposal to exchange some of
its existing convertible subordinated debentures for new
convertible subordinated notes with a materially reduced
value, which Moody's views as a distressed exchange.
The affected ratings are as follows:
* Caa2 rating of $26.1 million of 6% convertible
subordinated debentures due 2002
* Caa2 rating of $92.9 million of 6.375% convertible
subordinated debentures due 2004
* Caa2 rating of $69.2 million of 7.25% convertible
subordinated debentures due 2005
* B3 senior implied rating
* Caa1 senior unsecured issuer rating
Moody's review will focus on the terms and outcome of the
exchange offer, and its impact on the company's capitalization,
liquidity, debt service burden and maturity profile. As
reported, approximately $151 million of debt will be outstanding
following completion of the exchange, compared to $188 million
today. However, pro forma annual interest expense would increase
to $16.6 million, from $12.5 million currently, although the
company will still maintain its non-cash pay option, Moody's
said.
The rating agency added that the exchange offer is not expected
to affect Coeur d'Alene's cash and short-term investments
balance of $60 million (approximately $10 million of which is
restricted) as of March 31.
Coeur d'Alene Mines Corporation is located in Coeur d'Alene,
Idaho. The company produces silver and gold from mines located
in Nevada, Idaho, and Chile.
DC DIAGNOSTICARE: Selling U.S. Subsidiaries For CDN $8.8 Million
----------------------------------------------------------------
DC DiagnostiCare Inc. has reached agreement to sell its wholly
owned subsidiaries North American Imaging, Inc. and Aspect
Electronics, Inc. to McDonough Medical Products Corporation of
Deerfield, Illinois for total cash consideration of
approximately CDN $8.8 million. Closing is scheduled for July
18, 2001.
North American Imaging was purchased in July 1998 to provide the
Company with a springboard into hospital-based asset management.
That initiative has not proven to be successful. In the 6-months
ended March 31, 2001 North American Imaging recorded
consolidated net loss of CDN $17,000 due to weak x-ray and image
intensifier sales and gross margins. Once the sale is complete
the net proceeds will be used to pay down the Company's bank
debt. The sale will result in a loss of approximately CDN $3.2
million being recorded, which will be included in
DiagnostiCare's third quarter results.
"The sale of North American Imaging and Aspect Electronics is an
important step in DiagnostiCare's restructuring process
providing a meaningful reduction in the Company's bank debt.
However, DiagnostiCare remains in default of its credit facility
and continues to work with its lenders to negotiate a
restructured facility," said Brock Armstrong, President and CEO.
Based in Edmonton, DC DiagnostiCare Inc. provides a
comprehensive suite of medical imaging services through a
network of over 140 diagnostic imaging centres across Canada.
The common shares of DC DiagnostiCare trade on the Toronto Stock
Exchange under the symbol DCE.
DRYPERS CORP: Plan Confirmation Hearing Set For August 8
--------------------------------------------------------
The Disclosure Statement of Drypers Corporation was approved on
June 20, 2001. The hearing on confirmation of the plan of
liquidation shall be held on August 8, 2001 at 3:00 PM. Counsel
for Drypers is Doug H. Edwards of Haynes and Boone, LLP. Counsel
for the Unsecured Creditors Committee is John J. Sparacino of
Andrews & Kurth, LLP.
ELCOTEL INC.: Will Not Make Form 10-K Filing On Time
----------------------------------------------------
Elcotel, Inc. (OTC Pink Sheets: EWTLQ), a leading provider to
the public communications market, intends to file a notification
of late filing with the Securities and Exchange Commission with
respect to its Annual Report on Form 10-K for the year ended
March 31, 2001, and that its financial results for the year
will, most likely, reflect material impairment losses related
to the write-down of certain property and substantially all of
the Company's other long-lived assets, including goodwill,
identified intangible assets, capitalized software and other
assets related to both its payphone and Internet appliance
business segments.
On January 22, 2001, Elcotel, Inc. and its subsidiaries
filed in the United States Bankruptcy Court in the Middle
District of Florida voluntary petitions for relief under chapter
11 title 11 of the United States Bankruptcy Code. Because of
continued operating losses, the Chapter 11 Proceedings and other
factors, the Company performed an evaluation of the
recoverability of the assets of its payphone and Internet
appliance business segments, and concluded that a significant
impairment of the long-lived assets of such business segments
had occurred since the estimated future cash flows of the
businesses are not expected to be sufficient to recover the
carrying value of the assets.
Accordingly, the Company's results of operations for the year
ended March 31, 2001, will, most likely, reflect material
impairment losses related to the write-down of certain property
and substantially all of the Company's other long-lived assets,
including goodwill, identified intangible assets,
capitalized software and other assets related to both its
payphone and Internet appliance business segments. The carrying
values of goodwill, identified intangible assets, capitalized
software and other assets related to the Company's payphone and
Internet appliance business segments at March 31, 2001, before
write-downs related to the impairment thereof, aggregate
approximately $32.5 million. Furthermore, the Company's results
of operations for the year ended March 31, 2001 are expected to
reflect, in addition to the impairment losses described in the
preceding sentence, provisions related to reductions in the net
realizable value of inventories of the Company's Internet
appliance business of approximately $2 million.
During the year ended March 31, 2000, the Company reported a net
loss of $11.188 million, or $0.83 per diluted share, and a
$7.902 million loss before income taxes, on net sales and
revenues of $47.295 million. William Thompson, Elcotel's Chief
Financial Officer, said, "Although we are still finalizing our
financial results, the Company expects to report a slightly
higher loss before income taxes and the impairment losses and
charges referred to above for the year ended March 31, 2001, on
substantially lower net sales and revenues, which are expected
to approximate $28.3 million."
EPIC RESORTS: In Talks With Credit Suisse for Possible Funding
--------------------------------------------------------------
EPIC Resorts, LLC announced it is continuing in active
discussions with Credit Suisse First Boston to provide a
timeshare receivables purchase facility to meet its funding
needs, and that if those discussions do not result in agreements
necessary to provide financing to sustain normal sales and
marketing operations, EPIC intends to actively explore
alternatives.
EPIC also announced that it may not be in compliance with
certain covenants relating to the $130 million of 13% senior
secured notes due 2005 issued by EPIC and its co-issuer and
subsidiary, EPIC Capital Corp. Specifically, EPIC did not
release the installment interest payment that was due on June
15, 2001, although it had sufficient funds to do so. A failure
to pay interest on the notes when due would be an event of
default under the notes if continued for 30 days. Additionally,
the monies to make such payment were not held, as required by
the terms of the notes, in a separate escrow account. While EPIC
is working toward stabilizing its funding arrangements in order
to make the payment, there is no assurance that it will be
successful.
EPIC is a nationwide developer and marketer of high-quality
timeshare resorts located in proven, major tourist destinations.
EPIC currently owns eight resorts and operates five off-site
sales centers.
FACTORY CARD: Bankruptcy Court Approves Disclosure Statement
------------------------------------------------------------
Factory Card Outlet Corp. announced that the bankruptcy court
approved the disclosure statement relating to its amended plan
of reorganization. The Company indicated that it would commence
soliciting creditors' acceptance of the amended plan on or
before June 18, 2001. The amended plan is sponsored by the
Company, its Creditors Committee and Factory Card Holdings, Inc.
Under the terms of the amended plan, Factory Card Holdings, Inc.
will acquire the Company. An investor group led by John Cathcart
and Scott Miller, principals in the buyout and management
consulting firms Mercator Capital Corporation of Nevada and
Beacon Capital Partners of Arizona, is expected to provide $6
million in equity.
Wells Fargo Retail Finance, the Company's existing lender, has
also committed to provide $4 million in debt as part of a $50
million exit facility subject to the satisfaction of, among
other things, various conditions precedent. "We are extremely
pleased to be providing this new financing," said Andrew H.
Moser, Wells Fargo Retail Finance Senior Managing Director and
Co-Chief Operating Officer. "The Company has worked hard, and we
remain extremely supportive of the turnaround."
"No group of people has worked harder or shown greater
dedication than our key management staff and our associates.
They have toughed it out and, with the support of our equally
loyal vendors, the Company has achieved a dramatic turnaround,"
said Chairman, Chief Executive Officer and President, William E.
Freeman. He added, "We are excited about our partnership with
Factory Card Holdings, Inc. The $10 million capital infusion
allows the Company to emerge from bankruptcy and provides a
solid platform for future growth."
The Company also stated that it anticipates emerging from
Chapter 11 by mid-summer if the requisite majority of creditors
accept and the court confirms, the amended plan. It is currently
anticipated that, upon emergence, the Company will merge into
and with its wholly-owned operating subsidiary, Factory Card
Outlet of America, Ltd.
Factory Card Outlet operates 175 company-owned retail stores, in
20 states, offering a vast assortment of party supplies,
greeting cards, gift wrap and other special occasion merchandise
at everyday value prices. On March 23, 1999, the company filed a
petition for reorganization under Chapter 11 of Title 11 of the
United States Code and is currently operating as a debtor in
possession.
FOSTER & GALLAGHER: Cuts Jobs and Considers Bankruptcy
------------------------------------------------------
Foster & Gallagher, Inc. (F&G) will substantially reduce its
workforce at its operations in Grand Rapids, MI, Peoria, IL,
Tipp City, OH, Piqua, OH, Louisiana, MO, Knoxville, TN, Canada
and the Netherlands. The workforce reduction is effective
immediately.
F&G said that it has been working to address significant
financial and operational challenges. Nevertheless, the Company
said that it cannot continue normal operations while a
restructuring is implemented.
In the past two years, F&G has taken a number of steps to
address its financial and operational challenges, such as
divesting non-core businesses and assets, consolidating
operations and reducing management and employee headcount while
initiating new marketing strategies.
F&G said that the Company has value, and it continues
discussions with the lenders regarding the most efficient manner
of recovering that value for the secured creditors, including a
sale of the Company or a liquidation of its assets under the
U.S. Bankruptcy Code.
HOLMES GROUP: Moody's Places Low-B Ratings Under Review
-------------------------------------------------------
Moody's Investors Service placed under review for possible
downgrade the following ratings of The Holmes Group, Inc.:
* $135 million B3 rating of 9 7/8% senior subordinated
notes, due 2007
* $305 million B1 rating of its secured credit facility
* B1 senior implied rating
* B2 issuer rating
Approximately $440 million of long-term of debt securities are
affected.
Moody's says that the review is pushed by the company's weak
operating performance, thin interest coverage, high leverage,
and weak retail demand environment. Holmes faces significant
challenges, which could confine potential improvements in cash
flow in the near term, the rating agency states.
Moody's says that the capitalization and overall financial
condition of Holmes, as well as an assessment of the business
risks, company profile, and management's future operating
strategy will be the focus of the review. The company's year-to-
date operating performance and the condition of the retail
supply chain will also be considered as well as the issues of
pricing pressure and the impact of weather on product sales.
Holmes Products Corporation is a developer, manufacturer and
marketer of branded home comfort products such as fans, heaters,
humidifiers and air purifiers. The company maintains its
headquarters in Milford, Massachusetts.
ICG COMMUNICATIONS: Assumes Two California Hib Site Leases
----------------------------------------------------------
By Motion, ICG Communications, Inc. seeks Judge Walsh's
authority to assume (1) a lease with The Irvine Company for real
property located at 5 Park Plaza, Irvine, California, and (2) a
lease with Brannan Partners LP, successor to Hawley Terminal,
Inc., regarding real property located at 274 Brannan Street, San
Francisco, California.
