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/raid1/www/Hosts/bankrupt/TCR_Public/010904.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, September 4, 2001, Vol. 5, No. 172 Headlines 360NETWORKS: Unsecureds Panel Wants to Hire Jefferies as Advisor ADVANCE HOLDING: S&P Assigns B+ on Planned $680 Million Loan AMES DEPT.: Gets Okay to Honor Prepetition Customer Obligations AMF BOWLING: Parent Gets Okay to Maintain Existing Bank Accounts AMF BOWLING: Files Plan of Reorganization in E.D. of Virginia ARMSTRONG HOLDINGS: UST Appoints Official Property Damage Panel BOSTON CHICKEN: Trustee Proposes 0.274% Dividend to Unsecureds BRIDGE INFO: Kirkwood Seeks Relief from Stay to Perfect Lien COMDISCO: Court Okays Bidding Procedures for Leasing Asset Sales COMDISCO INC: Court Okays Bingham Dana as International Counsel CONSUMERS PACKAGING: June 30 Results Expected on Oct. 15 COVAD COMMS: Hires Arthur Andersen as Financial Consultants DANBEL INDUSTRIES: Has 120 Days to Meet Listing Requirements DELSOFT CONSULTING: Files Chapter 11 Petition in New York DELSOFT: Case Summary & 20 Largest Unsecured Creditors ENITEL ASA: S&P Drops Ratings to SD after Seeking Court Shield FOXMEYER: Reliance Insurance Tries to Stall Andersen Litigation HARNISCHFEGER: Asks for Extension of Rule 9027 Removal Period LEINER HEALTH: Lenders Agree to Forbear Until Sept. 28 LOEWEN GROUP: Enters Deal with LLC to Sell Michigan Assets LTV CORP: Equity Committee Seeks to Retain Bell as Lead Counsel LTV CORPORATION: Thomas Garrett Appointed as Senior VP and CFO LTV STEEL: Loan Guarantee Filing for Debtor Extended to Sept. 30 METRICOM: Receives Another Filing Deficiency Notice from Nasdaq NEWCOR INC: Will Delay Interest Installment Payment on Sub Notes OWENS CORNING: RLC Moves to Compel Decision on Equipment Lease PACIFIC AEROSPACE: Defaults on $63.7MM Senior Subordinated Notes PACIFIC GAS: Williams Files $591 Million Claim Against Debtor PACIGIC GAS: Court Okays Settlement Stipulation of CellNet Claim PENTASTAR: Gets Defaults Waiver & Maturity Extension to Sept. 30 PILLOWTEX CORP: Moves to Set-Up De Minimis Asset Sale Procedures PILLOWTEX: Gets Court Approval to Complete Blanket Division Sale PSINET INC: Court Okays FTI as Committee's Financial Advisor QUEENSWAY FINANCIAL: A.M. Best Places Rating Under Review Status RESPONSE USA: Enters Global Agreement Spinning-Off Health Watch RIVERWOOD INTERNATIONAL: Proposes 10-5/8% Note Exchange Offer SCHWINN/GT CORP: Court Approves Employee Retention Program SCHWINN/GT: Court Allows Employee Details to Stay Under Wraps SUNTERRA CORP: Incurs $1.6 Million Net Loss in June TELEGEN: Ability to Meet Capital Requirement Still Uncertain THERMADYNE: Cash Sources Not Enough to Meet Debt Servicing Need UNIVERSAL AUTOMOTIVE: Closes $2.8M Investment with Wanxiang Unit VENCOR INC: Bel Air Seeks Payment of Administrative Expenses VLASIC FOODS: Claims & Causes of Action Preserved Under the Plan W.R. GRACE: Ex-Employees Seek to Compel Employee Benefit Payment WHEELING-PITTSBURGH: Needs to Give Ryder a Decision Today WINSTAR COMMS: SBC Demands Adequate Assurance of Future Payments BOND PRICING: For the week of September 4 - 7, 2001 ********* 360NETWORKS: Unsecureds Panel Wants to Hire Jefferies as Advisor ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of 360networks, inc. asks the Court for authority to employ and retain Jefferies & Company, Inc. as Investment Bankers to the Committee, nunc pro tunc as of July 23, 2001. Jefferies offers a broad range of corporate advisory services to its clients, including services pertaining to general financing advice, mergers, acquisitions, and divestitures, and corporate restructuring. The firm also provides underwriting services, performs research, sales and trading functions, and structures project finance transactions. Mark Brandenburg of Pirelli Cables & Systems, a member of the Official Committee of Unsecured Creditors, explains that the Committee seeks to retain Jefferies as their investment banker because: (i) Jefferies and its senior professionals have an excellent reputation for providing high quality investment banking services to debtors and creditors in bankruptcy reorganizations and other debt restructurings, (ii) Jefferies has significant capabilities in merger, acquisition and sale transactions, (iii) Jefferies has extensive knowledge of the Debtors' industry and its dynamics, and (iv) Jefferies has extensive knowledge and experience in valuing and trading securities. In addition, Mr. Brandenburg notes, Jefferies and its senior professionals have extensive experience in the reorganization and restructuring of troubled companies, both out-of-court and in chapter 11 cases. According to Mr. Brandenburg, Jefferies will concentrate its efforts on reviewing strategic alternatives and advising the Committee of the Debtors' efforts with regard to a restructuring. In an Engagement Letter, Jefferies has agreed to provide these investment banking services: (a) become familiar with and analyze the business, operations, properties, financial condition and prospects of the Debtors; (b) advise the Committee on the current state of the "restructuring market"; (c) assist and advise the Committee in developing a general strategy for accomplishing a restructuring; (d) assist and advise the Committee in potentially formulating a plan of reorganization or liquidation; (e) assist and advise the Committee in evaluating and analyzing a restructuring, including the value of the securities, if any, that may be issued under any reorganization plan; (f) assist the Committee