/raid1/www/Hosts/bankrupt/TCR_Public/010802.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, August 2, 2001, Vol. 5, No. 150
Headlines
AMERICAN HOMEPATIENT: Reports Second Quarter Losses
AMF BOWLING: Parent Company Files For Chapter 11 -- As Expected
AMF BOWLING, INC.: Case Summary & Largest Unsecured Creditors
AMF BOWLING: Obtains Nod To Employ Ordinary Course Professionals
APOGEE ENTERPRISES: First Quarter Net Sales Decrease By 14%
ARMSTRONG: W.W. Henry & Ardex Want Decision on Acquisition Pact
BROKAT AG: Fitch Further Cuts Senior Unsecured Note Rating To CC
CITYSCAPE TRUST: S&P Drops Home Equity Loan Rating to D from CC
COMDISCO INC.: Seeks To Maintain Cash Management System
CONTIMORTGAGE: S&P Downgrades Rating To CCC From B
CORAM HEALTHCARE: Files Second Amended Joint Chapter 11 Plan
CYCLIX ENGINEERING: Committee Opposes PNC's Move For Stay Relief
DIRECTRIX INC.: Terminates Reseller Agreement With Akamai
FACTORY CARD: Committee Supports Continuance of Plan Hearing
FINOVA GROUP: Committee Taps Lazard Freres As Investment Banker
HARNISCHFEGER: Distributes New Stock & Nasdaq Trading Begins
HIGH SPEED ACCESS: Charter Comm. Proposes To Buy Some Assets
INTEGRATED HEALTH: Angell Seeks Relief From Automatic Stay
INTERNET COMMERCE: Files for Chapter 11 Protection in Denver
INTIRA CORPORATION: divine, inc. Plans To Acquire Assets
ITEMUS INC.: Commences Bankruptcy Proceeding in Toronto
LEGEND AIRLINES: Viking Retains NY Firm to Assist Asset Purchase
LOUISIANA-PACIFIC: Fitch Cuts Senior Unsecured Rating to BB+
LOUISIANA-PACIFIC: S&P Downgrades Long-Term Ratings To Low-B's
MARINER POST-ACUTE: Banks Propose Plan Solicitation Procedures
MMH HOLDINGS: Designates New Board of Directors
METRICOM INC: Appoints Kevin Dowd as New Chief Executive Officer
MICROAGE, INC.: Emerges from Chapter 11 Bankruptcy
NETIA HOLDINGS: Polish Telecom Firm Denying Bankruptcy Rumors
OPTIO SOFTWARE: Shares Subject To Nasdaq Delisting
PACIFIC GAS: Compromises and Settles San Francisco Tax Claims
PACIFICARE HEALTH: Reports Second Quarter 2001 EPS of $0.45
PILLOWTEX: Rejecting Factory Outlet Lease With Stanley Tanger
PIONEER COMPANIES: Files For Chapter 11 in Houston
PIONEER COMPANIES: Chapter 11 Case Summary
POINEER COMPANIES: Posts $15.2 Mil Loss For 2001 Second Quarter
RELIANCE GROUP: Committee Hires Orrick Herrington As Counsel
REVLON INC: CW Cosmetics Acquires Maesteg, Wales Facility
SUN HEALTHCARE: Hearing on Government Stipulation Is On Aug. 3
TRICO STEEL: Retains Credit Suisse As Financial Advisors
UCAR INT'L: Closes $98 Million Public Offering of Common Stock
VENCOR INC.: Interim & Final Applications For Compensation
VIDEO UPDATE: Disclosure Statement Hearing Set For September 11
VITTS NETWORK: FactSet Research Acquires Data Center Facility
W.R. GRACE: Requests One-Year Extension of Exclusive Periods
W.R. GRACE: French Subsidiary Acquires Pieri SA
WARNACO GROUP: Proposes De Minimis Claims Settlement Protocol
WICKES INC.: Ironwood Discloses 11.5% Equity Ownership
WINSTAR COMM.: Has Until October 18 To Make Lease Decisions
*********
AMERICAN HOMEPATIENT: Reports Second Quarter Losses
---------------------------------------------------
American HomePatient, Inc. (OTC:AHOM) reported its financial
results for the three months and six months ended June 30, 2001.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) for the second quarter was $12.4 million, representing
an increase of $0.6 million over the same quarter of 2000 and
an increase of $0.4 million over the previous quarter of this
year. For the first six months of 2001, the Company reported
EBITDA of $24.5 million, representing an increase of $3.4
million over the first six months of 2000. The Company's net
loss for the second quarter of 2001 was $(2.1) million compared
to $(5.8) million for the same quarter of 2000. For the first
six months of 2001, the Company reported a net loss of $(8.9)
million compared to a net loss of $(14.4) million for the same
six month period of 2000.
Revenues for the three months ended June 30, 2001 were $89.8
million, down from $91.1 million reported for the same three
month period of 2000. For the first six months of 2001, the
Company reported revenues of $180.9 million up from $179.0
million for the same six month period of 2000. The termination
of a services contract in January and the sale of two
unprofitable infusion branches in April have negatively impacted
revenues for the first six months of 2001 by approximately $4.5
million. The Company continues to aggressively implement its
sales and marketing initiatives.
EBITDA margin for the second quarter of 2001 was 13.8% of
revenues compared to 12.9% for the second quarter of 2000. For
the first six months of 2001, EBITDA margin was 13.5% compared
to 11.7% for the same period in 2000. Overall, operating
expenses decreased in the current quarter and six month period
compared to last year. This decrease is due primarily to a
significant improvement in bad debt expense. As a percentage of
revenues, bad debt expense in the second quarter of 2001 was
3.7% compared to 7.6% in the second quarter of 2000. For the
first six months of 2001, bad debt expense was 4.0% compared to
7.7% for the same period in 2000. This improvement in bad debt
expense is largely the result of improved cash collections
resulting from the redesign and standardization of reimbursement
processes and the consolidation of certain billing locations
into larger regional billing centers. Also, in the second
quarter, bad debt expense was positively impacted by the
reversal of approximately $0.7 million in previously established
reserves as a result of the collection of past due balances
associated with a terminated contract. Without this reserve
reversal, bad debt expense as a percentage of revenues would
have been 4.5% for the second quarter and 4.4% for the six
months.
As previously announced the Company and its lender group entered
into an amended credit agreement in the second quarter which
cured the then existing defaults, amended the principal
amortization schedule, and extended the term of the agreement to
December 31, 2002. In addition, the new credit agreement waived
all default rate interest associated with the then existing
defaults and, in the second quarter, the Company reversed $1.5
million of default interest expense accrued in the previous
quarter.
American HomePatient is one of the nation's largest home health
care providers with over 300 centers in 38 states. Its product
and service offerings include respiratory services, infusion
therapy, parenteral and enteral nutrition, and medical equipment
for patients in their home. American HomePatient's common stock
is currently traded over-the-counter under the symbol AHOM.
AMF BOWLING: Parent Company Files For Chapter 11 -- As Expected
---------------------------------------------------------------
The parent company of AMF Bowling Worldwide has filed a petition
under Chapter 11 of the U.S. Bankruptcy Code. The voluntary
filing by AMF Bowling, Inc. on Tuesday follows voluntary Chapter
11 filings by AMF Bowling Worldwide, Inc. and certain operating
subsidiaries on July 2, 2001.
AMF Bowling, Inc. is a holding company with no operations, and
its filing is not expected to have any material effect on AMF
Bowling Worldwide's Chapter 11 case or operations of AMF Bowling
Worldwide and its subsidiaries. The filing will allow AMF
Bowling, Inc. to begin to conclude its outstanding business
affairs and was previously discussed in the Form 10-Q filed with
the Securities and Exchange Commission by AMF Bowling, Inc. for
the quarter ended March 31, 2001. In that 10-Q, the company said
that it is expected that the common stock and zero coupon
convertible debentures of AMF Bowling, Inc. will ultimately be
cancelled.
Since filing under Chapter 11 in early July, AMF Bowling
Worldwide has received approval from the court for orders that
enable the company to conduct business in the ordinary course.
These include motions providing for continuation of employee
wages and benefits, interim approval of a debtor-in-possession
financing facility, and approval of a broad-based retention and
severance program. The company's bowling centers and
manufacturing facilities are continuing normal business
operations.
AMF BOWLING, INC.: Case Summary & Largest Unsecured Creditors
-------------------------------------------------------------
Debtor: AMF Bowling, Inc.
8100 AMF Drive
Richmond, VA 23111
804-730-4000
Chapter 11 Petition Date: July 31, 2001
Court: Eastern District of Virginia (Richmond)
Bankruptcy Case No.: 01-61299-DOT
Judge: Douglas O. Tice Jr.
Debtor's Counsel: Lawrence H. Handelsman, Esq.
Kristopher Hansen, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
(212) 806-5400
and
Kevin R. Huennekens, Esq.
Peter J. Barrett, Esq.
Kutak Rock LLP
Suite 800, Bank of America Center
1111 East Main Street
Richmond, Virginia 23219-3500
Total Assets: $138,954
Total Debts: $178,876,000
Debtor's Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
HSBC Bank USA Zero Coupon $530,364,000
Attn.: Russ Paladino Convertible
Indenture Trustee Debentures
Corporate Trust Office
140 Broadway
New York, NY 10005
800-975-4722
Vulcan International Class action $0.00
Corporation regarding initial
Wilmington, DE public offering
Verizon Wireless Wireless telephone $0.00
Attn.: Executive contract
Correspondence
P.O. Box 4009
Silver Spring, MD 20914-4009
800-922-0204
AMF BOWLING: Obtains Nod To Employ Ordinary Course Professionals
----------------------------------------------------------------
Prior to the Petition Date, AMF Bowling Worldwide, Inc. employed
120-some attorneys and other professionals in the ordinary
course of business to render services relating, inter alia, to
(i) taxes, (ii) real estate, (iii) finance, (iv) litigation, (v)
commercial and corporate issues, and (vi) insurance. In
addition, because of the Debtors' substantial foreign
operations, the Debtors utilize in the ordinary course of their
business numerous professionals located abroad. The Debtors paid
each of these Ordinary Course Professionals less than $100,000
in 2000, and approximately $3,000,000 in the aggregate.
By application, the Debtors seek authorization, pursuant to
sections 105(a), 327, and 328 of the Bankruptcy Code, to retain
professionals that are utilized by the Debtors in the ordinary
course of their business. The Ordinary Course Professionals are
not integral to the day-to-day bankruptcy administration of the
cases. The Debtors ask that they be permitted to employ Ordinary
Course Professionals without the need to prosecute a formal
employment application and that they be permitted to pay their
Ordinary Course Professionals without the need for each
professional to file and prosecute formal fee applications.
Each Ordinary Course Professional will submit an affidavit
attesting to the Firm's disinterestedness and the Debtors will
limit payments to any one Ordinary Course Professional to
$50,000 per month and $150,000 in any twelve-month period during
these chapter 11 cases.
Ordinary Course Professionals will include foreign insolvency
attorneys in foreign countries, including Australia, Hong Kong,
Japan, the United Kingdom, Brazil, the Netherlands, Russia and
Poland. Payments to Foreign Insolvency Counsel will be capped
at $40,000 per month and $120,000 in any 12-month period.
Noting the cost and paper-saving benefits of this procedure,
Judge Tice approved the Debtors' Motion in all respects. (AMF
Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
APOGEE ENTERPRISES: First Quarter Net Sales Decrease By 14%
-----------------------------------------------------------
Consolidated net sales of Apogee Enterprises Inc. for the first
quarter ended June 2, 2001, were $203.6 million, a 14% decrease
from the $237.3 million reported for the prior year quarter.
The results of the Auto Glass distribution unit, which Apogee
contributed to the PPG Auto Glass joint venture in July 2000,
were not included in the Company's continuing operations for the
first quarter of fiscal 2002, as they were for fiscal 2001.
Fiscal 2002 revenues were flat compared to the prior year
quarter after being adjusted for the formation of the PPG Auto
Glass joint venture. Fiscal 2002 earnings from operations were
$5.6 million, a 186% increase over the prior year period's
earnings from operations of $2.0 million. Fiscal 2002 figures
include one less week in the quarter as compared to the same
quarter a year ago.
ARMSTRONG: W.W. Henry & Ardex Want Decision on Acquisition Pact
---------------------------------------------------------------
The W. W. Henry Company and Ardex, Inc., and each of their
affiliates, appearing through William E. Kelleher, Jr., and Tina
L. Campo of the Pittsburgh firm of Cohen & Grigsby PC, joined by
Bayard J. Snyder of the Wilmington firm of Snyder & Associates,
ask Judge Farnan to order Armstrong Holdings, Inc. to assume or
reject their contract with Henry by a date certain. W. W. Henry
is the Debtors' exclusive supplier of certain underlayment,
adhesive and floor care products in Canada, Mexico and the
United States as a result of Ardex's acquisition of the
Installation Products Division from Armstrong only approximately
four months before Armstrong filed for bankruptcy. Because of
the unique and comprehensive nature of the acquisition agreement
and the continuing prejudice to Henry and Ardex, they ask Judge
Farnan to set the earliest possible date by which the Debtors
must assume or reject the acquisition agreement.
Before AWI's bankruptcy filing, Ardex purchased from AWI the
stock of The W. W. Henry Company and certain assets related to
the Installation Products Division of AWI for approximately $86
million at a closing held on July 31, 2000, and under an
Acquisition Agreement dated as of June 27, 2000. Conditions
precedent to the parties' obligations under the Acquisition
Agreement included the execution and delivery of a series of
agreements between Armstrong and Ardex, W. W. Henry, and
their affiliates, that were part of and exhibits to the
Acquisition Agreement. These included a Private Label Supply
Agreement, Specification Agreement, License Agreement, Technical
Support Agreement, Trademark License Agreement, Cross-License
Agreement, Sublicense Agreement, patent License Agreement,
Recommendation Agreement, Logistics Services Agreement, and
Lease Agreement, all dated as of August 1, 2000. The
Acquisition Agreement and its exhibits contain what is described
as confidential information and include confidentiality
provisions, so is not directly included in the Motion.
AWI also signed a letter dated July 31, 2000, to "reflect our
agreement" under the Acquisition Agreement concerning
Armstrong's covenant to perform remediation activities with
respect to W. W. Henry's facilities located in Arlington, Texas,
Bourbonnais, Illinois, and Dallas, Georgia.
Central to Ardex's acquisition of W. W. Henry's stock and the
assets sold by AWI under the Acquisition Agreement was AWI's
agreement to purchase from W. W Henry all of AWI's and its
affiliates' requirements in the United States, Canada and Mexico
for certain underlayment, adhesive and floor care products for a
term of eight years at a target sales level of $27,285,000 in
aggregate purchase prices for each of the first five years.
Within the Private Label Supply Agreement, Ardex would not have
agreed to purchase the W. W. Henry stock and other assets. From
the beginning of AWI's indication of interest in the sale, a
supply agreement was part of AWI's proposals. In addition, the
negotiations over the purchase price assumed AWI's agreement to
purchase its requirements of the Private Label Products from W.
W. Henry.
The sale of the AWI Private label Products to Armstrong is
critical to W. W. Henry's business. Accordingly, since AWI's
bankruptcy filing, Ardex and W. W. Henry have continuously
requested AWI to assume the Acquisition Agreement, including the
Private Label Supply Agreement. AWI has refused to do so unless
W. W. Henry agrees to substantial concessions and material
changes to the Private Label Supply Agreement.
Moreover, in addition to asserting that the Acquisition
Agreement and its exhibits are separate agreements, and that the
Acquisition Agreement is not executory, AWI has argued that it
cannot assume its environmental obligations owed to Ardex and
W.W. Henry. Nevertheless, AWI repeatedly advised W.W. Henry and
Ardex after AWI's bankruptcy filing that AWI would honor its
environmental obligations with respect to a property formerly
owned by AWI and by W.W. Henry located in Maywood, California,
The "Alamo Street Property", and a property formerly owned by
W.W. Henry located in South River, New Jersey, The "South River
Property".
Despite conducting investigative and remediation activities
post-petition and affirmatively promising to continue to honor
its environmental obligations with respect to the Alamo Street
and the South River Properties post-petition, AMI abruptly
announced in April, 2001 to the California EPA, Regional Water
Quality Control Board and to the New Jersey DEP, Bureau of
Environmental Evaluation, Clean Up and Responsibility Assessment
that AMI was abandoning investigation and remediation at the
Alamo Street and the South River Properties.
On June 15, 2001, the California EPA, Regional Water Quality
Control Board issued Cleanup & Abatement Order No 01-146R to
AWI. Consequently, W. W. Henry has been compelled to file a
Motion to Enforce Debtor's Obligations Under Cleanup and
Abatement Order issued by the California EPA, "Motion to
Enforce" Which is being filed simultaneously with the Motion.
Among AWI's many other continuing obligations under the
Acquisition Agreement is AWI's obligation to conduct and
complete remediation activities at, among other properties, the
Alamo street Property and to indemnify Ardex and its affiliates
for any loss resulting from or related to, among other things,
the Alamo Street Property.
AMI also has failed and refused to cooperate with W. W. Henry in
adjusting the prices for the AMI Private Label Supply Products
to correct the initial base prices that were set erroneously as
a result of misrepresented information provided by AMI. W. W.
Henry and Ardex also have been compelled to file a Motion For
Relief From the Automatic Stay to permit the pricing issues to
be addressed through arbitration in accordance with the
Agreement.
Because the Acquisition Agreement contemplates W. W. Henry and
Ardex continuing to service an entire business unit of AMI, the
former Installation Products Division, with all of the attendant
and substantial capital, research and development and other long
term expenses and investment necessary to service a business of
the size, it is grossly unfair to expect W. W. Henry and Ardex
to continue to position themselves to honor their obligations
over the remaining seven years without AMI deciding whether to
assume or reject the Acquisition Agreement until plan
confirmation, which could be years away.
In deciding whether contracts are divisible or indivisible, the
Bankruptcy Court should look to state law and, more
specifically, to the law of the forum state. Under Delaware law,
whether a contract is to be construed divisible or entire
depends upon the intention of the parties, as ascertained by
reference to the text and subject matter of the contract and
from any other facts and circumstances as shown by the evidence.
In the case at bar, the Acquisition Agreement is governed by
Pennsylvania law and Pennsylvania law is in accord. Where
agreements are part of a single business transaction, courts
find contracts to be indivisible. If the business transaction
would not have occurred without the other agreement or
agreements, the contracts are indivisible.
Clearly, the Acquisition Agreement and its Exhibit Agreements
are one indivisible contract. They were executed by the same
parties, at the same time, for the same purpose and in the
course of the same transaction. The Acquisition Agreement and
its Exhibits were executed for the purpose and in the course of
the acquisition transaction under which Ardex purchased from AWI
the W. W. Henry stock and other assets. AWI, on the one side,
and Ardex or W. W. Henry, on the other side, were parties to all
of the Agreements. Some of their affiliates differed on some of
the Agreements, but the main parties were the same on all of
the Agreements. The closing occurred at 11:59 p.m. on July 31,
2000, by agreement of the parties. The Exhibit Agreements all
were dated as of August 1, 2000.
The parties' intent that the Acquisition Agreement and the
Exhibit Agreements are one indivisible contract is unequivocally
demonstrated by the fact that they are Exhibits to, and part of,
the Acquisition Agreement. Moreover, the Exhibit Agreements
were conditions precedent to the parties' obligations under the
Acquisition Agreement. Under the terms of the Acquisition
Agreement, if any one of the Exhibit Agreements were not
executed and delivered, the acquisition transaction would not
have occurred.