The Debtors conduct critical components of their
telecommunications businesses from these leased premises. Absent
continued use of the premises, the Debtors will suffer
significant disruption to their businesses to the detriment of
their estates and creditors. By their own terms, the Debtors'
leases with Brannan and Irvine will expire in 2001. Telecom and
the respective landlords have agreed to modify the leases to
extend their terms, among other changes. The Debtors have
determined, in their business judgment, that it is essential to
the Debtors' continued operations to continue to lease these
premises after the expiration of the present leases, and that
these leases, as amended, should be assumed.
The leased premises are literally the only viable spaces for the
Debtors' California headquarters and San Francisco
telecommunications hub, respectively. Accordingly to ensure the
continued operation of the Debtors' business during this
critical juncture in the Debtors' Chapter 11 cases, the Debtors
negotiated the best terms and conditions they could with respect
to these leases.
The Irvine Lease
The Irvine premises houses the Debtors' Southern California
headquarters, including approximately 100 employees,
engineering, planning, sales and real estate divisions, and a
regional operating center. The ROC is a regional hub for the
Debtors' telecommunications network.
The Debtors would incur significant capital expenditures if they
were forced to relocate their Southern California headquarters.
In addition to the expenses involved in any major office
relocation, to relocate the ROC the Debtors would be forced to
reconfigure the ROC and risk service blackouts to many of their
customers.
Moreover, in order to function effectively the ROC requires a
high level of connectivity. It would be difficult, if not
impossible, for the Debtors to locate another site in southern
California containing the high level of connectivity available
at the Irvine premises.
The principal terms of the Irvine lease are: a one-year term,
monthly rent in advance of $73,641 with the first six months
paid in advance, and a one-time right to terminate the lease by
either party upon written notice of termination or before a
certain date with the termination effective five months later.
In addition, Irvine has agreed to waive any and all of its
prepetition claims, which the Debtors estimate total at least
$400,000. Commencing on November 1, 2001, rent would decrease to
$70,307 per month.
The Brannan Lease
The Brannan premises houses a "Type 2 Critical Hub" which
provides telecommunications services to the entire San Francisco
area. The Brannan premises is the only site in San Francisco
that provides the high level of connectivity necessary to
maintain a Type 2 Critical Hub.
Essentially, the Brannan premises is a "telecommunications
hotel" where hundreds of telecommunications companies maintain
hubs and connect with other telecommunications providers. The
Debtors depend on such interconnections to provide their
customers with nationwide telecommunications services. In fact,
without such interconnections, the Debtors would be unable to
service certain of their major customers. Any relocation would
require both significant transition time and material capital
expenditures.
The principal terms of the Brannan lease are: a one-year term
and yearly rent paid in advance in the amount of $509,680. In
addition, with respect to Brannan, Telecom is required to pay
the sum of $33,052.88, which are unpaid charges incurred for
Telecom's electricity usage to date, the majority of which was
incurred postpetition.
Agreeing with the Debtors' arguments, Judge Walsh authorizes the
assumption of these two leases on the terms stated. (ICG
Communications Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
INPRIMIS INC.: Receives Nasdaq's Delisting Notice
-------------------------------------------------
Inprimis, Inc. (Nasdaq:INPM) received a Nasdaq Staff
Determination on June 26, 2001, indicating that the Company does
not meet the net tangible assets requirement for continued
listing set forth in Marketplace Rule 4450(a)(3), and that its
securities are, therefore, subject to delisting from The Nasdaq
National Market. The Company is also currently not in compliance
with the $1 minimum bid requirement as set forth in Marketplace
Rule 4450(a)(5).
The Company has requested a hearing before a Nasdaq Listing
Qualifications Panel to review the Staff Determination. Inprimis
will remain listed and its common stock will continue to trade
on The Nasdaq National Market pending the outcome of the
hearing. A hearing date has not been set.
There can be no assurance as to when the Panel will reach a
decision, or that the Panel will grant the Company's request for
continued listing. An unfavorable decision would result in the
immediate delisting of the Company's common stock from The
Nasdaq National Market irrespective of the Company's ability to
appeal the decision. If delisted, the Company expects that its
common stock will be eligible for quotation on the Over-the-
Counter Bulletin Board.
About Inprimis
During the last year, Inprimis Inc. changed its business focus
to providing product design services and the technology to help
consumer electronics companies, cable operators, Internet
service providers and telecommunications companies bring devices
to market quickly and cost effectively. Headquartered in Boca
Raton, Fla., the Company develops product designs, customizes
embedded system software and offers systems engineering and
manufacturing consultation services for interactive-television,
video-on-demand, Internet-access and other convergent-technology
appliances. Inprimis' television set-top box designs are
currently used by companies such as Philips Electronics (for
AOLTV)(TM), LodgeNet Entertainment and KoolConnect Interactive
Media. The Company maintains strategic relationships with
Liberate, National Semiconductor, Conexant, Sigma Designs,
Minerva Networks, and others.
For more information, visit the Company's Web site at
http://www.inprimis.com
INTERDENT INC.: Appeals Nasdaq's Delisting Determination
--------------------------------------------------------
InterDent, Inc. (Nasdaq:DENT) received a Nasdaq Staff
Determination on June 22, 2001, indicating that the Company
fails to comply with the minimum bid price requirement for
continued listing set forth in Market Place Rule 4450(a)(5), and
that its securities are therefore subject to delisting from The
Nasdaq National Market. The Company has requested a hearing
before a Nasdaq Listings Qualifications Panel to review the
Staff Determination. There can be no assurance that the Panel
will grant the Company's request for continued listing.
In an effort to address the Nasdaq minimum bid price requirement
for continued listing, InterDent's Board of Directors has
authorized a 6 to 1 reverse stock split. The reverse stock split
will be subject to stockholder approval. The Company has also
informed Nasdaq that if its appeal is unsuccessful, it intends
to apply for listing of its securities on the Nasdaq SmallCap
Market.
InterDent provides dental management services in 153 locations
in California, Oregon, Washington, Nevada, Arizona, Hawaii,
Idaho, Oklahoma and Kansas with total annualized patient
revenues under management of approximately $250 million. The
Company is continuing to build an integrated support environment
utilizing information technologies to enable dental
professionals to provide patients with high quality,
comprehensive, convenient and cost-effective care. InterDent
also owns a stake in Dental X Change, an advanced Internet
portal servicing the professional dental community. More
information about Dental X Change is available through the press
releases on their Web site, www.dentalxchange.com
ITC DELTACOM: S&P Cuts Ratings To Junk And Low-B Levels
-------------------------------------------------------
Standard & Poor's lowered its ratings on ITC Deltacom Inc. and
removed them from CreditWatch negative (see list below), where
they had been placed Jan. 26, 2001.
The outlook is negative.
The downgrade of ITC's corporate credit rating reflects Standard
& Poor's heightened concerns regarding liquidity issues, despite
the recent $150 million investment in cumulative convertible
preferred stock by ITC Holding Company Inc. and other investors.
Although ITC has a solid record of implementing its integrated
communications strategy, the following factors may potentially
threaten the company's ability to achieve its revenues and cash
flow targets in the next 30 months:
* The impact of a slowing economy;
* Ongoing competitive pressures in the company's markets;
* A longer-than-anticipated sales cycle in Web-hosting and
management services, which can potentially extend cash
losses in this business segment; and
* The cancellation of 2,600 primary rate interfaces (PRI)
by one of ITC's clients, which would represent about $14
million in annualized revenues.
Although the $150 million in additional funding improves ITC's
liquidity position in the short term, under a stress case
scenario simulated by Standard & Poor's the company may face a
cash shortfall in the next 18 to 24 months in the absence of
additional funding. Given the ongoing difficult conditions in
the equity and debt markets for telecommunication companies,
Standard & Poor's considers ITC's financial flexibility to be
limited to capital expenditure reduction and modest asset sales.
The senior unsecured debt rating is now rated two notches lower
than the corporate credit rating because the amount of priority
obligations as a percentage of ITC's assets exceeds 30%, based
on Standard & Poor's more conservative asset valuation.
Similarly, the bank loan rating, formerly one notch above the
corporate credit rating, is now rated the same as the corporate
credit rating because, based on a stricter asset valuation, in a
simulated default scenario it is not certain that a distressed
enterprise value would be sufficient to cover the entire loan
facility. Standard & Poor's more conservative approach to
competitive local exchange carrier (CLEC) asset values is based
on evidence that assets of recently bankrupted CLECs have been
liquidated at well below book value.
The ratings on ITC also reflect its high leverage and poor
credit measures, which are only partially offset by the
company's relatively favorable position in the CLEC industry. At
the end of the first quarter of 2001, debt to annualized EBITDA
was 14.7 times (x) and EBITDA coverage of interest expense was
about 0.8x.
ITC provides integrated voice and data telecommunications
services to midsize and major regional businesses. The company
is also a leading regional provider of wholesale long-haul
services to other telecommunications companies in the Southwest.
The retail business provides 75% of ITC's revenues; the
wholesale business contributes about 22%; and e^deltacom, which
offers collocation, Web hosting, and managed services,
contributes about 3%. The company has been able to execute and
scale its business, which has been demonstrated by continued
EBITDA margin growth in the retail and wholesale businesses,
whose combined margin grew to 19% in March 2001 from 11% in
March 1999. This improvement, however, has been offset by cash
losses in the Web-hosting venture, resulting in an overall
normalized EBITDA margin ranging from 11% to 13% during the same
period. Consolidated gross margin is in the mid-50% area, which
is among the highest in the CLEC industry.
Outlook: Negative
ITC faces significant operating challenges, which could limit
improvement in cash flow and lead to a funding gap in the medium
term. Management is currently focused on growing revenues,
optimizing its capital expenditures programs, and cutting
operating costs. Failure to produce these operating improvements
will likely result in a rating downgrade, Standard & Poor's
said.
Ratings Lowered And Removed From CreditWatch Negative
ITC DeltaCom Inc. TO FROM
Corporate credit rating B B+
Senior unsecured debt CCC+ B+
Subordinated debt CCC+ B-
Interstate FiberNet Inc.
Senior secured bank loan
(Guaranteed by ITC DeltaCom Inc.) B BB-
LAIDLAW INC.: Case Summary & 20 Largest Unsecured Creditors
-----------------------------------------------------------
Lead Debtor: Laidlaw Inc.
600 Six Flags Drive, Suite 300
Arlington, TX 76011-6329
Debtor affiliates filing separate chapter 11 petitions:
Laidlaw USA, Inc.
Laidlaw Investments Ltd.
Laidlaw International Finance Corporation
Laidlaw Transportation, Inc
Laidlaw One, Inc.
Type of Business: Laidlaw Inc. is a holding company that
provides, among other things, the following
services through its various direct and
indirect subsidiaries and affiliates:
(a) transportation services, including school
busing and intercity and municipal transit
services, in the United States and Canada; and
(b) healthcare services, including patient
transportation and emergency department
management services, in the United States.
Chapter 11 Petition Date: June 28, 2001
Court: Western District of New York
Bankruptcy Case Nos.: 01-14099 to 01-14104
Judge: Michael Kaplan
Debtors' Counsel: Garry M. Graber, Esq.
Hodgson Russ LLP
One M & T Plaza, Suite 2000
Buffalo, New York 14203
and
Richard M. Cieri, Esq.
Paul E. Harner, Esq.
