/raid1/www/Hosts/bankrupt/TCR_Public/010823.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 23, 2001, Vol. 5, No. 165
Headlines
AMERICAN TISSUE: Seeking Financing To Ease Liquidity Concerns
AMF BOWLING: Panel Balks at Application To Hire Andersen
AMF BOWLING: Will Delay Form 10-Q Filing
AMRESCO INC.: Seeks Suspension of Form 10-K & 10-Q Filings
AT HOME CORP.: Need to Raise More Funds to Ensure Survival
AVIATION DISTRIBUTORS: Obtains Waiver of Debt Default From GMAC
BOYSTOYS.COM: Reports Record Profits -- Narrowest Loss Ever
CHEROKEE INTERNATIONAL: S&P Junks Senior Subordinated Notes
COMDISCO INC.: Court Okays Hiring RGA as Realty Consultant
CONTINUCARE: Completes Restructuring of $10M Sub Notes Due 2002
COOKER RESTAURANT: Posts $10.5 Million Loss For Second Quarter
CRIIMI MAE: Annual Stockholders' Meeting Slated for September 25
CRITICAL PATH: Falls Short of Nasdaq Listing Requirements
DELTA FINANCIAL: Extends Exchange Offer Period To 5:00 PM Today
DERBY CYCLE: Fails To File Form 10-Qs by Due Date
D.I.Y. HOME: Closes 6 Remaining Stores & Liquidates Assets
EUROPEAN MICRO: Will Start Assets Liquidation To Repay Creditors
FRUIT OF THE LOOM: Moves to Extend Rule 9027 Removal Period
GENESIS HEALTH: Agrees With Abbott To Settle Prepetition Claims
ICG COMMS: Walks Away from Xerox Business Services Lease
IMP INC.: Faces Possible Delisting From Nasdaq
LAIDLAW: Bondholder Class Action Mediation Will Continue
LERNOUT & HAUSPIE: Dictaphone Committee Hires Bayard as Counsel
LOEWEN GROUP: Moves For Approval of Stipulation With Cusimano
LTV CORP.: Grupo IMSA Wins Bidding for VP Buildings Assets
MONTGOMERY WARD: Taps CONSOR & WebReCo for Online Asset Sale
NETWORK-1: Fails to Meet Bid Price Requirement & Faces Delisting
OPTEL: Unsecureds Approve & Support Reorganization
OWENS CORNING: Claimants' Panel Taps Tersigni as Accountant
PACIFIC GAS: Unsecureds Get Okay to Hire Milbank as Counsel
PHYCOR INC.: Continues Talks with Convertible Sub Noteholders
PILLOWTEX CORP.: ARK CLO Moves to Compel Decision on Lease
PSINET: Objects to Global's Motion to Compel Decision On CPA
REGAL CINEMAS: H1 Net Loss Widens Due To Theatre Closing Costs
RESPONSE ONCOLOGY: Reorg Plan Calls For New Equity Financing
SAFETY-KLEEN: Tort Claimant Moves To Nullify Automatic Stay
SCHWINN/GT: Tells Court a New Financing Deal Is on the Way
SERVICEWARE: Appeals Nasdaq Delisting Notice
STELLEX: Court Approves Amended Chapter 11 Plan
TALON AUTOMOTIVE: Will Delay 10-Q Filing Due to Plan Preparation
TELESPECTRUM: Banks Agree to Relax Financial Covenants
TWINLAB CORP.: S&P Drops Corporate Credit Rating to B From B+
USCI INC.: Subsidiary's Bankruptcy Proceeding Dismissed
U.S. HOME: Faces Delisting For Failure To Meet Price Requirement
VENCOR INC.: Wants Time to Object to Claims Extended to Oct. 17
WARNACO GROUP: Will Restate Certain Results for the Last 3 Years
W.R. GRACE: First Union Moves to Compel Equipment Lease Decision
WHEELING-PITTSBURGH: Court Okays PCC Bid & Auction Procedures
WINSTAR COMMS: Speedera Balks at Attempt to Splinter Contract
*********
AMERICAN TISSUE: Seeking Financing To Ease Liquidity Concerns
-------------------------------------------------------------
American Tissue Inc.'s revenues for the third quarter of fiscal
2001 were $146.5 million, climbing 15.5% from $126.8 million for
the third quarter of fiscal 2000.
Revenues for the first nine months of fiscal 2001 were $431.4
million, compared to $358.2 million for the first nine months of
fiscal 2000, an increase of $73.2 million, or 20.4%. This sales
growth was primarily due to higher market demand for tissue
products as we increased market share, as well as changes in
tissue product mix and price increases.
The Company's capability to meet this higher market demand was
primarily due to an increase in its installed capacity for the
manufacture of jumbo tissue rolls and converted tissue products.
This increase in tissue products sales was partially offset by a
net sales decrease of virgin woodpulp, primarily due to higher
internal usage due to lower prevailing market demand conditions
and lower average sales prices to outside customers.
Low Pulp Prices Hurt EBITDA
EBITDA (earnings before interest, taxes, depreciation and
amortization) was $15.0 million for the quarter ended June 30,
2001, compared to $16.8 million for the quarter ended June 30,
2000, a decrease of $1.8 million, or 10.7%.
Although revenues have increased by 15.5%, EBITDA has been
negatively affected by higher energy costs and lower pulp prices
during the third quarter of fiscal 2001 when compared to the
third quarter of fiscal 2000.
EBITDA was $54.6 million for the first three quarters of fiscal
2001 compared to $54.3 million for the first three quarters of
fiscal 2000, an increase of $0.3 million, or 0.6%.
Net sales of tissue products were $107.3 million for the quarter
ended June 30, 2001, compared to $75.7 million for the quarter
ended June 30, 2000, an increase of $31.6 million, or 41.7%.
This sales growth was due to higher market demand as the Company
increased market share, as well as changes in product mix and
price increases.
The Company's capability to meet this higher market demand was
primarily due to an increase in its installed capacity for the
manufacture of jumbo tissue rolls and converted tissue products.
Net sales of uncoated freesheet paper products increased $3.3
million, or 10.1%, from $32.8 million for the third quarter of
fiscal 2000 to $36.1 million for the third quarter of fiscal
2001. This increase was due to increased production, which
provided additional tons that enabled the Company to meet its
increased demand, and was partially offset by lower selling
prices.
Net sales of virgin woodpulp decreased $14.2 million, or 83.0%,
from $17.1 million in the third quarter of fiscal 2000 to $2.9
million in the third quarter of fiscal 2001. This decrease was
primarily due to lower prevailing market demand conditions and
lower average sales prices to outside customers.
Gross profit increased $1.2 million, or 4.8%, from $25.0 million
for the quarter ended June 30, 2000 to $26.2 million for the
quarter ended June 30, 2001.
Gross profit, as a percentage of revenues, decreased from 19.7%
for the third quarter of fiscal 2000 to 17.9% for the third
quarter of fiscal 2001, primarily as a result of higher energy
costs and lower net sales prices of uncoated freesheet paper
products and woodpulp, offset by lower fiber costs.
Weakening Liquidity
In its quarterly report filed with Securities and Exchange
Commission, American Tissue reported that it has been
experiencing increasing liquidity problems. The Company is in
default under its revolving credit facility, which also has
caused a default under the indenture governing its senior
secured notes.
Further loans to the Company under the revolving credit facility
will be made by the lenders in their sole and absolute
discretion, and will be subject to the satisfaction of a number
of conditions. The Company is working diligently to satisfy
these conditions and has engaged financial advisors to assist
management in this process.
The Company's liquidity problems have resulted from further
weaknesses in the market for pulp, weaknesses in commodity grade
paper prices, increases in energy costs and, since April 2001,
the limited availability of funds under its revolving credit
facility.
In an immediate attempt to reduce cash expenses and provide for
reduction of inventories, the Company has temporarily shut down
certain of its woodpulp, tissue and uncoated freesheet paper
mills. The Company expects to continue converting and shipping
operations at all of these locations during this period.
Mr. Mehdi Gabayzadeh, President and CEO of the Company, stated:
"The current annual sales run rate of American Tissue Inc.
reflects a volume of over $600 million a year with continued
profitable operations. Our liquidity issues are of paramount
importance and concern to us at this time. We have taken a
number of immediate steps to assist us in increasing our cash
availability in the short term and are diligently pursuing
alternative financings for longer-term liquidity strength.
During this period of tightness, we appreciate all of the help
from our vendors and the continued strong support from our
customers."
AMF BOWLING: Panel Balks at Application To Hire Andersen
--------------------------------------------------------
The Official Committee of Unsecured Creditors objects to the
application of AMF Bowling Worldwide, Inc. to employ Arthur
Andersen LLP as its auditors, accounting, tax and restructuring
advisors.
Jonathan L. Hauser, Esq., at Troutman Sanders Mays & Valentine
LLP in Richmond, Virginia observes that the Application is based
on four engagement letters with three different indemnification
provisions:
a. Tax Services Agreement - limits AA's maximum liability to
charges paid to Arthur Andersen for its work products
giving rise to liability. It further states that in no
event shall AA be "liable for consequential, incidental or
punitive loss, damage or expense or lost profits" and AA
will be indemnified against any third party claims that
arise as a result of AA's work for the Debtors unless
those claims are "finally determined" to have arisen from
negligence or willful misconduct of AA.
b. Restructuring Services Agreement - AA is indemnified from
all liability unless the Court determines that it arises
primarily from AA's gross negligence or willful misconduct
provided that AA's liability is limited to the fees it
receives for the "work giving rise to liability" and is
not liable for "any special, consequential, incidental or
exemplary damages or loss."
c. Employee Stock Ownership Plan Agreement - AA's liability
is limited to the fees paid for the service in the event
that liability is "fully determined to have resulted from
AA's fraudulent behavior and AA is indemnified from all
Claims by third parties including those arising from
negligence.
Mr. Hauser claims that although these provisions differ from
each other, their collective effect is to absolve AA from any
meaningful responsibility for its own negligence and prevent the
Debtor from obtaining money damages to which they may be
entitled. In addition, the Application makes no attempt to
clarify which indemnification provision will apply under what
circumstances.
Mr. Hauser contends that the indemnification provisions are not
in the best interests of the Debtors' creditors and a
significant departure from indemnification customarily given in
Chapter 11 cases.
When questions of liability should arise, Mr. Hauser notes, the
Debtors would have to litigate which engagement letter applies
to the services at issue. Mr. Hauser opines that multiple
indemnification provisions provide unreasonable and unusual
protection to AA.
Mr. Hauser asks the Court to direct that a standard
indemnification provision be inserted into each of the
engagement letters and that the uniform indemnification language
obligate AA to accept responsibility for its own negligence and
pay the full amount of damages associated with any wrongdoing.
(AMF Bankruptcy News, Issue No. 5; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
AMF BOWLING: Will Delay Form 10-Q Filing
----------------------------------------
AMF Bowling Worldwide, Inc. expects that the filing of its
quarterly report on Form 10-Q for the quarter ended June 30,
2001 will be delayed.
As previously disclosed, AMF Bowling Worldwide, Inc., a Delaware
corporation, and certain of its subsidiaries and its immediate
parent, filed voluntary petitions for reorganization under
Chapter 11, Title 11 of the United States Code on July 2, 2001
with the United States Bankruptcy Court for the Eastern District
of Virginia in Richmond, Virginia. The Company is in possession
of its assets, and manages and operates its businesses as
debtor-in possession under the Bankruptcy Code.
Since the petitions were filed on July 2, 2001, the accounting
and financial staff have been required to dedicate substantial
amounts of time to the reorganization process and related tasks.
These tasks have included preparing Company Schedules of Assets
and Liabilities, the Statement of Financial Affairs and List of
Equity Holders which were filed with the Bankruptcy Court on
August 3, 2001 and responding to various requests for
information from interested parties in the bankruptcy case such
as pre-petition and post-petition secured lenders and the
Official Committee of Unsecured Creditors.
The Company expects that the results of operations for the
quarter ended June 30, 2001 will show a significant decline from
the corresponding quarter for the last fiscal year.
Moreover, the Company is unable to make a reasonable estimate of
the results at this time because it is completing its analysis
of the appropriate charges to be reflected in its results of
operations for the quarter ended June 30, 2001 as a result of
filing for bankruptcy protection and related matters.
AMRESCO INC.: Seeks Suspension of Form 10-K & 10-Q Filings
----------------------------------------------------------
Amresco, Inc. announces that it will be unable to timely file
the Form 10-Q for the quarterly period ended June 30, 2001. The
Company has also submitted a no-action request to the Securities
and Exchange Commission for the suspension of the filing of
annual reports on Form 10-K and quarterly reports on Form 10-Q
during the pendency of the its bankruptcy proceeding.
As reported by Amresco Inc. on July 5, 2001, the Company filed a
voluntary petition for relief on July 2, 2001 under the
provisions of Chapter 11 of the United States Bankruptcy Code.
The Company's management and personnel are currently allocating
all of their energy and resources toward the pursuit of the
Company's Chapter 11 reorganization, including participation in
various hearings and other proceedings being held in the United
States Bankruptcy Court for the Northern District of Texas.
The bankruptcy proceedings presently require a substantial
amount of time and effort on the part of key personnel. There
are significant unresolved issues concerning valuations of
certain assets and potential claims that would materially impact
the Amresco's balance sheet and income statement.
Amresco anticipates that revenues for the three and six months
ended June 30, 2001 will be substantially lower than the
revenues for the comparable periods during 2000.
This reduction in revenue is primarily a result of the
continuation of the decline in value of the Company's retained
interests in securitizations, goodwill and loan portfolios as
well as a reduction in loan originations, reduced securitization
profits and the sale of revenue-generating assets through June
30, 2001.
In addition, certain new liabilities may have to be recorded
that would materially impact the Company's financial statements.
Amresco also anticipates net losses for the three and six months
ended June 30, 2001 will be more than the net losses for the
comparable periods during 2000, which had losses of $93.6
million and $91.6 million for three and six months ended June
30, 2000, respectively.
AT HOME CORP.: Need to Raise More Funds to Ensure Survival
----------------------------------------------------------
Ernst & Young LLP, which audited the consolidated balance sheets
of At Home Corporation as of December 31, 2000 and 1999, raised
substantial doubt about the Company's ability to continue as a
going concern, owing to recurring operating losses and negative
cash flows, with a substantial need for additional funding to
prop up its operations.
The auditors also cited the Company's $100 million convertible
notes, which requires the Company to maintain the listing of its
Series A common stock on either the New York Stock Exchange, the
Nasdaq National Market or the American Stock Exchange.
According to the auditors' report, the Company currently does
not meet Nasdaq's continued listing requirements. If the
Company's Series A common stock is delisted, the terms of the
convertible notes provide for their acceleration of repayment in
cash at that time.
Meanwhile, Standard & Poor's junked the Company's debt ratings
to triple-C.
Need for Additional Funding
Prior to December 31, 2001
On July 24, 2001, the Company announced that it would need to
raise additional funding prior to December 31, 2001 to support
its operations, as it did not expect to experience a recovery in
the demand for its online advertising and marketing services, to
secure financing terms from some of its equipment vendors, to
receive standard payment terms from several critical suppliers
or to recover previously expected amounts in connection with
real estate lease commitments, as well as due to other factors.
The Company's planning to take further measures to conserve cash
in addition to the restructuring plans announced in January and
April 2001, and that it might raise additional funds through
strategic means including the possible sale or restructuring of
its media operations, or financing transactions.
The Company has not yet completed any transactions in this
regard and there can be no assurance that it will be successful
in achieving sufficient cash conservation measures, completing
strategic transactions or otherwise raising sufficient
additional funds to finance its operations on a timely
basis.
If the Company is unable to successfully complete the necessary
measures, there would be a material adverse impact on its
operations and liquidity.
On April 17, 2001, the Company entered into a letter agreement
with AT&T which would have provided for an outsourcing
arrangement to maintain and improve current network performance
levels. The Company has decided not to go forward with this
arrangement.
Backbone Capacity Agreement with AT&T
On June 19, 2001, the Company terminated its backbone capacity
agreement with AT&T and simultaneously entered into a revised
agreement. The Company received $85.2 million in cash in
exchange for granting AT&T a security interest in the capacity
rights under the agreement and the Company recorded this amount
in capital lease and other obligations.
The $85.2 million principal amount, plus interest at a rate of
8%, was required to be repaid to AT&T in monthly installments of
approximately $0.7 million through April 2020, the term of the
revised backbone capacity agreement.
Additionally, the Company paid AT&T $7 million in June 2001 for
backbone route extensions and this amount, together with the
previously unamortized balance, is being amortized on a
straight-line basis to operations over the term of the
agreement. The new backbone capacity agreement generally
preserves the backbone operations and upgrade and expansion
rights provided under the original agreement.
Convertible Note Financing
On June 8, 2001, the Company issued convertible notes and
entered into related agreements with third party investors under
which the Company received $100 million in cash financing.
The notes do not bear interest and are convertible at any time
into shares of our Series A common stock at a rate of $4.38 per
share, based on 110% of the weighted-average price of its Series
A common stock on June 8, 2001.
This conversion rate is subject to reduction as specified in the
agreements upon the issuance of common stock in future equity
transactions. The holders of these notes may elect to convert
the notes at the original issuance price on each anniversary of
the date of issuance starting on June 8, 2002.
The notes are also redeemable by the Company on the second,
third and fourth anniversary of the date of issuance. At each
such conversion or redemption date, as well as at maturity, we
have the option of delivering the par amount in cash or Series A
common stock at a rate of 95% of the average of the volume-
weighted trading price of the common stock over the 10 trading
days prior to each date of issuance, and the shares would be
issued in eight equal installments over an 80-day period.