Central to Ardex's acquisition of W. W. Henry's stock and the
assets sold by AWI under the Acquisition Agreement was AWI's
agreement to purchase from W. W. Henry all of AWI's and its
affiliates' requirements in the United States, Canada and
Mexico for the AWI Private Label Products for a term of 8 Years
at a target sales level of $27,285,000.00 in aggregate purchase
prices for each of the first 5 years.
In fact, Ardex would not have agreed to purchase the W. W. Henry
stock and other assets without the Private Label Supply
Agreement, Exhibit A to the Acquisition Agreement, from the
beginning of AWI's indication of interest in the sale, a supply
agreement was part of AWI's proposals. In addition, the
negotiations over the purchase price assumed AWI's agreement to
purchase its requirements of the AWI Private Label Products from
W. W. Henry.
The Private Label Supply Agreement and other related Exhibit
Agreements were component and necessary parts of the acquisition
transaction. Consequently, because the parties assented to all
of the promises as a whole, so that there would have been no
bargain whatever if any promise of set of promises had not been
stricken, the Acquisition Agreement and its Exhibits are one
indivisible contract.
Most courts, including the United States Court of Appeals for
the Third Circuit, have adopted Professor Countryman's
definition that an executory contract is "a contract under which
the obligation of both the bankrupt and the other party to the
contract are so far unperformed that the failure of either to
complete performance would constitute a material breach excusing
the performance of the other".
The Acquisition Agreement clearly was executory on both sides
when AWI filed for bankruptcy relief. The obvious way to
demonstrate that the Acquisition Agreement was executory, and
still remains so, is to mention a few of the substantial,
continuing and material obligations both parties have under the
Private Label Supply Agreement. Examples include: (a) W. W.
Henry must manufacture, and AWI must purchase, all of AWI's and
its affiliates' requirements in the United stares, Canada
and Mexico for the AWI Private Label Products for a term of 8
Years. (Armstrong Bankruptcy News, Issue No. 8; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
BROKAT AG: Fitch Further Cuts Senior Unsecured Note Rating To CC
----------------------------------------------------------------
Fitch, the international rating agency, downgraded the Senior
Unsecured rating of Brokat AG (formerly Brokat Infosystems AG)
and its EUR 125 million Senior Unsecured notes due 2010 to 'CC'
from CCC'. At the same time, the agency affirmed the Rating
Watch Negative status.
Fitch took this rating action following the announcement of
worse than expected preliminary second quarter results for the
three months ended June 2001, with the company reporting
revenues of EUR28.0mln and EBITDASO (EBITDA plus non-cash stock
option costs) of -EUR 40mln (minus EUR40.0mln). At the same time
Brokat announced that it was taking an exceptional non-cash
charge of EUR735mln to reflect the write-down of goodwill
relating to the acquisitions of US companies Blaze Software and
Gemstone Systems, both of which were acquired in 2000. Given
Brokat's cash position of EUR41mln at the end of Q2 2001, Fitch
recognises that without an injection of new capital before the
end of September 2001, the company is in danger of exhausting
its cash resources by that time. While Fitch understands that
Brokat is in discussions with potential equity investors, the
lack of visibility regarding the likelihood of such a
transaction being completed leads the agency to take a cautious
view of the situation.
This uncertainty is exacerbated by the announcement last week
that Brokat has appointed Dresdner Kleinwort Wasserstein Inc as
its financial adviser to examine strategic options for a
restructuring of the notes. The company is proposing to enter
into detailed negotiations and discussions with the noteholders
aimed at achieving this restructuring, but the agency believes
that the implications of this announcement are likely to be
negative for noteholders. Moreover, the completion of a
restructuring of the notes may be required in order to
facilitate a substantial equity injection by a third party,
given the Change of Control provisions contained in the existing
bond indenture. These provisions stipulate that on the
occurrence of any Change of Control of the company, the
noteholders can exercise a put option under which Brokat is
obliged to repurchase the notes at 101 per cent of their
principal amount together with accrued and unpaid interest.
Clearly, this EUR125mln liability could deter any potential
acquirer, and Fitch therefore views the ongoing restructuring
discussions as crucial to the future of the company, while
acknowledging that the noteholders are likely to suffer some
form of loss.
This action follows the agency's decision to downgrade the notes
from 'B-' (B minus) to 'CCC' on 24 July 2001, which reflected
Fitch's concerns over the announcement regarding the
restructuring of the notes.
CITYSCAPE TRUST: S&P Drops Home Equity Loan Rating to D from CC
---------------------------------------------------------------
Standard & Poor's lowered its rating on Cityscape Home Equity
Loan Trust 1997-B's (Cityscape 1997-B) home equity
loan pass-through certificates class B-1A to 'D' from double-
'C'. At the same time, Standard & Poor's affirmed its
outstanding ratings on all other Cityscape 1997-B certificates.
The class B-1A has reached default status due to the full
erosion of its loss protection having led to principal loss
allocations to the security.
The affirmations are based on current credit support percentages
averaging 2.4 times original levels, despite continuing high
trigger-event levels of delinquency that require close
monitoring.
Cityscape 1997-B is a two-loan-group securitization, in which
each loan group backs a separate group of certificates. Loan
group one consists of fixed-rate collateral and collateralizes
classes A-6, A-7, M-1F, M-2F and B-1F. Loan group two consists
of adjustable-rate mortgage loans and backs classes M-1A, M-2A,
and B-1A. Cash flow can be drawn from one loan group to cover
losses in the other loan group, provided the loan group
providing the additional coverage is at its
overcollateralization target and all of its certificate payments
are current.
Loss protection is provided by excess interest cash flow,
overcollateralization, and shifting interest senior
subordination. Excess interest is now being directed to cover
losses. To the extent that monthly net losses exceed monthly
excess interest production the difference is covered by
overcollateralization, although very little excess interest is
available in loan group two. The class A and M certificates are
further protected by subordination. The class B certificates do
not have subordinated protection, as they are the most junior
classes within the structure.
Approximately 36.02% of the outstanding loan group one (fixed-
rate) principal balance is at least 30 days delinquent. The
seriously delinquent (90-plus days, foreclosure, and REO) loans
account for approximately 26.60% of the outstanding balance.
Cumulative losses amount to $10.7 million or 6.51% of the
original bonded amount.
Approximately 59.86% of the outstanding loan group two
(adjustable-rate) principal balance is at least 30 days
delinquent. The seriously delinquent (90-plus days, foreclosure,
and REO) loans account for approximately 50.20% of the
outstanding balance. According to the trustee the REO balance is
presently zero. Cumulative losses amount to $2.6 million, or
7.91% of the original bonded amount.
The Cityscape 1997-B certificates are backed by 15- to 30-year,
first-and second-lien, subprime home equity loans. At issuance,
the mortgages were secured by residential properties
concentrated predominantly in New York. Second-lien mortgages
are only present in loan group two, Standard & Poor's
said.
OUTSTANDING RATING LOWERED
Cityscape Home Equity Loan Trust 1997-B
Home equity loan pass-thru certificates
Class Rating
To From
B-1A D CC
OUTSTANDING RATINGS AFFIRMED
Cityscape Home Equity Loan Trust 1997-B
Home equity loan pass-thru certificates
Class Rating
A-6 AAA
A-7 AAA
M-1F AA
M-1A AA
M-2F A
M-2A BBB
B-1F BB
COMDISCO INC.: Seeks To Maintain Cash Management System
-------------------------------------------------------
John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher &
Flom, describes Comdisco, Inc.'s cash management system as a
complex, highly automated and computerized system that allows
the Debtors to centrally manage their cash flow. It also
enables the Debtors to trace funds through the system and ensure
that all transactions are adequately documented.
If they are required to adopt new, segmented cash management
systems at this critical stage of this case, the Debtors fear
such requirement would adversely affect their operations as well
as their reorganization efforts. Not to mention expensive and
would create unnecessary administrative problems, Mr. Butler
adds. As a result, Mr. Butler says, adopting new cash
management system would likely be more disruptive than
productive.
By motion, the Debtors ask Judge Barliant to permit them to
continue using their existing cash management system and enter
an order that:
(a) the Banks be authorized and directed to honor all
representations from the Debtors as to which checks should be
honored or dishonored, and
(b) any final payment made by a Bank prior to the Petition
Date against any of the Bank Accounts, or any instrument used by
a Bank on behalf of any Debtor pursuant to a "midnight deadline"
or otherwise, shall be deemed to be paid pre-petition, whether
or not actually debited from the Bank Accounts pre-petition.
Prior to Petition Date, Mr. Butler relates that the Debtors
maintained more than 120 bank accounts in the United States and
abroad in their centralized cash management system. According
to Mr. Butler, the Debtors' centralized cash management system
is designed to efficiently collect, transfer, and disburse funds
generated from their operations, and to record accurately, on a
daily basis, such collections, transfers, and disbursements.
Though the Debtors manage their accounts through a centralized
cash management system, Mr. Butler notes, the Debtors also
maintain a separate corporate accounting to account for all
inter-company loans and transfers. Mr. Butler explains that
inter-company balances from the transfer of such funds are
treated as dollar-denominated loan to the funded entity, and
these are interest bearing and have a stated maturity and
payment schedule.
Mr. Butler says the Debtors maintain several types of bank
accounts in financial institutions around the country:
(a) lockbox account,
(b) concentration accounts,
(c) controlled disbursement accounts,
(d) investment accounts, and
(e) foreign currency accounts.
The Debtors maintain one primary account to centralize cash
management, called the "operating account". It is a zero
balance account used to process wire payments and receipts
related to:
(a) debt payment,
(b) intercompany loans and transactions,
(c) segregation of collections arising from trade and
lease receivables,
(d) short-term investments,
(e) dividend payments, and
(f) other treasury related expenses.
The balance of operating account is transferred to investment
account on a daily basis for overnight investment, and then
returned daily as needed.
The Debtors maintain approximately "15 lockbox" accounts used to
collect payments from customers. Balances of lockbox accounts
are transferred to "concentration accounts" on a daily basis.
The Debtors have approximately 8 "concentration accounts" based
on the their lines of business. These accounts are also zero
balance accounts set up to easily account for transactions
dealing with a given line of business and balances are
transferred to operating account on a daily basis.
The Debtors also have 7 "disbursement accounts," established by
lines of business used to pay by check, ACH or wire transfer the
debtors' operating expenses and other obligations. Majority of
disbursement accounts are controlled zero-balance accounts with
approximately $5,000,000 worth of checks processed daily.
The Debtors maintain 4 "investment accounts" with Goldman Sachs
for investing excess cash for the investment of excess cash.
The Debtors invest in proven and safe investments to ensure that
principal is preserved but that a market-rate of return in
realized.
The Debtors also maintain certain foreign currency accounts to
pay vendors or dealing with subsidiaries in non-US$ currencies.
In addition, the Debtors maintain certain international accounts
related to the operations of their non-debtor foreign
subsidiaries. Mr. Butler relates these accounts are established
for administrative convenience and at the request of and comfort
of foreign banks.
The Debtors' payroll in the US is processed through the
operating account and controlled disbursement account. The
services of ADP Inc. are used to process the payroll. Mr.
Butler tells the Court that a portion of the payroll for those
employees that have requested direct deposit of their pay is
made through a singe Automatic Clearing House (ACH) debit made
by ADP. Physical checks are processed through the payroll
Controlled Disbursement Account. Payroll Tax remittances are
processed primarily as reverse wires from the Operating Account.
Mr. Butler relates that Prism and its subsidiaries maintain a
separate cash management system. The Prism subsidiaries are
also in the process of being liquidated. Majority of funds from
liquidation are held in two accounts of Prism Management
Services, LLC. The two accounts were used to facilitate a sale
transaction that required the proceeds not be mingled with other
Prism funds. No funds remain in that account and Prism is about
to close these accounts soon. (Comdisco Bankruptcy News, Issue
No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900)
CONTIMORTGAGE: S&P Downgrades Rating To CCC From B
--------------------------------------------------
Standard & Poor's lowered its rating on ContiMortgage Home
Equity Loan Trust 1997-3's (Conti 1997-3) home equity loan
pass-through certificates class M-2F to triple-'C' from single-
'B'. At the same time, ratings are affirmed on all other classes
of Conti 1997-3.
Class M-2F is expected to reach default status prior to full
retirement of the security. Based upon the average loss and
excess interest performance over the last 12 months, defaulted
payment obligations could be realized before the November 2001
remittance. P. The current overcollateralization balance is zero
for the fixed-rate group. Consequently, since losses have
exceeded excess interest in 11 of the last 12 distributions,
class B-1F has been regularly realizing principal reductions due
to losses. P. The affirmations are based on current credit
support percentages averaging 3.1 times original levels. Class
B-1F is not included in this statistic because its rating is
'D'. Loss protection is provided by excess interest cash flow,
overcollateralization (zero in the fixed-rate group), and
shifting interest senior subordination. To the extent that
monthly net losses exceed monthly excess interest production,
the difference is covered by overcollateralization.
The class A and M certificates are further protected by
subordination. The class B certificates do not have subordinated
protection, as they are the most junior classes within the
structure. Conti 1997-3 is a two-loan-group securitization, in
which each loan group backs a separate group of certificates.
The fixed-rate group one consists of fixed-rate residential
mortgage collateral backing classes A-7 through A-9, M-1F, M-2F,
and B-1F. The adjustable-rate group consists of adjustable-rate
mortgage loans backing classes A-10, M-1A, M-2A, and B-1A.
Approximately 25.88% of the fixed-rate group one principal
balance is at least 30 days delinquent. The seriously delinquent
loans (90-plus days, foreclosure, and REO) account for
approximately 17.69% of the outstanding balance. Cumulative
losses amount to $51.8 million, or 5.48% of the original bonded
amount.
Approximately 38.87% of the outstanding adjustable-rate group
principal balance is at least 30-days delinquent. The seriously
delinquent loans (90-plus days, foreclosure, and REO) account
for approximately 30.46% of the outstanding balance. Cumulative
losses amount to $12.2 million, or 3.83% of the original bonded
amount. P. At issuance, the fixed-rate group generally consisted
of fixed-rate, 10-to 30-year, subprime home equity loans secured
by first- or second-liens on owner-occupied, single-family
detached residential properties. The percentage of the initial
pool secured by second-liens was approximately 7%, and
approximately 52% of the pool was secured by 15-year balloon
mortgages.
The adjustable-rate group initially generally consisted of
adjustable-rate, 30-year, subprime home equity loans secured by
first-liens on owner-occupied, single-family detached
residential properties. Approximately 47% of the adjustable-rate
group was initially populated by 2/28 and 3/27 loans, which
carried a fixed-rate for the first two to three years before
converting to an adjustable-rate mode. No balloon mortgages are
present in the adjustable-rate group.
Fairbanks Capital Corp., a Select Servicer under Standard &
Poor's Servicer Evaluations program, acquired ContiMortgage
Corp.'s entire subprime servicing portfolio and operations,
which includes the servicing rights and obligations related to
the Conti 1997-4 collateral, Standard & Poor's said.
OUTSTANDING RATING LOWERED
ContiMortgage Home Equity Loan Trust 1997-3
Home equity loan pass-thru certificates
Class Rating
To From
M-2F CCC B
OUTSTANDING RATINGS AFFIRMED
ContiMortgage Home Equity Loan Trust 1997-3
Home equity loan pass-thru certificates
Class Rating
A-7 AAA
A-8 AAA
A-9 AAA
A-10 AAA
M-1F AA
M-1A AAA
M-2A A
B-1F D
B-1A B
CORAM HEALTHCARE: Files Second Amended Joint Chapter 11 Plan
------------------------------------------------------------
Coram Healthcare Corporation (OTCBB:CRHEQ) and Coram, Inc.,
filed their Second Joint Plan of Reorganization and Second Joint
Disclosure Statement with the U.S. Bankruptcy Court for the
District of Delaware in their ongoing Chapter 11 cases.
Coram filed voluntary petitions under Chapter 11 of the U.S.
Bankruptcy Code on August 8, 2000 with the support of the
lenders holding the Company's principal debt. The Company's
operating subsidiaries have continued to maintain normal patient
services and business operations, paying trade creditors
currently throughout the process.
The Second Joint Plan of Reorganization differs from the initial
Plan of Reorganization primarily in its proposal to increase the
distribution to Coram Healthcare General Unsecured Creditors to
$3 million from $2 million and, in order to facilitate a
consensual resolution with Equity Interests, distribute a new
voluntary contribution of up to $10 million in cash to the
stockholders of Coram Healthcare on a pro rata, per share basis.
These proposed distributions are subject to the terms and
conditions described in the Second Joint Disclosure Statement,
including approval by at least two-thirds in amount of claims or
shares, as applicable, of those voting in these classes, and the
Plan itself is subject to confirmation by the Bankruptcy Court.
The terms of the Second Joint Plan of Reorganization were
approved by the independent members of the Board of Directors of
Coram. They adopted the recommendations of Goldin Associates,
LLC, a financial advisory firm specializing in distressed
situations whose expertise includes financial advisory services,
business valuation services, review of debtors' operations and
business plans, solvency analyses, valuation, litigation
oversight and management, and service as trustee, examiner, plan
administrator, special master, liquidator, mediator and other
fiduciary capacities in complex bankruptcy and insolvency
situations. Mr. Harrison J. Goldin, a respected, independent
insolvency professional who served as Comptroller of the City of
New York from 1974 to 1989, heads Goldin Associates. In
connection with its retention, Goldin Associates was found by
the Court to be a completely disinterested party with respect to
the Debtors' estates, with no material connections to the
Debtors, the Debtors' management, the Senior Noteholders, the
members of the Creditors' Committee or the members of the Equity
Committee. The full report of Goldin Associates is included as
an attachment to the Second Joint Disclosure Statement.
As proposed in the initial Plan of Reorganization, under the
Second Joint Plan, Coram would emerge from bankruptcy as a
privately held company and its noteholders would own 100 percent
of the stock.
Denver-based Coram Healthcare, through its subsidiaries,
including all branch offices, is a national leader in providing
quality home infusion therapies and support for clinical trials,
medical product development and medical informatics.
CYCLIX ENGINEERING: Committee Opposes PNC's Move For Stay Relief
----------------------------------------------------------------
The Official Committee of Unsecured Creditors of P.C. Service
Source, Inc. objects to the motion of PNC Bank for relief from
the automatic stay.
Pursuant to an order of the court dated May 25, 2001, all
consideration recovered from the sale of assets of PCSS and
Cyclix Engineering Corp has been deposited in the Registry of
the Court. None of the sale proceeds are to be distributed
without further order of the court.
The sale proceeds include approximately $4.7 million in cash,
two promissory notes in excess of $3 million and a $500,000 cash
payment to be paid on or before August 23, 2001 and two warrants
to purchase a stated number of shares for the common stock of
Teleplan International, NP, with an option to "put" the warrants
to Teleplan or its subsidiary within two years after the entry
of the Sale Order for $1 million per warrant.
The debtors and the Committee believe that they have reached an
agreement in principal with respect to the sale proceeds,
however, such agreement can only be effective if there are funds
available for distribution to creditors other than the Bank.
The debtors and the Committee have been unable to reach an
agreement with the Bank. The Bank states that it is entitled to
receive all of the Sale Proceeds until its claim, plus interest,
attorneys fees, consulting fees, and related bank charges and
fees are paid in full. The Committee opposes the Bank's motion
stating that the bank has not established its entitlement to
interest and/or fees, including attorney and consulting fees and
related charges since it has not established the principal
amount of its claim or the value of its purported collateral.
The Committee is represented by Susan F. Balaschak and Michael
S. Fox of Traub, Bonacquist & Fox LLP.
DIRECTRIX INC.: Terminates Reseller Agreement With Akamai
---------------------------------------------------------
Directrix, Inc. (OTC Bulletin Board: DRCX) announces the
issuance of a termination notice to Akamai Technologies
terminating their reseller agreement entered into on August 15,
2000.