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Total Assets: $4,297,916,000
Total Debts: $4,763,217,000
List of 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
US Bank Trust National Indenture Trustee $400,000,000
Association for 7.65%
Corporate Trust Services Debenture Dated
Attn: Manager, Bondholder 9/11/1997
Services Due 2006
180 East Fifth Street
Saint Paul, Minnesota 55101
Tel: (612) 973-5840
Fax: (651) 244-1142
US Bank Trust National Indenture Trustee $225,000,000
Association for 6.65%
Corporate Trust Services Debenture, Dated
Attn: Manager, Bondholder 9/11/1997
Services Due 2004
180 East Fifth Street
Saint Paul, Minnesota, 55101
Tel: (612) 973-5840
Fax: (651) 244-1142
Canadian Imperial Bank of Lender Under $205,096,620
Commerce Syndicated
Attn: managing Director bank Facility
Commerce Court West,
7th Floor
Toronto, Ontario M5L 1A2
Tel: (416) 980-4412
Fax: (416) 359-5151
US Bank Trust National Indenture Trustee $200,000,000
Association for 6.50%
Corporate Trust Services Debenture, Dated
Attn: Manager, Bondholder 9/11/1997
Services Due 2005
180 East Fifth Street
Saint Paul, Minnesota 55101
Tel: (612) 973-5840
Fax: (651) 244-1142
US Bank Trust National Indenture Trustee $200,000,000
Corporate Trust Services for 7.70 %
Attn: Manager, Bondholder Debenture, Dated
Services 7/22/1992
180 East Fifth Street Due 2002
Saint Paul, Minnesota 55101
Tel: (612) 973-5840
Fax: (651) 244-1142
US Bank Trust National Indenture Trustee $200,000,000
Corporate Trust Services for 6.72%
Attn: Manager, Bondholder Debenture, Dated
Services 9/11/1997
180 East Fifth Street Due 2027
Saint Paul, Minnesota 55101
Tel: (612) 973-5840
Fax: (651) 244-1142
Toronto Dominion (Texas) Lender Under $182,487,437
Inc. Syndicated Bank
Attn: Vice President Facility
31 West 52nd Street
New York, NY 10019
Tel: (713) 653-8281
Fax: ((713) 951-9921
US Bank Trust National Indenture Trustee $150,000,000
Corporate Trust Services for 7.875%
Attn: Manager, Bondholder Debenture, Dated
Services 7/22/1992
180 East Fifth Street Due 2005
Saint Paul, Minnesota 55101
Tel: (612) 973-5840
Fax: (651) 244-1142
US Bank Trust National Indenture Trustee $150,000,000
Corporate Trust Services for 8.75%
Attn: Manager, Bondholder Debenture, Dated
Services 7/22/1992
180 East Fifth Street Due 2025
Saint Paul, Minnesota 55101
Tel: (612) 973-5840
Fax: (651) 244-1142
Royal Bank of Canada Lender Under $149,936,550
Attn: Senior Account Manager Syndicated
Royal Bank Plaza Bank Facility
200 Bay Street
13th Floor, South Tower
Toronto, Ontario
Canada M5J 2J5
Tel: (416) 974-7077
Fax: (416) 974-0248
Bank of America Canada Lender Under $146,727,473
Attn: Senior Credit Syndicated
200 Front Street West, Bank Facility
Suite 2700
Toronto, Ontario
Canada M5V 3L2
Tel: (416) 349-5413
Fax: (416) 349-4295
Bank of Montreal Lender Under $118,838,345
Attn: Vice President Syndicated
1 First Canadian Place Bank Facility
24th Floor
Toronto, Ontario
Canada, M5X 1A1
Tel: (416) 867-4800
Fax: (416) 867-4741
US Bank Trust National Indenture Trustee $100,000,000
Association for 8.25%
Corporate Trust Services Debenture, Dated
Attn: Manager, Bondholder 7/22/1992
Services Due 2023
180 East Fifth Street
Saint Paul, Minnesota 55101
Tel: (612) 973-5840
Fax: (651) 244-1142
US Bank Trust National Indenture Trustee $100,000,000
Association for 7.05%
Corporate Trust Services Debenture, Dated
Attn: Manager, Bondholder 7/22/1992
Services Due 2003
180 East Fifth Street
Saint Paul, Minnesota 55101
Tel: (612) 973-5840
Fax: (651) 244-1142
US Bank Trust National Indenture Trustee $100,000,000
Association for 6.07%
Corporate Trust Services Debenture, Dated
Attn: Manager, Bondholder 9/11/1997
Services Due 2008
180 East Fifth Street
Saint Paul, Minnesota 55101
Tel: (612) 973-5840
Fax: (651) 244-1142
Bank One Capital Markets, Lender Under $94,847,993
Inc. Syndicated
Attn: Vice President Bank Facility
1 Bank One Plaza, 10th Floor
Chicago, IL 60670-0324
Tel: (312) 732-8872
Fax: (312) 732-3885
Bear Stearns & Co. Lender under $93,971,256
Attn: Managing Director Syndicated
245 Park Ave., 4th Floor Bank Facility
New York, NY 10010
Tel: (212) 272-9499
Fax: (212) 272-8709
Bank of America, N.A. (NC) Lender Under $77,449,505
Attn: Managing Director Syndicated
1850 Gateway Blvd., Bank Facility
5th Floor
Concord, CA 94520
Tel: (925) 675-8066
Fax: (925) 675-8051
Bank of Nova Scotia Lender Under $73,087,495
Attn: Managing Director Syndicated
Scotia Plaza Bank Facility
40 King Street West
29th Floor
Toronto, Ontario
Canada M5H 1H1
Montreal Trust Company Indenture Trustee $67,540,000
of Canada for 10.95%
c/o Computershare Investor Debenture,
Services, Inc. Series A, Dated
Attn: Manager, Corporate 4/16/1991,
Trust Due 2001
100 University Avenue
11th Floor
Toronto, Ontario M5J 2Y1
Tel: (416) 263-9362
Fax: (416) 981-9777
LEINER HEALTH: Reports Fourth Quarter and Year-end Results
----------------------------------------------------------
Leiner Health Products Inc. reported financial and operating
results for its fourth quarter and fiscal year ended March 31,
2001.
Net sales for the fourth quarter were $157.5 million compared to
$214.2 million during the same period a year ago. The company
had a net loss before taxes for the quarter of $98.9 million
compared to a net gain before taxes of $15.4 million for the
same period in 2000. The fourth quarter loss reflects charges of
$77.1 million in relation to an operational restructuring more
fully discussed below and in the company's 10-K.
For the fiscal year ended March 31, 2001, net sales were $612.1
million compared to $662.3 million during fiscal year 2000. The
company had a net loss before taxes for fiscal 2001 of $120.4
million compared to a net gain before taxes of $8.0 million for
the fiscal year 2000. The fiscal 2001 loss reflects the charge
relating to the operational restructuring noted above.
Operational Restructuring Yields Positive Results
The company said that it is continuing to execute its
operational restructuring, for which it recognized restructuring
and other related charges of $77.1 million to close three OTC
drug manufacturing facilities, reduce approximately 2,600 of
it's 6,000 SKUs and eliminate approximately 500 positions.
Robert Kaminski, Chief Executive Officer, said, "Our previously
announced plant closings, headcount reductions and product line
streamlining have allowed us to simplify our operations and
improve our performance in both the commercial and financial
segments of the business. Furthermore, with the first quarter of
fiscal 2002 nearly complete, we are seeing improvement in our
business, both from a revenue and a gross margin perspective. We
believe that, based upon our strong order book position and the
effect of our restructuring program, these trends will continue
in the second quarter." Kaminski continued, "I cannot overstate
my appreciation of our customers' and suppliers' support during
this period."
As previously announced, Leiner delivered a detailed, formal
business plan to its bank lenders on June 13, 2001 that reflects
its operational restructuring and the strong demand experienced
to date. The company said that the business plan serves as a
basis for discussions Leiner is holding with its bank lenders
regarding a financial restructuring. Additionally, the company
said that it has initiated negotiations with its major
subordinated debt holders.
Leiner has agreed that it will not make the interest payment on
its subordinated notes due July 2, 2001, and has received a
formal blockage notice from its bank lenders prohibiting that
payment. The company underscored that it believes that cash flow
from operating activities, combined with its current cash
availability, will be sufficient to fund the company's currently
anticipated working capital requirements while it continues
restructuring negotiations with its creditors.
As previously announced, Leiner has been operating under a
series of waivers as a result of covenant breaches under its
bank credit agreement, which initially occurred in its December
Quarter. The company said that its most recent waiver extension
expired on June 27, 2001. Consequently, the company received a
formal notice of default from its bank lenders on June 28, 2001,
and is currently in active discussions with bank lenders
regarding a forbearance agreement. A forbearance agreement would
provide an interim period while a permanent restructuring
solution is pursued. During the period of the forbearance, the
bank lenders would agree not to exercise remedies available to
them. Leiner said that its independent auditors have advised the
company that its Fiscal Year 2001 financial statements must
contain a disclaimer as to the company's ability to continue as
a "going concern."
Kaminski commented, "We are pleased with the ongoing support we
have received from our bank lenders. We believe that when
announced, the results for the first quarter of fiscal year
2002, which ends June 30, 2001, will reflect profitability
improvements driven by the company's restructuring plan. The
company anticipates that its continued implementation of this
plan will yield further operational and profitability benefits."
Leiner Health Products Inc., headquartered in Carson,
California, is one of America's leading vitamin, mineral,
nutritional supplement and OTC pharmaceutical manufacturers. The
company markets products under several brand names, including
Natures Origin(TM), YourLife(R) and Pharmacist Formula(R). For
more information about Leiner Health Products, visit
www.leiner.com.
LOEWEN GROUP: Cemex Demands $9MM Administrative Claim Payment
-------------------------------------------------------------
In connection with Osiris Holding of Florida, Inc.'s attempt to
terminate a contemplated sale of cemetery property, Cemex, Inc.
(the Initial Bidder) has filed an administrative expense claim
in the amount of $9,000,000 pursuant to 11 U.S.C. section 503,
for alleged breach of agreement and misrepresentations, among
other things.
Osiris' Proposed Sale
On or about February 27, 2001, Osiris filed with the Court a
Notice of Proposed Sale, pursuant to The Loewen Group, Inc.'s
Disposition Program, seeking authority:
(a) to sell property at two sale locations in Florida to Cemex
(the Initial Bidder) at an aggregate purchase price of
$800,000 free and clear of all liens, claims and
encumbrances; and
(b) to assume and assign 7 executory contracts and unexpired
leases in relation to that.
The 2 sale locations are:
(1) Osiris Holding of Florida, Inc., a Florida corporation,
doing business as Graceland Memorial Park North (2125), 4580
SW 8th Street, Miami, FL 33134;
(2) Osiris Holding of Florida, Inc., a Florida corporation,
doing business as Graceland Memorial Park South (2126),
13900 SW 117th Avenue, Miami, FL 33186.
In addition to (a) and (b) above, the notice says that:
-- Copies of the motion and the Purchase Agreement were
available on request;
-- A hearing on the motion was scheduled for March 19, 2001
before Judge Walsh;
-- The Selling Debtor and the Initial Bidder contemplated to
place $75,000 of the Purchase Price into escrow for one year
pending determination by the State of Florida whether certain
trusts related to the Sale Locations are properly funded.