However, if the Company had not met specified conditions for
redeeming the notes in stock, the Company might be obligated to
pay cash rather than stock to satisfy these redemption
obligations.
In addition, the Company may elect to pay cash if redeeming the
notes in stock results in an unacceptable level of dilution to
our stockholders. It is required to register the resale of the
shares issuable upon conversion of the notes.
The Company has granted holders of these notes a security
interest in $100 million of its assets that are not otherwise
secured, as collateral for the outstanding amounts due under the
notes. These notes are senior to the Company's outstanding
subordinated notes and debentures.
* * *
Combining content with conduit, At Home (which does business as
Excite@Home) offers broadband Internet access and operates the
Excite portal. Excite@Home uses high-speed cable modem and DSL
(digital subscriber line) technology to provide Internet access
to more than 3 million residential customers (@Home) and more
than 10,000 businesses (@Work). The slump in Internet
advertising has hurt the company, however: It has shut down its
Work.com joint venture with Dow Jones & Company, and it is
closing most of its European portal operations. Excite@Home is
controlled by AT&T, which has a 25% economic stake and a 74%
voting interest.
AVIATION DISTRIBUTORS: Obtains Waiver of Debt Default From GMAC
---------------------------------------------------------------
Aviation Distributors, Inc. (OTCBB:ADIN) reported results from
operations for the three and six month periods ended June 30,
2001.
Revenues for the three months ended June 30, 2001 were
$6,702,000, a decrease of 33.0% as compared with revenues of
$9,998,000 for the same period a year ago. For the six-month
period ended June 30, 2001, revenues were $18,413,000,
essentially unchanged from $18,272,000 in the year ago
period.
Net loss for the quarter, including non-cash increases in
reserves for inventory and bad debt of $1.3 million, was
$3,196,000, or $0.94 per basic and diluted share, compared with
net income of $80,000, or $0.02 per basic and diluted share, for
the prior year period. For the six month period ended June 30,
2001, the net loss was $3,121,000, or $0.92 per basic and
diluted share, compared with net income of $144,000, or $0.04
per basic and diluted share, for the prior year six month
period.
The Company also reported that, as of June 30, 2001, it was not
in compliance with certain of the financial covenants contained
in its line of credit agreement with GMAC. GMAC has waived these
financial covenant requirements as of June 30, 2001.
In a separate matter, the Company announced that, effective
Sept. 1, 2001, William D. King, Chairman and Chief Executive
Officer, will relinquish the Chief Executive Officer title but
remain Chairman of the Board of Directors and its newly formed
Executive Committee.
The Executive Committee, whose members will be Steven O. Davis,
Bruce H. Haglund, John J. Jacobs, Gary L. Joslin and William D.
King, will function as the interim Chief Executive Officer of
the Company.
The Company stated in its quarterly filing that it continues to
face the industry-wide downward pressure on both revenues and
gross margins that is attributable to both an unprofitable
worldwide commercial airline industry and the excess
availability of surplus parts.
In response to these deplorable market conditions, the Company,
effective July 1, 2001, has taken steps to decrease its annual
selling, general and administrative expenses by $1.8 million.
Additionally, the Company reported that it has not yet been
successful in its efforts to improve the Company's capital
structure.
Aviation Distributors, Inc. is one of the world's 10 largest
aircraft part redistributors and inventory management service
providers to major commercial airlines worldwide with agents in
the US, UK, throughout Europe, Australia, India, Jordan,
Indonesia and Chile with its headquarters in Lake Forest.
BOYSTOYS.COM: Reports Record Profits -- Narrowest Loss Ever
-----------------------------------------------------------
BoysToys.com, Inc. (OTC Bulletin Board: GRLZ) an entertainment
holding company, has just completed its 10Q financials for the
second quarter ending June 30, 2001. The Company filed a 10Q-SB
with the US Securities and Exchange Commission.
In the fiscal second quarter of operations (April 1, 2001 to
June 30, 2001), the Company increased gross revenues by 11.8% to
$638,870 from $571,187 (for the same quarter last year) and
posted an operating income profit of $83,371, based on EBIDTA
(Earnings Before Interest, Taxes, Depreciation and
Amortization), as compared to a net operating loss of (-
$56,429), for the same period last year.
The operating income profit takes into account all charges
incurred to date related to the Chapter 11 bankruptcy re-
organization. Additionally, the Company reduced principal and
interest by $37,157.
During the six months ending June 30, 2001 (the "First Six
Months of 2001"), the Company recorded Sales Revenues of
$1,256,536 compared to $1,071,163 in Sales Revenues during the
six months ending June 30, 2000. This is an increase of $185,373
or 17.3%.
The Company recorded an operating income profit for the First
Six Months of 2001 of $168,855 based on EBIDTA, as compared to a
loss of (-$254,417) for the same period of year 2000, based on
EBIDTA.
While the Company did incur a Net Loss (inclusive of deductions
for interest, taxes, depreciation and amortization) during the
Second Quarter 2001 of (-$44,324), this was less than the Net
loss of (-$200,807) incurred during the Second Quarter 2000. For
the First Six Months of 2001 the Company recorded a Net Loss of
(-$120,862) compared to a Net Loss of (-$557,203) during the
first six months of 2000.
Company's management is pleased that they have continued to
maintain profitability (based on EBIDTA) during the second
quarter of this year and anticipates a substantial increase once
the Company has successfully emerged from its Chapter 11 status.
The Company would like to reiterate that the Boys Toys club
located at 408-412 Broadway in San Francisco remains open and it
is the Company's intent that it will stay open. The Company is
current in its monthly rent payments, taxes, payroll, and trade
payables and all of its obligations will continue to be met.
Business as usual continues at the club.
Corporate information may be viewed at http://www.boystoys.com
CHEROKEE INTERNATIONAL: S&P Junks Senior Subordinated Notes
-----------------------------------------------------------
Standard & Poor's lowered its ratings on Cherokee International
LLC and placed them on CreditWatch with negative implications.
The action reflects poor operating performance, which is likely
to persist in the near term, and a leveraged profile,
contributing to weak credit measures and a violation of bank
covenants.
Tustin, Calif.-based Cherokee is a designer and manufacturer of
a broad range of switch-mode power supplies for original
equipment manufacturers, primarily in the telecommunications,
networking, and high-end workstations industries.
Cherokee's revenue has fallen sequentially in each of the past
two quarters, to $32.9 million in the quarter ended June 30,
2001, from $45.9 million in the quarter ended Dec. 31, 2000.
Profitability has also dropped significantly, triggering bank
covenant violations at the end of the June quarter.
On Aug. 13, 2001, the company entered into an agreement with its
lenders waiving the financial covenant defaults and agreeing to
modifications to the terms of the existing credit agreement.
These modifications included a $10.5 million guarantee by equity
constituents of the company's senior debt until certain
financial ratios are attained.
Waivers will expire if final documentation of an amendment is
not completed by Sept. 14, 2001.
EBITDA to interest coverage has fallen to 1.6 times over the
past two quarters from 2x in 2000. Still, the company generated
$8.5 million of cash from operations in the June 2001 quarter
due to reductions in receivables and inventory, partially offset
by reduced payables.
As of June 30, 2001, Cherokee had $7.6 million of cash and cash
equivalents, but it no longer has access to additional
borrowings under its revolving line of credit until final
documentation of an amended credit facility is completed.
Standard & Poor's will review the company's operations,
liquidity, and industry environment before resolving the
CreditWatch.
Ratings Lowered & Placed On CreditWatch Negative
To From
Cherokee International LLC
Corporate credit rating B B+
Sr secured bank facility B B+
Sr subordinated notes CCC+ B-
COMDISCO INC.: Court Okays Hiring RGA as Realty Consultant
----------------------------------------------------------
Comdisco, Inc. sought and obtained an order from Judge Barliant
authorizing them to employ Rockwood Gemini Advisors as their
real estate consultants.
RGA is a joint venture consisting of Rockwood Realty Associates,
L.L.C. and Gemini Realty Advisors, L.L.C. Rockwood Realty is a
real estate investment banking firm specializing in providing
real estate advisory and transactional services. Gemini Realty
is a real estate consulting firm experienced in advising
distressed operating companies.
Its activities include advising companies in complex
restructuring assignments concerning the reduction of real
estate costs and the more efficient operation and use of real
estate assets and advising companies on all real estate
matters during bankruptcy proceedings and
reorganization/liquidation efforts.
Normal P. Blake, Jr., Comdisco's CEO, tells Judge Barliant that
he will look to Rockwood to:
(a) assist in evaluating on a global basis the real estate
properties owned or leased by the Debtors, and
(b) formulate a marketing and disposition plan to maximize
value to the Debtors.
Mr. Blake further outlines the specific services that RGA will
render under a Letter Agreement dated May 24, 2001:
(a) Prepare a proprietary financial model for the purpose of
valuing the Debtors' portfolio of fee-hold and leasehold
interests and calculate their value on a property-by-
property basis in the current marketplace.
(b) Conduct in-depth meetings with key personnel of the
Debtors to discuss valuation potentials an define any
operational issues that may affect the valuation of the
Debtors' real estate interests.
(c) Work with the Debtors to identify and, where possible,
resolve or quantify any unresolved issues or detriments
to value.
(d) Review and analyze all pertinent and available
documentation and data regarding the real estate
interests including, but not limited to, engineering and
environmental reports, zoning information, feasibility
studies, market studies, appraisals, operating and
capital budgets, financial statements and violation
reports.
(e) Conduct in-depth market analysis utilizing proprietary
databases, public records, GIS systems, Internet
databases and interaction with local real estate
professionals.
(f) Physically inspect, where necessary, the Debtors' real
estate interests, including any improvements to the real
estate, in order to valuate location, site, physical
condition and market appeal and constraints compared with
competitive properties or future sites in the market
area.
(g) Determine the maximum additional development potential
for each parcel, if appropriate, and the potential impact
on the value of existing improvements.
(h) Engage and supervise outside consultants including
engineers, environmental consultants, architects and
zoning experts, to assist in specific critical areas
which might include, but not necessarily be limited to:
(1) analyzing the condition of the existing physical
improvements;
(2) evaluating any environmental issues;
(3) summarizing existing zoning regulations; and
(4) ascertaining a "hard" price for any such work which
might be required to realize the best value for the
particular real estate interest.
(i) Determine if any development land or competing improved
real property will be coming on the market and if there
are any new developments contemplated or possible given
the availability of suitable sites, and, if so, what
impact they may have on the Debtors' real estate
interest.
(j) Prepare detailed financial models for the Debtors' real
estate interests including a detailed discussion
regarding the underlying assumptions utilized in
developing the financial models.
(k) Prepare a strategic action plan that (i) clearly
identifies and quantifies complex issues; (ii) assesses
and values alternative courses of action; (iii) provides
for the most effective means of achieving the Debtors'
objectives.
(l) Prepare a comprehensive written report for the Debtors'
real estate interests, which will include thorough
descriptive information (including photographs and
graphics), market data, area information, zoning
information and all other information necessary for the
Debtors to effectively evaluate the real estate interests
in the marketplace.
(m) Prepare a portfolio database of the Debtors' real estate
interests in Excel form for internal use by the Debtors'
management.
(n) Work directly with the Debtors' management, staff, its
counsel, its outside brokers and other advisors in their
review of the Debtors' real estate interests, and the
competitive marketplace for such assets.
(o) Prepare and present regular and thorough status reports
to the Debtors regarding the execution of the Assignment
and attend regular Comdisco staff meetings with the
Debtors regarding current real estate issues.
The Debtors will pay RGA a monthly fee of $75,000 for each of
the three phases of the project being worked on for any given
month.
The Debtors will also reimburse the actual and reasonable
expenses incurred by RGA in connection with the services
provided. Upon execution of the Retention Agreement, RGA
received a retainer of $150,000. The Debtors have agreed that
this retainer shall be replenished in full upon its complete
diminution.
Michael P. Deighan, Managing Director of Rockwood Realty
Associates, assures the Court that each of RGA, Rockwood Realty
and Gemini Realty and their respective principals and
professionals do not have any connection with the Debtors, are
"disinterested persons" as defined in Section 101(14) of the
Bankruptcy Code, and do not hold or represent an interest
adverse to the estate.
If any new relevant facts or relationships are discovered or
arise, RGA will identify such further developments and will file
a Supplemental Affidavit. (Comdisco Bankruptcy News, Issue No.
3; Bankruptcy Creditors' Service, Inc., 609/392-0900)
CONTINUCARE: Completes Restructuring of $10M Sub Notes Due 2002
---------------------------------------------------------------
Continucare Corporation (AMEX:CNU), a leader in the field of
providing outpatient healthcare services through managed care
arrangements and home healthcare services in the Florida market,
has concluded a restructuring of its outstanding $10 million 7%
Convertible Subordinated Notes due 2002.
As a result of the restructuring, $6.2 million of the Notes have
been purchased by six investors, including entities controlled
by Dr. Frost, a director of the Company, and Spencer Angel,
President and CEO of the Company.
These repurchased Notes were immediately exchanged for an
aggregate amount of 6.2 million shares of the Company's common
stock and new notes in the aggregate principal amount of
$912,195, which mature October 31, 2005, bear interest at 7%
(payable semi-annually) and are convertible into shares of the
Company's common stock at a conversion rate of $1.00 per share.
The six investors also purchased 9.6 million shares of common
stock held by these selling Noteholders. As a result, Dr. Frost
now owns approximately 49% of the Company's outstanding common
stock, prior to giving effect to the conversion of the new note.
Holders of the remaining $3.8 million of outstanding Notes have
agreed to restructure various terms of the Notes which, among
other things, extend the maturity date to October 2005, reduce
the conversion rate from $2.00 to $1.00 per share, provide for
quarterly interest payments, and cure all prior defaults under
the Notes.
"We are very excited about the completion of this
restructuring," said Spencer J. Angel, President and Chief
Executive Officer of Continucare. "Not only has shareholder
value been enhanced but Dr. Frost has unequivocally signaled his
commitment to Continucare and now owns approximately 49% of the
Company's outstanding common stock. Through the reduction of a
substantial amount of debt we have further strengthened the
foundation upon which Continucare rests."
"This restructuring," Mr. Angel continued, "allows us to
continue to focus on enhancing our physician network, while we
continue to position ourselves as an industry leader in Florida
as a third party manager of risk in the healthcare market."
Continucare Corporation, headquartered in Miami, Florida, is a
holding company with subsidiaries engaged in the business of
providing outpatient physician care and home healthcare
services.
COOKER RESTAURANT: Posts $10.5 Million Loss For Second Quarter
--------------------------------------------------------------
Cooker Restaurant Corporation (OTC Bulletin Board: CGRT)
reported a loss for the quarter of $10,509,000 or $1.72 per
share, compared with a loss of $684,000 in the same quarter last
year.
Sales for the quarter were $30,460,000 compared to $36,573,000
last year; same store sales were down 13.7% and the remaining
decrease was due to closing 14 restaurants (previously
announced) during the quarter. $1.10 per share of the loss in
the current quarter came from restructuring and impairment
charges.
For the two quarters ended July 1, 2001, sales were $67,848,500
compared with $75,113,700 last year. The net loss for the first
two quarters was $13,857,000 or $2.26 per share, compared with
$826,000 for the first two quarters of the year.
The Company also announced that it has closed 7 restaurants in
Tennessee (2), Florida (1), Georgia (1), Indiana (1), Kentucky
(1) and North Carolina (1) since the close of the quarter. Henry
R. Hillenmeyer, Chairman and CEO, said, "While these restaurants
produced positive cash flows, they are worth more as real estate
than as Cooker operations at this time. We believe we can sell
these restaurants, pay down debt, and save considerably more
interest than the cash flows the restaurants produce. This
leaves us with 43 restaurants, 38 of which are in tight
geographic clusters, enabling us to concentrate our efforts.
This is the first step in our restructuring process."
The Company is currently going through a Chapter 11
reorganization. The Company operates "Cooker Bar & Grille" full-
service restaurants in Florida, Michigan, Ohio, Tennessee, and
Virginia. The restaurants offer a family-friendly, cozy
ambience, with menu selections that include a wide variety of
appetizers, soups, salads, entrees, sandwiches and desserts, as
well as a full beverage menu in most locations; a large
percentage of these items are actually prepared "from scratch"
daily, using original recipes and fresh ingredients. Portion
sizes are generous, service is prompt, friendly and efficient,
and The Cooker backs everything with its famous "100%
Satisfaction Guarantee".
Cooker is traded on Over the Counter Bulletin Board (OTCBB)
under the symbol CGRT.
CRIIMI MAE: Annual Stockholders' Meeting Slated for September 25
----------------------------------------------------------------
The Annual Meeting of Stockholders of Criimi Mae Inc. will be
held at the Doubletree Hotel, 1750 Rockville Pike, Rockville,
Maryland 20852, on Tuesday, September 25, 2001, at 10:00 a.m.,
Eastern time, for the following purposes:
1. To approve an amendment to the Company's Amended and
Restated Articles of Incorporation to effect a one-for-ten
reverse stock split of the shares of the Company's common
stock par value $0.01 per share.
2. To approve the 2001 Stock Incentive Plan.
3. To elect three Class I directors to serve until the 2004
annual meeting of stockholders and until their respective
successors are elected and qualified.
4. To ratify the appointment of Arthur Andersen LLP as the
Company's independent accountants for the fiscal year
ending December 31, 2001.
5. To transact such other business as may properly come
before the Annual Meeting or any adjournment or
postponement thereof.
Only stockholders of record of the Company at the close of
business on August 9, 2001 are entitled to notice of and to vote
at the Annual Meeting.