Directrix had previously reported in its Form 10-KSB which was
filed on July 15, 2001 that it had received a default notice
from Akamai and that it was contesting the notice and that there
were outstanding services issues. The parties were unable to
resolve the numerous technical problems and service issues.
Directrix' agreement with Akamai calls for Akamai to continue to
service any current customers unless these accounts choose to
move to another Content Delivery Network.
"Despite our attempts to rectify our problems with Akamai's
technical and sales personnel, these problems remain unsolved.
We have identified other solutions, which will better serve our
customers. In the meantime, none of our current customers will
suffer any interruption of service," stated Donald J. McDonald,
President of Directrix.
DIRECTRIX, Inc. is digital video asset management company
providing all of the technical services required to create,
support and deliver digital video programming and data services
from its advanced digital network facility. DIRECTRIX offers a
number of services including digital video playback and
uplink, satellite space segments, digital video archiving and
trafficking, video Internet streaming, digital ad insertion, and
digital archiving and distribution for VOD (Video on Demand)
platforms.
FACTORY CARD: Committee Supports Continuance of Plan Hearing
------------------------------------------------------------
The Official Committee of Unsecured Creditors of Factory Card
Outlet Corp. and Factory Card Outlet of America Ltd. support a
continuance of the July 18, 2001 plan confirmation hearing. The
plan is a joint plan among the debtors, the Committee and FCH.
The plan contemplates that FCH will acquire the debtors in
accordance with the terms of the FCH Agreement. Among other
things, the FCH Agreement provides that FCH will make an equity
investment in the debtors of $6 million on the effective date of
the plan. FCH maintained the right to designate the equity
investor, originally Ingenium Capital Group. However, FCH now
intends to designate another entity to make the $6 million
investment in the debtors.
With a new investor, the Committee is discussing the possible
need to amend the Disclosure Statement and plan to include
information about the new investor and the debtors' proposed
corporate structure upon emergence.
FINOVA GROUP: Committee Taps Lazard Freres As Investment Banker
---------------------------------------------------------------
The Committee, which represents substantially all of the
indebtedness of The FINOVA Group, Inc. as the Debtors have not
incurred material secured indebtedness, seeks the Court's
authority for the retention and employment of Lazard Freres &
Co. LLC as its investment banker. The Committee asks the Court
to authorize the retention and employment, nunc pro tunc as of
March 20, 2001, as Lazard commenced work immediately on its
retention upon its retention on March 20, 2001 on several
matters requiring immediate attention in connection with the
FINOVA chapter 11 cases, including reviewing the Debtors'
proposed loan agreement with Berkadia.
The Committee selected Lazard as their investment banker
because, among other things, Lazard and its senior professionals
have an excellent reputation for providing high quality
investment banking services to debtors and creditors in
bankruptcy reorganizations and other debt restructurings. Lazard
and its senior professionals have extensive experience in the
reorganization and restructuring of troubled companies, both
out-of-court and in chapter 11 proceedings.
The Committee contemplates that Lazard will render the following
professional services in the FINOVA chapter 11 cases:
(a) review and analyze the business, operations, properties,
financial condition and prospects of the Debtors;
(b) assist in the determination of an appropriate capital
structure for the Debtors;
(c) determine a range of values for the Debtors on a going
concern basis and on a liquidation basis;
(d) advise and attend meetings of the Committee as well as due
diligence meetings with the Debtors;
(e) review and provide an analysis of all proposed chapter 11
plans proposed by any party;
(f) review and provide analysis of any new securities, other
consideration or other inducements to be offered and/or
issued under a Plan;
(g) assist the Committee and/or participate in negotiations
with the Debtors;
(h) assist the Committee in preparing documentation within
Lazard's area of expertise required in connection with
supporting or opposing a Plan;
(i) when and as requested by the Committee, render reports to
the Committee that Lazard deems appropriate under the
circumstances;
(j) participate in hearings before the Bankruptcy Court with
respect to the matters upon which Lazard has provided
advice;
(k) perform all other related services for the Committee which
may be necessary and proper in the proceedings.
The Committee submits that Lazard and PwC will coordinate their
efforts to avoid duplication of the services to be provided to
the Committee.
Disinterestedness
The Committee has been advised that Lazard was retained as
reorganization investment banker by an informal committee of the
holders of the Debtors' prepetition bonds, and was paid $200,000
in connection with such representation, and that such
representation was terminated prior to its retention by the
Committee.
the Committee believes that the services performed by Lazard on
behalf of the informal committee have redounded to the benefit
of all of the Debtors' creditors and presents no conflict with
Committee, inasmuch as (a) Lazard's prior representation was on
a co-operative basis, (b) the Committee is composed of members
of the prior informal bank and bond committees, plus the trustee
for many of the bond issues and (c) substantially all of the
Debtors' creditors are pari passu unsecured.
The Committee submits that to the best of its knowledge,
information, and belief, Lazard has no connection with, and
holds no interest adverse to, the Debtors, their creditors, or
any other party in interest, or their respective attorneys or
accountants, the Committee, or the Office of the United States
Trustee or any person employed in the Office of the United
States Trustee, in the matters for which Lazard is proposed to
be retained except as disclosed in the Affidavit of Frank A.
Savage. Based on the Savage Affidavit, the Committee believes
that Lazard is a "disinterested person", as such term is defined
in section 101(14) of the Bankruptcy code and as required under
section 327(a) of the Bankruptcy Code.
Terms of Retention
The Committee has determined that Lazard's compensation should
depend directly upon the recoveries achieved by unsecured
creditors in the FINOVA cases.
Accordingly, the Committee contemplates that Lazard will be
compensated for its services at $200,000 per month (the "Monthly
Advisory Fee"), as well as a contingent Restructuring Fee (the
"Contingent Fee") based on the value of the distributions paid
to unsecured creditors. Lazard will also be reimbursed for its
actual and necessary expenses.
Distributions in the form of securities would be valued based on
the average trading price of those securities for 20 trading
days after the Debtors emerge from bankruptcy. Distributions
received from litigation recoveries or other miscellaneous
sources will be valued on receipt.
The creditors' recovery will be computed on a basis that
includes in the debt amount post-petition interest (whether or
not payable under a confirmed plan) at a rate equal to the
Debtors' weighted average non-default cost of debt on the plan
confirmation date.
No Contingent Fee would be payable if creditor recoveries did
not exceed 85% of total debt. On the other hand, the maximum
Contingent Fee achievable would be $4,500,000. Between those
extremes, the Contingent Fee would be computed as follows:
Total Recovery to Creditors
(computed on the basis of $10.998 billion pre-petition debt
plus post-petition interest at non-default cost of debt at
plan confirmation):
Value of Recovery Amount of Lazard
as % of Total Debt* Contingent Fee
------------------- ----------------
below 85% $0
85%-- 87% $1.25-- $1.75 MM
87%-- 89% $1.75-- $2.25 MM
89%-- 91% $2.25-- $2.75 MM
91%-- 93% $2.75-- $3.25 MM
93%-- 95% $3.25-- $3.75 MM
above 95% $4.5 MM
The Committee represents that the overall compensation structure
proposed is comparable to compensation generally charged by
investment banking firms of similar stature to Lazard and for
comparable engagements, both in and out of court.
In order to induce Lazard to do business with the Committee in
bankruptcy, the fees were set against the difficulty of the
assignment and the potential for failure. The Committee
acknowledges and agrees that Lazard's restructuring expertise as
well as its capital markets knowledge, financing skills and
mergers and acquisitions capabilities, some or all of which may
be required by the Committee during the term of Lazard's
engagement, were important factors in determining the amount of
the Monthly Advisory Fee and the Contingent Fee and that the
ultimate benefit to the Committee of Lazard's services could not
be measured merely by reference to the number of hours to be
expended by Lazard's professionals in the performance of such
services.
The Committee also acknowledges and agrees that the Contingent
Fee has been agreed upon by the parties in anticipation that a
substantial commitment of professional time and effort will be
required of Lazard and its professionals, and in light of the
fact that such commitment may foreclose other opportunities for
Lazard and that the actual time and commitment required of
Lazard and its professionals to perform its services may vary
substantially from week to week or month to month, creating
"peak load" issues for the firm.
In addition, given the numerous issues which Lazard may be
required to address in the performance of its services, Lazard's
commitment to the variable level of time and effort necessary to
address all such issues as they arise, and the market prices for
Lazard's services for engagements of this nature in an out-of-
court context, the Committee is of the opinion that the fee
arrangements are reasonable under the standards set forth in
section 328(a) of the Bankruptcy Code.
As part of the compensation payable to Lazard under the terms of
the Lazard Agreement, the Committee has agreed to certain
indemnification and contribution obligations.
The Committee represents that the economic structure of the
Lazard Agreement, including the fees, reimbursement of expenses
and indemnification provisions, is typical of the arrangements
entered into by Lazard and other investment banks in matters of
a similar type.
Fee Applications
The Committee is advised by Lazard that it is not the genera]
practice of investment banking firms to keep detailed time
records similar to those customarily kept by attorneys. The
Committee is of the opinion that for certain departments within
Lazard, such as its high yield and investment grade bond trading
departments, it is not reasonable to expect traders to keep time
logs on any particular client since the speed and complexity of
a bond trading department would not allow it. The Lazard Bond
Trading Department has never kept time records of their
activities; neither has Lazard's Research Department, the
Committee notes.
The Committee advises that Lazard will provide time detail in a
summary format, and will file interim and final applications for
allowance of its fees and expenses in respect of its services,
pursuant to sections 330 and 331 of the Bankruptcy Code,
applicable Bankruptcy Rules, local rules (the "Local Rules") and
orders of the Court.
Limited Objection of the Equity Committee
The Equity Committee makes it clear that it has no objection to
the retention of Lazard or to the payment of compensation to
Lazard on the terms and conditions requested in the Application.
However, the Equity Committee observes that the payment of
compensation from the assets of the estate, to the extent it
exceeds a $200,000 monthly fee plus expenses for Lazard's
services, would otherwise inure to the benefit of the equity
constituency. The Equity Committee believes that, any additional
amount of Lazard's compensation, over and above its monthly
charges, should be paid from the recovery to unsecured creditors
in the FINOVA cases.
The Equity Committee notes that the FINOVA case is unusual in
many respects, four of which are relevant to the issue at hand:
(1) the magnitude of the case is enormous in terms of asset
size;
(2) the creditors are being paid in full and equity is receiving
a significant, albeit far smaller, distribution;
(3) assuming the Debtors' plan is confirmed, the duration of
the case will be very short;
(4) counsel for the Creditors Committee has already filed an
application which also seeks payment of a success fee of up
to $3.95 million.
The Equity Committee notes that the distribution to creditors in
the FINOVA cases will include nearly $8 billion in cash and more
than $3 billion in notes but, by contrast, equity value is in
the range of $600 million. Thus, payment of even as much as $8.5
million to Wachtell Lipton and Lazard can be more than amply
provided for from the distribution to creditors but, such
payment will account for substantially more than 1% of the value
the equity constituency will receive, the Equity Committee
reckons.
The Equity Committee tells Judge Walsh that it is not fair or
equitable for the Creditors Committee to award success fees to
its professionals at the expense of another constituency in
which the creditors have no interest. The Equity Committee
acknowledges that it is unusual for old equity to receive a
meaningful distribution as it appears it will in the FINOVA
cases. When that happens, the equity constituency should be the
one to decide what success fees or bonuses for professionals are
paid at its expense, the Equity Committee asserts. Absent that
principle, the creditors could cheerfully seek to award any
amount of success fees with no constraint whatsoever as to their
cost since they would not bear the consequences, the Equity
Committee notes.
Limited Objection of the U.S Trustee
The United States Trustee requests that Lazard's retention be
approved only on condition that it is effective as of the date
of formation of the Committee, and that approval of any
compensation to Lazard be reserved for plenary review (i.e. not
limited only to "improvidently granted" review under section
328(a)) as of the time of the final fee application, with Lazard
retaining the burden of proving its entitlement to any fee
enhancement or Contingent Fee.
Based on the terms of the revised Plan as outlined at the
Disclosure Statement hearing on June 13, 2001, the U.S. Trustee
believes it is a near certainty that the valuation of the
distribution to creditors will trigger the maximum Contingent
Fee to Lazard under the formula proposed in the Application.
However, the U.S. Trustee does not see any feature of the case
that justifies the pre-approval of fixed compensation to Lazard
as of the scheduled time for confirmation of the Plan. To the
contrary, the U.S. Trustee observes, this is a particularly
inappropriate case for approval of such a compensation scheme
for the following reasons:
(a) It is inappropriate for Lazard to be compensated on a
transactional basis where Lazard and the Committee did not bring
the deal to the table; indeed, the Committee complained that its
constituency had been shut out of the negotiating process that
led to the Berkadia proposal.
(b) It appears that the Committee has, subsequently been
involved in the negotiations that led to certain modifications
and enhancement of the Berkadia plan, but the extent to which
Lazard should be allowed premium compensation for its role in
these negotiations should not be fixed in stone presently.
Rather, it should be subject to plenary review at the conclusion
of the case at which time the value added by Lazard can be
evaluated and compared with the actual time, effort and
opportuntiy costs invested by Lazard, and further balanced
against the principle that a success fee should be reserved for
extraordinary results, and counsel should not be rewarded for
merely doing what it was supposed to do in furtherance of the
basic fiduciary duty of the Committee.
(c) In light of the relative speed at which this case is
progressing, with confirmation set for August 10, 2001, and
agreement already been reached among the Debtor, the Committee,
the equity holders and the banks on the material terms of the
Plan, there is a danger that the proposed fixed fee could
significantly overcompensate Lazard. (Finova Bankruptcy News,
Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900)
HARNISCHFEGER: Distributes New Stock & Nasdaq Trading Begins
------------------------------------------------------------
Joy Global Inc. (Nasdaq: JOYG) began distributing its new common
stock following the completion of its reorganization on July 12,
2001. The initial distribution of 39,743,681 shares of common
stock is expected to be made on July 31, 2001 to holders of
allowed pre-petition claims against Harnischfeger Industries,
Inc., the Company's name prior to completing its reorganization.
Regular trading of the new shares is expected to begin on or
about August 1, 2001, under the symbol JOYG on the Nasdaq
National Market.
The initial distribution equates one share of Joy Global Inc.
common stock to a $28.60 allowed claim and is based on
approximately $1.43 billion of current adjusted claims,
including provisions for unresolved claims and approximately
$1.14 billion in resolved claims. Future distributions of
stock are expected to take place at six-month intervals as the
remaining bankruptcy related claims against Harnischfeger
Industries, Inc. are resolved over the next few years.
The Company estimates that, if such claims are resolved as the
Company currently anticipates, total projected claims or the
total amount of claims after all claims have been resolved
would be approximately $1.20 billion. While this number has not
changed significantly since it was included in the Company's
plan of reorganization in March of this year, given the
uncertainties inherent in the claims resolution process, there
can be no assurance that the remaining claims will be resolved
for the amounts currently estimated by the Company. The amount
of stock distributed in future distributions is contingent on
the resolution of such claims. A total of fifty million shares
have been designated for ultimate distribution to creditors.
The Company's transfer agent, American Stock Transfer & Trust
Company, is distributing the shares. Shares to be distributed
on account of Harnischfeger Industries, Inc.'s $450 million of
pre-petition public notes and $500 million pre-petition credit
agreement will be distributed to the respective trustee and
agent for further distribution to the participants in those
facilities. Such subsequent distributions by the trustee and
agent may delay receipt by participants in those facilities of
their shares and may be net of fees charged by the trustee or
agent under the terms of the respective indenture and credit
agreement.
The Company also announced that over the next nine months it
plans to grant stock options and performance units for
approximately four million shares of stock to its officers,
employees and directors. The initial grant of approximately
nine hundred thousand stock options to approximately 175
individuals occurred on July 16, 2001. The options were granted
with a $13.76 exercise price, consistent with the valuation of
the Company prepared for its plan of reorganization. The
Company plans to grant a similar number of stock options and
performance units on November 1, 2001, February 1, 2002
and May 1, 2002 with exercise prices of such options set at the
then-current market prices. The Company's plan of
reorganization authorizes the grant of up to 5,556,000 stock
options, performance units and other stock-based awards.
The Company also indicated that it expects to distribute
approximately $109 million of its 10.75% Senior Notes due 2006
within the next two weeks to holders of allowed claims against
P&H Mining Equipment and Joy Mining Machinery and most of their
domestic subsidiaries (defined in the plan of reorganization as
the Note Group Debtors).
Joy Global Inc. is a worldwide leader in manufacturing,
servicing and distributing equipment for surface mining through
its P&H Mining Equipment division and underground mining through
its Joy Mining Machinery division.
HIGH SPEED ACCESS: Charter Comm. Proposes To Buy Some Assets
------------------------------------------------------------
High Speed Access Corp. (Nasdaq:HSAC), a provider of broadband
Internet access and related communication services nationwide,
received a non-binding proposal from Charter Communications,
Inc. to acquire certain assets of the company's cable modem
business. The company is evaluating the proposal and its impact
on the company. Among the matters to be considered, assuming a
definitive agreement with Charter could be achieved on mutually
acceptable terms, is whether the company would commence an
orderly shutdown of its remaining businesses and distribute the
net proceeds to its shareholders or utilize the proceeds of sale
in furtherance of a restructuring and expansion of the company's
remaining businesses. In light of the complexity of the Charter
proposal, the time required to negotiate and close a
transaction, and the company's review and assessment of the
effect of such a transaction on its remaining businesses, the
company is presently unable to determine whether the net value
of the proposal, when combined with the value of the company's
remaining assets and liabilities, equals or exceeds the recent
trading value of its common stock. There can be no assurance
that the company will agree upon or consummate a transaction
with Charter or with any other party.
A Special Committee of the company's Board of Directors,
comprised of directors not affiliated with Charter or Vulcan
Ventures, Incorporated, an affiliate of Charter, has been
investigating a broad range of strategic options for the
company, including, but not limited to, a sale of the
company, a sale of the company's assets, an acquisition, merger,
consolidation, or other business combination, a strategic
transaction, joint venture or partnership with a financial,
strategic or industry partner or other similar transaction, or a
public or private sale of debt or equity securities. Lehman
Brothers, a leading investment banking firm, has been
assisting the Special Committee.
In view of the related-party issues attendant on Charter's
proposal, the company has received letters from Messrs. Jerald
L. Kent, Stephen E. Silva and William D. Savoy resigning from
the company's Board of Directors. Mr. Kent is President, Chief
Executive Officer and a director of Charter and Mr. Silva is
Senior Vice President, Corporate Development and Technology of
Charter. Mr. Savoy is a director of Charter and President of
Vulcan.
About High Speed Access Corp.
High Speed Access Corp. (Nasdaq: HSAC), a Wired World
company(TM), is a provider of broadband Internet access and
related communications services to residential and commercial
customers nationwide, primarily through cable modem technology.
HSA's core service offering currently consists of cable
modem-based Internet access, which HSA offers at several speeds
and prices to residential end users through partnerships with
cable multiple system operators.
INTEGRATED HEALTH: Angell Seeks Relief From Automatic Stay
----------------------------------------------------------
The acquisition of Premiere by Integrated Health Services, Inc.
attaches with it the provision that under IHS' Prepetition
Credit Facility, all of IHS' then-existing and after-acquired
active subsidiaries are to join in a limited guaranty of the
indebtedness under the Facility and to pledge 100% of their
stock in other subsidiaries, if any, as security for such
indebtedness. The Angell Creditors complain about this to the
District Court in North Carolina, naming four of the IHS former
or current officers as defendants but not IHS. The Debtors filed
an Adversary Proceeding in their chapter 11 cases over the issue
of the automatic stay.