-- The proposed sale was subject to Bidding Procedures in
accordance with the Disposition Order; competing bid must
exceed $840,000 i.e. 5% above the Purchase Price and must be
on the same or more favorable terms and conditions as set
forth in the Purchase Agreement;
-- If one or more Qualified Competing Bids were received, an
auction would be conducted on the last business day before
the Hearing Date. At the auction:
(1) Competing bidders could submit bids for the sale
Locations in excess of and in increments of 5% of the
Purchase Price,
(2) The Selling Debtor would seek authority to enter into
the Purchase Agreement with, and consummate the sale of
the Sale Locations to the bidder submitting the
Successful Bid at the hearing on the motion
-- If no Qualified Competing Bids were received for the Sale
Locations, the Debtors might, after consulting with the
Creditors' Committee, seek the Court's approval of the
Purchase Agreement and the Transaction without conducting the
Auction.
Cemex's Allegations
In its Motion and Application for Allowance and Payment of
Administrative Expense Claim, Cemex relates the series of events
as follows:
-- On February 26, 2001, Osiris and Cemex entered into a
purchase and sale agreement by which Osiris agreed to sell
cemetery property located in Florida to Cemex, subject only to
final Court approval.
-- By the Sale Agreement, Osiris represented and warranted
that it had the requisite authority to enter into and bind
itself to the agreement's covenants, including, a covenant that
Osiris would use reasonable efforts to obtain Court approval of
the transactions contemplated by the Sale Agreement.
-- After execution of the Sale Agreement, Osiris requested
that Cemex execute and deliver a side letter agreement providing
that (i) Osiris would use its best efforts to obtain the
approval of the sale transaction by the company's "Executive
Committee", and (ii) if no such approval was obtained, the Sale
Agreement would be terminated and no liability would remain
except for those provisions which survive termination under
Section 9.2 of the Sale Agreement.
-- Osiris represented to Cemex that Executive Committee
approval was perfunctory and expected that Osins was requesting
the Side Letter simply as an accommodation to it. Based on these
representations, Cemex signed the Side Letter.
-- Upon information and belief, however, Osiris knew when
requesting the Side Letter that Executive Committee approval was
at least doubtful.
-- As required by the Sale Agreement, Osiris filed a
motion for approval of the sale with the Court on February 27,
2001, and set the motion for hearing on March 19, 2001 (the
"Sale Motion").
-- On March 6, 2001, Osiris sent Cemex a letter purporting
to terminate the Sale Agreement pursuant to the Side Letter,
alleging that Executive Committee approval of the transaction
had been denied.
-- Osiris subsequently withdrew the Sale Motion and
cancelled the scheduled hearing.
-- Osiris has informed Cemex that it has decided to retain
the property and as such, has taken the property out of the
bidding process.
Cemex accuses Osiris of:
(1) breaching the Sale Agreement by misrepresenting that it
had the requisite authority to enter into and bind
itself to the agreement and by failing to use reasonable
efforts to obtain approval of the transaction from the
Bankruptcy Court;
(2) breaching the Side Letter by failing to use its best
efforts to obtain Executive Committee approval of the
Cemex sale; and
(3) breaching its duty of good faith and fair dealing by its
entire course of dealing with Cemex.
Cemex claims that, as a result of these breaches, Cemex has been
damaged in the amount of $9,000,000 for costs and expenses
incurred in negotiating the Sale Agreement and by lost profits
from the sale.
Accordingly, Cemex requests that the Court enter an order (i)
allowing Cemex an administrative priority claim in the amount of
$9,000,000, and (ii) for such other relief as is just.
Agreed Scheduling Order
Pursuant to an agreed Scheduling Order, the parties will seek to
resolve their differences, and if they are not able to resolve
such differences, an evidentiary hearing before the Court will
take place on October 30, 2001 at 9:30 a.m.
Forty-five days before the evidentiary hearing is scheduled to
commence, the parties will seek to complete discovery after
exchanging requests and responses. Cemex will file and serve its
pre-hearing brief no later than 30 days before the evidentiary
hearing is scheduled to commence. The Debtors will file and
serve their response to Cemex's pre-hearing brief no later than
15 days after Cemex submits its pre-hearing brief. Cemex will
file and serve its reply, if any, to the Debtors' response brief
no later than 7 days after the Debtors submit their response
brief. (Loewen Bankruptcy News, Issue No. 41; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
MALIBU ENTERTAINMENT: Extends and Amends Credit Facility
--------------------------------------------------------
Malibu Entertainment Worldwide, Inc. (OTC Bulletin Board: MBEW)
has amended its existing credit agreement to extend the maturity
date by two years. The Company also announced the completion of
a sale-leaseback transaction for two parks in Georgia.
The credit agreement, under which $12.7 million of secured debt
is now outstanding, has been amended to extend the maturity date
to August 21, 2003 and significantly reduced the company's
principal paydown requirements. Under the amended credit
agreement, the Company is obligated to make monthly principal
amortization payments of $40,000, to make an additional payment
of $1.62 million by December 31, 2001 and to use the majority of
the net proceeds of any asset sale to further reduce the
outstanding indebtedness under the credit agreement.
The Company also consummated a sale-leaseback transaction with
respect to two properties in Georgia. The proceeds of this
transaction were used to repay indebtedness under the Company's
credit facility and resulted in a net principal paydown of
approximately $2.8 million.
"The amended credit agreement for a majority of our debt is very
exciting. This facility provides the Company with additional
financial flexibility. While we continue to operate in a
challenging environment, this amendment allows us to refocus our
efforts on executing our business plan," said Malibu's Chief
Executive Officer, Rich Beckert.
The Company will continue its program to sell assets in an
effort to generate cash to reduce debt and to fund its ongoing
obligations while simultaneously pursuing refinancing. There can
be no assurance that the Company will be able to complete such
sales or refinancing, or, if so, as to the timing, terms or
proceeds thereof. If the Company is unsuccessful in selling
these assets, in securing certain sale-leaseback arrangements,
in obtaining alternative financing or if the proceeds of the
sales are significantly less than their estimated value or if
these actions are not sufficient to permit the Company to
continue to operate, the Company may seek or be forced to seek
to restructure or reorganize its liabilities, including through
proceedings under the federal bankruptcy laws.
Headquartered in Dallas, Texas, Malibu Entertainment Worldwide,
Inc. is a leader in the location-based entertainment industry,
operating 17 parks in 7 states under the SpeedZone, Malibu Grand
Prix and Mountasia brands, primarily clustered in Texas,
California and Georgia.
METAL MANAGEMENT: Emerges from Chapter 11 Bankruptcy
----------------------------------------------------
Metal Management, Inc. has satisfied all conditions required for
its emergence from Chapter 11 and has begun operating without
bankruptcy court supervision. Court approval for its plan of
reorganization was granted on June 18 from the United States
Bankruptcy Court for the District of Delaware.
In furtherance of its plan of reorganization, Metal Management
entered into a new credit agreement with its existing senior
lenders providing the company with $150 million of borrowing
capacity. The senior credit agreement matures in June 2003. As
part of the plan, the Company also restructured its $30 million
senior secured notes due May 2004. Substantially all other debt
of the company will be converted to equity of reorganized Metal
Management.
Albert A. Cozzi Chairman and Chief Executive Officer remarked,
"I am extremely pleased that Metal Management has emerged from
Chapter 11 so quickly. We have come out with one of the
strongest balance sheets in the industry. We appreciate the
confidence that our scrap metal suppliers have shown in us,
which has allowed us to maintain our market share and are
anxious to move forward and grow our business profitably in each
of the major markets we operate facilities in."
Michael W. Tryon, President and Chief Operating Officer added,
"We can now continue our operational acceleration efforts to be
the low cost processor with a leading market share in every
market we serve. Emerging from Chapter 11 allows us to grow
profitably in each of these markets."
About Metal Management, Inc.
Metal Management is one of the largest full service metals
recyclers in the United States, with over 40 recycling
facilities in 14 states and estimated annual revenues of
approximately $800 million.
MICROCAP: Completes Liquidation of Investment Portfolio
-------------------------------------------------------
The MicroCap Liquidating Trust announced that it sold its
investment in First Colony Coffee and Tea Company, the Trust's
sole remaining portfolio investment, for $100,000 in cash.
First Colony is a privately held company engaged in the
production of private label coffees for specialty shops and
department stores. The sale of the Trust's investment in First
Colony completes the liquidation of the Trust's investment
portfolio. The sale of the First Colony investment will enable
the Trust to consider the timing and amount of the final
liquidating distribution to unit holders. Raymond S. Troubh, the
trustee of the Trust, expects to announce the final distribution
and termination of the Trust shortly.
The Trust was formed in February 1997 to continue the
liquidation of The MicroCap Fund, Inc., a closed-end management
investment company. Including the initial liquidating
distribution of $3.50 per share paid by the Fund in August 1996,
cumulative liquidating distributions paid to beneficiaries total
$16.5 million, or $6.80 per unit of beneficial interest in the
Trust.
Continental Stock & Transfer is the transfer agent for the
MicroCap Liquidating Trust.
MPOWER COMM.: S&P Cuts Senior Unsecured Rating To CCC+ From B-
--------------------------------------------------------------
Standard & Poor's lowered its senior unsecured debt rating on
MPower Communications Inc. to triple-'C'-plus from single-'B'-
minus following the company's announcement that it has
consummated a corporate reorganization into a holding company
structure. The 13% senior unsecured notes will reside at the
holding company level and become structurally subordinated to
all operating company liabilities. The level of operating
liabilities warrants a one notch downgrade given the dramatic
reduction in value of competitive local exchange carrier (CLEC)
assets over the past six to nine months.
At the same time, Standard & Poor's lowered its rating on
MPower's preferred stock to 'D' from single-'C' and removed the
rating from CreditWatch negative, as the company missed its May
15, 2001, dividend payment.
In addition, Standard & Poor's affirmed its single-'B'-minus
corporate credit and senior secured debt ratings on MPower.
The outlook is negative.
The ratings on MPower reflect its leveraged capital structure,
significant operating losses, and limited liquidity and
financial flexibility. Operationally, performance has improved
over the past few quarters, as EBITDA losses have narrowed and
overhead costs and capital spending have been reduced, closing
the company's funding gap. During the first quarter ended March
31, 2001, MPower generated $46.6 million of revenue, up 12%
sequentially from the fourth quarter of 2000, despite lower
switched access revenue. Gross margins improved to 10% due to
increasing scale and lower transport costs, while EBITDA losses
narrowed to $46.7 million. Long-term debt at March 31, 2001, was
$475.3 million, excluding $197 million of redeemable preferred
stock, and cash balances were $438 million.
Outlook: Negative
Ratings will likely be lowered unless the company can become
cash flow positive and generate adequate EBITDA for debt service
obligations, Standard & Poor's said.
PENN TRAFFIC: First Quarter 2002 Net Loss Amounts To $27.1 Mil
--------------------------------------------------------------
Penn Traffic company's total revenues for the first quarter of
fiscal 2002 increased to $608.4 million from $592.6 million in
the first quarter of fiscal 2001. The increase in revenues for
the first quarter of fiscal 2002 is primarily attributable to an
increase in same store sales and the commencement of the
Company's operation of 10 New England stores. Same store sales
for the first quarter of fiscal 2002 increased 0.4% from the
comparable prior year period. Wholesale supermarket revenues
were $68.7 million in the first quarter of fiscal 2002 compared
to $67.7 million in the first quarter of fiscal 2001.