CRITICAL PATH: Falls Short of Nasdaq Listing Requirements
---------------------------------------------------------
Critical Path, Inc. (Nasdaq:CPTH), a global leader in
communication technology and complete messaging solutions for
wireless and wireline carriers, service providers and
corporations, has significantly improved the company's balance
sheet over the last few months by buying back its outstanding
convertible subordinated notes at a net gain of more than $90
million.
As part of the company's plan to restructure its outstanding
debt, Critical Path has successfully repurchased nearly $129
million of face value of its outstanding convertible
subordinated notes at an average price of less than 25 cents per
dollar for a net gain (and increased equity) of approximately
$90 million.
As announced in its second quarter financial results press
release on August 2, 2001, $5 million of face value of debt was
repurchased in the second quarter and approximately $40 million
of face value of debt during July.
Subsequent to August 2, 2001 Critical Path continued to execute
on the company's debt restructuring plan by repurchasing
approximately $83 million of face value of outstanding debt at a
significant net gain.
In addition, the company announced that, as anticipated during
the second quarter earnings call, it has received formal
notification from Nasdaq that based on its Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 2001, Critical
Path did not meet both the minimum net tangible asset and
minimum equity requirements for continued listing on the Nasdaq
National Market.
However, on a pro forma basis, if the additional debt
repurchases completed so far during the third quarter had been
completed as of June 30, 2001, the company's net worth would
have been approximately $35 million, which is greater than the
Nasdaq National Market requirement.
Critical Path will present to Nasdaq on or before September 4,
2001 the success of its strategy for short-term compliance to
date as well as its plan for long-term compliance.
"A debt reduction this significant is a major milestone for
Critical Path as we continue to successfully restructure the
company's balance sheet," said William E. McGlashan, Jr.,
President and COO of Critical Path. "When combined with the
solid Q2 progress we reported on our restructuring plan,
we are optimistic about the company's ability to execute on our
path to profitability."
The company also expects to soon receive notification regarding
the minimum bid requirement for continued listing on the Nasdaq
National Market, as the company's bid price has been under $1
for twenty-eight consecutive trading days.
As part of its definitive plan for long-term compliance,
Critical Path will take all necessary steps to meet this listing
requirement and will present its plans to the Nasdaq National
Market when required.
About Critical Path, Inc.
Critical Path Inc. (Nasdaq: CPTH) is a global leader in
communication technology and complete messaging solutions for
wireless and wireline carriers, service providers and
corporations through its integrated platform of messaging
applications and directory infrastructure.
Critical Path is headquartered in San Francisco, with offices
throughout North America, Europe, Asia and Latin America. More
information on Critical Path can be found at http://www.cp.net./
DELTA FINANCIAL: Extends Exchange Offer Period To 5:00 PM Today
---------------------------------------------------------------
Delta Financial Corporation (OTCBB: DLTO) will extend the
expiration date to 5:00 p.m. on August 23, 2001 for its exchange
offer and consent solicitation relating to the exchange of its
currently outstanding 9 1/2% Senior Secured Notes due 2004 and
its 9 1/2% Senior Notes due 2004 for membership interests in a
newly formed LLC, to which the Company will transfer all of the
mortgage-related securities currently securing the senior
secured notes, the Company's newly-issued preferred stock, and
shares of common stock in a newly formed management company.
The exchange offer and consent solicitation was commenced on
July 23, 2001.
The Company has been informed by U.S. Bank Trust National
Association, the exchange agent for the exchange offer and
consent solicitation, that as of 5:00 p.m., New York City time,
August 20, 2001, the holders of approximately $130.7 million in
principal amount of the Notes have tendered and not withdrawn
the same, representing 87.1% of the $150 million aggregate
principal amount of Notes outstanding.
The exchange offer is conditioned upon at least 95% of the
existing Noteholders tendering their Notes, although the Company
has the option of waiving this condition to the exchange offer
if at least 90% of the existing Noteholders tender.
If the exchange offer is not consummated, the Company will
default on the Notes, and seek bankruptcy protection.
Putnam Investment Management, Fidelity Investment and Prudential
Investments, which in the aggregate own more than 50% of the
bonds, already have tendered their Notes in the exchange offer.
The Company worked with the financial advisors and attorneys
representing these three large institutional investors to
maximize value for the Noteholders and avoid an interest payment
default on the Notes.
Following numerous discussions and meetings, it was agreed that
the Company would ultimately launch the proposed exchange offer
which, if successful, would transfer all of the mortgage-related
securities currently securing the Senior Secured Notes to a
newly formed limited liability company owned by the Noteholders,
without the cost of a bankruptcy proceeding.
This new entity would then distribute on a quarterly basis,
beginning this year, all net proceeds received from these assets
to its members, comprised of all Noteholders who tender in the
exchange offer.
If the exchange offer is successful, and the Company remains a
going concern, the Noteholders will have an opportunity to take
part in any success that the Company may experience by virtue of
the $15 million in the aggregate of the Company's newly issued
preferred stock which they will receive in the exchange offer.
Each Noteholder should have received a prospectus containing a
comprehensive description of the exchange offer and all of the
risks associated with it.
Noteholders with questions, or those who wish to receive a copy
of the prospectus, should contact Richard Blass of Delta
Financial Corporation at 1-800-225-5335, extension 8200.
Founded in 1982, Delta Financial Corporation is a Woodbury, New
York-based specialty consumer finance company engaged in
originating, securitizing and selling (and until May 2001,
servicing) non-conforming home equity loans.
Delta's loans are primarily secured by first mortgages on one-
to four-family residential properties. Delta originates home
equity loans primarily in 20 states. Loans are originated
through a network of approximately 1,500 brokers and the
Company's retail offices.
Prior to July 1, 2000, loans were also purchased through a
network of approximately 120 correspondents. Since 1991, Delta
has sold approximately $6.7 billion of its mortgages through 29
AAA rated securitizations. At March 31, 2001, Delta's servicing
portfolio was approximately $3.1 billion.
DERBY CYCLE: Fails To File Form 10-Qs by Due Date
-------------------------------------------------
The Derby Cycle Corporation announce that owing to devoting the
resources to the sale of Gazelle and to the exploration of
restructuring or refinancing alternatives, Lyon Investments B.V.
and the Company failed to complete and file their respective
Form 10-Qs by the date required.
Lyon Investments B.V.'s U.S. financial reports are prepared by
its holding company, The Derby Cycle Corporation.
The management of the Company has devoted substantial time and
effort to the sale of all of the issued and outstanding stock of
its former subsidiary, Koninklijke Gazelle B.V., and, with the
help of its financial advisors, Lazard Freres & Co. L.L.C., to
exploring alternatives for refinancing or restructuring the
Company's indebtedness.
Net revenues for the quarter ended July 1, 2001 were $126.0
million, 25% below year ago. While gross margins were held at
25.7% of revenues, selling, general and administrative expenses
could not be reduced as quickly as the decline in revenues and
were 11% below year ago.
$2.1 million of fees for financial advisory services and related
professional advice were paid by the Company for the review of
its business and exploration of alternatives in order to repay
the Revolving Credit Facility in the quarter ended July 1, 2001.
As a result, operating income declined by $8.2 million, to $2.6
million, compared with $10.8 million in the quarter ended July
2, 2000. The decline in revenues largely mirrored a decline
throughout the market of sales to independent bicycle dealers.
The decline in revenues allowed the Company to reduce its levels
of inventories and accounts receivable, such that the cash flow
improved compared with a year ago.
D.I.Y. HOME: Closes 6 Remaining Stores & Liquidates Assets
----------------------------------------------------------
D.I.Y. Home Warehouse, Inc. (OTC Bulletin Board: DIYH) reported
a net loss of $15,763,000 for the second quarter ended June 30,
2001. The results for the second quarter of fiscal year 2001
were negatively impacted by $15,237,000 of store closing costs
and the absence of a tax benefit for the loss recorded during
the period.
In comparison, the Company reported a net loss of $246,000 for
the same period a year ago.
On April 10, 2001, the Company announced the closing of three
locations. Concurrent with this announcement, the Company began
the liquidation of the stores' merchandise inventories,
furniture and fixtures.
On June 19, 2001, the Company announced that its Board of
Directors had authorized the Company to cease its ordinary
business operations and commence an orderly disposition of its
remaining assets.
In conjunction with this announcement, the Company voluntarily
closed its remaining six stores and began liquidating its
merchandise inventories, furniture and fixtures.
Net sales for the second quarter ended June 30, 2001 decreased
to $21,896,000 from $26,234,000 during the second quarter ended
July 1, 2000 due to additional competition from national
warehouse retailers in the Company's markets and fewer Company
stores. The decrease in sales between the two periods was
partially offset by the favorable sales impact of the Company's
inventory liquidation sales.
The Company's gross profit percentage decreased to 16.2% during
the second quarter ended June 30, 2001 from 27.3% during the
second quarter ended July 1, 2000, primarily reflecting the
reduced gross profit attained by the Company during its current
period's merchandise inventory liquidation sales.
Store operating, general and administrative expenses decreased
to $4,027,000 during the second quarter ended June 30, 2001 from
$7,377,000 during the same period a year ago, due primarily to
the closing of the Company's stores.
Store closing costs recorded during the second quarter of fiscal
year 2001 included charges of $2,109,000 for net expenses to
close the three locations in April 2001 and $13,128,000 for
costs to close the Company's remaining six stores and cease its
ordinary business operations in June 2001.
Included in the $2,109,000 of net expenses associated with the
three-store closing in April 2001 was a $3,107,000 net gain
resulting from the Company's assignment of a lease interest to a
third-party.
EUROPEAN MICRO: Will Start Assets Liquidation To Repay Creditors
----------------------------------------------------------------
European Micro Holdings, Inc. (OTCBB:EMCC), an independent,
focused distributor of microcomputer products, announced that:
- On August 17, 2001, European Micro Plc's primary lender in
Europe, Natwest, temporarily froze all the operating
accounts for European Micro Plc. therefore effectively
calling its loans to European Micro. In order to avoid this
outcome, Mr. Harry Shields, European Micro Holdings, Inc.'s
Co-President and Co-Chairman, advanced $630,000 to European
Micro Plc to payoff Natwest's loans. In addition, Mr.
Shields has advanced another $625,000 to European Micro Plc
to satisfy a loan it has with European Micro Holdings and
another $618,000 to European Micro Plc to purchase
inventory. European Micro Holdings intends to use the
proceeds received from European Micro Plc to repay a loan
to SouthTrust Bank. European Micro Plc intends to proceed
to an orderly liquidation of its business in order to repay
Mr. Shields and other creditors. The liquidation of
European Micro Plc would leave European Micro Holdings,
Inc. with one operating business, American Micro Computer
Center, Inc.
- As previously reported, European Micro Holdings, Inc. will
be unable to meet certain obligations to the former
shareholders of American Micro Computer Center, Inc.,
including obligations owed to Mr. John B. Gallagher, Co-
President and Co-Chairman of European Micro Holdings, Inc.
Unless circumstances change, which is not anticipated,
these former shareholders will be entitled to a return of
their shares of capital stock in American Micro Computer
Center, Inc. Such a result would leave European Micro
Holdings, Inc. without an operating business.
FRUIT OF THE LOOM: Moves to Extend Rule 9027 Removal Period
-----------------------------------------------------------
As of the Petition Date, Risa M. Rosenberg, Esq., at Milbank,
Tweed, Hadley & McCloy, relates, Fruit of the Loom was party to
numerous civil actions pending in multiple forums and asserting
a wide variety of claims. Fruit of the Loom Ltd. proposes that
the time by which it may file notices of removal with respect to
any pending prepetition actions be extended through the earliest
of:
(a) the date of entry of an order confirming the plan, or
March 15, 2002, whichever first occurs, or
(b) 30 days after the entry of any order terminating the
automatic stay with respect to the particular action
sought to be removed. (Fruit of the Loom Bankruptcy News,
Issue No. 36; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
GENESIS HEALTH: Agrees With Abbott To Settle Prepetition Claims
---------------------------------------------------------------
Genesis Health Ventures, Inc., Abbott Laboratories and Abbott
Laboratories Inc. and its Ross Products Division and its
MediSense Division, and its affiliate TAP Pharmaceuticals Inc.
stipulate and agree, subject to Court approval, to resolve
issues over Abbott's Pre-petition Claims for goods supplied to
the Debtors pre-petition, Reclamation Claims for goods shipped
from June 12 through June 22, 2000, Setoff Claims for amounts
that the suppliers owed the Debtors for various credits
including rebates, returned goods, overpayments, bonuses,
grants, price discounts and price adjustments, Prior Critical
Vendor Payments that the Debtors made, and written demands made
for reclamation of goods from the Debtors pursuant to U.C.C.
section 2-702 and section 546 of the Bankruptcy Code.
Subject to Court approval, salient terms of the Stipulation and
Order are as follows:
(1) The Debtors may use the Ross Reclamation Goods and the
Abbott Reclamation Goods as they see fit, in the ordinary
course of their business.
(2) Unless the parties otherwise agree in writing, 60-day
payment terms will be provided by the Abbott Companies,
provided the Debtors timely pay for goods.
(3) The Debtors determined, in the exercise of their business
judgment, that the Abbott Companies are Critical Vendors.
(4) The Ross Pre-Petition Claim in the amount of
$3,427,445.41 for goods supplied prior to the petition
date is adjusted, reconciled, and allowed as follows:
- Within ten days of the date upon which the docket
reflects the approval of this Stipulation and Order by
the Court, the Debtors will pay to Ross, pursuant to
the Critical Vendor Order, $507,572.59 in full and
final satisfaction of the Ross Reclamation Claim for
goods shipped from June 12 through June 22, 2000, that
is, within 10 days after the petition (the Ross
Reclamation Goods).
- The amount of $1,021,039.11 that Ross owed the Debtors
as of the commencement date for various credits and the
Prior Critical Vendor Payment are applied to and setoff
against the Ross Prepetition Claim, leaving, after
payment of the Ross Reclamation Claim and application
of the Ross Setoff Amount and the Prior Critical Vendor
Payment, a general unsecured claim in the amount of
$687,600.77 (the "Remaining Ross General Unsecured
Claim").
- Within ten days of the date upon which the docket
reflects the approval of this Stipulation and Order by
the Court, the Debtors shall pay to Ross, pursuant to
the Critical Vendor Order, an additional $593,603.35 to
be applied against the Remaining Ross General Unsecured
Claim, leaving the unpaid balance of the Remaining Ross
General Unsecured Claim at $93,997.42 as an allowed
Claim.
(5) The Abbott Pre-Petition Claim in the amount of
$181,433.99 is adjusted, reconciled, and allowed as
follows:
- Within ten days of the date upon which the docket
reflects the approval of this Stipulation and Order by
the Court, the Debtors will pay to Abbott, pursuant to
the Critical Vendor Order, $26,381.61 in full and final
satisfaction of the Abbott Reclamation Claim.
- The Abbott Setoff Amount is applied to and setoff
against the Abbott Pre-Petition Claim, leaving, after
payment of the Abbott Reclamation Claim and application
of the Abbott Setoff Amount, a general unsecured claim
in the amount of $106,530.49 (the "Remaining Abbott
General Unsecured Claim").
- Within ten days of the date upon which the docket
reflects the approval of this Stipulation and Order by
the Court, the Debtors shall pay to Abbott, pursuant to
the Critical Vendor Order, $95,877.44 to be applied
against the Remaining Abbott General Unsecured Claim,
leaving the unpaid balance of the Remaining Abbott
General Unsecured Claim at $10,653.05 as an allowed
Claim.
(6) The MediSense Pre-Petition Claim in the amount of
$404,139. 64 is adjusted, reconciled, and allowed as
follows:
- The MediSense Setoff Amount of $218,338.20 is applied
to and setoff against the MediSense Pre-Petition Claim,
leaving a general unsecured claim in the amount of
$185,801.44 (the "Remaining MediSense General Unsecured
Claim").
- Within ten days of the date upon which the docket
reflects the approval of this Stipulation and Order by
the Court, the Debtors will pay to MediSense
$167,221.30, pursuant to the Critical Vendor Order, to
be applied against the Remaining MediSense General
Unsecured Claim, leaving the unpaid balance of the
Remaining MediSense General Unsecured Claim at
$18,580.14 as an Allowed Claim.
(7) The application and setoff of the Ross Setoff Amount, the
Abbott Setoff Amount and the MediSense Setoff Amount
against the Ross Pre-Petition Claim, the Abbott Pre-
Petition Claim and the MediSense Pre-Petition Claim, as
set forth in the stipulation will be in full and final
satisfaction of any credits, including credits for
rebates, returned goods, overpayments, bonuses, grants,
price discounts and price adjustments, owed by any of the
Abbott Companies to any of the Debtors arising from
transactions prior to the Commencement Date.
(8) In the event a preference claim, fraudulent transfer
claim, or other avoidance claim is asserted under state
law and/or chapter 5 of the Bankruptcy Code against any
of the Abbott Companies in the Debtors' chapter 11 cases,
or, in the event the Debtors' chapter 11 cases are
converted to cases under chapter 7, in the Debtors'
chapter 7 cases (the "Avoidance Claims"), the Abbott
Companies will be entitled to assert any defense to any
such Avoidance Claims as though the payments and setoffs
set forth in this Stipulation and Order had never
occurred; by way of example, and without limitation, such
payments and setoffs will not exclude, reduce or in any
way impair the amount of new value which may be asserted
by any of the Abbott Companies for the purposes of the
defense under Section 547(c)(4) of the Bankruptcy Code.
(9) Upon approval of this Stipulation and Order by the Court,
the automatic stay of section 362(a) of the Bankruptcy
Code will be modified to the extent necessary to
accomplish the setoff and settlement contemplated by this
Stipulation and Order. (Genesis/Multicare Bankruptcy
News, Issue No. 12; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
ICG COMMS: Walks Away from Xerox Business Services Lease
---------------------------------------------------------
ICG Holdings, Inc., asks Judge Walsh for an order authorizing
them to reject the Document Source Client Services Agreement
with Xerox Business Services, a division of Xerox Corporation,
effective as of July 13, 2001.