An Alternative Motion for Relief from Stay was then filed by Don
G. Angell, D. Gray Angell, Jr. and Don R. House, in their
capacities as Co-Trustees of the Don G. Angell Irrevocable Trust
Under Instrument Dated July 24, 1992, Angell Group,
Incorporated, Angell Family Limited Partnership, Bermuda Village
Retirement Center Limited Partnership, and Angell Care, Inc.
(the Movants) seeking relief from the automatic stay in the
event the Court finds their filing of a separate lawsuit against
certain former and current officers and directors of IHS and
Permiere Associates, Inc. a violation of the automatic stay.
Acquisition of Premiere
Premiere, a North Carolina corporation, is a wholly-owned
subsidiary of IHS which was acquired in June 1998 from the then-
existing shareholders of Premiere (including most of the Angell
Creditors), pursuant to a merger transaction. Premiere is a
holding company whose sole assets are the stock of Healthcare
Properties 111, 1nc. (HCPIII), Premiere Associates Healthcare
Services, Inc. ("PAHS") and SHCM Holdings, Inc., which are also
Debtors in the IHS cases. HCPIII and SHCM own the stock of
several other Debtors, which operate skilled nursing facilities
located in Georgia and Florida. (Premiere, HCPIII, SHCM, PAHS
and their Debtor subsidiaries are collectively referred to
herein as the "Premiere Group").
Most of the merger consideration paid by IHS was in the form of
IHS common stock and cash. As partial consideration for the
acquisition, IHS agreed to guarantee the payment of Premiere's
obligations under certain outstanding notes issued to certain of
the Angell Creditors in 1994.
Joinder of Prepetition Credit Facility upon Merger
Prior to the acquisition of the Premiere Group, IHS and a
syndicate of lenders had entered into a Revolving Credit and
Term Loan Agreement dated as of September 15, 1997 (the
"Prepetition Credit Facility"). Pursuant to the Prepetition
Credit Facility, IHS received access to a revolving credit and
term loan facility of up to $2.15 billion. In exchange, the
Prepetition Credit Facility required, among other things, that
all of IHS' then-existing and after-acquired active subsidiaries
be caused to join in a limited guaranty of the indebtedness
under the Facility and to pledge 100% of their stock in other
subsidiaries, if any, as security for such indebtedness.
As required under the Prepetition Credit Facility, upon the
acquisition of the Premiere Group, substantially all of the
Premiere Group entities entered agreements to be bound by the
guaranty of IHS' debt under the Prepetition Credit Facility (the
"Joinder Agreements").
The Debtors contend that the Prepetition Credit Facility was
fully disclosed and available in IHS public filings with the
Securities and Exchange Commission at the time of the
negotiation of IHS' acquisition of Premiere. In addition,
pursuant to disclosure obligations in the acquisition agreement
dated March 31, 2001 among IHS, Premiere and the Angell
Creditors, IHS specifically agreed to provide such SEC documents
to the Angell Creditors.
The Angell Action
On February 27, 2001, the Angell Creditors commenced a civil
action, styled as Don G. Angel, el al., v. Elizabeth B. Kelly,
C. Taylor Pickett, Daniel J. Booth and Ronald L. Lord, in the
General Court of Justice, Superior Court Division of Forsyth
County, North Carolina. Case No. 01 CVS 2036.
The Angell Complaint names 4 IHS Officers as defendants: (i)
Elizabeth B. Kelly, a former Executive Vice President-Corporate
Development of IHS and of substantially all of the Debtors; (ii)
C. Taylor Pickett, the current Executive Vice President and
Chief Financial Officer of IHS and of substantially all of the
Debtors; (iii) Daniel J. Booth, the current Senior Vice
President-Finance of IHS and of substantially all of the
Debtors; and (iv) Ronald L. Lord, the current Senior Vice
President and Associate General Counsel of IHS and of
substantially all of the Debtors.
The Angell Action has since been removed to the United States
District Court for the Middle District of North Carolina.
The Angell Complaint alleges a variety of claims, all of which
relate to the alleged conduct of the Officers in connection with
IHS' acquisition of the Premiere Group and the liability of
those entities under the Joinder Agreements. Specifically, the
Angell Complaint asserts the following causes of action under
North Carolina law:
(1) fraud claims against each of the Officers ("First Claim for
Relief");
(2) negligent misrepresentation claims against each of the
Officers ("Second Claim for Relief");
(3) claims for breach of fiduciary duty by each of the Officers
("Third Claim for Relief");
(4) claims for constructive fraud by each of the Officers
("Fourth Claim for Relief");
(5) claims against each of the Officers for causing an alleged
fraudulent conveyance of Premiere's assets to IHS ("Fifth
Claim for Relief");
(6) claims against Mr. Pickett for allegedly causing Premiere
to violate North Carolina's unlawful shareholder
distribution statute ("Sixth Claim for Relief");
(7) claims against Messrs. Booth and Lord for the allegedly
unauthorized execution of the Joinder Agreements on behalf
of the Premiere Group entities ("Seventh Claim for
Relief"); and
(8) claims against each of the Officers for treble damages and
attorney's fees for allegedly violating North Carolina's
unfair and deceptive trade practices statute ("Eighth Claim
for Relief').
As a separate count, the Angell Creditors have also requested
the imposition of punitive damages as a result of the Officers'
alleged misconduct giving rise to the various alleged claims.
Adversary Proceeding and Injunction
On April 12, 2001, IHS and Premiere commenced an adversary
proceeding (the Injunction Proceeding) in the IHS chapter 11
cases upon the filing of an Injunction Complaint in which IHS
and Premiere seek declaratory relief and specific enforcement of
the automatic stay of Section 362 of the Bankruptcy Code and
injunctive relief pursuant to section 105 of the Bankruptcy
Code.
Specifically, IHS and Premiere seek a judgment,
(1) declaring that the causes of action asserted in the Third,
Fourth, Fifth, Sixth, Seventh and Eighth Claims for Relief
In the Angell Action are property of the Debtors' estates;
(2) enjoining the defendants from pursuing or taking any action
in continuance or in furtherance of those claims which are
property of the Debtors' estates;
(3) declaring that the automatic stay applies to the Angell
Action in its entirety, and that the Angell Action is void
ab initio;
(4) enjoining Defendants from further prosecution of the Angell
Action;
(5) directing the Defendants to cause the dismissal of the
Angell Action; and
(6) awarding the Debtors costs and expenses incurred in the
prosecution of the Injunction Complaint.
Contemporaneously with the filing of the Injunction Complaint,
IHS and Premiere filed a motion for a preliminary injunction and
a temporary restraining order (the "Preliminary Injunction
Motion") and requested an expedited hearing. The Court granted
the Debtors' request for an expedited hearing to be held on
April 19, 2001. Prior to the hearing, the Debtors and the Angell
Creditors entered into a Stipulation and Order, pursuant to
which the Angell Creditors agreed to be bound by a temporary
restraining order, and the Injunction Complaint and Preliminary
Injunction Motion were temporarily removed from the Court's
calendar.
However, subsequently, in accordance with their rights under the
Stipulation and Order, the Angell Creditors restored the
Preliminary Injunction Motion to the calendar for a hearing on
June 12, 2001. On May 25, 2001, the Angell Creditors filed a
response in opposition to the Preliminary Injunction Motion.
Angell's Motion for Relief from Stay
Contemporaneously with their response to the Preliminary
Injunction Motion, the Angell Creditors filed a Motion seeking
relief from the automatic stay only to the extent that the Court
finds in the Injunction Proceeding that the commencement of the
Angell Action violated section 362(a) of the Bankruptcy Code
and/or sought to control estate property.
Specifically, in the event of such a finding, the Angell
Creditors request that the Court either
(a) annul the automatic stay, preserve and validate the filing
of the complaints and permit the Angell Creditors to
continue the Angell Action; or
(b) lift the stay for the sole purpose of permitting the Angell
Creditors to refile the Angell Action in state court and
effect service of process on the Officers.
If the Court enters an order in the Injunction Proceeding
extending the stay to the Officers or finding that the Angell
Creditors attempted to exercise control over property of the
estate, the Angell Creditors seek a ruling that section 108(c)
applies vis a vis the Officers so that the Angell Creditors'
time to commence or continue the action may be enlarged.
Contention over the Motion
Both the Angell Movants base their argument upon the three
factors in determining whether cause exists:
(1) the prejudice that would be suffered should the Court grant
relief from the stay;
(2) the balance of hardships facing the parties; and
(3) the probability of success on the merits should the Court
grant relief from the stay.
The Angell Movants assert that:
(1) No prejudice would befall the Debtors should relief
from the stay be granted, considering that relief from the stay
is only requested for the limited purpose of preserving and
validating the civil actions previously commenced by the Movants
against non-debtor third parties, or authorizing the
commencement of the Angell Action against the non-debtor third
parties by the re-filing of the state court litigation.
(2) A balancing of the hardships weighs heavily in favor
of the Movants. If relief from the automatic stay is not granted
by the Court, the Movants could forever lose valid and just
claims against the Director and Officer Defendants by operation
of the statute of limitations. Although the Movants assert that
the statute of limitations is not a bar to the state court
litigation, any delay in the validation of the Angell Action or
in re-filing the Angell Action after a lifting of the automatic
stay works a hardship on the Movants and eventually provides the
Director and Officer Defendants with a potential affirmative
defense to the Angell Action, thereby causing irreparable harm
to the Movants.
(3) The Movants have a sufficient probability of success
on the merits to justify granting relief from the automatic
stay. The movants remind the Court that it has previously been
held that even a "slight probability" of success on the merits
may be enough to justify the lifting of an automatic stay. (In
re Continental Airlines Inc., 152 B.R. 420, 426 (D. Del. 1993),
In re Rexene Products Co., 141 B.R. 574, 578 (Bankr. D. Del.
1992).)
The Movants assert that they satisfy the three factors for
determining that cause for relief from the stay exists. The
Movants submit that they seek relief from the automatic stay in
the alternative and only if the Court finds that the stay
applies to the non-debtor Officer and Director Defendants. The
Movants indicate that they prefer that the Court annul the
automatic stay thereby validating the filing of the Angell
Action through an annulment's retroactive effect. Alternatively,
the Movants request the Court modify the automatic stay with
respect to the Director and Officer Defendants to allow them to
re-file the litigation in state court and effect service of
process on the Director and Officer Defendants.
In the event the Court Conclude that section 362(a) applies to
the Angell Action, the Movants request an annulment of the
automatic stay to preserve the status of the pending state court
civil action flied against the Director and Officer Defendants.
The Movants argue that annulment of the stay is appropriate
because the Angell Action is not an action against the Debtors
and therefore does not automatically give rise to a stay under
section 362(a). Furthermore, section 362(a)(l) does not by its
express language automatically stay actions against non-debtor
third-parties. Rather, a party must seek extension of the
automatic stay to cover such non-debtor third parties based on
unusual circumstances, the Movants assert.
The Movants further argue that, since the automatic stay of
section 362(a) was not implicated by virtue of the filing of the
Angell Action vis-a-vis the Director and Officer Defendants, but
rather only through the Debtors' Complaint and Motion, the
Movants cannot be charged with actual knowledge that the stay
extended to these non-debtor third parties.
With respect to the Debtors' contention that a D&O insurance
policy and its proceeds constitute property of the Debtors'
estates, the Movants represent that they could not possibly have
been aware of the Debtors' contention on this issue. Now that
the Angell Action has commenced, the Movants assert that, as a
matter of economy and fundamental fairness, the Court should
annul the stay to allow the Movants to continue the Action.
The Movants indicate that they wish to insulate themselves from
any affirmative defense regarding the statute of limitations for
the causes of action asserted in the Angell Action.
The Movants further request that, should the Court determine
that the provisions of section 362(a) extend to the Director and
Officer Defendants, then the Court enter an order extending the
benefits of section 108(c) of the Bankruptcy Code to the
Director and Officer Defendants thereby enlarging the time
period within which the Movants may commence or continue a civil
action in a court other than a bankruptcy court based on claims
against the Director Officer Defendants.
Debtors' Oppostion to Angell's Motion
The Debtors assert that it is the moving party which bears the
burden of making the prima facie case that cause exists for
lifting the automatic stay.
In this regard, the Debtors observe that the Angell Creditors
completely ignore the scenario of a continuation of the Angell
Action and focus entirely on whether there is "cause" to
maintain a valid complaint.
The Debtors note that the Angell Creditors have failed to
address the potential prejudice to IHS and Premiere and the
balance of hardships upon continuation of the Angell Action
because the balance of hardships in that scenario tips decidedly
in favor of the Debtors. The Debtors tell Judge Walrath they
would suffer substantial prejudice upon the continuation of the
Angel1 Action.
The Debtors submit that since the Angell Creditors have failed
to even attempt to satisfy their burden of proof on these
issues, the Angell Action should not be permitted to proceed
under any circumstances.
The Debtors also observe that the Motion is devoid of any
evidence or argument in support of a sufficient probability of
success. Rather than supporting this argument, the Angell
Creditors merely cite to authority that "even a 'slight
probability' of success on the merits may be enough to justify
the lifting of an automatic stay," the Debtors remark. Moreover,
not even a "slight probability" of success on the merits is
discerned in the Angell motion, the Debtors tell Judge Walrath.
In this regard, the Debtors represent that Angell's allegations
focus on IHS' and Premiere's actions, with gratuitous reference
to the Officers' knowledge of that conduct and concomitant
failure to disclose and/or misrepresentation of IHS' and
Premiere's actions.
The Debtors point out that virtually all of the allegations of
the Officers' conduct refer to conduct that would have been
undertaken on behalf of (i) IHS, in its arm's length acquisition
of Premiere from the Angell Creditors and the other Premiere
stockholders, which included IHS' guaranty of the Notes; and
(ii) Premiere, in its execution of the Joinder Agreements.
The Debtors do not think the Officers owed the Angell creditors
a fiduciary duty in the context of negotiating from across the
bargaining table on IHS' behalf. The Angell Complaint, the
Debtors note, is virtually devoid of allegations that would
distinguish the Officers' conduct from the corporate conduct of
IHS.
The Debtors also point out that the Angell Complaint makes no
allegations of personal gain by the Officers or anything that
would suggest that the Officers had a motive to commit wrongful
conduct and/or harm the Angell Creditors, the Debtors, or any
other party in interest.
Furthermore, when all of the subject information was on public
record with the Securities and Exchange Commission, it is
difficult to accept the notion that the Angell Creditors can
sustain claims against the Officers arising from their alleged
failure to disclose the subsidiary guaranty requirements and
subsequent execution of the Joinder Agreements under the
Prepetition Credit Facility, the Debtors argue.
The Debtors seek a judgment that the Angell Action is void ab
initio on the ground that substantially all of the claims
asserted therein are property of the estates of IHS and/or
Premiere. Upon such finding, it would make no sense for the
Court to then permit the Angell Creditors to preserve those
claims, because the Angell Creditors would never have standing
to assert them, the Debtor argue.
Finally, insofar as the Angell Creditors request that they be
afforded the tolling protections of section 108(c) of the
Bankruptcy Code, the Debtors contend that the Angell Creditors
are not entitled to make that request within the context of this
Motion because that request is for declaratory relief and may
only be sought upon the commencement of an adversary proceeding.
The Debtors assert that they are entitled to all of the
procedural protections governing adversary proceedings and
therefore reserve their rights to respond to this request in the
proper procedural context. Accordingly, the Debtors request that
the Court deny the Angell request denied as procedurally
defective. (Integrated Health Bankruptcy News, Issue No. 18;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
INTERNET COMMERCE: Files for Chapter 11 Protection in Denver
------------------------------------------------------------
Internet Commerce & Communications (Nasdaq:ICCXC), a national
web solutions/e-commerce and connectivity company, has filed for
protection under Chapter 11 of Title 11, of the United States
Bankruptcy Code.
"We strongly believe we can emerge from this proceeding a much
stronger and viable company," said Douglas Hanson, Chairman &
CEO of IC&C. "As one of the largest investors, I thought long
and hard about this decision, but in the end I felt this was the
best course of action for our employees, our vendors and our
shareholders."
The company also announced that it is working with its secured
creditor to provide the funds necessary to meet its on-going
financial obligations.
"Our customers will continue to receive the excellent service
they have become accustomed to receiving," Hanson further
commented. "In fact, I hope that this action will make us a
formidable competitor in the market place."
About Internet Commerce & Communications
Denver-based Internet Commerce & Communications -- http://
www.iccx.net -- is a national e-commerce and connectivity
company, focusing on fully integrated solutions for small and
medium-sized enterprises (SME's). The Company specializes in e-
business applications; consulting, hosting, co-location, and web
solutions, including design and marketing; and high-speed
access, including DSL service.
INTIRA CORPORATION: divine, inc. Plans To Acquire Assets
--------------------------------------------------------
divine, inc., (Nasdaq: DVIN), an enterprise solutions provider
offering global businesses the ability to improve collaboration,
workflow, and business relationships by delivering a powerful
combination of services, technology and hosting capabilities,
announced that it plans to acquire the assets of Intira
Corporation, a high-end provider of outsourced infrastructure
services, subject to bankruptcy court approval.
The acquisition of the Intira assets is expected to expand
divine's capacity to host and manage sophisticated, enterprise-
level applications and to increase the monthly recurring revenue
and client base of the divine Managed Applications business.
Intira's Netsourcing Services design, build, deploy, and manage
high-performance infrastructure solutions. The Intira
acquisition presents synergies with other business units,
including the divine Professional Services Organization which
has extensive experience in delivering community-facing and
traditional enterprise systems using a fully hosted development
and deployment model, as well as divine's software business
units that currently offer fully hosted subscription-based
solutions.
"Today's businesses are realizing that a key to their future and
their success is extending and deploying enterprise systems to
embrace external communities. In the past, these systems were
contained within what could be visualized as a membrane defining
the outer edges of the enterprise. Today we have the ability to
significantly affect the success and profitability of a business
by acquiring the tools and skills that enable systems to
penetrate through that membrane and into business-critical
communities. Enterprises have to harness information and
knowledge from within and combine that with the vast knowledge
resource outside of their organization. Further, they have to
manage the process and risk of deploying this knowledge,
exploiting new technologies, dealing with challenging issues of
high-definition rich content in unprecedented volumes, and
advancing their brand, while providing for secure interaction
among their customers, partners and employees. As these complex
net-native systems tax the extremes, corporations will be
increasingly seeking out reliable partners with high-performance
infrastructure solutions to host and manage those applications,"
said divine Chairman and Chief Executive Officer Andrew
"Flip" Filipowski.
Through this acquisition, Intira brings more than 30 customers,
generating approximately $1.8 million in monthly recurring
revenue. divine is committed to providing the same level of
high-application availability that customers have come to expect
from Intira and has developed plans to ensure the smooth
transition of all customers.
"By combining Intira with divine's existing managed application
business, we are positioned not only as one of the leading U.S.
providers of application management services, but as a true
partner with our customers, delivering guaranteed service
levels, a single point of accountability, immediacy in
deployment and unparalleled 24x7x365 availability, security and
reliability," continued Filipowski.
Under the terms of deal, divine will acquire certain fixed
assets, the accounts receivable, Intira infrastructure and
technology, certain of Intira's data centers including locations
in Pleasanton, Calif., and St. Louis data, as well as the right
to the assignment of customer contracts and the right to offer
employees positions with divine. divine has agreed to pay
$1 million in cash and provide a $6.8 million debtor in
possession credit facility. divine also has agreed to assume
certain liabilities.
"This deal structure allows divine to acquire a strong customer
base, significant recurring monthly revenue, and sophisticated
data centers on attractive terms," said divine Chief Financial
Officer Michael Cullinane. "Given Intira's top-flight client
base and industry-leading personnel and systems, and our ability
to restructure Intira's debt on favorable terms, we believe the
Managed Applications unit can be operationally profitable within
the next fiscal year."