Net loss for the first quarter of fiscal 2002 was $27.1 million
compared to a net loss of $26.7 million for the first quarter of
fiscal 2001. Net income excluding New England lease income,
unusual item and amortization of excess reorganization value was
$0.2 million for the first quarter of fiscal 2002 compared to a
loss of $0.9 million for the first quarter of fiscal 2001.
Revenues include approximately $2.9 million and $2.8 million
income from the New England Operating Agreement in the 13-week
periods ended April 29, 2000, and July 29, 2000, respectively.
In contrast, during the second half of the 53-week period ended
February 3, 2001 ("Fiscal 2001"), the Company incurred
approximately $1 million of operating losses in connection with
the commencement of operation of these 10 stores.
Gross profit for the first quarter of fiscal 2002 was 23.7% of
revenues compared to 24.0% of revenues in the first quarter of
fiscal 2001. The decrease in gross profit as a percentage of
revenues in the first quarter of fiscal 2002 was due to the
expiration of the Company's prior agreement with another
supermarket company for the lease of 10 stores in New England on
July 31, 2000. This reduction in gross profit as a percentage of
revenues was partially offset by a reduction in inventory shrink
expense.
PENTACON INC.: Moody's Drops Senior Sub Note Rating to Caa1
-----------------------------------------------------------
Moody's Investors Service downgraded Pentacon, Inc.'s ratings as
follows:
* $100 million secured revolving credit facility to B1 from
Ba3
* $100 million of senior subordinated notes due 2009 to
Caa1 from B3
* senior implied to B2 from B1
* issuer rating was lowered to B3 from B2
The rating outlook is negative while approximately $200 million
of debt securities are affected. Moody's said that the outlook
reflects the rating agency's concern that Pentacon's results
will continue to be inadequate given the soft economy.
The downgrades reflect the decline of operating profits for
2000, net of charges for inventory write-down and severance and
idle facilities of $2 million in 2000 and $0.6 million for work
force reduction in 1999.
Pentacon, Inc. is a distributor of fasteners and small parts and
a provider of related inventory procurement and management
services to original equipment manufacturers (OEM's). The
Company has two principal operating segments, Aerospace and
Industrial. The company is headquartered in Houston, Texas.
PICCADILLY CAFETERIAS: Lenders Agree To Amend Credit Facility
------------------------------------------------------------
Piccadilly Cafeterias, Inc. (NYSE:PIC) has reached an agreement
with its senior bank lenders to amend the Company's Senior
Credit Facility. The Company previously announced that the
accounting charges for impairment of property, plant and
equipment recorded in the third quarter ended March 31, 2001,
reduced the Company's tangible net worth, and the Company was
not in compliance with the minimum tangible net worth provision
of the Senior Credit Facility. The Company also announced that
it anticipated certain charges in its fourth quarter ending June
30, 2001, that will have a negative impact on tangible net
worth.
The Senior Credit Facility supports the Company's letters of
credit and provides cash for short-term working capital needs.
As of today, the Company has no borrowings under the facility.
The amendment waives the third quarter violation and lowers the
required minimum tangible net worth to a level that accommodates
the third quarter and the previously announced fourth quarter
charges. Maintaining compliance with the tangible net worth
covenant will be difficult in the next year if the Company's
recent operating trends continue.
Piccadilly is the largest cafeteria company in the U.S. with 230
cafeterias in 16 Southeastern and Mid-Atlantic states with
approximately $425 million in annual revenues. Information about
the Company is available at www.piccadilly.com.
PILLOWTEX: US Trustee Oppose Laguzza's Employment As Consultant
---------------------------------------------------------------
The United States Trustee objects to Pillowtex Corporation's
application to employ Laguzza Associates, Ltd., as executive
search consultant.
Under the proposed Letter Agreement, the Debtors will pay
Laguzza Associates non-refundable monthly fees of $55,555 for
three months without the filing of any fee applications,
regardless of whether or not Laguzza is able to find suitable
candidates for the position of Pillowtex Corporation's new Chief
Executive Officer.
Joseph J. McMahon, Jr., Esq., who represents the US Trustee, was
appalled by this proposed arrangement. The United States
Trustee asks Judge Robinson to deny the Debtors' application
citing the arrangement is flatly inconsistent with sections 331
and 330 of the Bankruptcy Code. These provisions call for
reasonable compensation for actual services rendered, Mr.
McMahon reminds the Court.
But the Debtors are confident that Laguzza can deliver since
Laguzza already successfully assisted the Debtors in hiring
their new Chief Financial Officer, the current Vice-President
for Human Resources, and Anthony Williams, who is the current
President and Chief Operating Officer.
Daniel P. Winikka, Esq., at Jones, Day, Reavis & Pogue, in
Dallas, Texas, notes that Laguzza is well suited and qualified
to serve as executive search consultant since Laguzza is highly
familiar with the Debtors' businesses, their industry and the
appropriate qualifications for Chief Executive Officer
candidates.
Paying large sums of money for Laguzza's consultancy fees is
also nothing new for the Debtors. Within the year prior to the
Petition Date, the Debtors already made the following payments
to Laguzza:
Date Amount
------------ -------------
02/02/00 $ 46,026.30
03/02/00 48,141.60
04/21/00 59,874.33
05/30/00 10,173.10
06/01/00 45,995.00
06/26/00 48,963.30
07/31/00 22,222.22
09/15/00 27,623.90
09/26/00 131,492.10
10/19/00 3,282.92
10/20/00 $ 31,502.15
Shortly after the Petition Date, the Debtors engaged Laguzza to
assist in their search for a Chief Financial Officer. For these
services, Laguzza was paid $25,000 on January 30, 2001 and
$31,311.85 ($6,311.85 of which is for out-of-pocket expenses) on
February 2, 2001. Payments were made pursuant to the Court's
order authorizing Debtors to pay certain professionals in the
ordinary course of their business. Debtors still owe Laguzza
$25,000 in fees and $5,864.97 for out-of-pocket expenses, which
were billed on February 15, 2001, and $25,000 plus out-of-pocket
expenses, which were billed on March 26, 2001. The Debtors
intend to pay these amounts in accordance with the Ordinary
Course Professionals Order.
For the search of the new Chief Executive Officer, the Debtors
reserve the right to cancel Laguzza's appointment within 30 days
at which point Laguzza's time would be prorated for purposes of
determining the fee owed. Laguzza will also be entitled to
reimbursement of expenses. If for any reason, the selected
Chief Executive Officer does not remain in the Debtors' employ
for six months, Laguzza will have to redo the search for out-of-
pocket expenses only. In addition, Laguzza has agreed not to
solicit any employee of the Debtors for a period of two years.
The Debtors also seek authority from the Court to pay Laguzza's
fees, as contained in the Letter Agreement, without need for
further order. (Pillowtex Bankruptcy News, Issue No. 8;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
PINNACLE BRANDS: Delaware Court Confirms Plan of Liquidation
------------------------------------------------------------
On June 13, 2001, the Bankruptcy Court for the District of
Delaware entered an order confirming the debtors' and Bank
Group's joint consolidated plan of liquidation. Kaye Scholer,
LLP and Young Conaway Stargatt & Taylor LLP represent the
debtors.
PSINET INC.: Retains PricewaterhouseCoopers LLP as Accountants
--------------------------------------------------------------
At PSINet, Inc.'s behest, Judge Gerber issued an interim order,
authorizing the Debtors to employ and retain, in accordance with
Section 327(a) of the Bankruptcy Code, PricewaterhouseCoopers
LLP as their independent accountants, bankruptcy and
reorganization consultants, effective as of the commencement of
the PSINet cases.
Pursuant to the application, the Debtors will retain PwC to
provide professional services in their chapter 11 cases in the
areas of accounting, auditing, tax, bankruptcy and
reorganization consulting. Specifically, the scope of the
Debtors' retention of PwC may include, but not limited to:
(a) Accounting and Auditing
(1) Audits of the financial statements of the Debtors and
assistance in the filing of financial statements and
disclosure documents including Forms 10-K required by
the Securities and Exchange Commission ;
(2) Audits of benefit plans as may be required by the
Department of Labor or the Employee Retirement Income
Security Act, as amended;
(3) Review of the unaudited quarterly financial statements
of the Debtors and assistance in the preparation and
filing of financial statements and disclosure documents
required by the Securities and Exchange Commission
including Forms 10-Q; and
(4) Performance of other accounting services.
(b) Tax
(1) Review of and assistance in the preparation and filing
of any tax returns;
(2) Assistance regarding tax planning issues;
(3) Assistance regarding existing and future IRS or state
and local examinations; and
(4) Other tax assistance.
(c) Bankruptcy and Reorganization Consulting
(1) Assistance in analyzing the business, operations,
properties, and financial condition of the Debtors;
(2) Assistance in the preparation of reports or filings as
required by the Bankruptcy Court or the Office of the
United States Trustee, including monthly operating
reports and Schedules of Assets and Liabilities or
Statements of Financial Affairs;
(3) Attendance in meetings with bondholders, shareholders,
lessors, other parties of interest, and any creditors'
or other committees as requested by the Debtors;
(4) Assistance in the preparation of financial information
for distribution to creditors and other parties in
interest, including but not limited to, cash receipts
and disbursements analysis, legal entity financial
statements, analysis of various asset and liability
accounts, and analysis of proposed transactions for
which Bankruptcy Court approval is sought;
(5) Assistance in the analysis of creditor claims by type,
entity and individual claim;
(6) Assistance with the development and dissemination of
any potential plans of reorganization and disclosure
statement;
(7) Attendance at meetings of Debtors' management and
counsel focused on the coordination of resources
related to the ongoing bankruptcy reorganization
effort;
(8) Advisory assistance in connection with the development
and implementation of key employee retention and other
critical employee benefit programs;
(9) Assistance to the Debtors in the identification of
and, to the extent requested, consultation related to
the implementation of internal cost reduction plans;
(10) Litigation consultation services and expert witness
testimony, if requested by the Debtors;
(11) Assistance in evaluating potential voidable
transactions, including preferential payments and
fraudulent conveyances;
(12) Assistance with the identification of executory
contracts and leases and performance of cost/benefit
evaluations with respect to the affirmation or
rejection of each;
(13) Assistance in the preparation of information and
analysis necessary for the confirmation of a Plan of
Reorganization; and
(14) Render such other general business consulting or such
other assistance as Debtors' management or counsel may
deem necessary.
PwC may provide additional financial advisory services deemed
appropriate and necessary to the benefit of the Debtors' estates
at the request of the Debtors.
The Debtors are convinced that PwC is qualified to represent
them, and that the retention of PwC is in the best interests of
their estates and creditors. PwC, a limited liability
partnership comprised of experienced certified public
accountants and consultants, the Debtors note, and the firm has
extensive experience performing similar services and assisting
Debtors in their attempts to reorganize under Chapter 11 of the
Bankruptcy Code.
In addition, PwC has served as the Debtors' independent
accountants since 1990. Since the inception of its engagement,
PwC has rendered extensive accounting, auditing, certain tax
advisory and related services to the Debtors. Consequently, PwC
is familiar with the Debtors' operations, management and
accounting procedures, and can render the services for which the
Debtors seek to retain PwC most effectively and efficiently.