Under this agreement, Timothy R. Pohl, Esq., at Skadden Arps
Slate Meagher & Flom LLP, explains, Xerox:
(i) provides copiers for each of the Debtors' offices across
the United States,
(ii) maintains and services the copiers,
(iii) staffs a copy center at the Debtors' corporate
headquarters in Englewood, Colorado.
By its terms, the Xerox Agreement expires December 31 2002, and
the Debtors pay approximately $80,000 monthly with respect to
such agreement.
The Debtors say the terms of the existing agreement with Xerox
are not favorable to them. Specifically, as a result of the
Debtors' efforts to consolidate many of their local offices as
part of their ongoing efforts to reduce costs and expenses, the
Debtors no longer require certain of the copiers. In order to
return such equipment to Xerox, however, the Debtors would be
required to pay exorbitant penalties, totaling over $389,000,
even though the monthly fee would not be substantially reduced.
Moreover, the Debtors cannot upgrade equipment without paying
termination penalties for returning obsolete equipment.
In addition, the Debtors have determined that they can obtain
copiers and related services on more favorable economic terms
from alternative vendors.
As a result, the Debtors have found the Xerox agreement to be
unprofitable and unnecessary for the Debtors' reorganization.
According, the Debtors propose to reject the entire agreement.
(ICG Communications Bankruptcy News, Issue No. 8; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
IMP INC.: Faces Possible Delisting From Nasdaq
----------------------------------------------
IMP, Inc. (NASDAQ: IMPX) has received a letter from Nasdaq
notifying it that, because the Staff believes that the Company
does not currently comply with the net tangible
assets/stockholders' equity/market capitalization/net
income requirement as set forth in Nasdaq Marketplace Rule
4310(c)(2)(B), the Company's securities are subject to delisting
from the Nasdaq Small Cap Market.
The Company participated in an oral hearing before the Nasdaq
Listing Qualifications Panel on Thursday, July 26, 2001.
The outcome of the hearing is still pending, and the Panel will
consider the net tangible assets/stockholders' equity/market
capitalization/net income deficiency requirement in rendering
its decision.
There can be no assurance that the panel will grant the
Company's request for continued listing.
IMP, Inc. provides analog semiconductor solutions that power the
portable, wireless and Internet driven computer and
communications revolution.
>From its ISO 9001 qualified wafer fabrication plant in San Jose,
California, IMP supplies standard-setting, power-management
integrated circuit products and wafer foundry services to
computer, communications and control manufacturers worldwide.
LAIDLAW: Bondholder Class Action Mediation Will Continue
--------------------------------------------------------
Laidlaw Inc. is party to two class action lawsuits asserting
violations of the Securities Act of 1934 on behalf of investors
who purchased Laidlaw bonds between September 24, 1997 and May
12, 2000:
* Barbara Meltzer v. John Grangier, et al.,
Case No. 3:00-2518-17 (Dist. D.S.C. 2000); and
* John Hancock Life Insurance Company, et al., v. Grainger,
et al., Case No. 3:01-2070-17 (Dist. S.D.N.Y. 2001).
By order of the Judicial Panel on Multidistrict Litigation, the
actions were consolidated in June 2001 before the U.S. District
Court for the District of South Carolina. In the consolidated
proceeding, Kirby McInerney & Squire, LLP, was appointed as Lead
Counsel to the Bondholder Class. The District Court referred the
dispute to mediation.
The Debtors, John Hancock Life Insurance Company, New York Life
Insurance Company, Aid Association for Lutherans, American
General Annuity Insurance Company and the Variable Annuity Life
Insurance Company, would like to continue the mediation
proceeding notwithstanding Laidlaw's chapter 11 filing.
At the parties behest, Judge Kaplan So Ordered a Stipulation
modifying the automatic stay to permit the mediation process to
continue. (Laidlaw Bankruptcy News, Issue No. 5; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
LERNOUT & HAUSPIE: Dictaphone Committee Hires Bayard as Counsel
---------------------------------------------------------------
Allan A. Brown, the Chairman of the Official Committee of
Unsecured Creditors of Dictaphone Corporation, and Managing
Director of Magten Group Trust, asks Judge Wizmur to approve its
retention of The Bayard Firm as its local counsel.
The services Bayard have rendered and may be required to render
for the Committee include:
(a) Provision of legal advice with respect to its powers and
duties as an official committee;
(b) Assistance in the investigation of the acts, conduct,
assets, liabilities, and financial condition of the
Debtors the operation of the Debtors' businesses, and any
other matters relevant to the case or to the formulation
of a plan of reorganization or liquidation;
(c) The preparation on behalf of the Committee of necessary
applications, motions, complaints, answers, orders,
agreements, and other legal papers;
(d) The review, analysis, and response to all pleadings filed
by the Debtors and appearing in court to present
necessary motions, applications, and pleadings and to
otherwise protect the interests of the Dictaphone
Committee; and
(e) The performance of all other legal services for the
Committee which may be necessary and proper in these
proceedings.
The Dictaphone Committee represents to Judge Wizmur that it
intends to work closely with Bayard and Cadwalader to ensure
that there is no unnecessary duplication of services performed
or charged to the Debtors' estates.
The Committee seeks to have Bayard employed as of December 13,
2000, the date the L&H Committee was appointed in these cases.
Since the filing of these cases, Bayard has appeared and
participated in virtually every aspect of these cases on behalf
of the interests of creditors of Dictaphone.
This work has benefited the estate of Dictaphone, and ultimately
led to the formation of the Dictaphone Committee. Accordingly,
the effective date of its retention should coincide with the
date of formation of the L&H Committee, which now represents
only the interests of creditors other than creditors of
Dictaphone.
Bayard has advised the Dictaphone Committee that its hourly
rates range from $325 to $415 per hour for directors, from $180
to $260 for associates, and from $75 to $125 for
paraprofessionals.
Neil B. Glassman, a director of The Bayard Firm, assures Judge
Wizmur that the firm is disinterested and neither holds nor
represents any interests adverse to the Committee in the matters
for which employment is sought.
However, he advises that Bayard was informally retained, in
November 2000, by Fidelity Management & Research, Conseco
Capital Management, Inc., and Merrill Lynch Asset Management, as
counsel with respect to this matter.
In December 2000, Bayard was informally retained to represent an
ad hoc committee of bondholders in the Dictaphone bankruptcy
case, which committee included Conseco, MLAM, Magten Asset
Management Corporation, and Green & Smith Investment LLC. The
Dictaphone bondholders committee and Bayard have agreed that, as
of February 28, 2001, Bayard will no longer represent the ad hoc
Dictaphone bondholders committee in these cases, and will only
represent the Dictaphone Committee.
Bayard may have in the past represented, may currently
represent, and may in the future represent, in matters totally
unrelated to the Debtors' pending chapter 11 cases, entities
that are claimants or other parties in interest (or service
providers thereto) in these chapter 11 cases.
For so long as it represents the Dictaphone Committee, Bayard
will not represent any entity other than the Dictaphone
Committee in connection with these cases.
Acting promptly, Judge Wizmur approves this Application.
(L&H/Dictaphone Bankruptcy News, Issue No. 10; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
LOEWEN GROUP: Moves For Approval of Stipulation With Cusimano
-------------------------------------------------------------
Dominic J. Cusimano filed a motion earlier this year to compel
the Debtors to assume or reject Non-Competition Agreement,
Management Agreement and Right of First Refusal entered in 1998
between The Loewen Group, Inc. and Cusimano in connection with
LGII's purchase of the funeral home business located at 2005
West 6th Street, 214 Avenue T and 194 Avenue T in Brooklyn, New
York.
In the motion, Cusimano also sought administrative expense claim
arising under the Noncompetition Agreement in respect of a
payment that became due under the Noncompetition Agreement. The
Debtors responded, indicating that they were prepared to seek
authority to reject the Management Agreement, and, to the extent
that the agreements are executory contracts, to reject the
Noncompetition Agreement and the First Refusal Agreement, and to
request for the denial of payment of Cusimano's administrative
expense claim.
Under the terms of the Management Agreement, Cusimano agreed to
serve as the Manager of the Funeral Home for a five-year period
commencing May 7, 1998 at an annual salary of $100,000 plus
certain benefits including the use of an automobile.
Under the terms of the Noncompetition Agreement, LGII agreed to
pay Cusimano an aggregate amount of $2,200,000 during the 10
years commencing August 1998:
(a) $62,500 per quarter for the first 5 years and
(b) $47,500 per quarter for the second five years and
Cusimano agreed that he would not engage in certain specified
acts constituting competition with LGII within a 20-mile radius
of the Funeral Home until the later of:
(i) 10 years after May 7, 1998; or
(ii) three years after termination of any employment or
consulting relationship between Cusimano and LGII.
The Noncompetition Agreement, however, provides an express
carveout for Cusimano's ownership and operation of a funeral
home known as the Court Street Funeral Home, located at 230
Court Street in Brookyln, New York.
The First Refusal Agreement requires Cusimano and the nondebtor
party identified therein to offer the assets of the Court Street
Funeral Home, or Cusimano's or the other party's share of common
stock in the corporation that owns those assets, to LGII in the
event that a bona fide offer for the Assets or the Shares
acceptable to Cusimano is received.
Under the First Refusal Agreement, the Assets or the Shares must
be offered to LGII on terms and conditions, including purchase
price, equivalent to those set forth in the offer received by
Cusimano.
After making their presentations before Judge Walsh, the parties
engaged in negotiations to arrive at a consensual arrangement of
the matter. Accordingly, the parties agree and stipulate and
present their stipulation to the Court for approval.
The Stipulation provides that the Cusimano Motion is resolved as
follows:
(1) Rejection of Agreements
The Management Agreement, the Noncompetition Agreement
And the First Refusal Agreement will be deemed rejected
by the Debtors as of March 19, 2001, pursuant to section
365 of the Bankruptcy Code.
(2) Allowed Administrative Expense Claim of $94,890
Cusimano will have an allowed administrative expense
claim, pursuant to section 503(b) of the Bankruptcy Code,
in the amount of $94,890, which will be paid in full by
the Debtors to Cusimano within 10 days of the Court's
approval of the Stipulation.
(3) Delivery of Termination of First Refusal Agreement
The Debtors agree to execute and deliver to Cusimano,
within 10 days of the Court's approval of the
Stipulation, a Termination of the Right of First Refusal
Agreement.
(4) Insurance Benefits and Unemployment Benefits
The Debtors agree that Cusimano will be entitled to
retain all health insurance or other benefits to which
Cusimano is entitled under the provisions of the
Consolidated Omnibus Budget Reconciliation Act, 29 U.S.C.
section 1161 et seq. In addition, the Debtors agree not
to contest any requests by Cusimano for unemployment
benefits from the State of New York.
(5) Cusimano's Release
Cusimano releases, waives and discharges any and all
rights, claims or causes of action against the Debtors or
their affiliates based upon, arising out of or related to
the Agreements. Proof of claim number 2428 filed by
Cusimano will be deemed withdrawn with prejudice upon
Cusimano's receipt of the payment described above and
receipt of the Termination Agreement.
(6) Debtors' Release
The Debtors release, waive and discharge any and all
rights, claims or causes of action against Cusimano, his
immediate family members and Court Street Funeral Home,
Inc. based upon, arising out of or related to the
Agreements, including, without limitation, any avoidance
claims arising under chapter 5 of the Bankruptcy Code.
(7) Removal of Personal Effects and Return of Vehicle
The Debtors agree that within five business days of the
execution of the Stipulation, they will allow Cusimano,
at his own cost and expense, to remove all property owned
personally by Cusimano or members of his family from the
Funeral Home. At the time of the removal of his personal
effects, Cusimano will promptly deliver to the Debtors at
the Funeral Home the 1998 Lincoln Towncar owned by the
Debtors and presently in the possession of Cusimano.
(8) Use of Personal Name and Likeness
The Debtors agree that, subject to the following
sentence, they shall not be entitled to use, and shall
further refrain from using, the name or likeness
(including, without limitation, pictures or photographs)
of Cusimano and any of his family members (including,
without limitation, Cusimano's father and grandfather),
in any advertising, solicitations, bulletins, letterhead,
stationery or other communications or publications made
in connection with the operation of the Funeral Home or
otherwise.
Notwithstanding this, the Debtors retain the right, title and
interest in and to the names Cusimano Funeral Home, Cusimano &
Russo Funeral Home and Cusimano & Russo Inc. and any variations
of such names and may use such names in any and all advertising,
solicitations, bulletins, letterhead, stationery and other
communications or publications made in connection with the
operation of the Funeral Home. (Loewen Bankruptcy News, Issue
No. 44; Bankruptcy Creditors' Service, Inc., 609/392-0900)
LTV CORP.: Grupo IMSA Wins Bidding for VP Buildings Assets
----------------------------------------------------------
The LTV Corporation (OTC Bulletin Board: LTVCQ) selected Grupo
IMSA SA deCV as the successful bidder for all of the assets of
VP Buildings, Inc. and certain related VP Buildings
subsidiaries.
VP Buildings is the nation's second largest manufacturer of pre-
engineered steel buildings for low-rise commercial applications.
It operates 11 facilities in North America and has an interest
in three joint venture plants in Latin America.
Revenues for 2000 were approximately $400 million. The company
employs about 2,300 people in the United States.
The purchase price was $102 million plus the assumption of
certain liabilities.
"The sale of VP Buildings will provide LTV with additional
financial resources and is an important step in our
restructuring effort," said John D. Turner, executive vice
president and chief operating officer. Mr. Turner said that VP
Buildings had grown appreciably since being acquired by LTV in
1997 and that he expected the company to continue its pattern of
success under the ownership of IMSA.
The LTV Corporation is currently operating under protection of
chapter 11 of the U.S. Bankruptcy Code. Completion of the sale
is subject to regulatory and bankruptcy court approvals. A
hearing on the transaction is scheduled in U.S. bankruptcy court
on August 29.
Grupo IMSA, a holding company, was founded in 1936 and is today
one of Mexico's leading diversified industrial companies. The
Group operates in four core businesses: steel processed
products; automotive batteries and related products; aluminum
and other related products; and steel and plastic construction
products.
With manufacturing facilities in Mexico, the United States and
throughout Central and South America, Grupo IMSA currently
exports to all five continents. In 2000 Grupo IMSA's sales
reached US$2.2 billion, of which close to 45% was generated
outside Mexico. Grupo IMSA shares trade on the Mexican Stock
Exchange (IMSA) and, in the United States, on the NYSE (IMY).
The LTV Corporation is a manufacturing company with interests in
steel and metal fabrication. LTV's Integrated Steel segment is a
leading producer of high-quality, value-added flat rolled steel,
and a major supplier to the transportation, appliance,
electrical equipment and service center industries.
LTV's Metal Fabrication segment consists of LTV Copperweld, the
largest producer of tubular and bimetallic products in North
America.
MONTGOMERY WARD: Taps CONSOR & WebReCo for Online Asset Sale
------------------------------------------------------------
The leading intellectual property valuation and leverage
consulting firm has partnered with the premier online
marketplace for web-based infrastructure to sell the information
technology assets of the bankrupt department store chain
Montgomery Ward, LLC (Wards).
CONSOR(R) Intellectual Asset Management of La Jolla, California,
and Website Recycling Company (WebReCo), developed jointly by
Gordon Brothers Group, LLC, and The Screen House, both of
Boston, will market and sell Ward's fine jewelry website and
several retail-specific software packages through
http://www.WebReCo.comand a special website,
http://www.WardsIT.comlaunched on Tuesday, August 21, 2001.
The assets for sale include Ward's website for the sale of fine
jewelry, its Class B Internet license, and its SMARTsuite
software (a series of integrated programs designed to run both
store and back office operations).
Among the SMARTsuite (Strategic Merchandising and Retail
Technology) software packages are SMARTauto, a complete system
for managing retail auto maintenance facilities; SMARTmerchant,
a merchandise management application; SMARTservice, a management
system for warranty service and in-home repairs; SMARTstaff, an
automated staff-scheduling system for retail stores; and
SMARTstore, the design of a point of sale and back room
application.
In addition, a robust data warehouse designed and developed for
the most demanding retail operations is available.
"Wards invested a great deal of thought, time, and nearly $100
million in building these systems," said Jay Lussan, Director of
CONSOR, who is leading the sale of Ward's assets. "In some
aspects, the enterprise systems for sale here are the only ones
of their kind, in part because there was no acceptable
commercial off-the-shelf alternative at the time they were
developed in 1999 and 2000."
"These offerings will bring tremendous value to any operation
looking to upgrade its systems," said Gage Andrews, President of
WebReCo and Managing Director of Gordon Brothers. "Purchasers of
these assets can now harness cutting edge technology at a
fraction of the cost usually associated with the development of
such sophisticated systems."
Montgomery Ward, LLC was forced to close its entire 252-store
chain earlier this year after 128 years in business. The company
appointed CONSOR to manage the process of selling its custom and
commercial software applications, including enlisting the
resources necessary to execute the disposition of those assets,
such as the alliance with WebReCo.
About CONSOR Intellectual Asset Management
For the last fifteen years, CONSOR has been the leading
independent intellectual property consulting firm in the world.
CONSOR specializes in the valuation, licensing and leverage of
the complete range of intellectual capital and intangible
assets, including trademarks, patents, software, operating
platforms, IT and Internet assets.
CONSOR's valuation and disposition clients include Boston
Market, Kenar, and Polartec. In addition, it conducts
assignments for GE Capital, Bank of America and JPMorgan-Chase.