About divine, inc.
divine, inc., (Nasdaq: DVIN) delivers a unique combination of
services, Web-based technology, and managed applications
capability that enables businesses to rapidly deploy advanced
enterprise edge solutions that are fully integrated with every
aspect of their business strategy and existing technical
systems. Founded in 1999, Chicago-based divine is a leader in
promoting the development of new technologies, products, and
services that dramatically change how businesses manage
information, engage and interact with their constituents, and
develop new market opportunities. For more information, visit
the company's web site at www.divine.com
ITEMUS INC.: Commences Bankruptcy Proceeding in Toronto
-------------------------------------------------------
itemus inc. (OTCBB:ITMUF, TSE:ITM) announced that its board of
directors has authorized the company to make an assignment into
bankruptcy under the Bankruptcy and Insolvency Act (BIA). It is
expected that the assignment will be filed with the Official
Receiver on July 31, 2001 in Toronto.
In recent weeks, itemus inc. has been engaged in active
negotiations for various forms of financing, the sale of various
of its operating subsidiaries as well as its minority interest
in numerous private companies for the purpose of raising capital
to satisfy its obligations and continue its operations. Although
some sales were made, the company was unable to raise sufficient
funds. Continuing difficulties in settling with Shooting Gallery
creditors precluded success in financing or divestiture
pursuits.
Based on an assessment of itemus' opportunities and the lack of
prospects to raise additional financing, the board of directors
determined that there was no viable alternative to bankruptcy,
and therefore authorized the voluntary assignment for the
benefit of its creditors under the BIA.
itemus also announced that prior to today's assignment, all of
the directors of itemus had resigned and that it has withdrawn
its previously filed preliminary short form base shelf
prospectus.
A. Farber & Partners Inc. has been engaged to act as trustee in
bankruptcy of itemus inc.
LEGEND AIRLINES: Viking Retains NY Firm to Assist Asset Purchase
----------------------------------------------------------------
Viking Resources International, Inc. (OTC: VIKG) a diversified
holding company with a primary focus of expansion through
acquisitions and development within the aviation industry,
announced that they have retained First Wall Street Capital
International of New York to assist them to finalize the
purchase of Legend Airlines, Inc., which had filed Chapter 7
bankruptcy in March.
First Wall Street will advise Viking in how to restore Legend's
flight operations, headquartered in Dallas, TX, with flights
between Dallas' Love Field Airport and LaGuardia Airport, NY;
Dulles Airport, Washington, DC; Los Angeles International
Airport, CA and Las Vegas International Airport, NV.
Viking with First Wall Street has submitted a bid of $425,000 to
the Bankruptcy Court to purchase the operating certificate, DC-9
parts, gate items necessary to the continued operation as well
as rights, title and interest owned by Legend Airlines and
property of Legend Bankruptcy Estate, as well as other items
necessary to the successful operation of Legend Airlines.
The buyers have received an Asset Purchase Agreement from the
Court appointed Trustee and are working to establish a
definitive closing date.
The decision to purchase the assets of Legend was finalized
after discussions with the FAA and the DOT regarding the
viability of Legend's operating certificate. Upon completion of
the purchase, the purchasers will operate Legend Airlines,
assuming Legend's operating certificate.
Glenn Myles, CEO of First Wall Street stated, We are confident
in Viking's management to develop a strong regional niche
airline. Love Field is well positioned to become a valuable hub
to help the business traveler in and out of Dallas. The success
of other recent airline startups, such as JetBlue, have given us
the confidence to look hard at this sector.
LOUISIANA-PACIFIC: Fitch Cuts Senior Unsecured Rating to BB+
------------------------------------------------------------
Fitch downgraded the senior unsecured long-term debt of
Louisiana-Pacific Corp. to 'BB+' and, based on the uncertainty
of future pricing in the building products industry, placed the
rating on Negative Rating Watch. Louisiana-Pacific is the No. 1
producer of oriented strand board (OSB) in North America. The
company derived approximately 60% of its revenue from this
single building product in fiscal 2000. Until recently, OSB
prices had been trending downward. Louisiana-Pacific responded
by adjusting its workforce and production to meet demand. In
addition, the company reduced its dividend to improve liquidity.
Despite these actions, profitability has declined; EBITDA was
negative over the last 12 months; and debt balances stand at
$1.2 billion at the end of the second quarter. OSB prices may
have seen their low, but prices will have to average 10% above
second quarter levels for the company to sustain profitability,
with the market absorbing announced capacities coming onstream.
The company recently announced a major refinancing which
involves the creation of a new senior class of secured
debtholders. Louisiana-Pacific is looking to raise a $200
million revolver secured by certain timberlands, securitize
trade receivables aggregating up to $125 million, and issue $200
million in senior subordinated notes. Proceeds will be used to
repay existing borrowings under the company's revolver due 2003
and an existing term loan. The new secured classes disadvantage
existing senior unsecured debtholders, who will assume
additional risk. Ratings will be assigned to other classes of
debt when issued.
LOUISIANA-PACIFIC: S&P Downgrades Long-Term Ratings To Low-B's
--------------------------------------------------------------
Standard & Poor's lowered its long-term ratings on Louisiana-
Pacific Corp. (see list below). The current outlook is stable.
At the same time, Standard & Poor's assigned its triple-'B'-
minus bank loan rating to Louisiana-Pacific Corp.'s new $200
million senior secured credit facility and its double-'B'-minus
rating to the company's $200 million senior subordinated notes
due 2008.
The company's short-term corporate credit rating and commercial
paper ratings are withdrawn.
These rating actions reflect a business risk assessment that
incorporates greater-than-expected earnings volatility and a
cautious view of supply and demand fundamentals for the
company's commodity building products during the next few years,
as well as reduced financial flexibility following the securing
of bank debt with company assets.
Portland, Ore.-based Louisiana-Pacific is a leading manufacturer
of structural panels and lumber. However, earnings and cash flow
are subject to wide swings due to the company's narrow product
focus within cyclical, commodity markets.
Although pricing for plywood, oriented strandboard (OSB; a
plywood substitute) and lumber remain well above 10-year lows
experienced in the first quarter of this year, they have
declined from second-quarter highs. Results from operations,
though improving, remain disappointing, as they continue to be
negatively affected by sub-optimal production levels and the
company's remaining interests in noncore pulp operations, which
it is in the process of exiting. The funds from operations to
debt ratio is currently in the low single digit percentage area,
with EBITDA interest coverage below 1 times (x), but these
measures should strengthen meaningfully under current wood
product pricing conditions. Even so, the potential for weaker
housing markets over the intermediate term and considerable net
OSB capacity additions during the next few years remain a
concern. Moreover, lumber prices could come under renewed
pressure depending on the outcome of ongoing U.S.-Canadian trade
negotiations.
The proposed refinancing, which is also expected to include the
establishment of a $125 million accounts receivable
securitization program, lengthens the company's debt maturity
profile and should provide significant credit availability at
closing. Financial flexibility is also enhanced by significant
reductions in capital spending, working capital, and dividend
payments, as well as unencumbered timberlands totaling about
450,000 acres. In addition, outlays to settle siding claims,
which had been substantial, have declined significantly.
Debt (excluding debt that is offset by timberland notes
receivable) to capital approximates management's target level of
40%, but is expected to decline through debt reduction and
earnings retention in cyclically strong periods. Earnings and
cash flow measures are expected to be robust at the peak of the
cycle, offsetting extreme weakness at the trough. However,
during the next few years, operating margins (before
depreciation and amortization) are likely to average in the high
single-digit percentage area and are not expected to approach
the 20% peak reached in 1999. Return on permanent capital is
likely to remain below 10%, with funds from operations to
adjusted debt averaging about 25%.
Ratings on the existing senior unsecured notes were lowered to
double-'B', one notch below the corporate credit rating. This
reflects the significant amount of new secured debt and existing
subsidiary liabilities that rank senior to these notes. Should
the senior unsecured notes at any time become secured, as is
required if debt secured by pledged assets exceeds 15% of total
assets, the ratings on these notes would likely be raised.
The new credit facility consists of a $200 million 3-year
revolving credit facility to be secured primarily by 500,000
acres of the company's Texas timberlands with an appraised value
of at least $400 million. The credit agreement is expected to
contain customary terms and conditions, including financial
covenants.
The bank loan rating, which is based on preliminary terms and
conditions, is triple-'B'-minus, one notch above the corporate
credit rating. Standard & Poor's believes that in a distressed
scenario the timberlands should continue to retain sufficient
value to completely cover amounts outstanding under the fully
drawn revolver. The credit agreement provides for the collateral
to be released upon achievement of certain financial ratios. If
that occurs, the bank loan rating would be made equivalent to
the corporate credit rating.
OUTLOOK: STABLE
Standard & Poor's expects that current market conditions will
permit the company to restore credit measures to levels
appropriate for the lowered ratings and that financial
flexibility will be sufficient to weather industry downturns.
RATINGS LOWERED
Ratings
Louisiana-Pacific Corp. To From
Corporate credit rating BB+ BBB-
Senior unsecured debt BB BBB-
RATINGS ASSIGNED
Louisiana-Pacific Corp. Ratings
Senior secured bank loan rating BBB-
Subordinated debt BB-
RATINGS WITHDRAWN
Louisiana-Pacific Corp. Ratings
Short-term corporate credit rating A-3
Commercial paper A-3
MARINER POST-ACUTE: Banks Propose Plan Solicitation Procedures
--------------------------------------------------------------
Plan Proponents PNC Bank, National Association and First Union
National Bank, as agents for the Senior Bank Lenders to the MHG
Mariner Post-Acute Network, Inc. move the Court for the entry of
an order pursuant to sections l05, 1125, 1126 and 1128 of the
Bankruptcy Code and Bankruptcy Rules 2002, 3017, 3018 and 3020
and Local Delaware Bankruptcy Rule 3017-1(b):
(a) approving the form of the ballots as presented to the Court;
(b) establishing a record date for voting on the Plan as the
date of approval of the Disclosure Statement;
(c) establishing August 24, 2001 (or such other date as the
Court deems appropriate) as the Voting Deadline;
(d) establishing procedures for the solicitation of votes on the
Plan;
(e) approving (i) the form of non-voting notices, (ii)
publication procedures and (iii) the form of counterparty
notices relating to unexpired leases and executory
contracts;
(f) approving the form of notice summarizing the pertinent terms
of the Procedures Order;
(g) establishing the procedures for tabulating the votes
accepting or rejecting the Plan, which encompass a deadline
of August 15, 2001, 4:00 p.m. (New York time) for claims
allowance motion;
(h) scheduling a hearing on confirmation of the Plan to be on
September 4, 2001 at 10:30 a.m. and fixing August 24, 2001
as the Objection Deadline (the Confirmation Hearing may be
continued from time to time, ;
(i) approving the appointment of Poorman-Douglas as voting
agent.
Notice of Solicitation
The Plan Proponents propose that, in accordance with Bankruptcy
Rule 3017(d), the solicitation materials will include: (a) the
Procedures Order and a notice summarizing the pertinent terms
thereof, (b) a copy of the Disclosure Statement, as approved by
the Court, and the Plan, and (c) the appropriate Ballot, Ballots
or Master Ballots (with instructions).
The Plan Proponents propose that the following will receive the
Solicitation Materials (with exclusions):
(a) the United States Trustee (excluding Ballots);
(b) holders of Claims and Equity Interests in all classes other
than the Voting Classes, i.e., Class A (Priority Non-Tax
Class), Class G (MPAN Claims), Class H (Punitive Damage
Claims), Class I (Securities Litigation Claims) and Class J
(Equity Interests) (collectively, the "Non-Voting Classes")
(excluding Ballots); and
(c) holders of Claims in the Voting Classes
(i) that are listed in the Debtors' Schedules as of the
Record Date,
(ii) that are not listed in the Schedules but as to which a
proof of claim has been filed on or before the Record
Date, and
(iii) any other known holder of a Claim in one of the Voting
Classes against the Debtors, if any, including any
entity that has, as a transferee of a Claim, filed
with the Court a notice of the transfer of such Claim
under Bankruptcy Rule 3001(e) on or before the Record
Date.
Solicitation Materials sent to a financial institution that is a
record holder of any Class E-2 Non-MPAN Subordinated Note Claims
will be responsible for delivering the Solicitation Materials to
the beneficial holders of the Non-MPAN Subordinated Note Claims,
collecting the executed Ballots from the holders of the Non-MPAN
Subordinated Note Claims, preparing the Master Ballot in
accordance with the voting instructions provided and delivering
the Master Ballot to the Voting Agent by the Voting Deadline.
The holders of Claims and Equity Interests in the Non-Voting
Classes will also receive in their Solicitation Materials
package a Notification of Non-Voting Status (the "Non-Voting
Notification"), which informs those holders that they are not
entitled to vote on the Plan.
Record Date
The Plan Proponents propose, pursuant to Bankruptcy Rule
3017(d), that in the event the Disclosure Statement is approved
by the Court, the Court establish the date of such approval as
the Record Date.
Each holder of a Claim in a Voting Class as of the Record Date
(each, a "Record Holder") is entitled (i) to receive the
Solicitation Materials and (ii) subject to the tabulation
procedures, to vote on the Plan.
Voting Deadline
The Plan Proponents anticipate commencing the solicitation
period as soon as practicable and in any event within 7 days
after the later of (a) the approval of the Disclosure Statement
or (b) the entry of the Procedures Order. If the Procedures
Order and the Disclosure Statement are approved at the Hearing
on July 18, 2001, the Plan Proponents request that, pursuant to
Bankruptcy Rule 30 17(c), the Court establish August 24, 2001
(or such other date as the Court deems appropriate) as the
Voting Deadline.
The Plan Proponents request that the Court order that all
Ballots must be properly executed, completed and actually
received by Poorman-Douglas (the Voting Agent) on or before the
Voting Deadline.
Counterparty Notification of Assumption or Rejection
The Plan Proponents request approval to mail or cause to be
mailed to the counterparties to the unexpired leases and
executory contracts a notification of assumption or rejection,
as appropriate on or before August 15, 2001, or such other date
that is at least 20 days prior to the Confirmation Hearing.
Publication
In order to give notice of the Confirmation Hearing and the
objection deadline to all holders of Claims and Equity Interests
who are not listed in the Debtors' Schedules or have not filed a
proof of claim or interest, or any other parties in interest,
the Plan Proponents propose to publish the Procedures and
Scheduling Notice in each of The Wall Street Journal (National
Edition) and the Daily News Record, once each, no later than 5
business days after the Record Date.
Moreover, the Plan Proponents will provide a copy of the
Procedures Order, the Plan and the Disclosure Statement to any
party in interest that submits a written request to the Plan
Proponents.
The Confirmation Hearing
The Plan Proponents propose a solicitation period to begin no
later than 7 days after the later of the approval of the
Disclosure Statement and the entry of the Procedures Order, and
a Voting Deadline of 30 days thereafter. Based on such schedule,
and in accordance with section 1128(a) of the Bankruptcy Code
and Bankruptcy Rule 3017(c), the Plan Proponents request that,
subject to the Court's availability, the Confirmation Hearing be
scheduled for a date no later than ten days after the Voting
Deadline (or such later date as the Court deems appropriate).
September 4, 2001 is the date provided in the proposed Court
order. The Plan Proponents also suggest an Objection Deadline of
August 24, 2001 at 4:00 p.m. New York time. Pursuant to
Bankruptcy Rule 2002(b), a plan proponent is required to give
creditors and equity security holders not less than twenty-five
days notice by mail of the time for filing and serving
objections to, and the date and time of the Confirmation
Hearing, unless that time is shortened.
The Plan Proponents submit that their proposal to mail the
Procedures and Scheduling Notice as part of the Solicitation
Materials within seven days of the Record Date complies with
this requirement and request that the Court approve the timing
of the mailing of the Procedures and Scheduling Notice.
The Plan Proponents submit that the proposed solicitation period
of approximately thirty days is a reasonable period of time
within which holders of Claims in the Voting Classes can make an
informed decision to accept or to reject the Plan. (Mariner
Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
MMH HOLDINGS: Designates New Board of Directors
-----------------------------------------------
MMH Holdings Inc., et al. designates a New Board of Reorganized
Holdings as of and following the Effective Date of the Plan.
Jack F. Stinnett Chairman of the Board and
CEO of Reorganized Holdings
Roy Hendin Director
Michael C. Hadjinian Director
John Sumner Director
Stephen Wertheimer Director
An executive search firm has been engaged to assist the Secured
Lenders in designating two additional directors of the New Board
of Reorganized Holdings.
Co-counsel to the debtors are Teresa K.D. Currier and Kathleen
Makowksi of Klett Rooney Lieber & Schorling, Wilmington, CE and
Alan B. Hyman, Jeffrey W. Levitan and Glenn S. Walter of
Proskauer Rose LLP, New York, NY.
METRICOM INC: Appoints Kevin Dowd as New Chief Executive Officer
----------------------------------------------------------------
Metricom, Inc. (Nasdaq:MCOMQ), a high-speed wireless data
services company, announced the appointment of Kevin I. Dowd as
chief executive officer effective July 31, 2001. Dowd, 57,
succeeds Derrickson, who was interim chief executive officer for
the past six months.
A corporate turnaround specialist with more than 25 years of
U.S. and international sales, marketing, operations,
administrative and general management experience, Dowd is a
principal of Nightingale & Associates, LLC and was appointed as
Metricom's chief restructuring officer on July 2, 2001, when the
Company filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. Since then, he has been working with the
Company to evaluate options for financing the Company's
continuing operations, as well as other strategic alternatives.
Metricom continues to operate its wireless data network and to
work with its creditors to restructure its debt obligations.
"Kevin brings tremendous breadth of executive and financial
experience, particularly in restructuring situations, and can
provide us with the insight we need to evaluate Metricom's
options," said Derrickson. "I am delighted that the Board has
made this decision and look forward to working in partnership
with Kevin to help Metricom preserve the inherent value in its
leading Ricochet technology and network."
"Although there are certainly many challenges ahead, I believe
in the potential of our technology," said Dowd. "In his six-
month tenure as CEO, Ralph has done a formidable job of focusing
the Company's efforts on building its subscriber base in
existing markets and maintaining high standards for service. I
will work hard to preserve what he's accomplished, while
evaluating the alternatives before us," said Dowd.
In addition to having held a variety of operating management
positions in the communications, office products, computer,
consumer banking and investment banking industries, Dowd has
served as interim president and chief executive officer for more
than 28 companies, including an $800 million microelectronics
distributor, $350 million financial services conglomerate, and a
major international shipping concern.
The Company is not providing any further information about the
restructuring at this time.
About Nightingale & Associates, LLC
Founded in 1975 and based in Stamford, Conn., Nightingale &
Associates, LLC helps clients implement its recommendations on
turnaround and profit-improvement projects. The Company has a
strong record of performance in implementing divestiture and
asset-recovery assignments. Many of the engagements it works on
are large and complex requiring a variety of management and
specialized disciplines.
About Metricom
Metricom, Inc. is a high-speed wireless data company. With its
high-speed Ricochet mobile access, Metricom is making
"information anytime" possible-at home, at the office, on the
road, and on many devices. Founded in 1985, Metricom has spent
more than 15 years on the development of its distinctive
MicroCellular Data Network (MCDN) technology. That experience
has enabled Metricom to develop the fastest wireless mobile data
networking and technology commercially available today. Ricochet
has been operating since 1995 at speeds up to 28.8 kbps. The new
Ricochet, delivering user speeds of 128 kbps, is currently
available in thirteen markets and is connected to two other 28.8
kbps service areas (Seattle and Washington DC) to increase
coverage for mobile professionals.