Moreover, PwC assisted the Debtors prior to the Petition Date in
preparing all necessary papers and documents needed to commence
these Chapter 11 cases. As of May 2001, PwC's Canadian practice
has been retained as financial 13 consultants by the Debtor's
Canadian subsidiaries. The Debtors indicate that, if the
Canadian subsidiaries file under the Companies' Creditors
Arrangements Act, the Canadian subsidiaries will petition the
Canadian Courts to appoint PricewaterhouseCoopers Inc. as
Monitor of the Canadian subsidiaries pursuant to that Act.
Disinterestedness and Eligibility
Deborah Smith, a partner of the firm of PricewaterhouseCoopers
LLP represents in her affidavit that a review of PwC's
professional contacts with the Debtors, their affiliates and
certain entities holding large claims against the Debtors shows
relationships, as summarized and presented to the Court, in
matters unrelated to the PSINet cases. PwC, Ms. Smith indicates,
has provided and likely will continue to provide services
unrelated to the Debtors' case for the various entities. Ms.
Smith tells the Court that the firm's assistance to these
parties has been primarily related to auditing, tax, and/or
other consulting services, and, to the best of her knowledge, no
services have been provided to these creditors or other parties
in interest which could impact their rights in the Debtors'
case, nor does PwC's involvement in the PSINet case compromise
its ability to continue such auditing, tax and/or consulting
services.
Ms. Smith reveals that Wilmer, Culter & Pickering, Counsel for
the Debtors, has represented PwC in matters unrelated to these
bankruptcy proceedings.
In general, Ms. Smith advises, as part of its diverse practice,
PwC appears in numerous cases, proceedings and transactions that
involve many different professionals, including attorneys,
accountants and financial consultants, who may represent
claimants and parties-in-interest in the Debtors' chapter 11
cases. Also, PwC has performed in the past, and may perform in
the future, audit, tax and consulting services for various
attorneys and law firms in the legal community, and has been
represented by several attorneys and law firms in the legal
community, some of whom may be involved in these proceedings. In
addition, PwC has in the past, may currently and will likely in
the future be working with or against other professionals
involved in the PSINet cases in matters unrelated to the Debtors
and these cases. Ms. Smith believes none of these business
relationships create interests materially adverse to the Debtors
herein in matters upon which PwC is to be employed, and none are
in connection with this case.
Ms. Smith advises the Court that PwC is not a "Creditor" of any
of the Debtors within the meaning of Section 101(10) of the
Bankruptcy Code. Specifically, neither she nor any other
PricewaterhouseCoopers partner or principal, to the best of her
knowledge, is a holder of any shares of the Debtors' stock.
Moreover, apart from what is made known in her affidavit, PwC
insofar as she has been able to ascertain, has no connection
with the PSINet Debtors, their significant creditors, equity
security holders, other parties-in-interest or their respective
attorneys. Nor does anyone involved in the PSINet case or in
PwC' s Business Recovery Services practice generally has any
connection to the U.S. Trustee or any person employed in the
Office of the U. S. Trustee in the Southern District of New
York.
Ms. Smith believes, to the best of my knowledge, that PwC 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. Neither does PwC hold or represent an
interest adverse to the Debtors within the meaning of Section
327(a) of the Bankruptcy Code, Ms. Smith adds.
Ms. Smith further assures that if any new relevant facts or
relationships are discovered or arise, PwC will promptly file a
Bankruptcy Rule 20 14(a) Supplemental Affidavit.
Compensation and Reimbursement
Pursuant to the application as approved by the Court on an
interim basis, PwC will be compensated based on its customary
and normal hourly rates, and will receive reimbursement of
expenses, all subject to approval by the Court in accordance
with Sections 330 and 331 of the Bankruptcy Code, the applicable
Federal Rules of Bankruptcy Procedure, the Local Rules and
further orders of the Court.
The range of current hourly rates for the PwC personnel
contemplated to work on this engagement are as follows:
Partners/Managing Directors $570 to $595 per hour
Managers/Directors $370 to $550 per hour
Associates/Sr. Associates $165 to $325 per hour
Administrative/ParaProfessional $ 85 to $160 per hour
These rates are subject to periodic adjustments for normal rate
increases and promotions.
Ms. Smith informed the Court that the Debtors paid PwC an
initial financial advisory retainer fee of $100,000 in March of
2001. The Debtors and PwC have agreed that any portion of the
retainer fee not used to compensate PwC for its pre-petition
services and expenses will be applied against its post-petition
billings and will not be placed in a separate account.
Dispute Resolution Provisions
The Debtors and PwC agree:
(1) that 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 Debtors as outlined in this
Application, including any matter involving a successor in
interest or agent of the Debtors or of PwC, shall be brought
in the Bankruptcy Court for the Southern District of New
York or the District Court for the Southern District of New
York,
(2) to 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) to waive trial by jury, such waiver being informed and
freely made;
(4) in an instance in which the reference is withdrawn, if the
Bankruptcy Court or the District Court does not have or
retain jurisdiction over the foregoing claims and
controversies, to submit first to non-binding mediation;
and, if mediation is not successful, then to binding
arbitration; and
(5) that judgment on any arbitration award may be entered in any
court having proper jurisdiction. The foregoing is binding
upon the Debtor, PwC and any and all successors and assigns
thereof.
PwC agrees 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 (if 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 this Application or the
services provided. (PSINet Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
QUALITY STORES: Moody's Cuts Bank Debt Rating to Caa2 From B3
-------------------------------------------------------------
Moody's Investors Service downgraded the debt ratings of Quality
Stores, Inc. as follows:
* senior implied rating to Caa2 from B3
* $105 million 10.625% senior unsecured notes due 2007 to
Ca from Caa2
* $150 million secured guaranteed revolving credit facility
to Caa2 from B3
* $188 million (current balance) term loan facilities to
Caa2 from B3
* senior unsecured issuer rating to Ca from Caa3
The downgrade reflects Moody's expectations of near-term
liquidity concerns resulting from a difficult sales environment
during the company's important Spring selling season. The
upcoming payments and cleandowns on its bank credit facility are
also taken into consideration.
The senior notes' Ca rating reflects the notes' subordination to
a large amount of secured debt and the potential for important
levels of impairment in a default scenario while the Caa2 rating
on the bank credit facility reflects the possibility for these
creditors to be partially impaired in default, Moody's says.
The rating agency believes that Quality's difficult operating
scenario and constrained financial condition make prospects for
a quick recovery unlikely, despite management having taken the
appropriate steps to manage through the period.
The rating outlook is negative while approximately $440 million
of debt is affected. At current operating levels, Moody's
believes that, without an external source of financing, Quality
may have difficulty meeting the near-term requirements under its
bank credit facility.
Quality Stores, Inc. is in Muskegon, Michigan. The Company
operates approximately 350 farm and agricultural stores, mostly
in the Eastern and Midwestern United States.
RSTAR CORPORATION: Shares Face Delisting From Nasdaq Market
-----------------------------------------------------------
rStar Corporation (Nasdaq:RSTR) said that on June 27, 2001 it
received notice from the Nasdaq National Market advising the
company that, because the company has failed to maintain a
minimum bid price of at least $1.00 per share in accordance with
Nasdaq Marketplace Rule 4450(a)(5), the NNM had determined to
delist the company's common stock from the NNM, effective at the
opening of business on July 6, 2001, unless the company requests
a hearing prior to that time. The company intends to request a
hearing. The hearing request will stay the delisting of the
company's securities, pending a decision by the Nasdaq Listing
Qualification Panel.
The company believes that it has taken and can take further
steps that may bring it in compliance with NNM's requirements
for continued listing on the NNM, although there can be no
assurance that this will be the case.
Lance Mortensen, chairman and chief executive officer of rStar
Corporation, said: "For the past few months, we have been
actively seeking to develop and implement our new business plan,
including the commencement of the previously announced tender
offer for shares of our common stock at a price substantially in
excess of our current bid price and the Nasdaq's $1.00 minimum
bid price. In addition, we have previously announced the
acquisition of a company that will provide Internet access
services and voice services to consumers and small office and
home office subscribers across Latin America and provide a
bundled product with direct-to-home television service using a
single satellite dish in Latin America. We remain confident in
our future prospects and in the business opportunity in Latin
America."
There can be no assurance as to when the Nasdaq Listing
Qualification Panel will reach its decision, or that such a
decision will be favorable to the company. An unfavorable
decision would result in immediate delisting of the company's
common stock from the NNM irrespective of the company's ability
to appeal the decision. If delisted, the company expects to
pursue other alternatives including seeking to have it shares
quoted on the Over the Counter Bulletin Board.
About rStar Corporation
rStar (Nasdaq:RSTR) develops, provides and manages satellite-
based networks for large-scale deployment across corporate
enterprises, educational systems, and user communities of
interest. rStar's core products include remote high-speed
Internet access, data delivery, high-quality video and
networking services distributed though its satellite broadband
Internet gateway and bi-directional solutions. rStar's
technology assures instantaneous, consistent, secure and
reliable delivery of content within the rStar network. rStar is
located in San Ramon, Calif., and can be reached at 925/543-0300
or at www.rstar.com on the Web.
SCAN-OPTICS: Restructures Debt With Patriarch Partners
------------------------------------------------------
Scan-Optics, Inc. (OTC BB: SOCR), a leader in Information
Capture and Customer Service Solutions for Government,
Insurance, Order, Proxy, Test Scoring and other paper-intensive
businesses, said that the Company has come to an agreement with
Patriarch Partners LLC of New York on terms and conditions to
complete its debt restructuring. Scan-Optics and Patriarch
Partners have also agreed to execute a 60-day extension,
effective June 30, 2001, of the current forbearance agreement to
allow adequate time to document the debt restructuring. Under
the proposed amendment from Patriarch, the maturity date of the
Second Amended and Restated Loan Agreement, dated May 10, 1999
will extend to January 1, 2004. The current $8.5 million term
loan will be restructured to a senior term loan of $6.5 million,
which will remain at prime plus 2%; and a subordinated term loan
of $2 million at a fixed rate of 10%. The revolving line of
credit will remain at $10 million at a rate of prime plus 2%.
This amendment will include warrants to purchase Scan-Optics
common stock in an amount equal to 12.5% of the common equity on
a fully diluted basis with reciprocal put and call rights. The
closing is scheduled to take place on or before September 1,
2001.
In discussing this agreement, James C. Mavel, Chief Executive
Officer of Scan-Optics, stated, "We are pleased to have
negotiated a successful completion of the debt restructuring
activity with Patriarch Partners. Extending the maturity date to
2004 will allow Scan-Optics management to focus on the
operations of the business going forward."
Scan-Optics, Inc., with headquarters in Manchester, Connecticut,
is recognized internationally as an innovator and solution
provider in the information management and imaging business. It
designs, manufactures and services products and systems for
character recognition, image processing and display, data
capture, and data entry. Scan-Optics systems and software
are marketed worldwide to commercial and government customers
directly and through distributors. Through its Manufacturing
Services Division, Scan-Optics also provides contract
manufacturing services to customers, outsourcing the
manufacturing of complex, electro-mechanical assemblies. The
Company has sales and service offices located throughout the
United States and abroad. Additional information is available at
www.scanoptics.com
STAFF BUILDERS: Stockholders' Meeting Scheduled For July 24
-----------------------------------------------------------
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.
STARTEC GLOBAL: Shares Move To OTCBB After Nasdaq Delisting
-----------------------------------------------------------
Startec Global Communications Corporation (Nasdaq: STGC)
reported that the company's securities were delisted from the
NASDAQ Stock Market at the opening of business Friday. Nasdaq
halted trading of Startec's common stock on June 28, 2001, at a
last price of $0.18 per share.