For more information, visit http://www.consor.com
About Website Recycling Company (WebReCo)
The Website Recycling Company (WebReCo), developed by Gordon
Brothers Group, LLC, and The Screen House, both of Boston, is
the first value added, online marketplace for the re-sale of
infrastructure and intellectual property assets from any company
with an Internet presence.
WebReCo brings together buyers, sellers and licensees of such
Internet infrastructure assets as IT hardware, custom written
source code and website functionality, and software development
environments. For more information, visit http://www.WebReCo.com
NETWORK-1: Fails to Meet Bid Price Requirement & Faces Delisting
----------------------------------------------------------------
Network-1 Security Solutions, Inc. (NASDAQ: NSSI), (Boston Stock
Exchange: NWT), a technology leader in intrusion prevention
software for critical servers, desktops and mobile computers,
reported that revenues for the second quarter ended June 30,
2001 were $308,000, compared with $352,000 for the quarter ended
June 30, 2000, a decrease of 13%.
Of the $308,000 in revenues for the quarter ended June 30, 2001,
$251,000 was from product licenses and $57,000 was from product-
related services, as compared to $317,000 from product licenses
and $35,000 from product-related services for the comparable
period in the prior year.
The decrease in product licensing was primarily due to a single,
large enterprise workstation license in the same quarter last
year.
The Company reported a loss from continuing operations for the
second quarter ended June 30, 2001 was $1,740,000 compared to a
loss of $2,677,000 for the quarter ended June 30, 2000.
The Company reported a net loss for the second quarter ended
June 30, 2001 of $1,721,000, compared to a net loss of
$2,618,000 for the quarter ended June 30, 2000.
For the six months ended June 30, 2001, revenues were $765,000
compared with $544,000 for the same period in 2000, an increase
of 41%. Network-1 reported a net loss from continuing operations
for the first six months of 2001 of $3,382,000, compared with a
net loss from continuing operations of $3,845,000 for the first
six months of 2000.
The Company ended the second quarter of 2001 with cash and cash
equivalents totaling $2.5 million. The Company has continued to
institute measures to reduce its overhead so that its current
cash balance, together with revenue assumptions, will be
sufficient to satisfy its cash requirements through December
2001.
The Company is currently seeking financing necessary to
finance its operations after December 2001.
During the second quarter of 2001, the Company entered into a
license agreement with a major government research laboratory
for its CyberwallPLU-SV (server) products for $75,000. This same
facility had already standardized on CyberwallPLUS-WS
(workstation) to directly protect the desktop computers of its
employees and subsequently extended the deployment to include an
additional layer of defense for more valuable data and
application servers.
"The Company continues to see an increase in major account and
strategic partner opportunities as companies allocate resources
to internal security projects," said Murray Fish, President and
Chief Financial Officer of Network-1. "While companies have cut
back their overall spending or have deferred projects, there has
not been an equivalent cutback or slowdown in computer security
projects."
"The success of our product in defending against the CodeRed
Worm versions I, II and III Internet attacks is a testament to
our proactive intrusion detection and prevention approach,"
stated Fish. "Many companies are now experiencing CodeRed Worm
internal attacks from unsecured laptops or Internet connections.
On Microsoft Internet Information Servers (IIS), CyberwallPLUS
stops CodeRed attacks cold, logging attempts so that the
attacking machine can be identified and quarantined. If
CyberwallPLUS is installed on a previously infected laptop or
server, CyberwallPLUS allows the infected machine to continue
functioning on the network, but blocks attempts to scan or
infect other IIS servers."
Fish continued, "In the second quarter we reorganized our
business to reallocate assets to development from other business
units and to reflect the changing economic climate. Our
operations, including license revenues, were impacted in this
quarter and will be impacted in the third quarter by the
reallocation of resources from sales and marketing to
development, but we believe that these are necessary decisions
for the long-term success of the Company."
In the June 2001 issue of SC Security Magazine, CyberwallPLUS
was awarded their top rating: Five Stars. In an article titled
"The King of Firewalls," the magazine stated, "Closing the
security gaps in Windows, CyberwallPLUS enforces network access
control policies on all incoming and outgoing traffic, detecting
and blocking an impressive array of network attacks and
intrusions in real-time. For added security, the CyberwallPLUS
packet filter engine provides stealth protection of the closed
networking ports so that they silently drop incoming connection
attempts."
The Company was recently notified by Nasdaq that its Common
Stock failed to maintain a minimum bid price of $1.00 over the
previous 30 trading days as required by The Nasdaq SmallCap
Market Rules.
In accordance with such rules, the Company has until October 29,
2001, for its Common Stock to trade at a closing bid price of at
least $1.00 for 10 consecutive trading days or its securities
will be delisted from Nasdaq. In the event of a delisting, an
investor could find it more difficult to dispose of or to obtain
accurate quotations as to the market value of the Company's
Common Stock.
About CyberwallPLUS
Network-1 Security Solutions, Inc. (NASDAQ: NSSI) is a leader in
server and workstation intrusion prevention software, combining
the benefits of firewalls and intrusion detection directly on
critical servers, desktops, and mobile computers. Distributed
intrusion prevention protects against abuses by those with
"insider access" and provides multiple layers of defense against
breaches by outsiders.
Leading edge companies are using CyberwallPLUS as an integral
component of their "defense in depth" security strategies.
Additional details about the Company and its products are
available at http://www.network-1.com/
OPTEL: Unsecureds Approve & Support Reorganization
--------------------------------------------------
OpTel announced that its official committee of unsecured
creditors has agreed to support OpTel's exit from bankruptcy.
The company said it expects to file its plan of reorganization
and disclosure statement shortly and complete its exit prior to
year-end 2001.
A spokesman for OpTel said, "The company looks forward to a
return to normalized operations, generating positive cash flow
and the introduction of enhanced services in its markets."
OpTel offers cable television services to over 335,000 single
family and multiple dwelling residences in eleven major urban
clusters. Its largest clusters are in Houston, Dallas-Fort
Worth, South Florida, Chicago and San Francisco.
OpTel filed its Chapter 11 bankruptcy in October 1999. Since
that time, OpTel has divested itself of assets in Southern
California and Austin, Texas.
OWENS CORNING: Claimants' Panel Taps Tersigni as Accountant
-----------------------------------------------------------
The Official Committee of Asbestos Claimants of Owens Corning
sought and obtained an order from the Court to employ L.
Tersigni Consulting P.C. as accountant and financial advisor.
Matthew G. Zaleski, Esq., at Ashby & Geddes in Wilmington,
Delaware discloses that Tersigni provides expert services
regarding accounting, financial and valuation in bankruptcy and
litigation related matters.
Mr. Zaleski reveals that the Committee selected Tersigni based
upon its extensive experience and knowledge in providing expert
consultation and advice regarding complex financial matters,
rendering such services as the analysis and interpretation of
accounting, tax, statistical, financial, economic and valuation
date.
The Committee believes that Tersigni's services are both
necessary and appropriate and will assist the Committee in the
negotiation, formulation, development and implementation of the
plan of reorganization.
Mr. Zaleski adds that among matters that Tersigni has provided
consulting and expert testimony services are the H.K. Porter,
Keene Corporation, Hillsborough Holdings Company and Babcock &
Wilcox Company asbestos reorganizations.
Tersigni will perform services to the Committee including:
a) Development of oversight methods and procedures so as to
enable the Committee to fulfill its responsibilities to
monitor the Debtors' financial affairs;
b) Interpretation and analysis of financial materials,
including accounting, tax, statistical, financial and
economic date regarding the Debtors and related parties;
c) Analysis and advice regarding additional accounting,
financial, valuation and related matters that may arise in
the course of these proceedings.
Tersigni will be compensated on an hourly basis and compensation
will be on the basis of the hourly rate schedule:
Managing Director Level $395/hour
Director Level $300/hour
Senior Manager Level $275/hour
Manager Level $225/hour
Professional Staff Level $150-175/hour
Paraprofessional Level $75/hour
Loreto T. Tersigni, principal of L. Tersigni Consulting, P.C.
discloses that he has provided services to the Committee through
his former firm Goldstein Golub Kessler LLP (GGK) during the
period October 16 to December 31, 2000. Mr. Tersigni states that
he will remit to GKK any portion of the fees generated by
services during that period that are payable to GGK.
Mr. Tersigni contends that they do not have any relationship
with any entity which would be adverse to the Committee or the
creditors, and neither are they a creditor, former employee,
equity security holder or insider.
Mr. Tersigni also adds that neither he nor his Firm have any
interest adverse to the Debtors' estates, creditors or equity
holders and are disinterested. (Owens Corning Bankruptcy News,
Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900)
PACIFIC GAS: Unsecureds Get Okay to Hire Milbank as Counsel
-----------------------------------------------------------
The Official Committee of Unsecured Creditors of Pacific Gas and
Electric Company sought and obtained Judge Montali's permission
to retain Milbank, Tweed, Hadley & McCloy LLP as its attorneys
in the Debtor's chapter 11 case, nunc pro tunc to April 16,
2001. Specifically, Milbank will:
(a) advise the Committee with respect to its rights, powers
and duties in this case, and assist the Committee in
exercising and fulfilling such rights, powers and duties;
(b) assist and advise the Committee in its consultations
with PG&E relative to the administration of this case;
(c) assist the Committee in analyzing the claims of PG&E's
creditors and in negotiating with such creditors;
(d) assist with the Committee's investigation of the acts,
conduct, assets, liabilities and financial affairs and
condition of PG&E and the operation of PG&E's business;
(e) assist the Committee in its analysis of, and
negotiations with, PG&E or any third party concerning
matters related to, among other things, the terms of a
plan of reorganization for PG&E;
(f) assist the Committee in connection with legislative
hearings, proceedings and matters, state and federal
regulatory proceedings, hearings and matters, and other
similar hearings, proceedings and matters;
(g) assist the Committee in connection with any litigation
affecting PG&E's assets and business operations, the PG&E
chapter 11 case, the confirmation and implementation of a
plan of reorganization, and the outcome of the PG&E
bankruptcy case;
(h) assist and advise the Committee with respect to its
communications with the general creditor body regarding
significant matters in this case, including relevant
legislative, regulatory and administrative matters;
(i) review and analyze all applications, orders, statements
of operations and schedules filed with the Court and
advise the Committee with respect thereto;
(j) assist the Committee in evaluating, and pursuing if
necessary, where appropriate and authorized, claims and
causes of action;
(k) assist the Committee in preparing pleadings and
applications as may be necessary in furtherance of the
Committee's interests and objectives;
(l) represent the Committee at all hearings and other
proceedings before judicial, legislative, administrative
and regulatory tribunals and bodies; and
(m) perform such other legal services as may be required and
are deemed to be in the interests of the Committee in
accordance with the Committee's powers and duties as set
forth in the Bankruptcy Code.
Milbank will bill for its services at its customary hourly
rates:
Partners $450 to $595
Associates $295 to $435
Paralegals $125 to $155
The three principal partners working for the Committee --
Paul Aronzon, Esq., Edwin Feo, Esq., and Robert Moore, Esq. --
have agreed to cap their hourly rates at $595 per hour (and $80
per hour reduction for Messrs. Aronzon and Feo).
Mr. Aronzon discloses that Milbank distributed a memorandum to
all of its partners, other attorneys and all other employees in
all of its offices around the world, asking them to disclose
whether they owned any shares in PG&E Corporation and reminding
them that PG&E Corporation is on the Firm's Restricted
Securities List.
Three partners responded in the affirmative. One partner
owns less than 50 shares; a second owns 55 shares; and a third
owns less than 220 shares. In the aggregate, the market value of
these shares totals less than $4,000. Mr. Aronzon suggests, and
Judge Montali agrees, this does not impair the Firm's
disinterestedness.
Mr. Aronzon further discloses that it has connections with the
CalPX. In 1998, Milbank served as counsel during the period of
its formation and incorporation. In December, 2000, Milbank
offered advice on employment related issues.
In January 2001, Milbank counseled CalPX's Board of Directors
about insolvency and filed tariff issues and appeared in certain
state court injunctive relief actions. On January 23, 2001,
Milbank resigned as counsel to the CalPX after discovering too
many potential conflicts with CalPX creditors. Milbank is
currently a creditor of the CalPX. (Pacific Gas Bankruptcy News,
Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900)
PHYCOR INC.: Continues Talks with Convertible Sub Noteholders
-------------------------------------------------------------
PhyCor, Inc. (OTCBB:PHYC) announced the results of its
operations for the second quarter ended June 30, 2001. The
Company reported revenues for the quarter of $70.9 million,
compared with $258 million for the same period in 2000.
The net loss for the second quarter was $4.4 million, compared
with a net loss of $426.8 million for the same quarter in 2000.
The decline in revenues was primarily attributable to the sales
of clinic assets that occurred in the last two quarters of 2000
and the first quarter of 2001.
PhyCor no longer owns any clinic assets, although it does
provide management services to several clinics and physician
networks in its PhySys Division.
The Company also sold its demand management subsidiary,
CareWise, Inc., in May 2001.
For the six months ended June 30, 2001, PhyCor reported revenues
of $156.2 million and a net loss of $24.5 million, compared with
$567.5 million in revenues and a net loss of $452.4 million in
the first six months of 2000.
The Company said that its Independent Practice Association (IPA)
Management Division, which includes the California-based
subsidiary PrimeCare Medical Network, Inc., as well as its IPA
businesses operated under its North American Medical Management
(NAMM) structure in Illinois, Kansas, Missouri, Tennessee and in
Northern and Southern California, reported revenues in the
second quarter of 2001 of $66 million and earnings before
interest, taxes, depreciation and amortization (EBITDA) of $3.6
million.
For the six months ended June 30, 2001, the IPA Management
Division reported revenues of $136.3 million and EBITDA of $6.1
million.
PhyCor is in default on the payment of certain obligations,
including the interest on its Convertible Subordinated Notes,
and is in discussion with a committee that represents the
holders of these notes. The failure to reach a satisfactory
agreement with these holders and other bondholders and creditors
could have a substantial material adverse effect on the Company.
PILLOWTEX CORP.: ARK CLO Moves to Compel Decision on Lease
----------------------------------------------------------
Prior to the Petition Date, Pillowtex Corp., entered into a
lease agreement with Fleet Business Credit Corporation for the
Debtors' yarn production facility in Newton, North Carolina.
Kathleen P. Makowski, Esq., at Klett Rooney Lieber & Schorling,
in Wilmington, Delaware, tells Judge Robinson that all right,
title and interest of the lessor in and to the Lease Documents
were sold and assigned to ARK CLO 2000-1 Limited last December.
As of Petition Date, the Debtors owe ARK CLO $5,824,194.60 under
the Lease Agreement. Although the Debtors made post-petition
lease payments amounting to $836,976.33, Ms. Makowski says, the
Debtors failed to make any further payments since April 2001.
According to Ms. Makowski, the Debtors' liability for post-
petition payments for the Newton Facility continues to
accumulate at $133,333.33 per month.
But on June 30, 2001, the Debtors ceased its operations at the
Newton Facility.
Given this development and the fact that the Debtors have
stopped making lease payments, Ms. Makowski argues that the
Debtors should be compelled to immediately decide whether to
assume or reject the Lease Agreement.
Ms. Makowski says a prompt decision will allow the Debtors'
estate to avoid incurring additional administrative expense
liability and allow ARK CLO to avoid suffering further economic
harm. Ms. Makowski cites section 365(d)(3) of the Bankruptcy
Code as basis for this argument.
Ms. Makowski notes that this provision requires the Debtors to
perform their obligations under an unexpired lease of
nonresidential real property until such time that the lease is
assumed or rejected.
On the Debtors assertion that the Lease Agreement is not a true
lease, ARK CLO is disputing this allegation. But ARK CLO is also
covering its bases by filing Uniform Commercial Code financing
statements in the appropriate jurisdictions as precautionary
notice filings.
Ms. Makowski says these filings are enough to perfect ARK CLO's
liens in case the Court should determine that the Lease
Agreement is a financing transaction. (Pillowtex Bankruptcy
News, Issue No. 11; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
PSINET: Objects to Global's Motion to Compel Decision On CPA
------------------------------------------------------------
PSINet, Inc. opposes the Motion of Global Crossing U.S.A. Inc.
to compel the Debtor to assume or reject the Capacity Purchase
Agreement. The Debtors cite three major reasons for the
opposition.
First, it is established law that a Debtor is entitled to a
"reasonable" amount of time to decide which executory contracts
should be assumed or rejected, viewed in light of all of the
facts and circumstances of the particular case.
Global Crossing's Motion was filed on day 33 of these bankruptcy
cases, and heard by the Court on day 50. The Debtors are unaware
of any case - and Global Crossing does not identify any - in
which any Debtor has been required to assume or reject any
executory contract in such a short a period of time, let alone
an agreement as significant as the CPA, in a Chapter 11 case as
complex as the PSINet's.
Second, the CPA and its separately negotiated schedules for the
purchase and maintenance of fiber optic cable is not a single
"contract" within the meaning of Section 365 of the Bankruptcy
Code. Whether a single instrument constitutes one contract or
several contracts is a question of state law, the Debtors aver,
and under New York law, which governs construction of the CPA,
it is clear that the CPA contains several severable contracts.
Specifically, these are:
(a) The Operating and Maintenance ("O&M") obligations
represent separate contracts from the purchase of the
IRUs themselves; and
(b) Each of the individual IRU purchases, which is separately
negotiated, and attached as schedules to the CPA,
contains separate price terms and can separately be
assigned outside of bankruptcy. Each purchase thus
represents a separate and distinct contract, each of
which can be individually assumed or rejected under
Section 365.
Based on this, the Debtors argue that Global Crossing is not
entitled to use the pending dispute between the parties
regarding the Latin America IRU as a ground to seek immediate
assumption or rejection of other IRU purchases.