MICROAGE, INC.: Emerges from Chapter 11 Bankruptcy
--------------------------------------------------
MicroAge Inc. announced the company emerged from Chapter 11
reorganization of as July 31, 2001.
The company's Plan of Reorganization was confirmed by the U.S.
Bankruptcy Court for the District of Arizona in Phoenix on July
10, 2001 and became effective July 31, 2001.
The company will begin implementing the Plan of Reorganization,
including making payments to creditors and liquidating remaining
assets. In addition, MicroAge Inc. stock was officially canceled
as of today and will no longer trade.
"We have made every effort to develop a reorganization plan that
would maximize the return to our creditors," said Jeffrey D.
McKeever, MicroAge chairman of the board. "As we begin
implementing the reorganization plan, we will be paying pre-
petition creditors as quickly as legally and operationally
possible. Our goal is to move through the final steps of the
legal process with minimal delays."
The Plan of Reorganization outlines the sale of remaining assets
in order to maximize return to creditors. The company had
previously announced the sale of assets for three of its
subsidiaries, Pinacor Inc.; MicroAge Technology Services,
L.L.C.; and MicroAge Teleservices, L.L.C., to outside parties.
NETIA HOLDINGS: Polish Telecom Firm Denying Bankruptcy Rumors
-------------------------------------------------------------
Netia Holdings SA (Nasdaq:NTIA, WSE: NET), Poland's largest
alternative fixed-line telecommunications services provider,
announced that it is not considering any bankruptcy scenarios.
Such announcement is made in connection with the multiple rumors
and questions from investors in Warsaw regarding possible
bankruptcy due to the continuous fall in the share price of the
Company within the last couple of days.
Mattais Gadd, President & CEO said: "With our present cash
position we feel comfortable and, as announced in the past, we
are fully funded until the end of the first quarter 2002. I am
positively looking at the next round of financing."
NETIA HOLDINGS is the largest alternative fixed-line
telecommunications operator in Poland. Netia has 24 licenses for
local telecommunications services in territories covering some
15 million people or approximately 40% of the Polish population,
which include the most economically advanced parts of the
country. The Company's existing local telephone license
territories cover six of the country's ten largest urban areas
including Warsaw, Krakow, Poznan, Gdansk, Lublin and Katowice.
Netia has also secured the benefit of a nationwide data and IP
license to provide data transmission and Internet-based
services. In May 2000 Netia was issued a nationwide domestic
long distance voice license.
OPTIO SOFTWARE: Shares Subject To Nasdaq Delisting
--------------------------------------------------
Optio Software, Inc. (Nasdaq: OPTO) announced that on July 25,
2001, the Company received a Nasdaq Staff Determination
indicating that the Company fails to comply with the minimum bid
price requirement of the Nasdaq Marketplace Rule 4310(c)(8)(B),
which requires that the minimum bid price for the Company's
Common Stock be at least $1.00 per share.
As a result, the Company's Common Stock is subject to delisting
from the Nasdaq National Market.
The Company has requested a hearing before a Nasdaq Listing
Qualifications Panel to review the Staff Determination and to
request continued listing. The date for the hearing has not been
established. The Company has been advised that Nasdaq will not
take any action to delist the Common Stock pending the
conclusion of that hearing. There can be no assurance, however,
that the Company will be successful with the Nasdaq Listing
Qualifications Panel, and the Common Stock may be delisted from
The Nasdaq National Market if the Nasdaq Listing Qualifications
Panel accepts the administrative staff's determination and/or
the Company decides, for business reasons, not to effectuate
alternative remedies. In such event, the Company would apply to
list the Common Stock on the OTC Bulletin Board or other
quotation system or exchange on which the Common Stock would
qualify.
About Optio Software, Inc.
Optio Software, Inc. provides infrastructure software that
enables organizations to communicate and connect with their e-
commerce constituents. Optio's software improves the quality of
an organization's communications with customers, suppliers,
partners and employees by customizing, delivering and exchanging
information over a global network of digital destinations. Optio
has more than 4,000 customers serving the manufacturing,
healthcare, retail, distribution and financial industries. For
more information contact Optio Software - Phone: (770) 576-3500,
Fax: (770) 576-3699, E-Mail: info@optiosoftware.com, Corporate
Headquarters: 3015 Windward Plaza, Windward Plaza, Fairways II,
Alpharetta, GA 30005, Web Site: http://www.optiosoftware.com.
PACIFIC GAS: Compromises and Settles San Francisco Tax Claims
-------------------------------------------------------------
William J. Lafferty, Esq., at Howard, Rice, Nemerovski, Canady,
Falk & Rabkin, relates that Pacific Gas and Electric Company is
involved in on-going litigation with the City and County of San
Francisco. Specifically, the Debtor is a plaintiff in four
lawsuits against San Francisco challenging the constitutionality
of its business tax structure:
(A) Panther Creek Leasing v. City and County of San
Francisco, San Francisco Superior Court, Case No.
307873;
(B) General Motors Corp. v. City and County of San
Francisco, San Francisco Superior Court, Case No.
312487;
(C) Chevron Corp. v. City and County of San Francisco, San
Francisco Superior Court, Case No. 317416; and
(D) Chevron Corp. v. City and County of San Francisco, San
Francisco Superior Court, Case No. 321665.
One part of the taxing scheme was declared unconstitutional in
General Motors Corp. v. City and County of San Francisco, 69
Cal. App. 4th 448, 452-54 (1999). In response, San Francisco
eliminated a Manufacturing Tax. A Selling Tax suffers, PG&E and
its co-plaintiffs, from a similar defect and should be
eradicated because it violates the commerce clauses of the state
and federal Constitutions.
Negotiations among the Plaintiffs and San Francisco have
culminated in a proposed Global Settlement Agreement under which
the plaintiffs will recover $58,500,000 of principal plus
$10,907,856 of interest. The total amount represents roughly
37% recovery of principal and 31% recovery of interest by PG&E
on what it claims it's entitled to.
PG&E is convinced, Tod V. Beebe, at Barton, Klugman & Oetting
LLP, tells the Bankruptcy Court, that the Global Settlement is a
good deal because it's fair and reasonable, avoids uncertainty
in litigation, and eliminated continued litigation costs.
Accordingly, the Debtor asks Judge Montali for permission to
sign-off on the Global Settlement Agreement, take the money and
run. (Pacific Gas Bankruptcy News, Issue No. 10; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
PACIFICARE HEALTH: Reports Second Quarter 2001 EPS of $0.45
-----------------------------------------------------------
PacifiCare Health Systems Inc. (Nasdaq:PHSY) announced that net
income for the second quarter ended June 30, 2001, was $15.3
million, or $0.45 per diluted share. This compares with second
quarter 2000 net income of $69.2 million, or $1.96 per
diluted share.
The year-over-year decline in net income is primarily the result
of rising health care costs in the company's commercial and
Medicare lines of business, reflecting the significant shift in
hospital contracts from capitated to per diem, fee-for-service
or risk-based arrangements over the past 18 months.
Howard G. Phanstiel, PacifiCare president and chief executive
officer, noted the improvement achieved in the second quarter
over the 2001 first quarter EPS of $0.39: "We believe that our
improved results over the first quarter are indicative of the
progress being made to turn around the company.
"We're pleased that the company has generated four consecutive
quarters of stable to moderately improved EBITDA while we manage
through a significant change in our business model. In addition,
we saw sequential improvement from the first to the second
quarter as we benefited from reductions in both our commercial
and Medicare medical care ratios."
Revenue Growth and Membership
For the quarter ended June 30, 2001, total operating revenue
increased 3% to $3 billion compared with the same period a year
ago, driven by a 7% increase in Medicare premiums. Commercial
premiums, including specialty companies, declined 2% from the
year-ago quarter because of membership losses, offset by premium
rate increases averaging 11%.
Consistent with the company's strategic decision to exit
unprofitable markets, the company's HMO membership dropped to
approximately 3.6 million on June 30, 2001, from 4 million
members a year ago. Commercial HMO membership decreased 13% due
to planned market and product exits, rate increases and provider
network terminations.
Membership in the company's Medicare + Choice program fell 1% as
a result of county exits and limits on new enrollment in 42 out
of 101 counties.
Other income, principally from the company's specialty
businesses, grew 11% from the second quarter of 2000, primarily
due to increased mail service revenue from the company's
pharmacy benefit manager, Prescription Solutions. Net investment
income rose to $33 million, including $6 million of gains on
marketable securities.
"It was prudent to take gains on our fixed income portfolio,
especially in light of the increase in our effective tax rate in
the second quarter," said Greg Scott, chief financial officer.
The effective tax rate in the 2001 second quarter increased to
54.3% on a non-recurring basis from 47.5% in the first quarter,
lowering EPS in the second quarter by $0.07.
Membership grew at the company's pharmacy benefit management and
behavioral health subsidiaries. Prescription Solutions'
membership grew 21% in the second quarter compared with the
prior year through the addition of membership that is not
affiliated with PacifiCare health plans.
The increase represented about a third of the 600,000 new
unaffiliated members that Prescription Solutions has signed this
year, with the balance scheduled to come on line later in 2001.
PacifiCare's behavioral health HMO membership grew 9%, while
behavioral health membership unaffiliated with PacifiCare plans
increased 26%.
Revenue Growth and Membership
Health Care Costs
Fee-for-service or risk-based provider contracts continued to
increase the company's health care costs. However, in 2001 the
company has experienced a more moderate transition from hospital
capitation compared with 2000, which is helping the company
stabilize its medical care ratios.
Following a 20% shift in hospital membership from capitated to
risk-based arrangements in 2000, in the current year there has
been just a 6% move in membership to risk-based hospital
contracts, which is consistent with previous guidance.
On a sequential quarter basis, the 2001 second quarter
consolidated MCR and commercial MCR both improved by 30 basis
points, and the Medicare MCR improved by 40 basis points. The
MCR improvements from the prior quarter primarily reflect higher
revenues and lower seasonal utilization trends.
The Medicare MCR also benefited from higher premiums resulting
from new federal legislation that was in effect the entire
quarter, compared with just one month of the first quarter.
Year-over-year MCR increases are due to higher health care costs
under risk-based arrangements that were not anticipated in 2001
commercial pricing that was completed in 2000, and the failure
of the federal Medicare + Choice program to raise premiums at a
rate consistent with medical inflation. The June 30, 2001
consolidated MCR increased to 89.9% from 85.8% in the year-ago
quarter.
The Medicare MCR increased to 90.3% at June 30, 2001 from 88%,
while the commercial MCR was 89.2% compared with 82.9% for the
same period of 2000.
Medical Claims and Benefits Payable
Medical claims and benefits payable totaled $1.1 billion at June
30, 2001, compared with $1.3 billion at March 31, 2001. The
decrease was primarily related to the increase in cash payments
of claims that were previously part of the reserve established
for claims incurred but not yet paid or reported (IBNR).
This step up in claims payments was a result of productivity
improvements and claims processing systems enhancements that the
company has implemented to keep pace with its growing risk-based
business. The decrease in risk-based membership due to planned
market exits further contributed to the decline in the IBNR
reserve level.
"We continue to pay claims faster through enhanced staff support
and upgraded systems that allow us to handle a higher volume of
claims more efficiently. We also made a concerted effort in the
quarter to focus on reducing higher-dollar claims in our
Medicare claims inventory," said Greg Scott. He also noted that
the company's California operations improved their claims
payment turnaround by about 20% in the second quarter.
Days claims payable for the quarter decreased sequentially to
39.3 from 42.9 days, and increased from 37.6 days at June 30,
2000. Days claims payable for just the risk-based portion of the
company's business was 74.3 days compared with 83.4 days at
March 31, 2001. Days claims receipts on hand stood at 8.9
at June 30, 2001.
"Days claims receipts on hand are now well within our company
standard of 10 days," Scott added.
MG&A Ratio
The marketing, general and administrative (MG&A) cost ratio of
10% for the second quarter of 2001 was 40 basis points below the
prior year and 20 basis points above the previous quarter. The
year-over-year improvement reflects Medicare marketing and
overhead staffing reductions made in January 2001, as well as
technology-driven productivity improvements and higher revenues.
While MG&A expense was comparable with the prior quarter, the
slight increase in the MG&A ratio over the first quarter
reflects the impact of membership declines on the company's
revenue base and staff additions required to manage a larger
risk-based business and to launch new products.
EBITDA and Cash Flows
Earnings before interest, taxes, depreciation and amortization
(EBITDA) rose to $87.3 million from $80.3 million in the 2001
first quarter.
The company generated free cash flow (net income plus
depreciation and amortization, less capital expenditures) during
the quarter of $36.2 million, while the company's free cash at
corporate averaged $130 million, despite a $30 million debt
repayment made in April.
2001 Initiatives
Phanstiel said, "We have now completed six months of corrective
actions to strengthen our core business and to broaden our
health insurance portfolio, which are the initial phases of our
evolution from an HMO into a leading health and consumer
services company.
"In the second half, we intend to stay focused on securing the
remainder of this year's business renewals, on stabilizing
pricing for 2002 renewals, and on generating profitable new
membership growth.
"As we disclosed last week, we will continue to work over the
coming months on debt refinancing solutions to repay or extend
our existing credit facility. While we are disappointed that
market conditions hampered our initial debt refinancing efforts,
we have other financing alternatives to explore.
"We are a profitable company with a strong cash position, ample
levels of capital at our regulated subsidiaries, and profitable
and growing specialty businesses, and we remain in compliance
with all of our existing bank covenants," Phanstiel continued.
"While working to stabilize our profitability as we manage the
transition from capitated to risk-based contracting, we have
also been laying the groundwork to launch our new Medicare
Supplement and PPO products," he added.
"Earlier this month, we received state regulatory approval to
market our new Secure Horizons Medicare Supplement plans in
California and Arizona, and plan to begin enrolling members in
September. We also anticipate receiving approvals over the
coming months in all the states where we plan to offer our
Medicare Supplement and PPO product lines in 2002.
"The launch of our Medicare Supplement and PPO initiatives are
key milestones in what is likely to be a two-year turnaround
process for the company," Phanstiel said.
PILLOWTEX: Rejecting Factory Outlet Lease With Stanley Tanger
-------------------------------------------------------------
About 12 years ago, Fieldcrest entered into a lease agreement
covering space in a factory outlet center in St. Gabriel,
Louisiana with Stanley K. Tanger d/b/a Tanger Properties.
Under the lease, Michael G. Wilson, Esq., at Morris, Nichols,
Arsht & Tunnell, relates that Fieldcrest is allowed to use and
occupy 5,000 square feet of floor space at the Center where they
can sell their various products and merchandise. The lease also
requires Fieldcrest to sell these goods at discount prices, Mr.
Wilson adds.
The current term of the lease is scheduled to expire on February
28, 2003.
According to Mr. Wilson, Fieldcrest is required to pay Tanger
$55,000 annually in installments of $4,583.33 per month. Aside
from the Fixed Rent, Fieldcrest is also required to pay Tanger
3% of their gross sales in excess of $1,210,000 that they earned
from the Leased Premises. On top of that, Mr. Wilson adds,
Fieldcrest is also responsible for payign its prorata portion of
Tanger's real estate taxes, repairs and common area maintenance
costs, insurance and promotional costs for the Center.
By this motion, Fieldcrest asks Judge Robinson for authority to
reject the lease effective as of July 31, 2001.
Mr. Wilson says, "Fieldcrest has determined that rejection of
the Lease is in the best interests of its estate and creditors.
Fieldcrest no longer needs its space at the Center, and
rejection of the Lease will ensure that no further
administrative expense liability to Tanger is incurred."
At the same time, Mr. Wilson explains that Fieldcrest served
Tanger a copy of this motion as well as a notice of Fieldcrest
intentions to reject the lease effective July 31, 2001. Thus,
Fieldcrest is hopeful Judge Robinson will consider rejecting the
lease effective July 31. (Pillowtex Bankruptcy News, Issue No.
10; Bankruptcy Creditors' Service, Inc., 609/392-0900)
PIONEER COMPANIES: Files For Chapter 11 To Restructure Debt
-----------------------------------------------------------
Pioneer Companies, Inc. (OTC Bulletin Board: PIONA) and certain
of its subsidiaries have filed voluntary petitions for
reorganization under Chapter 11 of the Bankruptcy Code in the
U.S. Bankruptcy Court in Houston, and that a parallel filing
under the Companies' Creditors Arrangement Act has been filed in
Superior Court in Montreal by Pioneer's Canadian subsidiary.
Pioneer has also signed an agreement with certain of its senior
secured creditors that provides for restructuring and reducing
the obligations owed to them. Under the agreement, the
creditors will, subject to the satisfaction of certain
conditions, vote in favor of a restructuring plan that provides
for the exchange of approximately $552 million of outstanding
indebtedness (plus accrued interest) for $250 million of new
debt and 97% of the common stock of the reorganized company.
With the base of support already provided by a majority of the
senior secured creditors who will be voting in favor of the
proposed restructuring plan, the Company is highly confident
that the plan will be approved and implemented in a timely
manner.
All obligations incurred by the Company and its subsidiaries
after the filings made today will constitute a priority claim
against the Pioneer assets and will be paid in accordance with
standard industry terms. The proposed plan provides that all of
Pioneer's outstanding common stock and preferred stock will be
cancelled, and the holders of those shares will not share in the
value of the reorganized company.
Pioneer believes that the restructuring plan that has been
negotiated with the senior creditors will provide financial
viability and stability for the future. The filings with the
courts in Houston and Montreal allow Pioneer to implement the
restructuring while continuing to operate its business in
the ordinary course and in a manner consistent with its emphasis
on the highest standards of environmental, health and safety
practices. The filings are part of a restructuring effort that
began in December 2000 when Pioneer deferred an interest payment
on its secured notes.
Pioneer has also obtained an agreement for debtor-in-possession
financing in the amount of $50 million. The terms of the
financing provide the Company with $4 million more financing
than was available under the previous revolving credit facility,
which Pioneer believes is adequate for its needs. Liquidity at
June 30, 2001, adjusted for the additional DIP availability,
Was $20.4 million.
Michael J. Ferris, President and CEO of Pioneer, said, The
difficult circumstances of the chemical industry since the
beginning of 1999 have been well chronicled. Our liquidity
eroded to the point that, regrettably, a restructuring of our
indebtedness became necessary. It is also unfortunate
that the restructuring required a Chapter 11 filing, and a
similar filing in Canada, to be effected. However, because the
proposed restructuring plan has the support of a majority of
Pioneer's senior creditors, we believe that the process will be
relatively brief and will not affect operations. There will be
no disruption of deliveries to customers.
Mr. Ferris concluded, When Pioneer emerges from the legal
process in Houston and Montreal, it will be a more financially
secure company with a much stronger balance sheet. We
appreciate the support and encouragement that we have received
from our customers, suppliers and employees.
Pioneer, based in Houston, Texas, manufactures chlorine, caustic
soda, hydrochloric acid and related products used in a variety
of applications, including water treatment, plastics, pulp and
paper, detergents, agricultural chemicals, pharmaceuticals and
medical disinfectants. The Company owns and operates five
chlor-alkali plants and several downstream manufacturing
facilities in North America. Current financial information
and press releases of Pioneer Companies, Inc. can be obtained
from its Internet web site at www.piona.com .
PIONEER COMPANIES: Chapter 11 Case Summary
-------------------------------------------
Lead Debtor: Pioneer Companies Inc.
700 Louisiana Street Suite 4300
Houston, TX 77002
Debtor affiliates filing separate chapter 11 petitions:
Pioneer Corporation of America
Imperial West Chemical Co
Kemwater North America Company
PCI Chemicals Canada Inc / PCI Chimie Canada Inc
Pioneer Americas Inc
Pioneer (East) Inc
Pioneer Water Technologies Inc
Pioneer Licensing Inc
Type of Business: Holding company with subsidiaries engaged in
the manufacture and sale of chlor-alkali
chemicals and downstream products.