Effective immediately, the company's common stock will be listed
on the OTC Bulletin Board. Emerging Growth Equities, Ltd., will
serve as a market- maker for the security.
Information about the OTC Bulletin Board is available on the
Internet at http://www.otcbb.com, and information regarding
Emerging Growth Equities, Ltd., is available at
http://www.egequities.com.
About Startec
Startec Global Communications Corporation is a leading provider
of advanced communications and Internet services to ethnic
residential customers and enterprises transacting business in
the world's emerging economies. Startec's extensive affiliated
network of international gateway and domestic switches, IP
gateways and ownership in undersea fiber optic cables also
provides IP-based voice, data and video service to major long
distance carriers, Internet service providers (ISPs) and
Internet portals.
For more information, please visit the Web sites at
http://www.startec.comand http://www.estart.com.
SUN HEALTHCARE: Examiner Taps Rosenthal Monhait As Local Counsel
----------------------------------------------------------------
Kevin W. Pendergest, the Examiner, submitted an application to
the Court to retain Wilmington, Delaware-based Rosenthal,
Monhait, Gross & Goddess, P.A. (RMG&G) as local counsel in Sun
Healthcare Group, Inc.'s chapter 11 cases.
The U.S Trustee interposed an objection to the length of the
retroactive period sought, and the Examiner agreed to reduce the
nunc pro tunc retention request to 30 days.
In the absence of any further objection to the application after
the reduction of retroactive period, Judge Walrath approved the
application. (Sun Healthcare Bankruptcy News, Issue No. 21;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
TANDYCRAFTS: Creditors' Meeting Set For July 12 in Wilmington
-------------------------------------------------------------
On May 15, 2001, Tandycrafts, Inc., et al. filed voluntary
petitions for relief under Chapter 11. A meeting of creditors
will be held on July 12, 2001 at 1:00 PM, Wilmington, DE.
Counsel for the debtors are Scott K. Rutsky, Esq. of Proskauer
Rose LLP and Mark E. Felger, Esq. of Cozen & O'Connor.
USG CORP.: Court Okays Continued Use Of Cash Management System
--------------------------------------------------------------
Richard H. Fleming, Executive Vice President and Chief Financial
Officer for USG Corporation, tells Judge Farnan that the Company
uses a sophisticated cash management system that allows the
Company to (a) control and monitor corporate funds, (b) invest
idle cash, (c) ensure the availability of funds where they're
needed when they're needed; and (d) reduce administrative
expenses by facilitating the movement of funds and aiding
accounting processes.
By motion, the Debtors sought and obtained permission to
maintain their pre-petition cash management system.
There are four major components to USG's cash management system,
Mr. Fleming relates:
(1) Cash Collection and Concentration. USG customer
payments are received in a handful of lockboxes
maintained at Northern Trust Bank, Suntrust Bank and
Harris Bank. L&W customer receipts are deposited into
140 local banks across the country.
(2) Cash Concentration. L&W accounts are swept daily an
concentrated at Harris. Funds received at Suntrust and
Harris are swept into a Concentration Account at
Northern.
(3) Investment of Idle Cash. Idle funds on deposit at
Northern are invested in A1, P1 and AA-rated or better
instruments with average maturities of 45 days.
(4) Disbursements. As necessary, funds are transferred to
The Chase Manhattan Bank to fund USG disbursement
accounts; to Suntrust to fund 60 L&W disbursement
accounts; or fed into the Company's Foreign Cash
Management System.
The Debtors and their non-debtor affiliates have comprehensive
internal controls governing the receipt and disbursement of
funds within their respective cash management systems. The
Debtors' software systems enable them to trace each receipt and
disbursement that enters the system by payor or payee, which
then permits the Debtors to account for the funds either by
operating division or legal entity.
Paul E. Harner, Esq., at Jones, Day, Reavis & Pogue, notes that
bankruptcy courts routinely grant Chapter 11 debtors authority
to continue using their existing cash management systems and
treat such requests as a relatively "simple matter".
Judge Farnan directs the Debtors to maintain a careful
accounting of all funds transferred from one legal entity to
another and, to the extent that one USG affiliate becomes a
debtor to another USG affiliate, the USG-affiliated creditor
entity is accorded a superpriority administrative expense claim
against the USG-affiliated debtor entity in these chapter 11
cases. (USG Bankruptcy News, Issue No. 2; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
VLASIC FOODS: Court Allows Payoff Of Prepetition Debt
-----------------------------------------------------
In September 1998, the Pre-Petition Lenders and Participants
extended credit to the Debtors under an Amended and Restated
Credit Agreement. Vlasic Foods International was the borrower,
Chase Manhattan Bank was the bank and syndication agent, and
Morgan Guaranty Trust Company of New York was the administrative
and collateral agent for the Lenders and Participants.
Sally McDonald Henry, Esq., at Skadden, Arps, Slate, Meagher &
Flom, reminds Judge Walrath that Vlasic owes $319,000,000 in
total outstanding principal balance plus accumulated interest,
fees and other amounts outstanding under the Prepetition Credit
facility. The Prepetition Credit Agreement, Ms. Henry notes,
provides Lenders and Agents to reimbursement for out-of-pocket
expenses, including the fees and disbursements of counsel, and
indemnification of certain other liabilities, such as losses and
costs in connection with any bankruptcy cases involving the
Borrower. Aside from the Prepetition Credit Agreement, the
Debtors are also parties to a Security Agreement with the
subsidiary guarantors and the collateral agent. Ms. Henry
explains the collateral agent asserts liens on and security
interests in substantially all of the assets of the Debtors
pursuant to the Prepetition Security Agreement.
Under a letter agreement dated July 2000, Ms Henry relates, the
Borrower agreed to pay certain fees and expenses and other
obligations (Dorrance Family Direct Obligation) that are also
secured, on a junior basis to the Prepetition Debt. According to
Ms. Henry, the rights and obligations of the Lenders and the
Participants are governed by, inter alia, a Master Loan
Participation Agreement dated August 2000. Under the
Participation Agreement, Mr. Weber says, the Participants
asserted a participation interest in the principal amount of
$17,500,000 in the loans outstanding under the Prepetition
Credit Agreement.
In January 2001, Judge Walrath entered an order providing for
the interim use of cash collateral. Ms. Henry recalls that the
order granted the Collateral Agent a replacement security
interest in, and a lien upon all the Prepetition Collateral, as
well as additional security interests and liens and priorities
in the order.
When the Debtors entered into an asset purchase agreement with
HMTF Foods Acquisition Corporation, now known as Pinnacle Foods
Corporation, they received $370,000,000, subject to adjustments,
plus warrants to purchase 15% of the common stock of the
acquiring entity and addition compensation. Those cash proceeds
exceed the outstanding Prepetition Debt.
By this motion, the Debtors seek the Court's authority to payoff
the outstanding Prepetition Debt to stop the accumulation of
interest, fees and other amounts, which accumulate at the rate
of $2,400,000 per month or $75,000 per day.
According to Ms. Henry, the obligation of the Debtors for the
Secured Indemnification Expenses may continue to exist even
after the interim distribution of the cash proceeds is made. In
such event, Secured Indemnification Expenses would continue to
be secured by the Cash Proceeds. In addition, Ms. Henry adds,
there may be expenses that constitute DF Direct Obligation
arising after the interim distribution for which the Borrower
remains obligated. This is also secured by the Cash proceeds on
a junior basis. So, Ms. Henry explains, the Debtors propose to
establish an escrow account containing $1,500,000 from the cash
proceeds to satisfy the Secured Indemnification Expenses and the
DF Indemnified Expenses. As a condition of receiving the interim
distribution and the establishment of the escrow, Ms. Henry
says, the Debtors propose to require the parties who will
receive the benefits of the interim distribution and such escrow
to release their liens on the remainder of the cash proceeds.
Objections
(A) Morgan Guaranty Trust Company of New York
(Administrative Agent)
Mark D. Collins, Esq., at Richards Layton & Finger, in
Wilmington, Delaware, notes that the Debtors' proposal for a
collective $1,500,000 cap as to both the Secured Indemnification
Expenses and Dorrance Family Indemnified Expenses is "completely
inappropriate." Mr. Collins argues that the Lenders have a
secured claim for any expenses they incur. Since this issue has
not been settled yet, the administrative agent proposes that the
proceeds remain subject to the interim cash collateral order
until confirmation of a plan in the Debtors' Chapter 11 cases.
Payments should continue to be made to the administrative agent
upon presentation of appropriate bills, Mr. Collins adds. After
the Lenders have filed proofs of claim, Mr. Collins notes, the
parties may then agree with respect to the size and shape of any
funds to be set aside for the Lenders and the Participants.
(B) Official Committee of Unsecured Creditors
The Committee vigorously disputes the priority of the
Participants' asserted claims, according to Michael R.
Lastowski, Esq., at Duane Morris & Heckscher, in Wilmington,
Delaware. Mr. Lastowski argues that the Participants' claims are
not senior to the claims of other unsecured creditors. There is
no authority requiring payment to the Participant, Mr. Lastowski
adds. According to Mr. Lastowski, the Court should make the
distinction between Lenders and Participants relative to the
size of their claims. Of the $2,400,000 accruing monthly
interest, Mr. Lastowski notes, it appears the Participants'
claims is less than $150,000. Mr. Lastowski contends that the
Participants, like other unsecured creditors should await the
confirmation of a plan of reorganization.
The Committee asks Judge Walrath to deny the Debtors' payoff
motion with respect to the Participants.
(C) Telerx Inc.
Telerx is a party to a prepetition executory contract with the
Debtors and a creditor of the Debtors' estate as well. Telerx
provides call center solutions services for the Debtors in
allowing them to interact with their customers via toll free
numbers, mail and the Internet.
Martin J. Weis, Esq., at Dilworth Paxson, in Philadelphia,
Pennsylvania, notes that the payoff motion does not provide for
the utilization of the proceeds to satisfy the claims of
postpetition venders, such as Telerx, who have provided
essential continued services to the Debtors.
Telerx asks the Court to deny the payoff motion or, in the
alternative, require that the Debtors promptly compensate Telerx
and other similarly situated creditors for all services rendered
under their contract through and including the effective date of
the sale.
Dorrance Family Responds
Michael L. Vild, Esq., at the Bayard firm, in Wilmington,
Delaware, argues that the Committee's objection is not supported
by fact or legal precedent. Therefore, Mr. Vild says, it should
be overruled because the Dorrance Family Participants are not
creditors of the Debtors' estates and the claims asserted by the
Creditors' Committee are without merit.
Mr. Vild explains that the DF Participants are not owed money by
the Debtors under the Credit Agreement. Mr. Vild clarifies that
the Dorrance Family are participants in a loan made by the
Agent. According to Mr. Vild, the Dorrance Family agreed to
participate in one of the advances made pursuant to the Credit
Agreement under a Master Loan Participation Agreement dated
August 2000. The DF Participants agreed to purchase from the
Agent a 50% interest in the $35,000,000 of additional advances
to be made available to the Debtors under the Credit Agreement.
* * *
After considering the arguments presented, Judge Walrath granted
the Debtors' payoff motion. The Debtors are authorized to pay:
(i) A portion of the cash proceeds in the amount sufficient
to repay in full all of the Prepetition Bank Debt owed to the
Lenders outstanding or accrued and unpaid on the Pay Down Date
to the Administrative Agent for distribution as provided under
the Prepetition Credit Facility and the Participation Agreement;
and
(ii) A portion of the cash proceeds in an amount equal to
the DF Direct Obligations outstanding or accrued and unpaid on
the Pay Down Date to the Participants directly.