Thus, even if the Court were inclined to compel a decision on
whether to assume or reject, the Debtors take the position that
it is not a single executory contract that must be assumed or
rejected in whole.
The Debtors tell the Court that the introduction to the CPA
itself makes it clear that the agreement to sell the IRUs was
viewed as a separate agreement from the O&M obligations, and
under New York law, the intent of the parties is paramount in
determining whether contracts are severable or entire.
"Application of common law principles of severability makes
clear that each of the IRU purchase agreements is severable from
the corresponding O&M agreement, and the agreements with respect
to each of the IRUs is severable from one another," the Debtors
add.
Third, the Debtors assert that the aspects of the contract
relating to the purchases of the IRUs themselves (as opposed to
the O&M obligations) represent financing agreements rather than
true leases under the principles of New York law and the UCC.
Thus, the IRU purchase obligations are not executory at all, the
Debtors argue, and not subject to the relief sought by Global
Crossing under Section 365.
The Debtors draw Judger Gerber's attention to Section 1-201(37)
of the N.Y.U.C.C. which provides that a transaction creates a
security interest, rather than being a true lease, if "the
consideration the lessee is to pay the lessor for the right to
possession and use of the goods is an obligation for the term of
the lease and not subject to termination by the lessee," and any
one of the requirements below is satisfied:
(a) the original term of the lease is equal to or greater
than the remaining economic life of the goods,
(b) the lessee is bound to renew the lease for the remaining
economic life of the goods or is bound to become the
owner of the goods,
(c) the lessee has an option to renew the lease for the
remaining economic life of the goods for no additional
consideration or nominal additional consideration upon
compliance with the lease agreement, or
(d) the lessee has an option to become the owner of the goods
for no additional consideration or nominal additional
consideration upon compliance with the lease agreement.
In addition, the Debtors refute Global Crossing's assertion that
the CPA was not terminated before PSINet's petition.
The Debtors point out that Global Crossing's assertion that the
CPA was terminated pre-petition cannot be reconciled with the
motion because if the CPA had been terminated before petition,
there would be no executory contract to assume or reject.
The Debtors' position is that Global Crossing did not terminate
the CPA and PSINet's rights under that contract are property of
their estates under 11 U.S.C. section 541(a).
The Debtors remind Judge Gerber that section 10(a) of the CPA
states that in the event of an uncured default, Global Crossing
may (a) suspend service until the default is cured, and (b) take
further action to enforce its rights under the CPA, including
the right to terminate.
PSINet reiterates that by 5:00 p.m. on May 31, 2001, Networks
cured the declared default. There is no dispute about this, the
Debtors assert. If Global Crossing did not terminate the CPA
before 5:00 p.m. on May 31, 2001, it could not terminate it
afterwards because the default had been cured, and as of
approximately 7:00 p.m. it would have violated the automatic
stay if it did so, the Debtors argue.
With respect to the critical vendor motion, the Debtors point
out that they brought the motion on the express understanding
that there were prepetition amounts due and that Global Crossing
had rejected or returned the Debtors' prepetition wire transfer.
The Debtors tell Judge Gerber that, they would have made the
agreed "commercially reasonable efforts" to secure the relief
set out in the critical vendor motion had Global Crossing
returned the prepetition amount.
However, upon the opposition by the Creditors' Committee, the
relief might still not be granted.
Reply of Global Crossing
Global makes it clear that it has requested the only relief it
is entitled to as a party to a prepetition contract with a
debtor - the right to compel the debtor to fix a time frame to
decide whether to assume or reject its contract, and relief from
stay to terminate. Furthermore, its motion is based upon the
Debtor's postpetition default on its promises in connection with
the agreement and its prepetition and postpetition payment
defaults.
It apprears to Global that the Debtor's purpose to sever the
various rights under the contract, first from each other, then
from the maintenance provisions, and selling them piecemeal,
might be to separate the rights and obligations that are
beneficial from those that are not although the Debtors have not
disclosed this.
Global also notes certain contradiction in the Debtors' argument
in that the Debtor has previously conceded that its rights under
the CPA comprise a fully "integrated system" which it asserts is
subject to the stay, but now argues that it is free to dismantle
the contract and assume and reject its various parts as it sees
fit.
Furthermore, confusion reigns, Global says, with respect to
the status of Global and the CPA in that the Debtors have
referred to Global as a critical vendor, a utility, and a
nondebtor executory contract party. The Debtors have flip-
flopped time and again, Global complains, on whether and what
protection Global should be afforded.
Global asserts that it should not be subject to such
uncertainty.
It has consistently taken the position that the backbone of its
business is the use of Global's network, Global tells the Court.
The problem with the Debtors' argument, Global says, is that it
is not seeking to pay Global and maintain the status quo while
it determines whether to assume or reject the CPA.
Moreover, despite promises to escrow payments due under the CPA,
the Debtors have refused to respond to requests that they do so.
Accordingly, the Debtors are getting the benefit of Global's
provision of network services, without payment (other than
maintenance).
Global takes the position that, because it maintains ownership
and control over the network, and is responsible for maintaining
it for the benefit of all users, has the right to terminate the
capacity - that is, Global at all times maintains the right to
terminate another party's right to use any capacity in the event
that such party defaults on its payment obligations.
Global reiterates certain points that it made in the motion and
in debunking the Debtors' Opposition, argues that:
(A) The Debtors should be compelled to assume or reject the CPA
The process of reorganization has been going on since
February when the Debtors retained sophisticated bankruptcy
counsel. Given the admitted significance of the services
provided under the CPA, it is unlikely that the Debtors have
not, or in any event cannot, make a decision about the
assumption or rejection of the CPA.
The Debtors have already sold a subsidiary and triggered
issues regarding the status of the CPA -- the clear language of
the CPA permits Global to suspend or terminate the capacity
transferred in the PSINet stock sale upon the expiration of the
60 day cure period following notice of a payment default; if the
payment default is not cured, the purchaser will suffer a
service interruption (the same service interruption that the
Debtors would suffer in the absence of the automatic stay). The
Debtors have taken the position that Global cannot terminate any
rights under the CPA - even service to nondebtor entities -
because the entire system is so interrelated. In essence, the
Debtors are seeking to extend the stay to nondebtor entities to
the detriment of Global.
The Debtors appear to be poised to transfer other rights
under the CPA, but without making any decision on whether to
assume or reject it. The thrust of the Debtors' position is that
they are selling assets and intend to sell, if appropriate, any
rights to use capacity in Global's circuits that may be
valuable, all without addressing Global's request to resolve
these issues. This assumes that the Debtors have the right to
sever the various provisions and rights of the CPA and transfer
them, notwithstanding the contract terms.
(B) The Cross-Default Provisions of the CPA are Enforceable,
Irrespective of Whether the CPA Is a Single Contract
Courts in the Second Circuit have repeatedly enforced cross-
default provisions, even in the context of separate contracts,
provided that they are related and involve the same integrated
transaction. See, e.g., In re Kopel, 232 B.R. 57 (Bankr.E.D.N.Y.
1999); In re Easthampton Sand & Gravel Co., 25 B.R. 193
(Bankr.E.D.N.Y. 1982) (enforcing cross default provisions of a
note and a lease); see also, In re T.& H Diner, Inc., 108 B.R.
448 (D.N.J. 1989) (enforcing cross-default provisions in a lease
and series of notes issued pursuant to a purchase agreement).
"Enforcement of a cross-default provision should not be refused
where to do so would thwart the non-debtor's party bargain."
Kopel, 233 B.R. at 66.
The case for enforcing the cross-default provision in the
CPA is even stronger than in Koppel. First, there is only one
master document, the CPA, spelling out the rights and
obligations of the parties. The CPA contemplated additional
usage rights, and the terms of the CPA are expressly
incorporated into each subsequent amendment. Without reference
to the CPA, the amendments and schedules describing the specific
IRUs are incomprehensible. As in Koppel, the assignment
provisions in the CPA ensure that liability and obligations
relating to all IRUs remains with PSINetwork, further supporting
that the CPA and amendments are a single transaction. Kopel, 233
B.R. at 66.
The key determination on whether a cross-default provision
should be enforced is whether a non-debtor party would have been
willing to enter into the contract that the debtor seeks to
assume in the absence of a cross-default clause. Global would
not have agreed to allow PSI to use the network without the
cross-default provisions and the simultaneous execution of the
maintenance and service agreement. The maintenance component is
thus a key element of the bargain and helps to preserve the
integrity of the whole network for the benefit of all of its
users. It is clear that cross defaults were provided to protect
the essence of the bargain. It is a fundamental element of the
transaction that Global maintain possession and control of the
network. Such control is necessary for the protection of the
network and other users.
The inequity is in allowing the Debtor to maintain the
benefit of its bargain without the corresponding burdens.
Without these "burdens" there would be no contract.
(C) The CPA IS a Single Contract within the Meaning of Section
365
The rights to use, the obligation to pay, the obligation to
maintain, and the obligation to pay for such maintenance, are
all among the multiple rights and obligations bundled up in this
"umbrella like" agreement, called the "Capacity Purchase
Agreement." The CPA provides that a default on either the
obligation to pay for the right to use the circuits or the
obligation to pay for their essential maintenance constitutes a
default under the agreement giving rise (in the absence of a
cure) to, among the rights, the right to terminate the entire
CPA.
To the contrary, the Debtors are apparently planning to
implement their view of the CPA and cut it up into pieces to
transfer or sell. The Debtors are simply trying to "cherry pick"
a contract that is clearly indivisible in order to reject
burdensome provisions and assume the beneficial clauses.
Any right to split the right to use from the obligation to
pay for operation and maintenance gives rise to the opportunity
for the Debtors to seek to take the benefits of the CPA and
obtain free service at the expense of Global and the other users
of the network.
Moreover, under New York law, the intent of the parties is
key to the determination of whether contracts are entire or
separable.
The cross-default provision in the CPA is a further
indication that the parties intended to treat their agreement as
a single, indivisible and integrated contract. Similarly, the
provisions in Section 23 of the CPA reflect the intent of the
parties to prohibit the piecemeal splitting of the contract
terms (maintenance versus use) or the usage rights. Section 23
generally prohibits assignment of the Debtors' rights and
obligations under the CPA, and is intended, among other things,
to enable Global to exercise its cross-default remedy by keeping
the liability and obligations under the CPA with one party, PSI.
(D) The CPA Is an Executory Contract under Section 365
In order for a contract to be deemed "executory" for section
365 purposes, material future performance obligations must
remain on both sides of the contract. In this matter, both
PSINetworks and Global have continuing material obligations
outstanding under the CPA. Global must continue to provide
service, to perform all operation, to maintain all licenses,
permits, government regulations and the like related to the
fiber optic cable and the Global Network in its entirety.
PSINetworks has significant and ongoing payment obligations,
including the unpaid balance on the right to use certain of
Global's circuits and the ongoing obligation to pay for
maintenance. Although a duty to pay alone is a sufficient
material obligation to render a contract executory, PSINetworks
has other continuing obligations, including the obligation to
abide by all rules, regulations and requirements governing the
entities with rights to use any circuits in the Global Network,
and to utilize the capacity in accordance with the terms of the
CPA. Further, PSINetworks must comply with the terms of the CPA
with regard to the restrictions on assignment and resale to end
users of the capacity. Finally, the parties have continuing
reciprocal indemnification and hold harmless obligations.
Global is the only party that can service the circuits, and
maintains complete control over them, including the right to
terminate service for nonpayment. This would generally end the
inquiry regarding whether the CPA is executory.
Initially, the Debtors' analysis ignores several fundamental
differences between equipment cases and the rights to use at
issue herein. At the core of the equipment cases is the fact
that the nondebtor party has delivered to the debtor equipment -
a tangible product over which the debtor has acquired both
possession and control. The lessor has forfeited these important
elements of ownership (temporarily) in exchange for the right to
payment by the debtor.
This is the starting point, and it is because the lessor has
parted with these elements of ownership that the analysis
continues to determine whether enough other elements were
retained to conclude that the equipment had not in fact been
sold.
Global, however, has not parted with any thing; nothing has been
delivered, and there has been no transfer of possession or
control. Global has allowed, subject to payment and the other
terms of the agreement, PSINetworks to use its fiber optic
network. Unlike the equipment lease situation where the lessor
must go to the lessee to retrieve on default, PSINetworks simply
flicks a switch that is at all times within its possession and
control.
PSINetworks has purchased the right to use equipment owned,
maintained, administered and controlled by Global, and shares
this right with others similarly situated. This is in fact the
essence of a use agreement, a lease, or a license, but it is not
a sale of anything more than the right to use. It is for this
reason that the lease/financing cases are not on point - they
start with the very premise that is lacking in the CPA.
The right to use regarding title transfer must control. Under
the Pacific Express analysis, the CPA is an executory contract -
it is by its terms a single agreement (with amendments, as
contemplated by the parties in the CPA), not three separate
contracts.
PSINetworks cannot transfer the rights it acquired under the
CPA. It acquires nothing at the end of the contract term on
terrestrial circuits (such as the Latin American Capacity), and
no connection rights at the end of the term on the submarine
circuits.
Even at the end of the contract term and even with respect to
submarine circuits, PSINetworks has no absolute right to arrange
for the disposition of the circuits (since it is subject to the
rights of the other parties with similar usage rights). Any
increase in capacity over the circuits inures entirely to the
benefit of Global - PSINet has absolutely no right to use any
more of the circuits or cable than the designated capacity set
forth in the CPA. Global retains a multitude of indicia of
ownership.
The Debtors' argument that they have purchased Global's circuits
because they have paid for their "useful" life and have an
option to purchase submarine circuits at the end of the contract
term for $1.00 simply ignores the fact that the Debtors get none
of the terrestrial circuits and that they share rights in all
circuits with numerous other users, all of which rely on Global
to maintain and operate the circuits.
Furthermore, the Debtors have no buy-out rights with respect to
the Latin American Capacity, no salvage rights in any part of
the network, and no rights with respect to the circuits other
than the raw right to use.
To find that the Debtor owns the equipment because they agreed
to pay to use it would be fundamentally at odds with the rights
of Global and the other parties who have similar rights of use.
The Debtors would obtain a windfall, moreover, because Global
would be required to incur the expense of continuing to provide
service and maintenance without payment. (PSINet Bankruptcy
News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
REGAL CINEMAS: H1 Net Loss Widens Due To Theatre Closing Costs
--------------------------------------------------------------
Regal Cinema Inc. posted in the first half of 2001 a net loss of
$121.7 million, as compared to $54.0 million in the first half
of 2000.
The increase in the net loss was primarily due to the $52.9
million increase in theatre closing costs, impairment charges,
and loss on disposal of operating assets, as well as increases
in interest expense of $17.0 million.
In addition, the Company incurred $8.0 million in professional
and consulting fees relating to the Company's ongoing
restructuring efforts.
Regal Cinemas Inc.'s total revenues for the second quarter of
fiscal 2001 increased 8.8% to $292.3 million from $268.6 million
in the comparable 2000 period. Box office ticket prices for the
second quarter of 2001 averaged $5.60, which was 4.7% higher
than the $5.35 average ticket price in the second quarter of
2000.
Average concession prices also were higher in the second quarter
of 2001 ($2.32) versus the second quarter in 2000 ($2.18). The
higher prices increased box revenues and concession revenues by
$8.4 million and $4.6 million, respectively. Admissions for the
second quarter of 2001 increased 4.4% to 35.6 million patrons as
compared to 34.1 million patrons for the second quarter of 2000.
The Company's attendance increased in spite of the fact that the
circuit's average screen count during the second quarter of 2001
decreased to 4,036 as compared to the average screen count of
4,428 during the second quarter of 2000.
The increased attendance yielded an increase in box revenues of
$8.3 million and concession revenues of $3.5 million.
Other operating revenue for the second quarter of 2001 was lower
than in the same period in 2000 by $1.1 million due primarily to
the elimination of revenues from the Company's entertainment
centers (Funscapes), partially offset by increased revenues from
certain vendor rebates.
The net loss in the second quarter of 2001 was $(29.0) million
as compared to $(29.4) million in the second quarter of 2000.
Total revenues for the first half of fiscal 2001 increased by
14.3% to $579.4 million from $506.8 million in the first half of
2000. This increase was due to both higher admissions as well as
increased ticket prices. Box office ticket prices for the first
half of 2001 averaged $5.56, which was 6.7% higher than the
$5.21 average ticket price for the same period in 2000.
Concession prices also were higher in the first half of 2001
($2.20) versus the same period in 2000 ($2.14). The higher
prices increased revenue by $27.4 million. Attendance was higher
in the first half of 2001 (72.0 million admissions) as compared
to the 2000 period (65.8 million admissions). The increase in
attendance yielded a revenue increase of $47.8 million.
Other operating revenue was lower in the first half of 2001 by
$2.8 million due primarily to the elimination of revenues from
the Company's entertainment centers (Funscapes), partially
offset by increased revenues from certain vendor rebates.
RESPONSE ONCOLOGY: Reorg Plan Calls For New Equity Financing
------------------------------------------------------------
Response Oncology, Inc. (OTC Bulletin Board: ROIX) announced its
financial results for the second quarter and six months ended
June 30, 2001.
Second Quarter Results
Net revenues for the three months were $30.9 million, down 11
percent from $34.6 million for last year's second quarter.
Several factors contributed to the decline.
The 68 percent decrease in IMPACT(R) Center revenue continues to
reflect the pullback in breast cancer admissions, which resulted
from the high dose chemotherapy/breast cancer study presented at
the American Society of Clinical Oncology (ASCO) in May 1999. As
a result of the decline in referrals, the Company has closed 29
IMPACT Centers since June 30, 2000.