Chapter 11 Petition Date: July 31, 2001
Court: Southern District of Texas (Houston)
Bankruptcy Case Nos.: 01-38259, 01-38260, 01-38262 through 01-
38268
Judge: Letitia Z. Clark
Debtors' Counsel: Alan Shore Gover, Esq.
Weil Gotshal & Manges
700 Louisiana
16th Fl
Houston, TX 77057
713-546-5120
POINEER COMPANIES: Posts $15.2 Mil Loss For 2001 Second Quarter
---------------------------------------------------------------
Pioneer Companies, Inc. (OTC Bulletin Board: PIONA) reported
that revenues for the second quarter of 2001 were $88.3 million,
slightly less than revenues of $89.1 million for the second
quarter of 2000. The Company incurred a net loss for the second
quarter of 2001 of $15.2 million or $1.31 per share
compared with a net loss of $5.9 million or $0.51 per share
during the second quarter of 2000.
Revenues during the 2001 second quarter were essentially the
same as the second quarter of 2000, as higher ECU
(electrochemical unit) prices were largely offset by lower sales
volumes of chlorine and caustic soda, particularly at the Tacoma
chlor-alkali facility. The average ECU price during the second
quarter of 2001 was $359, a $36 increase from a year ago.
Cost of sales decreased due to lower chlor-alkali sales volume
offset by substantially higher power costs. The Company's
EBITDA (earnings before interest, income taxes, depreciation,
amortization and unusual charges) for the 2001 second quarter
was $14.5 million, compared to $12.3 million for the 2000 period
(adjusted for the sale of excess property and the sale of
certain environmental indemnity claims).
Second quarter 2001 results also include a tax provision of $0.6
million compared to a tax benefit in the second quarter of 2000
of $2.8 million. The tax provision for the 2001 period resulted
from a provision for taxes in Canada that could not be offset by
the application of U.S. net operating loss carryforwards. At
December 31, 2000, the Company established a 100% valuation
allowance for its domestic net operating loss carryforwards.
Average ECU prices during the 2001 second quarter, in comparison
with the first quarter, declined from $374 to $359. However,
volumes increased somewhat leading to a nominal increase in
revenues. Manufacturing costs decreased primarily because of
lower power costs. EBITDA for the 2001 second quarter of $14.5
million was $1.0 million more than EBITDA for the first quarter.
Results included unusual charges of $2.6 million and $4.3
million for operating and financial restructuring charges for
the second and first quarters, respectively. The restructuring
charges relate principally to severance costs related to
curtailing certain operations and expenses incurred in efforts
to restructure the Company's debt.
Michael J. Ferris, President and Chief Executive Officer, said,
ECU pricing declined during the second quarter because of
reduced demand for caustic soda as general economic activity
slackened. Power costs, which spiraled sharply upward during
mid-2000, have begun to decline but remain at unusually high
levels, particularly in the Northwest. However we expect our
power costs in the Northwest to decrease significantly October
1, 2001 when a new power supply contract based on Bonneville
Power Authority power rates begins. BPA has recently announced
that it will need a substantially smaller rate increase than it
had originally thought.
Mr. Ferris concluded, We ended the quarter with cash of $5.1
million, borrowing under our revolving credit agreement of $29.9
million and total liquidity, cash plus borrowing availability
under the revolver after a special reserve of $5 million, of
$15.4 million. We have reached a restructuring agreement with
our secured creditors and have filed under Chapter 11 to
effectuate that agreement. We believe that the agreement
assures the financial viability of Pioneer for the benefit of
its various constituencies.
Pioneer, based in Houston, Texas, manufactures chlorine, caustic
soda, hydrochloric acid and related products used in a variety
of applications, including water treatment, plastics, pulp and
paper, detergents, agricultural chemicals, pharmaceuticals and
medical disinfectants. The Company owns and operates five
chlor-alkali plants and several downstream manufacturing
facilities in North America. Current financial information
and press releases of Pioneer Companies, Inc. can be obtained
from its Internet web site at www.piona.com .
The Company will conduct a teleconference today, August 2, 2001,
at 10:00AM Central time in order to discuss its financial
results for the second quarter of 2001. Individuals who are
interested in listening to the teleconference may call (800)
634-1570 at that time and request to listen to the Pioneer
earnings teleconference. A replay of this teleconference will
be available from 8AM (Central time) on August 3, 2001 until 5PM
on August 4, 2001 by dialing (800) 633-8284 (Domestic); (858)
812-6440 (International), reservation #19384260.
RELIANCE GROUP: Committee Hires Orrick Herrington As Counsel
------------------------------------------------------------
The Official Committee of Unsecured Creditors asks the
permission of Judge Gonzalez to employ Orrick, Herrington &
Sutcliffe as counsel.
On June 22, 2001, the Committee was appointed by the Office of
the United States Trustee for the Southern District of New York,
pursuant to section 1102(a) of the Bankruptcy Code. After its
appointment, its members met to, among other things, choose
their legal counsel. The Committee determined to retain Orrick
Herrington.
Committee co-chairs Eric R. Johnson, Vice President of Conseco
Capital Management, and Mohan V. Phansalkar, Executive Vice
President of Pacific Investment Management Company, tell the
Court that the Committee selected Orrick Herrington as counsel
based, among other reasons, on the fact that Orrick Herrington
has considerable experience and knowledge in the field of
creditors' rights and business reorganizations under chapter 11
of the Bankruptcy Code. In addition, Orrick Herrington has
expertise in other areas of law related to these chapter 11
cases, including litigation and corporate law matters, and are
well qualified to represent the Committee in these proceedings.
Around July 5, 2000, Messrs. Johnson and Phansalkar relate, an
informal committee of RGH debtholders retained Orrick to assist
in discussions about the restructuring of Debtors' financial
obligations. As a result, Orrick Herrington has an extensive
knowledge of RGH, their businesses, capital structure, financing
documents and other material agreements.
Specifically, the Committee will look to Orrick Herrington to:
(a) Assist and advise the Committee in its consultations
with Debtors relative to the administration of their
reorganization cases;
(b) Represent the Committee at hearings held before the
Court in these cases and communicate with the Committee
regarding the issues raised, as well as the decisions of the
Court;
(c) Assist and advise the Committee in its examination and
analysis of the conduct of Debtors' affairs and the reasons for
their chapter 11 filings;
(d) Review and analyze all applications, motions, orders,
statements of operations and schedules filed with the Court by
Debtors and other parties-in-interest in this proceeding, advise
the Committee as to their propriety, and, after consultation
with the Committee, take appropriate action;
(e) Assist the Committee in preparing the applications,
motions and orders in support of positions taken by the
Committee, as well as preparing witnesses and reviewing
documents in this regard;
(f) Apprise the Court of the Committee's analysis of
Debtors' operations;
(g) Confer with the financial advisors and any other
professionals retained by the Committee, if any are selected and
approved, so as to advise the Committee and the Court more fully
of Debtors operations;
(h) Assist the Committee in its negotiations with Debtors
and other parties-in-interest concerning the terms of any
proposed plan of reorganization; and
(i) Assist the Committee in its consideration of any plan
of reorganization proposed by Debtors or other party-in-interest
as to whether it is in the best interest of Debtors' unsecured
creditors and is feasible;
Orrick Herrington has advised the Committee that, except as
otherwise noted herein, neither Orrick Herrington nor any of its
members and associates represent any interest adverse to
Debtors, their estates, their creditors or the Committee in the
matters upon which Orrick Herrington is to be engaged. Orrick
Herrington is a "disinterested person," as the Committee
understands this term is defined, within the meaning of sections
101(14) and 101(31). Orrick Herrington has advised the
Committee that, based on its review to date, which is ongoing
and may be supplemented hereafter, it currently represents
and/or has represented the following entities (or in some cases
their affiliates) on matters unrelated to Debtors' cases:
(1) Debtors: Third parties in matters relating to
insurance policies issued by Debtors' affiliates;
(2) Case professionals: Greenhill & Co., LLC; Deloitte &
Touche, LLP; PricewaterhouseCoopers; Paul Weiss Rifkind Wharton
& Garrison.
(3) Reliance Group Holdings. Inc.'s creditors: Wells Fargo
Bank Minnesota, N.A.; HSBC Bank USA; Credit Suisse First Boston;
Bear Stearns & Co., Inc.; Aetna U.S. Healthcare; New York State;
New York City; Aetna Life Insurance; Icahn Associates Corp.; The
Bank of New York; First Unum Life; Unum Life Insurance Co.;
Federal Express; Avaya Financial Services.
(4) Reliance Financial Services Corporation's creditors:
Chase Manhattan Bank; Deutsche Banc Alex. Brown; Credit
Lyonnais; Bank of New York; Bank of America; Bank of Montreal;
ABN Amro Bank N. V .; First Union National Bank; Sanwa Bank
California; Fleet Bank, N.A.; Union Bank of California, N.A.;
Firsttrust Bank.
Orrick Herrington will bill for its professionals' services at
its customary hourly rates:
Anthony Princi $470 per hour
Duncan Darrow $520 per hour
Arnold Gulkowitz $475 per hour
Barbara Moses $450 per hour
Thomas L. Kent $395 per hour
Lydie Pierre-Louis $300 per hour
Jennifer Livingston $255 per hour
Other Orrick Herrington attorneys and paraprofessionals may,
from time to time, assist in this matter.
Orrick Herrington discloses that, in connection with its
representation of the Pre-Petition Informal Committee, the Firm
received $1,598,023.99 from RGH. (Reliance Bankruptcy News,
Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900)
REVLON INC: CW Cosmetics Acquires Maesteg, Wales Facility
---------------------------------------------------------
Revlon, Inc. (NYSE: REV), announced that CW Cosmetics Ltd. has
purchased the Revlon subsidiary that owns and operates its
manufacturing facility in Maesteg, Wales, UK, including all
production equipment. Revlon will receive approximately USD
$20.0 million, USD $10.0 million payable on the closing and USD
$10.0 million in deferred purchase price. CW Cosmetics Ltd. will
produce all Revlon color cosmetics and other products for
Revlon's European market pursuant to a long-term Supply
Agreement.
The Welsh Development Agency and the Welsh Assembly have been
working closely with both companies to ensure that the final
agreement results in a positive economic outcome for the Welsh
community.
Jeffrey Nugent, President and CEO of Revlon, said, "We are very
pleased to have reached an agreement that is positive for all
parties involved. As a third party manufacturer, CW Cosmetics
Ltd. will be able to utilize the excess capacity which has
burdened the performance of the Maesteg facility."
Michael ten Hope, Group Managing Director of CW Cosmetics Ltd.,
said, "We recognize the growing trend in outsourcing the
manufacturing of cosmetics and other beauty care products in the
European market, and Revlon's long-term contract is confirmation
of this trend. This acquisition will enable us to utilize the
plant capacity to meet the needs of Revlon and other customers
with a talented and highly skilled workforce already in place."
The sale of the Maesteg facility is another step in Revlon's
global manufacturing rationalization and consolidation plans to
increase operating efficiencies. Revlon intends to use the
proceeds from the Maesteg sale to fund portions of its
previously announced restructuring plan and for general
corporate purposes.
About Revlon
Revlon is a worldwide cosmetics, skincare, fragrance, and
personal care products company. The Company's vision is to
become the world's most dynamic leader in global beauty and
skincare. A web site featuring current product and promotional
information can be reached at http://www.Revlon.com.The
company's brands include Revlon(R), Almay(R), Ultima II(R),
Charlie(R) and Flex(R) and they are sold worldwide.
SUN HEALTHCARE: Hearing on Government Stipulation Is On Aug. 3
--------------------------------------------------------------
As previously reported, the Government Stipulation (between
Sun Healthcare Group, Inc. and the United States of America on
behalf of the Health Care Financing Administration and Office of
Inspector General of the United States Department of Health and
Human Services and the Department of Justice) provides for terms
for the Debtors' transfer or closure of a limited number of
facilities that were mutually agreed upon between the Parties
(Eligible Providers).
The Government Stipulation also provides that the Debtors have
180 days (the Divestiture Period) to transfer or close a
particular Eligible Provider.
The Divestiture Period was extended pursuant to a stipulation
entered into between the parties.
As the Divestiture Period was to expire on June 27, 2001 and
there are Eligible Providers remaining which Sun desires to
divest, the parties agree and stipulate that the Debtors will
have an additional period to and including October 25, 2001 to
either transfer or close Eligible Providers not yet divested
pursuant to the terms of the Government Stipulation.
A Hearing on the proposed stipulation and order will be
conducted on August 3, 2001 at 9:30 a.m. only if in the event of
objections filed by July 16, 2001, 4:00 p.m. (Sun Healthcare
Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
TRICO STEEL: Retains Credit Suisse As Financial Advisors
--------------------------------------------------------
By order of the US Bankruptcy Court, District of Delaware,
entered on July 5, 2001, Trico Steel Company LLC is authorized
to retain Credit Suisse First Boston as financial advisors with
respect to the Sale of Trico.
By separate order, the debtor was granted an extension of time
within which the debtor must assume or reject all of its
unexpired leases of nonresidential real property. The period
under 11 USC Section 365(d)(4) within which the debtor must
assume or reject any and all unexpired leases is
extended through September 26, 2001.
UCAR INT'L: Closes $98 Million Public Offering of Common Stock
--------------------------------------------------------------
UCAR International Inc. (NYSE:UCR) announced the closing of its
public offering of common stock, raising approximately $98
million. A total of 10,350,000 shares were sold at $9.50 per
share. The original offering was set at 8,000,000 shares,
however, higher than expected demand allowed UCAR to increase
the offering to 9,000,000 shares. An additional 1,350,000 shares
were sold to the underwriters to cover over-allotments.
Gil Playford, Chairman and CEO, stated, "We are extremely
pleased with the strong demand for and successful execution of
our stock offering. We are very satisfied not only with our
existing shareholder support, but also with the high level of
new investor support and participation in this offering.
The overwhelming response confirms confidence in our business
strategies and our strong management team. We will be
disciplined as we deploy this new capital to create
opportunities for growth and increased returns on investments in
order to deliver value to our shareholders."
UCAR intends to use 40 percent of the net proceeds from this
offering for the growth and expansion of its Advanced Energy
Technology Division, including the development of products for
the fuel cell power generation market and thermal management
products for the computer, communications and other industries.
The remainder of the net proceeds will reduce outstanding
term loans.
J.P. Morgan Securities Inc. was the lead manager for the
offering. Credit Suisse First Boston and Merrill Lynch & Co.
were co-managers.
UCAR provides natural and synthetic graphite and carbon products
and services to customers in the steel, aluminum, fuel cell
power generation, electronics, semiconductor and transportation
industries.
VENCOR INC.: Interim & Final Applications For Compensation
----------------------------------------------------------
The Professionals retained by Vencor, Inc. and the Committee
present the Court with their Fee Applications seeking approval
of their interim and final fees and expenses for services
renders in Vencor's chapter 11 cases:
Applicant Period Fees Expenses Total
--------- ------ ---- -------- -----
Cleary, 09/13/99 - 7,970,393.50 474,260.85 8,444,654.35
Gottlieb, 04/20/01
Steen & (Final)
Hamilton
(Counsel to
Debtors)
Morris, 09/13/99 - 881,479.50 819,111.20 1,700,590.70
Nichols, 04/20/01
Arsht & (Final)
Tunnell
(Bankruptcy
Counsel to
Debtors)
Reed, Smith 9/13/99 - 667,432.81 29,385.99 696,818.80
Shaw & 04/20/01
McClay (19
(Special applications)
Counsel to
Debtors)
Wachtell, 09/24/99 - 160,365,50 13,961.26 174,376.26
Lipton, 03/16/01
Rosen &
Katz
(Committee's
Lead Counsel
Pepper 09/28/99 - 25,488.50 19,464.59 44,953.09
Hamilton, 03/16/01
LLP (Final)
(Creditors'
Committee
Local
Counsel)
The 12/20/99 - 2,308,065.00 63,300.53 2,371,365.53
Blackstone 03/31/01
Group, L.P. (Final)
(Debtors'
Investment
Bankers)
PwC 09/13/99 - 6,441,646.50 496,532.19 6,938,178.69
(Atg. & 04/20/01
Business (Final)
Advisors,
Consultants
And Auditors
To Debtors)
KPMG 12/01/99 - 618,712.00 20,669.19 639,381.19
(Tax 12/31/99
Consultants (17
to Debtors) applications)
Mintz, 01/01/00 - 283,524.86 13,611.46 297,136.32
Levin Cohn, 04/20/01
Ferris, (Final)
Glovsky &
Popeo, P.C.
(Ordinary
Course
Professional)
Manatt, 12/01/99 - 316,736.05 12,436.94 329,172.99
Phelps & 03/31/01
Phillips, (7
LLP applications)
(Ordinary
Course
Counsel)
Jackson 3 months 178,198.00 18,582.55 196,780.55
Lewis during
Schnitzler & 02/01/00 -
Krupman 03/31/01
Foley & 12/01/99 - 84,100.76 2,615.03 86,715.79
Lardner 01/31/00
(Ordinary
Course
Professional)
McCutchen, 09/13/99 - 314,540.60 47,514.10 362,054.70
Doyle, 04/20/01
Brown & (Final)
Enersen, LLP
Arnall 11/01/00 - 190,048.18 9,071.77 199,119.95
Golden 04/20/01
Gregory LLP (1st)
Buchanan 07/01/99 - 20,916.35 -- 20,916.35
Ingersoll 04/03/01
(Protective
Application)
Zuckerman Entire 166,172.50 7,762.26 173,934.76
Spaeder Bankruptcy
Period
(Final)
-------------- ------------- --------------
$20,627,870.11 $2,048,279.91 $22,676,150.02
U.S. Trustee's Objection to Wachtell's Application
The United States Trustee objects to the Professional
Compensation Application of Wachtell, Lipton, Rosen & Katz (the
Committee's Counsel) on several bases.
In particular, the U.S.T. points to a request for an enhancement
fee of $250,000.00 in addition to the requested compensation of
$160,365.50 at the professionals' normal rate of compensation.
The U.S.T. notes that the enhancement fee is in excess of 150%
of the hourly rates for the services that the professionals were
contracted to provide and would provide an effective hourly
increase for some of the professionals:
* for Mr. Fortgang during the year 1999, from $625.00 per
hour to $1,600.00 per hour, and during the year 2000 from
$675.00 per hour to $1,725.00 per hour;
* Mr. Mason would be receiving an effective rate of
$1,472.00 per hour during the year 2000; and
* Associate Mr. Sullivan would increase from $130.00 per
hour to $332.50 per hour for the two years.
The UST believes that the enhancement is excessive considering
the contribution of the professional in this matter.
The UST is also dissatisfied with the way Wachtell presents its
application in that:
* it contains line items that fail to impart sufficient
information to allow a reviewer to determine the
reasonableness of the compensation;
* it provides no rates for charges on photocopying,
facsimile transmissions and electronic research;
* it contains numerous vague entries such as:
* Nov. 29, 2000, C. Fortgang, "Misc. t/c Cleary; t/c
RGM; ..."
* June 2, 2000, C. Fortgang, "T/C Cleary, Goldstein"
* May 17, 2000, S. Sullivan, "Litigation research"
* Feb. 18, 2000, C. Fortgang, "T/C Goldstein"
* Jan. 10, 2000, C. Fortgang, "Tepper, Goldstein, Altman"
* Nov. 4, 1999, R. Mason, "Reviewed articles"
The UST also picks out examples of distinct activities being
lumped together during time periods so that the reviewer does
not know how much time was spent on each activity, such as:
(a) Dec. 4, 2000, R. Mason, "Prepared for and attended conf,
call with Company and others re: Plan docs."