Judge Walrath emphasizes that the Court's order does not
establish either the allowability or priority of any claim or
the validity or priority of any lien. (Vlasic Foods Bankruptcy
News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
VODAVI TECHNOLOGY: Securities Subject To Nasdaq Delisting
---------------------------------------------------------
Vodavi Technology Inc. (Nasdaq: VTEK) has received a Nasdaq
Staff Determination indicating that the company fails to comply
with the market value of public float requirement for continued
listing set forth in Marketplace Rule 4450(a)(2) and that its
securities are, therefore, subject to delisting from the Nasdaq
National Market.
The company is requesting a hearing before a Nasdaq listing
qualifications panel to review the staff determination. While
the company's request stays the process until a final
determination is made, there can be no assurance the panel will
grant the company's request for continued listing on the Nasdaq
National Market.
If the company's request for continued listing on the Nasdaq
National Market is denied, the company will submit an
application for its securities to be listed on the Nasdaq
SmallCap Market, however, there can be no assurance that this
application will be accepted.
If at some future date the company's securities should cease to
be listed on either the National or SmallCap Markets, it may
continue to be quoted on the OTC-Bulletin Board.
Gregory K Roeper, chief executive officer, commented, "While the
valuations of many telecom stocks have certainly declined over
the past year, we believe the current market price of our stock
is significantly undervalued relative to our historical
operating performance and current book value of over $2.45 per
share."
"Our focus since announcing our cost reduction program in the
first quarter has been on improving the overall operating
results of the company. We are pleased to announce today that
the plans are clearly on track and, despite continued weakness
in the sector, we expect to return to profitability for the
second quarter.
WARNACO GROUP: Paying Postpetition Insurance Obligations
--------------------------------------------------------
The Warnaco Group, Inc. maintains various insurance policies
providing coverage for, among other things, property, crime,
earthquake, and directors' and officers' liability.
Since it is not economically advantageous for the Debtors to pay
the premiums their insurance policies on a yearly, the Debtors
would finance the premiums on many of their policies with third-
party lenders under the premium financing agreements.
Elizabeth R. McColm, Esq., at Sidley Austin Brown & Wood, in New
York, informs the Court that the Debtors presently finance 20 of
their policies under 4 financing agreements.
Ms. McColm relates that the existing premium financing
agreements carry interest rates of 5.3% to 7.3% for a total
finance cost of $88,505.34 on the principal amount of
$2,564,100.93. Of this total payment obligation, Ms. McColm
notes, $1,363,826.84 has been paid or prepaid through pre-
petition installments. The existing premium financing agreements
also require the Debtors to make monthly installment payments
reaching $1,200,274.09 through April 2002, Ms. McColm adds.
Maintaining the insurance coverage is important to the Debtors'
business activities as well as preserving their cash flow by
financing the insurance premiums, Ms. McColm explains.
Therefore, any interruption to the payment of these insurance
premiums it will adversely affect the Debtors' interests, Ms.
McColm states.
Finding merit in the Debtors' motion, the Court authorizes the
Debtors to continue to finance their annual insurance policy
premiums throughout these Chapter 11 cases by:
(i) Continuing their existing premium finance agreements,
(ii) Entering into new premium finance agreements,
(iii) Renewing the existing premium finance agreements in
the ordinary course of business, and
(iv) Continuing payment of premiums on existing insurance
policies directly to the insurance companies, all without the
need for further authority or approval of the Court. (Warnaco
Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
WHEELING-PITTSBURGH: John Testa Rejoins as Senior VP & CRO
----------------------------------------------------------
Wheeling-Pittsburgh Steel Corporation said that former Vice
President John W. Testa has rejoined the company as Senior Vice
President, Chief Restructuring Officer and Corporate Secretary.
Prior to his retirement last year after 36 years of service,
Testa had been a vice president for more than 20 years, most
recently as Vice President of the Office of the Chairman. Since
the company's bankruptcy filing, Testa had been a consultant
to the company on bankruptcy matters.
"As Chief Restructuring Officer, John brings tremendous
experience to Wheeling-Pittsburgh Steel's restructuring
process," said James G. Bradley, President and CEO. "He was a
key player during the company's successful emergence from
bankruptcy in 1991 and has been fully involved in the current
bankruptcy proceeding as a consultant. His knowledge of the
company and its current restructuring will help ensure a
successful emergence from bankruptcy."
The company also announced that Vice President and General
Counsel Steve R. Lacy has resigned, effective July 13.
Wheeling-Pittsburgh Steel is the 9th largest integrated domestic
steel company. It filed for bankruptcy protection on Nov. 16,
2000.
WINSTAR: Asks Court To Approve Asset Sale To E&J Acquisition
------------------------------------------------------------
Before and since they filed these Chapter 11 cases, the Winstar
Communications, Inc. Debtors have been engaged in efforts to
sell certain non-core assets in order to increase liquidity and
to focus restructuring efforts around their core business of
providing broadband services to customers in major commercial
centers.
The Debtors have identified Winstar Visinet Division as one of
their non-core assets.
By motion, the Debtors ask Judge Farnan to approve an Asset
Purchase Agreement with E&J Acquisition LLC and authorize the
sale of substantially all of the assets used in or related to
Winstar Visinet Division free and clear of all liens, interests,
claims and encumbrances. The Debtors also seek the Court's
authority to assume and assign certain executory contracts and
unexpired leases in connection with the sale of Winstar Visinet
Division.
Pauline K. Morgan, Esq., at Young Conaway Stargatt & Taylor, in
Wilmington, Delaware, tells Judge Farnan that there are
compelling reasons and sound business justifications for the
Court to authorize the Visinet sale.
Ms. Morgan relates that the Business was marketed by skilled in-
house Winstar professionals and investment banks experience in
the purchase and sale of Internet Service Providers (ISPs).
Investment bankers, Daniels and Associates, Rampart and
Associates, and McDonald Associates (a division of KeyBank)
informally surveyed the marketplace for companies willing to
close a cash transaction in a short period of time. But most
potential buyers that were approached were reluctant. Only E&J
Acquisition, an entity with significant knowledge and experience
with Winstar Visinet Division, expressed a strong interest and
willingness to close the transaction right away and pay the full
purchase price in cash.
The terms and conditions of the proposed transaction were
negotiated on an arm's length basis. Normally, the value of any
ISP is determined by applying a premium or discount to its
monthly annual revenue stream to reflect the overall condition
of business. This was one of the factors considered in the
reaching the agreement with E&J. In this case, Ms. Morgan
explains, Winstar Visinet Division would be assessed as a high-
risk investment because of the deterioration of the market for
ISPs generally, and an appropriate discount was applied to the
value of Visinet.
The Debtors believe that the sale price for Visinet is fair and
reasonable and reflects an appropriate current valuation of an
ISP. Ms. Morgan informs the Court that the monthly revenue of
Visinet has already decreased by $45,000 since the Petition
Date. And the Debtors expect this decline to continue if the
sale is delayed.
In late May 2001, the Debtors reached an agreement with E&J on
the sale of Visinet. The salient terms of the Asset Purchase
are:
(a) Seller: Winstar Wireless Inc.
(b) Purchaser: E&J Acquisition, LLC
(c) Effective Date: May 1, 2001
(d) Assets to be Sold:
(i) All items of tangible personal property set
forth in the Asset Purchase Agreement,
(ii) All trade names, domain names, logos,
trademarks, copyrights, designs and other
intellectual property (excluding the name
"Winstar" or any variant thereof),
(iii) The interest of the Business as lessee of real
property
(iv) All material contracts, including all deposits
and pre-payments received by the Business with
respect to performance of such material
contracts on or after the effective date,
(v) The billed and unbilled accounts receivable and
related deposits, security, or collateral
therefore,
(vi) All of the goodwill of the Business, and
(vii) All other assets of the Business used
exclusively by the Business.
(e) Purchase Price: Four (4) times the average monthly
revenue for the Business for three (3) calendar months prior to
the month in which the closing occurs, but in no event less than
$1,000,000, less the sum of:
(i) The amount by which the accounts payable as of
the effective date exceeds 95% of the trade
receivables less than 90 days old as of the
effective date, and
(ii) Cash receipts of the Business after the
effective date and prior to the closing.
The expected amount of the purchase price, without taking into
account these deductions, is approximately $1,200,000 and in no
event shall the purchase price be less than $600,000.
(f) Assumed Liabilities: The purchaser shall undertake,
assume, become responsible for, perform and otherwise pay and
discharge all of the liabilities and obligations listed to the
Asset Purchase Agreement. Purchaser will not assume or have any
responsibility with respect to any other liabilities or
obligations not included in the definition of Assumed
Liabilities. At the closing, the Purchaser shall assume the
Assumed Liabilities by executing and delivering to Winstar
Wireless an assignment and assumption agreement to the Asset
Purchase Agreement.
(g) Representations and Warranties of Seller: Standard
representations and warranties regarding corporate status and
authorization, no conflicts, financial statements, absence of
undisclosed liabilities, taxes, litigation, compliance with
laws, government approvals and consents, government contracts,
title to assets, material contracts, intellectual property,
including all of its domain names and brokers.
(h) Representations and Warranties of Purchaser: Standard
representations and warranties regarding corporate status and
authorization, no conflicts, litigation and brokers.
(i) Covenants: Standard covenants typical to transactions
of this type, including those relating to conduct of business,
access and information, public announcements, further actions
and further assurances.
(j) Conditions Precedent: Entry by the Bankruptcy Court of
an order approving the asset sale free and clear of all liens,
interests, claims, and encumbrances reasonably satisfactory to:
the Purchaser and the Purchaser's counsel, and the Debtors and
the Debtors' counsel.
(k) Indemnification: Typical indemnification provisions
for this type of transaction, including indemnification of the
Purchaser, its officers, directors, employees, agents, advisors,
representatives and affiliates by Winstar Wireless for Losses
resulting from or arising out of:
(i) The inaccuracy of any representation or
warranty,
(ii) Any failure of the Debtors to perform any
covenant or agreement under the Asset Purchase
Agreement,
(iii) The Debtors' operation of the Business prior to
the effective date, and
(iv) Any liabilities of the Business other than
Assumed Liabilities.
The maximum amount of the Debtors' indemnification obligations,
other than liabilities referred to in the foregoing clause (iv),
shall be a sum equal to the Purchase Price.
The Debtors expect that the transaction outlined will net
approximately $600,000 for its estates, after final purchase
price adjustments and payments of all closing-related items.
In accordance with the terms of the Debtor-in-possession
financing, Ms. Morgan notes, the proceeds of the sale will be
remitted to the Debtors' post-petition lenders to reduce post-
petition loans. The Debtors will be able to access such cash,
subject to the terms of the DIP Credit Agreement and this
court's final order approving the same.
Upon reasonable investigation, Ms. Morgan discloses, the
Debtors' Pre-Petition Lenders and Post-Petition Lenders are the
only entities that have a security interest in the assets of its
Winstar Visinet Division.
Ms. Morgan urges Judge Farnan to approve the Debtors' request
soon because if the Debtors are forced to continue marketing the
Business, there is little likelihood of obtaining a meaningfully
higher price. (Winstar Bankruptcy News, Issue No. 6; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
*********
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*********
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