Response Oncology also experienced a decline in insurance
approvals on some of the high dose referrals it obtained.
Physician practice management (PPM) fees were down 13 percent,
primarily due to the termination of a management service
agreement in February 2001.
However, net revenue on a same-practice basis increased 14
percent for the second quarter.
Clinical research revenue decreased quarter-over-quarter due to
a decline in research studies and patient accruals in current
studies. The Company is winding down its standard and high dose
chemotherapy clinical trials and has signed a letter of intent
to sell the assets and research infrastructure of the clinical
research segment to a third party.
These decreases were partially offset by a 12 percent rise in
pharmaceutical sales to physicians, resulting from the addition
of a new pharmacy management contract signed in February 2001
and higher drug utilization by physician groups who have
agreements with Response Oncology.
All operating and general expenses -- including reorganization
costs of $655,000, while excluding pharmaceuticals and supplies
-- for the latest quarter were down 22 percent, or $1.9 million.
This improvement reflected cost reduction and containment steps
put in place in the first quarter of 2000, lower patient volume
and fewer IMPACT Centers, and ending certain PPM service
agreements.
These items were tempered by increases in professional services,
primarily legal and consulting fees related to the Company's
restructuring efforts and bankruptcy filings. Pharmaceuticals
and supplies expense was relatively flat between the two
quarters.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) declined $1.9 million to a loss of ($100,000) for the
most recent quarter from $1.8 million a year ago. The Company's
net loss was ($872,000), equal to ($0.07) per diluted share,
compared with a net loss of ($123,000), equal to ($0.01) per
diluted share, for the 2000 second quarter.
Minimizing Costs While Planning the Future
President and Chief Executive Officer Anthony M. LaMacchia said,
"Our focus remains on stabilizing operations and maximizing
profitability at existing businesses while developing a plan to
divest non-core assets and leverage key ones for future growth.
We also are in discussions with various parties seeking
alternative debt or equity financing as part of our
reorganization plan. While we are disappointed with the wider
loss for the period, we are encouraged by the progress made in
curtailing our costs and increasing pharmaceutical sales."
First Half Results
Net revenues for the six months were 11 percent lower, at $62.5
million compared with $70.2 million for the year-ago period.
This reflected a 60 percent decline in IMPACT Center revenues,
an 11 percent reduction in PPM fees, and a 63 percent drop in
clinical research revenue. Pharmaceutical sales to physicians,
however, were up 8 percent.
All operating and general expenses -- including reorganization
costs and excluding pharmaceuticals and supplies -- were 17
percent lower for the first half of 2001.
EBITDA for the six months decreased $3.2 million to $100,000 in
2001 from $3.3 million for the 2000 period. Response Oncology's
net loss for the six months ended June 30, 2001, was ($2.1
million), equal to ($0.17) per diluted share, versus a net loss
of ($416,000), equal to ($0.03) per diluted share, for last
year's six months.
As previously announced, the Company and its wholly owned
subsidiaries filed voluntary petitions for relief under Chapter
11 of the United States Bankruptcy Code in the United States
District Court for the Western District of Tennessee on March
29, 2001.
Response Oncology is developing a reorganization plan to
restructure its obligations and operations. There can be no
assurance that any reorganization plan that is effected will be
successful.
Response Oncology, Inc. is a comprehensive cancer management
company. The Company provides advanced cancer treatment services
through outpatient facilities known as IMPACT(R) Centers under
the direction of practicing oncologists; owns the assets of and
manages the nonmedical aspects of oncology practices; compounds
and dispenses pharmaceuticals to certain medical oncology
practices for a fee; and conducts clinical research on behalf of
pharmaceutical manufacturers.
SAFETY-KLEEN: Tort Claimant Moves To Nullify Automatic Stay
-----------------------------------------------------------
Appellant Central National Insurance Company of Omaha (with
respect to certain policies issued through Craven, Dargan &
Company, Pacific Coast, as its Managing General Agent, joined by
each of Century Indemnity Company, as successor to CCI Insurance
Company, itself successor to Insurance Company of North America,
and Westchester Fire Insurance, in pursuit of their appeals from
Judge Walsh's Order granting stay relief in this matter,
designate the portions of the record which it considers supports
its requested appellate review, and describe the issues on which
the appellants believe Judge Walsh erred.
The Appellants are represented by Linda M. Carmichael and Curtis
J. Crowther of the Wilmington firm of White & Williams as local
counsel, and Leonard P. Goldberger and Steven E. Ostrow of the
Philadelphia branch of that firm.
Issues for Appellate Review
The Appellants ask that the reviewing court reverse Judge
Walsh's Order, arguing that Judge Walsh erred and abused his
discretion in determining that the stipulation and agreed order
between the civil plaintiffs and the Debtors regarding limited
relief from the stay was fair, reasonable and in the best
interests of the creditors of Safety-Kleen Corp.'s estates under
the circumstances that:
(a) Where the stipulation was, on its face, a collusive,
discriminatory agreement between some 28 to 30 personal
injury plaintiffs and the Debtors allowing the minority
of existing personal injury plaintiffs to proceed against
limited insurance assets of the Debtors on a "first come,
first served" basis to the exclusion and detriment of
hundreds of other similarly situated creditors and
claimants of these estates;
(b) Where the claims of the Montiel plaintiffs, as admitted
by the Debtors, could potentially exhaust available
insurance, to the detriment of the holders of hundreds of
other similarly situated tort and environmental claims
for damages in excess of $1.5 billion;
(c) Where the Montiel plaintiffs and other torte and
environmental claims far exceed the limits of the
Debtors' available insurance;
(d) Where the granting of relief from the automatic stay in
favor of the Montiel plaintiffs to allow them to
potentially exhaust available insurance will
substantially increase the claims held by hundreds of
other similarly situated creditors who were unaware that
their claims are at risk;
(e) Where approval of the stipulation and granting relief
from the automatic stagy solely to the Montiel plaintiffs
creates a "race to the courthouse" against the Debtors'
insurance assets in derogation of the fundamental
purposes of the Bankruptcy Code and automatic stay which
are designed to ensure an orderly and equitable
liquidation of limited assets of a bankruptcy estate
among competing creditors;
(f) Where the Debtors failed to serve hundreds of other
similarly situated creditors with notice of the
stipulation and failed to provide them with an
opportunity to object thereto;
(g) Where the Debtors previously sought to enjoin the Montiel
plaintiffs' continued violation of the automatic stay on
the grounds that their continuation of litigation would
unfairly allow a minority of creditors to deplete the
Debtors' insurance assets to the exclusion of other
similarity situated creditors;
(h) Where the stipulation impermissibly alters, limits,
violates and prejudices various insurers' rights and
interests with respect to their insurance policies,
including excess insurance policies by, among other
things, granting relief from the automatic stay to the
Montiel plaintiffs to proceed solely against certain
selective policies (including excess insurance policies)
to the exclusion of, and without lifting the automatic
stay to permit the Montiel plaintiffs to first exhaust,
the Debtors' primary policies, fronting policies, and
self-insured retentions, which effectively attempts to
force the insurers to provide defense and indemnity
obligations when such obligations do not otherwise exist
by improperly seeking to avoid the requirements of
prior exhaustion of underlying limits;
(i) Where the orchestrated limited relief from the automatic
stay would result in the Montiel plaintiffs being
entitled to prosecute their claims while the Debtors will
not have a source of funding to pay for any defense
costs, settlements and/or judgments in certain tort and
environmental litigation pending in various jurisdictions
throughout the country;
(j) Where the stipulation effects an impermissible de facto
assignment of the Debtors' insurance; and
(k) Where the Bankruptcy Court refused to grant insurers
adequate protection, and a reservation of rights, of
their claims, defenses and interests with respect to the
pending litigation and the various insurance policies.
The appellants also ask that the reviewing court determine
whether Judge Walsh abused his discretion by approving the
stipulation under the totality of circumstances, including
especially without limitation, the circumstances already
described.
The appellants further contend that Judge Walsh abused his
discretion by granting relief from the automatic stay to allow
the Montiel plaintiffs to liquidate and adjudicate their claims,
and to recover them against, and potentially exhaust, the
limited insurance assets of the Debtors on a "first come, first
serve" basis to the exclusion and detriment of hundreds of other
similarly situated claimants under the circumstances already
described. (Safety-Kleen Bankruptcy News, Issue No. 19;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
SCHWINN/GT: Tells Court a New Financing Deal Is on the Way
----------------------------------------------------------
Schwinn/GT announced to the Court that they are nearing
completion of a financing arrangement that is expected to have
the full support of all major creditor constituencies involved
in the Chapter 11 process.
Schwinn/GT anticipates a financing arrangement will be presented
to the Court for final approval on Monday, August 27, 2001. The
Company stated that a number of procedural issues need to be
completed, including signatures from all participating banks in
order for the agreement to be completed.
At the Company's request, the Court has continued the financing
hearing to Monday, August 27, 2001 to allow the Company to
finalize the agreement.
"We are extremely pleased that we are nearing completion of a
financing arrangement that allows us to normalize our business
with a long-term view which will allow the Company to recognize
the substantial value we believe exists in the Fitness
Division," said Jeff Sinclair, Schwinn/GT's chief executive
officer.
"We anticipate completing the procedural documentation
necessary to present the financing arrangement to the Court
early next week."
The Company stated that it believes this is a positive step in
its reorganization process. The Company currently has in excess
of $15 million on hand to fund and stabilize the business
pending the final approval of its financing arrangement.
"Schwinn/GT has performed ahead of financial projections during
the first month of its restructuring, which has allowed the
Company to negotiate a more favorable long-term financing
arrangement. We are optimistic that with our financing
arrangement in place we will continue this positive trend,"
Sinclair added.
Consideration of the Company's employee retention plan was also
continued to the August 27, 2001 hearing. The Company is
prepared at that time to offer support for its plan, which has
been developed to encourage critical employees to remain with
the Company during its restructuring.
"We are pleased that our lenders, creditors' committee and the
United States Trustee have indicated their support to the Court
of our employee retention program. We believe the plan meets the
Company's needs to encourage key individuals to remain on their
jobs throughout this process," said Sinclair.
The retention plan is on file with the Court and available to
the public; however, individual employee benefits have been kept
confidential to protect the privacy of the Company's employees.
The sale of Schwinn/GT's Cycling Division will proceed as
previously announced on September 10, 2001. Schwinn/GT filed
voluntary petitions for reorganization under Chapter 11 on July
16, 2001, in the United States Bankruptcy Court for the District
of Colorado in Denver.
SERVICEWARE: Appeals Nasdaq Delisting Notice
--------------------------------------------
ServiceWare Technologies, Inc. (Nasdaq:SVCW), a leading provider
of intelligent service applications, reported that on August 14,
2001 it received a Nasdaq Staff Determination indicating that
the Company has failed to comply with the minimum bid price
requirement for continued listing (Nasdaq Marketplace Rule:
4450(a)(5)) and that its securities are, therefore, subject to
delisting from the Nasdaq National Market.
ServiceWare has requested a hearing before the Nasdaq Listing
Qualifications Panel to appeal the Staff Determination.
ServiceWare stock will continue to be traded on the Nasdaq
National Market pending the final decision by the Qualifications
Panel.
The hearing date will be determined by Nasdaq.
About ServiceWare
ServiceWare is a leading provider of intelligent service
applications that enable companies to win on service in their
competitive markets.
ServiceWare's eService Suite(TM) software empowers organizations
to deliver superior service and support, while reducing
expenses. Powered by MindSync(TM), a patented self-learning
search technology, eService Suite enables businesses to develop
and manage a repository of knowledge to effectively answer
inquiries over the Web and in the call center.
More than 200 leading organizations have implemented ServiceWare
software including H&R Block, Northeast Utilities, Amgen, Stream
International, QUALCOMM, Marconi and Sage Software. ServiceWare
is the recipient of the prestigious CRM Excellence Award 2000,
as well as the Software Support Professionals Association (SSPA)
WebStar Service Award 2000.
ServiceWare was also named one of the "Top 100 Companies to
Watch" by KM World Magazine. Learn more by visiting
http://www.serviceware.com
STELLEX: Court Approves Amended Chapter 11 Plan
-----------------------------------------------
Stellex Technologies, Inc. announced the U.S. Bankruptcy Court
for the District of Delaware has approved its Amended
Consolidated Plan of Reorganization.
Stellex's senior lenders and the Committee of Unsecured
Creditors gave full support to the Plan of Reorganization.
On April 20, 2001, Stellex had announced it intended to propose
a "stand-alone" plan of reorganization under which Stellex would
be owned by its creditors.
With the Court's approval of the Plan, Stellex should emerge
from bankruptcy during the first half of September.
P. Roger Byer, Chief Financial Officer of Stellex, stated, "This
has been a long and difficult process that is now nearing a
conclusion. The successful approval of the Plan yesterday is a
tribute to all of the fine Stellex employees who have worked so
hard to make this happen. We would also like to acknowledge the
critical support of our customers and suppliers during this very
difficult year."
Stellex is a leading provider of highly engineered subsystems
and components for the aerospace and defense industries and
operates through its subsidiary Stellex Aerostructures.
Stellex Aerostructures is comprised of three subsidiaries,
Stellex Monitor, Stellex Precision and Stellex Aerospace.
Stellex Aerospace includes Bandy Machining, Paragon Precision,
SEAL Laboratories and General Inspection Laboratories and is
involved primarily in the precision machining of turbomachinery
components, aircraft hinges and other structural components for
the aerospace and space industries.
Monitor and Precision are leaders in the manufacturing of large
complex machined parts and structural sub-assembly components
for the aerospace industry.
TALON AUTOMOTIVE: Will Delay 10-Q Filing Due to Plan Preparation
----------------------------------------------------------------
Talon Automotive Group Inc. will delay the filing of it Form
10-Q financial statement with the Securities and Exchange
Commission.
The Company has indicated that its paramount financial and
accounting priority has been, and is, preparation of a plan of
reorganization and disclosure statement for timely mailing to
its creditors, including its noteholders, in furtherance of its
voluntary petition for reorganization under Chapter 11 of the
U.S. Bankruptcy Code.
The Company has reported that its net sales for the three months
ended June 30, 2001 were $73,392,000, as compared to net sales
of $82,633,000 for the three months ended July 1, 2000.
Income from operations for the second quarter of 2001 was
$892,000, as compared to income form operations of $2,386,000
for the second quarter of 2000.
Net loss for the second quarter of 2001 was $4,443,000, as
compared to a net loss of $2,754,000 for the second quarter of
2000.
Net sales for the six months ended June 30, 2001 were
$136,588,000, as compared to net sales of $168,314,000 for the
six months ended July 1, 2000.
Loss from operations for the first half of 2001 was $1,207,000,
as compared to income from operations of $5,615,000 for the
first half of 2000. Net loss for the first half of 2001 was
$10,900,000, as compared to a net loss of $5,125,000 for the
first half of 2000.
TELESPECTRUM: Banks Agree to Relax Financial Covenants
------------------------------------------------------
TeleSpectrum Worldwide Inc. (OTC: TLSP) posted a consolidated
second quarter net loss of $24.7 million or ($0.78) per share,
compared to a net loss of $4.0 million, or ($.12) per share in
the same period a year ago.
The second quarter 2001 net loss includes a $20.3 million charge
primarily comprised of a restructuring fee related to
TeleSpectrum's amending and restating its credit agreement in
April 2001. Consolidated revenue for the second quarter of 2001
was $57.5 million versus $79.3 million in revenue for
the second quarter of 2000.
Earnings before interest, taxes, depreciation, amortization and
charges for nonrecurring items (EBITDA) were $4.7 million for
the second quarter of 2001 compared to $6.3 million in the same
period a year ago.
J. Peter Pierce, Chairman and CEO commented, "We are pleased
that EBITDA as a percentage of revenue continues to improve
sequentially. The improvement in EBITDA as a percentage of
revenue from the first quarter of 2001 highlights the progress I
believe we are making in our cost reduction programs."
Pierce continued, "However, the current economic climate, our
business fundamentals and factors specific to the teleservices
industry continue to present challenges for TeleSpectrum, as
evidenced by the revenue decline in the second quarter."
Currently, the company has liabilities of $193 million,
exceeding assets of $129 million.
Outlook for Remainder of 2001
Given current economic conditions and their impact on the
telemarketing industry, the Company estimates that revenues for
the full year will fall between $225 million and $235 million,
down from previously stated guidance.
Additionally, the Company's financial condition has negatively
impacted its ability to gain the level of new business
previously expected earlier in the year. As a result of lower
revenue expectations, EBITDA is estimated to be in the $16.5
million to $18.0 million range for the same time period.
Modification of Credit Agreement
Effective on July 31, 2001, TeleSpectrum and its bank group
amended the Company's credit agreement to provide the Company
with the option to defer additional interest payments through
the end of 2001 and lower the financial covenant thresholds for
revenue and EBITDA, taking into account the lowered expectations
for the year.
In connection with this amendment, the Company is also required
to implement an additional cost reduction program by the end of
the third quarter of 2001, which is expected to provide $5
million in annual savings. The Company previously announced cost
reduction initiatives expected to provide $20 million of
annualized savings.
Management estimates that $8.6 million in cost savings have been
realized thus far in 2001. Through June 30, 2001, the Company
has recognized restructuring charges of $4 million with respect
to these initiatives.
Management believes that the credit agreement will need to be
refinanced prior to its maturity date on July 1, 2002. Although
the terms of any refinancing are not presently determinable, the
refinancing could result in substantial dilution to the
company's current equity holders.
About TeleSpectrum WorldWide Inc.
Headquartered in King of Prussia, PA, TeleSpectrum WorldWide
Inc. is a leading full-service provider of multi-channel
customer relationship management (CRM) solutions for Global
1,000 companies in diverse industries, including financial
services, telecommunications, technology, insurance, healthcare,
pharmaceuticals and government.