(b) Nov. 29, 2000, C. Fortgang, "Misc. t/c Cleary; t/c RGM;
review of plan documentation."
(c) Jan. 19, 2000, C. Fortgang, "Review letter of Weisfelner;
T/C Holders".
Wachtell's Response
Wachtell, Lipton responds to the UST's objection with 8 pages of
revised time records to address the points raised by the
Trustee. The Response also quotes rates as follows:
Photocopying: $0.15
Facsimile Transmission: $1.00 per page for outgoing only
Electronic research: At cost.
(Vencor Bankruptcy News, Issue No. 31; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
VIDEO UPDATE: Disclosure Statement Hearing Set For September 11
---------------------------------------------------------------
Video Update, Inc. (OTC Bulletin Board: VUPDA) and its US
subsidiaries filed a Plan of Reorganization and Disclosure
Statement with the United States Bankruptcy Court for the
District of Delaware.
Prior to filing for Chapter 11 bankruptcy protection from its
creditors on September 18, 2000, Video Update was the fourth
largest specialty retail video chain in North America, with
nearly 600 stores in the US and Canada. Since the bankruptcy
filing, Video Update has closed more than 200 underperforming
stores in the US.
In May, 2001, Movie Gallery, Inc. (Nasdaq: MOVI) of Dothan,
Alabama purchased 92% of Video Update's senior secured debt and,
with approval from the Bankruptcy Court, extended a $5.0 million
debtor-in-possession or DIP loan facility. Under the plan
proposed by Video Update, Movie Gallery will receive 100% of the
common stock of the reorganized Video Update in exchange for the
forgiveness of amounts outstanding under the DIP facility. Movie
Gallery will also provide Video Update with working capital
financing following confirmation of the plan. The plan also
provides for a restructuring of Video Update's senior secured
debt and for a cash payment in the satisfaction and release of
all general unsecured claims. All existing shares of stock,
including any warrants and options, in VUPDA will be cancelled
under the Plan.
A hearing on Video Update's disclosure statement is scheduled to
be held on September 11, 2001.
VITTS NETWORK: FactSet Research Acquires Data Center Facility
-------------------------------------------------------------
FactSet Research Systems (NYSE: FDS), a major supplier of
computer-based financial and economic data to the investment
community, announced the acquisition of a new data center in
Manchester, New Hampshire, along with its associated lease, from
Vitts Networks, Inc. for $600,000.
The 12,750 square foot state-of-the-art facility includes 7,500
square feet of conditioned data center space in a secure, fully
redundant installation. The Manchester data center became
operational in August 2000 and has served as the co-location
hosting facility for Vitts, which filed for reorganization in
February 2001. The sale to FactSet was recently approved
by order of the Federal Bankruptcy Court for the District of
Delaware.
The site was identified in the course of an extensive selection
and review process conducted earlier this year. The facility
stands out for its high level fit-out and existing fault
tolerant infrastructure, flexibility to specialized
requirements, low operational costs and geographic diversity
from FactSet's redundant twin data center in Greenwich,
Connecticut. Important features include a 1,500kw Caterpillar
generator set, dual redundant MGE 500kVA Uninterruptible Power
Supply (UPS) systems, distributed MGE power management switches,
multiple redundant cooling systems and diversely routed fiber
optic access to major network carriers.
"This facility was virtually tailor made to our requirements. It
has the size, redundancy and flexibility to host the next
generation of FactSet's online services, with a greater level of
security and reliability than we've ever been able to offer our
clients," said Townsend Thomas, Chief Technology Officer at
FactSet. "Building such a facility has been part of our growth
plan for the last several years. We are pleased to have been
able to acquire the data center for less than 20% of our
estimated construction cost of a comparable facility. The
Manchester lease is also economically advantageous compared to
the cost of our current space in midtown Manhattan."
FactSet expects to begin operations in Manchester in November
2001, at which time FactSet's New York City data center will be
closed and converted to conventional offices to support
continued growth. In connection with the relocation of the data
center facility, FactSet expects to incur a charge of $1
million, to be recognized in the first quarter of fiscal year
2002 which ends on November 30, 2001. Included in this charge
will be approximately $600,000 of non-cash expenses.
W.R. GRACE: Requests One-Year Extension of Exclusive Periods
------------------------------------------------------------
Without prejudice to their right to seek further extensions,
W.R. Grace & Co., et al., request a one-year extension of their
exclusive period during which to file a plan of reorganization
and solicit acceptances of that plan.
These chapter 11 cases are unique, James H.M. Sprayregen, Esq.,
at Kirkland & Ellis, tells Judge Farnan, in that they were filed
as a result of mounting asbestos-related litigation liabilities.
Defining these liabilities is central to resolving these chapter
11 cases and will involve significant litigation. That
litigation will take time.
In the first four months of their chapter 11 cases, the Company
has worked diligently to pave the way for the necessary
litigation to begin:
* debtor-in-possession financing is in place;
* an essential trade creditor program is on the table;
* the Debtors prepared and filed their Schedules of Assets
and Liabilities and Statements of Financial Affairs;
* reclamation claims are being reconciled;
* the core professionals the Debtors need are on board;
* Grace is reestablishing communications with trade vendors
and customers;
* cash management operations are stable; and
* Key Employees have stayed with the Company.
Considering the strength of the Debtors' core businesses, the
Debtors submit that it is reasonable to believe that the Company
will be able to file a viable plan of reorganization in due
course as the procedures for addressing the asbestos-related
claims unfolds. Amid intense opposition (from the Asbestos
Committees, of course) over the process to be employed, the
Debtors are working to put a case management schedule before the
Court that will establish a system to efficiently manage the
adjudication of they myriad of asbestos-related claims against
their estates.
A 12-month extension of their exclusive periods will not harm
creditors and other parties-in-interest, Mr. Sprayregen argues.
Indeed, Mr. Sprayregen says, a termination of the exclusive
periods would defeat the very purpose behind 11 U.S.C. Sec.
1121, which is to afford the Debtors a meaningful and reasonable
opportunity to negotiate with their creditors and to then
propose and confirm a consensual plan of reorganization.
Termination of the exclusive periods, Mr. Sprayregen warns,
would signal a loss of confidence in the Debtors and their
reorganization efforts by the Court. The Debtors' core
businesses would deteriorate, value would evaporate, and
everybody would lose.
Mr. Sprayregen notes that extensions of the exclusive periods in
excess of a year are typical in multi-billion-dollar chapter 11
cases in Delaware, pointing to In re Harnischfeger Industries,
Inc., Bankr. Case No. 99-2171 (PJW) (multiple extensions
totaling 20 months); In re Loewen Group Int'l, Inc., Bankr.
Case. No. 99-1244 (PJW) (exclusive periods extended for 19
months); In re Montgomery Ward Holding Corp., Bankr. Case No.
97-1409 (PJW) (exclusive periods extended for 21 months); In re
Trans World Airlines, Inc., Bankr. Case No. 02-115 (HSB)
(exclusivity extended for approximately 20 months).
Specifically, pursuant to 11 U.S.C. Sec. 1121(d), the Debtors
ask Judge Farnan to extend their exclusive period during which
to file a plan through and including August 1, 2002, and grant a
concomitant extension of their exclusive period during which to
solicit acceptances of that plan through and including October
1, 2002.
Judge Farnan will entertain the Debtors' request at a hearing
next month on a date to be determined. By application of
Del.Bankr.L.R. 9006-2, the Debtors' exclusive period during
which to file a plan of reorganization is automatically extended
through the conclusion of that to-be-scheduled hearing. (W.R.
Grace Bankruptcy News, Issue No. 10; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
W.R. GRACE: French Subsidiary Acquires Pieri SA
-----------------------------------------------
W. R. Grace & Co. (NYSE: GRA) announced that its French
subsidiary, W. R. Grace SAS, has acquired Pieri SA. Pieri,
headquartered in Saillenard, France, a leading supplier of
specialty chemicals to the European construction industry had
revenues of approximately $25 million in 2000. Terms of the
acquisition were not disclosed.
Pieri is a leading supplier of concrete surface retarders,
release agents, curing agents, sealers, stains and concrete
admixtures. The acquisition expands Grace's product offerings to
the precast and ready mix markets and enhances its presence in
continental Europe. Pieri will be integrated into the Grace's
Construction Chemicals business, a unit of Grace Performance
Chemicals.
"This investment underscores our commitment to grow
geographically to better serve our customers. Pieri's strong
position in France and other parts of Europe provides us with
the platform we need to accelerate our growth in these markets,"
said Paul J. Norris, Grace Chairman, President and Chief
Executive Officer. "Although we have filed for reorganization
under Chapter 11, we are committed to growing Grace through
internal development and by doing acquisitions like this one
where we can create economic value for all of our stakeholders."
Grace voluntarily filed for reorganization under Chapter 11 on
April 2, 2001, in response to a sharply increasing number of
asbestos claims. The filing was made in Wilmington, Delaware,
and allows the company to continue operating its business in the
usual manner. None of Grace's foreign subsidiaries, including W.
R. Grace SAS, were in its filing. The acquisition was completed
using available cash balances in Grace's European subsidiaries.
"Grace, like Pieri, is dedicated to providing the industry with
quality products and the highest level of customer service.
These strong similarities in philosophy are key reasons why
Grace and Pieri will so effectively complement one another,"
said Robert Bettacchi, President, Performance Chemicals. "The
Pieri name and its products have strong brand recognition
throughout Europe. Grace will continue to market these products
using Pieri brand names."
Grace is a leading global supplier of catalysts and silica
products, specialty construction chemicals and building
materials, and container products. With annual sales of
approximately $1.6 billion, Grace has over 6,000 employees and
operations in nearly 40 countries. Visit the Grace website at
www.grace.com.
WARNACO GROUP: Proposes De Minimis Claims Settlement Protocol
-------------------------------------------------------------
The Warnaco Group, Inc. and its debtor-affiliates seek an order:
(i) authorizing them to settle pre-petition claims, in the
amount of $100,000 or less, outside the ordinary course
of business without further court approval, and
(ii) approving the form and manner of notice of the proposed
settlements.
The Debtors anticipate that hundreds of its vendors, suppliers,
customers and contract parties will assert various claims in
these Chapter 11 cases. Kelley A. Cornish, Esq., at Sidley
Austin Brown & Wood, in New York, New York, suggests it would be
easier for the Debtors to resolve such claims without having to
seek Court approval. This way, Ms. Cornish says, the Debtors
will be able to focus more on their reorganization process.
In the settlement of claims where the amount is $100,000 or
less, the Debtors propose to implement this Notice Procedures
instead:
(a) The Debtors shall give notice of each Proposed Settlement
to:
(i) the United States Trustee;
(ii) Otter Bourg, Steindler, Houston & Rosen, P.C.,
Attn: Scott L. Hazan, Esq., counsel for the
Committee;
(iii) Shearman & Sterling, Attn: James L. Garrity, Esq.,
counsel for the Debt Coordinators for the pre-
petition banks;
(iv) Lisa Ash or such other person at KPMG as the Debt
Coordinators for the pre-petition banks shall
notify the Debtors of in writing; and
(v) Weil Gotshal & Manges LLP, Attn: Brian Rosen, Esq.,
counsel to the Post-Petition Agents.
Notices shall be served by facsimile, so as to be
received by 5:00 p.m. (Eastern Time) on the date of
service. The Notice shall specify:
(1) the Claim to be compromised and settled,
(2) the identity of the particular Debtor settling the
Claim,
(3) the identity of the claimant (including a statement
of any connection between the claimant and the
Debtors),
(4) the amount of the Proposed Settlement, and
(5) a brief statement of the basis for the settlement
and the ramifications for failing to effectuate the
Proposed Settlement.
(b) The Notice Parties shall have 5 business days after
the Notices are sent to object to or request additional
time to evaluate the Proposed Settlement in writing to
Sidley Austin Brown & Wood, 875 Third Avenue, New York,
New York 10022, Attn: Kelley A. Cornish, Esq. ("SAB&W")
If SAB&W receives no written objection or written request
for additional time prior to the expiration of such 5-day
period, the Debtors shall be authorized to consummate the
Proposed Settlement, and it shall be deemed consented to
by the Notice Parties. If a Notice Party provides a
written request to SAB&W for additional time to evaluate
the Proposed Settlement, such Notice Party -- and only
such Notice Party -- shall have an additional 15
calendar days to object to the Proposed Settlement.
(c) If a Notice Party objects to the Proposed Settlement
within 5 business days after the Notice is sent
(or, in the case of a Notice Party that has timely
requested additional time to evaluate the Proposed
Settlement (the additional 15 day review period)), the
Debtors and such objecting Notice Party shall use good
faith efforts to consensually resolve the objection. If
the Debtors and the objecting Notice Party are unable to
achieve a consensual resolution, the Debtors shall not
proceed with the Proposed Settlement pursuant to these
procedures, but may seek Bankruptcy Court approval of the
Proposed Settlement upon notice and a hearing.
(d) Nothing in the foregoing Notice Procedures shall prevent
the Debtors, in their sole discretion, from seeking
Bankruptcy Court approval at any time of any Proposed
Settlement upon notice and a hearing.
The use of this procedure would be the most efficient and cost-
effective means of resolving these de minimis disputes, Ms.
Cornish contends.
On the other hand, Ms. Cornish notes, obtaining court approval
of each proposed settlement would only burden the Debtors with
administrative expenses such as the time and cost of drafting,
serving and filing pleadings, and the time incurred by attorneys
in preparing for and appearing at Court hearings.
For compromises and settlements of claims over $100,000,
however, Ms. Cornish assures the Court that the Debtors will
follow the applicable procedures contained in section 363 of the
Bankruptcy Code and Bankruptcy Rule 9019(a) and will seek Court
approval after notice and a hearing. (Warnaco Bankruptcy News,
Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900)
WICKES INC.: Ironwood Discloses 11.5% Equity Ownership
------------------------------------------------------
The following tables detail the common stocks of Wickes Inc.
owned by Ironwood Capital Management, LLC, Warren J. Isabelle,
Richard L. Droster, Donald Collins, and the ICM/Isabelle Small-
Cap Value Fund:
Amount beneficially owned:
(i) ICM: 954,808
(ii) Isabelle: 954,808
(iii) Droster: 954,808
(iv) Collins: 954,808
(v) Fund: 451,871
Percent of class:
(i) ICM: 11.54%
(ii) Isabelle: 11.54%
(iii) Droster: 11.54%
(iv) Collins: 11.54%
(v) Fund: 5.46%
Number of shares as to which the person has:
(1) Sole power to vote or to direct the vote:
(i) ICM: 0
(ii) Isabelle: 0
(iii) Droster: 0
(iv) Collins: 0
(v) Fund: 0
(2) Shared power to vote or to direct the vote:
(i) ICM: 612,271
(ii) Isabelle: 612,271
(iii) Droster: 612,271
(iv) Collins: 612,271
(v) Fund: 451,871
(3) Sole power to dispose or to direct the
disposition of:
(i) ICM: 0
(ii) Isabelle: 0
(iii) Droster: 0
(iv) Collins: 0
(v) Fund: 0
(4) Shared power to dispose or to direct the
disposition of:
(i) ICM: 954,808
(ii) Isabelle: 954,808
(iii) Droster: 954,808
(iv) Collins: 954,808
(vi) Fund: 451,871
WINSTAR COMM.: Has Until October 18 To Make Lease Decisions
-----------------------------------------------------------
California State Teachers Retirement Systems (CALSTRS) objects
to Winstar Communications, Inc.'s motion for an order extending
the time within which Debtors must assume or reject leases of
nonresidential property.
Kevin Gross, Esq., at Rosenthal Monhait Gross & Godess PA in
Wilmington, Delaware, relates that prior to the petition date,
the Debtors entered into a lease agreement with CALSTRS for a
certain space in the building located at 685 Third Avenue, New
York, New York. The Debtors subsequently made the site their
corporate headquarters.
Mr. Gross explains that CALSTRS and the Debtors had several
conversations regarding the payment of unpaid post-petition
amounts due and owing by the Debtors to CALSTRS. As a
consequence of these conversations, the Debtors notified CALSTRS
that it intends to bring all post-petition payments current. To
date, the Debtor has failed to pay post-petition fees with an
aggregate amount of $153,612.81. The Debtors, therefore is
currently in default of the lease.
Mr. Gross contends that failure to make payments is a factor in
determining whether the Court should grant the requested
extension of time to assume or reject non-residential property
leases. By failing to fulfill post-petition payment obligations
under the CALSTRS lease, Mr. Gross argues the Debtors are not
entitled for additional time to assume or reject such lease.
SMC Objects
Counsel to SMC Investors, Todd R. Mendel, Esq., at Barris Sott
Denn & Driker, of Detroit, Michigan, relates that the Debtors
lease rooftop space in SMC Investors, LLC buildings located in
Livonia Michigan to set up antenna and radio communications
equipment. In connection with this lease, the Debtors pay SMC a
total of $656.25 per month, plus a late fee of $26.25 per month.
However, the Debtors have not paid these amounts since the
filing of these cases.
Mr. Mendel states that the Debtors have neglected to pay their
accounts with SMC Investors, LLC since May 1, 2001. Mr. Mendel
says that SMC will agree with the deadline extension if post-
petition arrearages amounting to a total of $1,146.60 for the
said leases are brought current on or before the hearing date
for approval of this motion.
Mr. Mendel requests the Court to deny the relief requested by
the Debtors as to its leases with SMC if the post-petition
arrears will not be paid and continue to be paid throughout the
time period within the deadline extension.
Bush Street & Others Object
Bush Street San Francisco Property, L.P., Star Property Fund
Management, LLC, U.S. Property Fund GmbH & Co. KG, Despa
Deutsche Sparkassen Immobilien - Anlage - Gesellschaft MbH, 1200
New Hampshire Washington, DC Property L.P., Prime Property Fund,
L.P., 2300 M Street Washington, D.C. Property, L.P., Cambridge
Executive I, LLC, and U.S. Property Investment Fund, L.P.
(collectively, the Objectors) object to the Debtors' motion to
extend the time within which the Debtors must assume or reject
unexpired leases of non-residential real property.
Stephen N. Miller, Esq., at Morris, James, Hitchens & Williams
LLP, in Wilmington, Delaware, tells the Court that each of the
Objectors is a party to a separate agreement with a Debtor.
Each agreement was entered into pre-petition and has a scheduled
expiration date after the Petition Date. Under each of the
agreements, the Debtors are obligated to pay the Objector a
monthly fee.
According to Mr. Miller, the Objectors oppose the extension
because:
(i) Objectors have not received all post-petition payments
and other benefits to which they are entitled with
respect to the agreements that they have with the
Debtors, and
(ii) with respect to Licenses, the Debtors seek to abolish
the rights provided to parties o executory contracts
under 11 U.S.C. Sec. 365(d)(2).
Finding that the Debtors' leases are critical to their
reorganization, that the Debtors can't be expected to make
crucial business decisions concerning the disposition of their
lease-related interests within the first 60 days of their multi-
billion dollar chapter 11 cases, and because the Debtors are
current in paying all post-petition rent, Judge Farnan approves
the Debtors' Motion to extend time to assume or reject lease on
nonresidential property. New deadline by which the Debtors must
decide whether to assume, assume and assign, or reject their
nonresidential real property leases is October 18, 2001.
(Winstar Bankruptcy News, Issue No. 9; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L.
Metzler, Bernadette de Roda, Aileen Quijano and Peter A.
Chapman, Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without
prior written permission of the publishers. Information
contained herein is obtained from sources believed to be
reliable, but is not guaranteed.
The TCR subscription rate is $575 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Christopher
Beard at 301/951-6400.
*** End of Transmission ***