In addition to providing both traditional business-to-consumer
and business-to-business teleservices, TeleSpectrum also offers
inbound customer service, customer care, as well as the ability
to measure, monitor and improve the customer service experience.
The Company operates in 20 customer contact centers and employs
over 6,000 people in the United States, Canada and the United
Kingdom.
TWINLAB CORP.: S&P Drops Corporate Credit Rating to B From B+
-------------------------------------------------------------
Standard & Poor's lowered its corporate credit rating on Twinlab
Corp. to single-'B' from single-'B'-plus and lowered its
subordinated debt rating to triple-'C'-plus from single-'B'-
minus.
The ratings remain on CreditWatch with negative implications,
where they were placed on May 16, 2001.
The company reported $76.9 million in total debt as of June 31,
2001.
The downgrade reflects operating results below Standard & Poor's
expectations. Sales declined 12% for the first half ended June
30, 2001 versus the same period in 2000. EBITDA for first half
of 2001 was a negative $10.6 million versus $9.3 million for the
same period in 2000.
With the implementation of a new computer system, sales fell
from lower production while operating expenses rose because of
training costs and unabsorbed overhead. The company has received
a waiver for covenant violations on its senior credit facility
and is currently negotiating an amendment with its lender.
Liquidity is adequate.
Standard & Poor's will remove its CreditWatch listing from
Twinlab once the company has obtained an amendment to its senior
credit facility revising its covenant requirements.
Hauppauge, N.Y.-based Twinlab manufactures and markets vitamins
and nutritional supplements sold in 95% of health food stores as
well as through mass merchants and direct-to-consumer channels.
USCI INC.: Subsidiary's Bankruptcy Proceeding Dismissed
-------------------------------------------------------
USCI Inc. has advised the Securities and Exchange Commission
that the bankruptcy proceeding of a principal operating
subsidiary of USCI was dismissed during the quarter ended June
30, 2001.
As a result of the dismissal of the bankruptcy proceeding, that
subsidiary is being reclassified from an affiliate to a
subsidiary and the operations of that subsidiary are being
included in the consolidated financial statements of USCI and
the results for the prior year period are being restated to
include the results of that former affiliate in the Company's
consolidated financial statements.
As a result of the reclassification of the former affiliate as a
subsidiary, USCI is unable to file its Form 10-QSB for the
quarter ended June 30, 2001 by the prescribed due date.
Further, as a result of the reclassification and a gain realized
by that subsidiary relating to settlement of payables, USCI
anticipates reporting net income for the six months ended June
30, 2001 of approximately $700,000.
U.S. HOME: Faces Delisting For Failure To Meet Price Requirement
----------------------------------------------------------------
U.S. Home & Garden Inc. (Nasdaq:USHG) received a notice dated
August 21, 2001 indicating that the Company has failed to regain
compliance with the $1.00 minimum bid price requirement for
continued listing (Marketplace Rule 4310(c)(4)).
The Company's common stock is therefore potentially subject to
delisting from the Nasdaq SmallCap Market. The Company will
request a hearing before the Nasdaq Listing Qualifications Panel
to review the Staff Determination.
U.S. Home & Garden's stock will continue to be listed on the
Nasdaq SmallCap Market unless the Panel does not grant the
Company's request for an extension of time to regain compliance
with the minimum bid price requirement.
The hearing is expected to occur within approximately 30 days
of its hearing request.
The Company intends to submit a plan at the hearing that it
believes will demonstrate its ability to regain compliance with
the $1.00 minimum bid price requirement.
The presentation will include, among other factors, the
significant progress that the Company has made in implementing
its business plan and a proposed reverse stock split, which
would require a special meeting of stockholders.
There can be no assurance the Panel will grant the Company's
request for continued listing.
Robert Kassel, Chairman & CEO of U.S. Home & Garden commented,
"We continue to make significant progress in all key areas
relating to the restructuring of our business and the
implementation of our business plan. Based on the results of our
efforts to date and our plan to regain compliance, we are
confident that we will be able to demonstrate our ability to
regain and maintain compliance with the minimum bid
requirement."
About U.S. Home & Garden Inc.
U.S. Home & Garden Inc. is a leading manufacturer and marketer
of a broad range of consumer lawn and garden products including
weed preventative landscape fabrics, weed trimmer replacement
heads, fertilizer spikes, decorative landscape edging, shade
cloth and root feeders which are sold under various recognized
brand names including Weedblock(R), Jobe's(R), Emerald Edge(R),
Shade Fabric(TM) Ross(R) and Tensar(R).
The Company markets its products through most large national
home improvement and mass merchant retailers.
To learn more about U.S. Home & Garden Inc., visit its web site
at http://www.ushg.com
VENCOR INC.: Wants Time to Object to Claims Extended to Oct. 17
---------------------------------------------------------------
Approximately 8,900 proofs of claim and interest were filed
against Vencor, Inc. as at the end of last month.
The Debtors have already resolved several thousand claims
through orders granting omnibus objections and reclassifying,
reducing or expunging such claims. The Debtors estimate that
less than 1,000 claims (or less than 12% of all scheduled and
filed claims) asserted against the Debtors' estates remain
unresolved, the majority of which appear to be trade claims
which generally are asserted at $25,000 or less.
The Debtors tell the Court they have worked diligently to
resolve or object to all outstanding claims and believe they
have resolved a significant number of claims.
In particular, the Debtors continue to negotiate with parties
that have responded to prior objections to claims or that have
asserted claims for administrative or "cure" payments, and the
Debtors are preparing the first distributions to be made to the
holders of Class 3B Claims that will be made in the next few
months.
To analyze the remainder of unresolved claims against their
estates and to file objections to any such claims if
appropriate, the Debtors seek to extend the time within which
they may object to claims for an additional 60 days, from August
20, 2001 to October 17, 2001.
The Debtors reason that, absent the relief, their creditors
could suffer an unfair dilution of their claims and/or the
Debtors could be forced to incur significant administrative
costs in attempting to complete the reconciliation of all claims
so as to meet the deadline to object to claims.
The Debtors ask Judge Walrath to consider the time needed for
the time consuming tasks and the substantial progress the
Debtors have made.
The relief is particularly appropriate because the Plan
specifically provided for the possibility of such an extension,
the Debtors represent.
Response of Debt Acquisition Company of America
Debt Acquisition Company of America V, L.L.C. (DACA) is engaged
in the business of purchasing claims in bankruptcy cases. DACA
purchases a claim, pays value to the underlying creditor and
files evidence of the transfer with the Clerk of the Bankruptcy
Court, under Bankruptcy Rule 3001. DACA is the holder of about
2,300 separate claims in Vencor's case.
"The debtor has defaulted in making payments under the Plan,"
DACA tells the Court.
Under the Plan, DACA's claims were classified into Class 3A
(unsecured claims of or reduced to $3,000 or less) and Class 3B
(other general unsecured claims). The Plan provides that
property to an impaired class will be distributed on or as
soon as practicable after the Effective Date, but no more than
10 days after the Effective Date with respect to property other
than cash and 30 days after the Effective Date. However, 63% of
the claims owned by DACA remain unpaid, DACA tells the Court.
Moreover, the Debtors state in the motion that they are
preparing for the first distributions to be made to holders of
Class 3B Claims that will be made in the next few months. DACA
is not happy about this.
DACA also points out that, the Debtors state that they have
resolved all but 12% of their claims yet it appears they are not
making distributions as required by Article VI of their
confirmed plan.
DACA tells Judge Walrath that, for the past 4 months it has made
telephone calls and sent letters to Heather Renfrow, the
individual in charge of disbursements at Vencor, in an attempt
to determine the status of payment but to no avail.
DACA therefore asks the Court to deny the Debtors' motion and
require the Debtors to make payments on those claims held by
DACA.
Further, DACA believes that it may be necessary to make a motion
to appoint an examiner to monitor the payments required by
Vencor. (Vencor Bankruptcy News, Issue No. 32; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WARNACO GROUP: Will Restate Certain Results for the Last 3 Years
----------------------------------------------------------------
The Warnaco Group, Inc. (OTC Bulletin Board: WACGQ) expects to
take a charge to earnings and to restate its financial results
for the last three fiscal years in an amount preliminarily
estimated to aggregate $43 million in order to correct certain
errors discovered in its recording of its intercompany pricing
arrangements and accounts payable and accrued liabilities and,
accordingly, such financial statements should not be relied
upon.
Warnaco noted that the actual amount of the charge to earnings,
as well as the allocation to the prior periods, will not be
definitively determined, and amended reports will not be filed
with the Securities and Exchange Commission, until a review by
the Company is completed.
Warnaco also noted that although it was providing a preliminary
estimate of the charge at this time in order to keep all of its
interested constituencies informed, it could not give assurance
that the finally determined amount would not be materially
different than the amount of its preliminary estimate or that
other adjustments may not be necessary.
The Warnaco Group, Inc., headquartered in New York, is a leading
manufacturer of intimate apparel, menswear, jeanswear, swimwear,
men's and women's sportswear, better dresses, fragrances and
accessories sold under such brands as Warner's(R), Olga(R), Van
Raalte(R), Lejaby(R), Weight Watchers(R), Bodyslimmers(R),
Izka(R), Chaps by Ralph Lauren(R), Calvin Klein(R) men's,
women's, and children's underwear, men's accessories, and men's,
women's, junior women's and children's jeans,
Speedo(R)/Authentic Fitness(R) men's, women's and children's
swimwear, sportswear and swimwear accessories, Polo by Ralph
Lauren(R) women's and girls' swimwear, Oscar de la Renta(R),
Anne Cole Collection(R), Cole of California(R) and Catalina(R)
swimwear, A.B.S.(R) Women's sportswear and better dresses and
Penhaligon's(R) fragrances and accessories.
As previously announced, on June 11, 2001, the Company and
certain of its subsidiaries voluntarily petitioned for
protection under Chapter 11 of the U.S. Bankruptcy Code with the
U.S. Bankruptcy Court for the Southern District of New York.
W.R. GRACE: First Union Moves to Compel Equipment Lease Decision
----------------------------------------------------------------
Represented by John D. Demmy of the Wilmington firm of Stevens &
Lee, First Union commercial Corporation asks Judge Farnan to
order W. R. Grace & Co. (i) to assume or reject an equipment
lease to which Debtor W. R. Grace & Co.-Conn. is a party with
First Union, and to comply with postpetition obligations under
that lease, and (ii) allowing First Union an administrative
claim for unpaid rent under the lease, and ordering the Debtors
to pay that claim.
In their first-day pleadings and in their press releases
regarding the bankruptcy cases, the Debtors make clear that the
reason for the cases is for the Debtors to obtain a forum in
which, they assert, asbestos claims that have been and will be
asserted against them can be resolved and paid in an efficient
and fair manner.
The Debtors have not pointed to any operational or other
business issues that require their reorganization under chapter
11. Rather, Mr. Demmy says, it is the specter of asbestos
litigation, and the actual or potential damage awards resulting
therefrom, potential damage awards resulting therefrom, that has
brought the Debtors, and forced their non-asbestos creditors,
including First Union, to the chapter 11 process. Now Mr. Demmy
and First Union asks the Debtors to live up to those words.
In April 1995, Grace and Baltimore Gas & Electric Company
entered into a contract whereby BGE would acquire and install a
power substation and associated equipment at Grace's facility
located at 5500 Chemical Road, Baltimore, Maryland. The
construction contract was amended, in an amendment signed by
Grace, BGE, and First Union's predecessor, Signet Leasing &
Financial Corporation, in December 1995, to provide for Signet
to acquire and lease to Grace the equipment comprising the
substation.
In that same month, Signet as lessor, and Grace as lessee,
entered into the equipment lease which is the subject of this
Motion.
In this lease, the parties recite, inter alia, that "the parties
agree that Lessee shall lease from Lessor the property described
in the Equipment Schedule(s) to be executed pursuant hereto .
subject to the terms set forth herein, in the Riders annexed
hereto and in the Equipment Schedule".
Signet and Grace then executed Equipment Schedule No. 3059., by
which Signet leased to Grace the equipment comprising the
substation, which Signet had purchased and had installed by BGE.
The first Rider to this lease gives Grace the option, at the end
of the lease term, assuming no defaults exist, to renew the
equipment schedule for all of the equipment at its then fair
market rental value, or to buy all of the equipment at its then
fair market value.
Mr. Demmy places emphasis on the word "all" in this clause. In a
second Rider, Grace represents that it is reasonable to assume
that the useful life of the equipment exceeds the lease term by
the greater of one year or 20% of the estimated useful life, and
that the equipment will have a value at the end of the term of
the equipment schedule of at least 20% of the total invoice cost
of the equipment.
Grace agreed, through a Real Property Waiver, that title to the
equipment remained in Signet, that the equipment would remain
personal property notwithstanding the "manner or mode" of its
attachment to the premises, and not to assert any lien, claim or
interest in the equipment by virtue of Grace's interest in the
realty.
To give notice to third parties of its ownership and lessor
interest in the equipment Signet recorded with the State of
Maryland a Uniform Commercial Code financing statement.
By merger with Signet in November, 1997, First Union became the
succor to all of Signet's right, title and interest in and to
the lease, the equipment schedule, the equipment, and all other
related documents.
First Union is therefore the owner and lessor of the equipment.
The term of the equipment lease is ten years, with rent payments
due on a monthly basis, in arrears, on the 21st day of each
month. The Debtors were current with respect to their rent
payment obligations under the equipment lease as of the Petition
Date, but have not made the payments that have come due on April
21, 2001, and thereafter.
Mr. Demmy and First Union believe that the equipment is
essential to the Debtors' operations at the premises as the
substation provides all of the power used by Grace at the
facility.
Therefore, First Union, disappointed with the Debtors'
nonpayment in light of its representations of no operational
financial problems, asks Judge Farnan to order the Debtors to
assume the equipment lease, cure all postpetition defaults, and
make all future payments timely and otherwise perform their
obligations under this lease. (W.R. Grace Bankruptcy News, Issue
No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900)
WHEELING-PITTSBURGH: Court Okays PCC Bid & Auction Procedures
-------------------------------------------------------------
Judge Bodoh entered an Order approving the bid procedures and
approved the auction procedures proposed by the Debtors to
flush-out the highest and best price for the Pittsburgh-Canfield
assets.
Pittsburgh-Canfield Corporation asked Judge Bodoh to approve
bidding procedures in connection with a proposed sale by PCC of
substantially all of its assets under a Purchase Agreement
between WHX Corporation, PCC Acquisition Co., Inc., a wholly
owned subsidiary of WHX, and PCC, for the sum of $15,000,000 and
the assumption of certain liabilities.
The Debtor further asked Judge Bodoh to approve the terms of the
Asset Purchase Agreement, if another party was the successful
bidder, to authorize and approve the sale of acquired assets to
WHX, or to another party making a higher and better offer, free
and clear of all liens, claims, encumbrances, and interests,
other than permitted encumbrances as defined in the DIP
Facility, to determine that the sale is exempt from any stamp,
transfer, recordation or similar taxes, and to authorize the
assumption and assignment of agreements included within the
definition of acquired assets in the Asset Purchase Agreement.
PCC is a manufacturer of a selection of specialty
electrogalvanized steel products, produced at its facility in
Canfield, Ohio. The facility also supplies other special
products and services, including coil coating, slitting, and
escalated slit coils. The facility has a capacity of 65,000 tons
a year.
The Debtors reminded Judge Bodoh that he had previously approved
the settlement of inter-company disputes.
The settlement and release agreement in that connection
contemplates and provides for a purchase agreement under which
WHX and its designee will (x) purchase specified assets of PCC
for an aggregate price of $15 million, plus the assumption of
specified trade payables of PCC, subject to such bidding
procedures as may be established by the Court, and (y) provide
the Debtors with the right to repurchase the assets of PCC for a
price equal to the price paid by WHX or its designee for such
assets. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 9;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
WINSTAR COMMS: Speedera Balks at Attempt to Splinter Contract
-------------------------------------------------------------
Around August 2000, Speedera Networks, Inc. and Winstar
Communications, Inc. agreed to a mutually beneficial exchange of
services. Winstar agreed to allow Speedera the use certain
infrastructure while, on the other hand, Speedera consented to
let Winstar resell content delivery and traffic management
services.
When the Debtors filed for relief, they moved that certain
executory contracts with Speedera be rejected, namely (a) the
Master Purchase Agreement for Speedera Services and (b) the
Speedera Reseller Agreement.
Counsel to Speedera, Mark Minuti, Esq at Saul Ewing of
Wilmington, Delaware, reveals that these 2 documents are part of
a single executory transaction. A third document, the Master
Purchase Agreement for Winstar Services, establishes Winstar's
obligation to provide services to Speedera Networks.
Mr. Minuti argues that all three documents constitute a single
document. He relates that all three documents were signed on the
same date and the Parties would not have agreed to execute one
document without the remaining two.
On this account, Mr. Minuti contends, the Court should not
permit Debtors to reject only a portion of the Parties'
agreement. He says that such a rejection would hold the Debtors
liable of breaching Section 365 of the Bankruptcy Code and
Speedera would be entitled to make a claim for the said breach.
Mr. Minuti further contends that the court should, at the very
least, investigate the Parties' intent before permitting a
piecemeal rejection of the Parties' agreement.
He requests that if the Courts grant the Debtors' motion to
reject the first two executory contracts, there should be a
concurrent rejection of the Winstar Services Agreement. (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
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Wednesday's edition of the TCR. Submissions about insolvency-
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of interest to troubled company professionals. All titles are
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For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
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Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L.
Metzler, Bernadette de Roda, Ronald Villavelez and Peter A.
Chapman, Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
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