in identifying potential financing sources for a recapitalization (including strategic investors); (g) assist the Committee in the negotiation of any and all aspects of a restructuring; and (h) render such other investment banking services as may from time to time be agreed upon by the Committee and Jefferies. Jefferies will be entitled to compensation for its services: (a) A monthly cash fee equal to $125,000 for the first month of the term of this Agreement and $100,000 per month for the remainder of the term of this Agreement. The Monthly Fee shall be payable in cash in advance on the first business day of each month. For the purposes of compensation calculations, the term of this Agreement shall begin on July 23, 2001. (b) A fee that is equal to 1.0% of the value of the total consideration received by all classes of the Debtors' pre-petition unsecured U.S. creditors on account of their claims against the debtors (the Transaction Fee). The Transaction fee shall be payable upon the effective date of a plan of reorganization or plan of liquidation in these cases. Such Transaction Fee may be paid in kind at the full option of Jefferies. (c) In addition to the compensation to be paid to Jefferies, without regard to whether any Plan is confirmed or this Agreement expires or is terminated, the Debtors shall pay to, or on behalf of, Jefferies, promptly as billed, all fees, disbursements and out-of-pocket expenses incurred by Jefferies in connection with its services to be rendered hereunder (collectively, the Disbursements). (d) Jefferies may resign at any time and the Committee may terminate Jefferies' services at any time, each by giving 10 days prior written notice to the other. If this Agreement expires, Jefferies resigns or the Committee terminates Jefferies' services for any reason, Jefferies shall be entitled to receive all of the amounts pursuant to Sections 5(a), 5(b) and 5(c) of the Engagement Letter up to and including the effective date of such expiration, termination or resignation, as the case may be. (e) It is intended by the parties hereto that Jefferies' fees payable pursuant to this Agreement but remaining outstanding at any time, shall be in the nature of a claim for administrative expenses. William Q. Derrough, Managing Director of Jefferies & Company, Inc., tells Judge Gropper that Jefferies received no previous compensation for its work on behalf of the Official Committee of Unsecured Creditors. Mr. Derrough assures the Jefferies is disinterested within the meaning of the bankruptcy code. (360 Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADVANCE HOLDING: S&P Assigns B+ on Planned $680 Million Loan ------------------------------------------------------------ Standard & Poor's today assigned its single-'B'-plus rating to Advance Stores Co. Inc.'s planned $680 million senior secured bank loan. Advance Stores is an operating subsidiary of Advance Holding Corp. Advanced Stores is also expected to issue $150 million in senior subordinated notes due 2008 under Rule 144A with registration rights. On receipt of documentation, Standard & Poor's will assign its single-'B'-minus rating to this issue. Both issues relate to Advance Holding's planned acquisition of Discount Auto Parts Inc. in a cash and stock transaction valued at $267 million. In addition, Standard & Poor's affirmed its single-'B'-plus corporate credit and single-'B'-minus senior unsecured debt ratings on Advance Holding, and affirmed its single-'B'-plus corporate credit and single-'B'-minus senior subordinated debt ratings on Advance Stores. These ratings were simultaneously removed from CreditWatch, where they had been placed Aug. 8, 2001, following the announced acquisition agreement. The outlook is stable. The ratings affirmation is based on satisfactory pro forma credit measures for the rating category, Advance Holding's improved operating performance during the first half of 2001 and the full year of 2000, and the company's success in integrating previous acquisitions. These factors help mitigate the risks associated with the integration of Discount Auto's 667 stores and Advance Holding's approximately $410 million of increased debt in its capital structure. The ratings reflect an aggressive acquisition strategy and high leverage. These risks are mitigated, somewhat, by a leading position in the auto supply retail segment and the company's success in integrating previous acquisitions. The acquisition of Discount Auto Parts will strengthen Advance Holding's position as the second leading auto supply retailer in the U.S., with the combined entity having more than 2,400 locations in 38 states. The acquisition also significantly enhances Advance Holding's market share in Florida where Discount Auto has 438 stores. Standard & Poor's will monitor the company's progress in integrating Discount Auto's operations; store remerchandising, systems conversions, and improvements in store appearances are expected to take one year to complete. Complete remodels are expected to be phased in over several years. Advance Holding acquired and successfully integrated Western Auto Supply Co., which consisted of more than 500 stores in 1998, and Carport Auto Parts Inc., which consisted of 51 stores in 2001. Standard & Poor's expects Advance Holding will continue to focus on the do-it-yourself segment of the market, which represents about 85% of the company's operations and has been growing at about 5% annually in recent years. Pro forma EBITDA coverage of interest is in the mid-2 times area, which provides some downside protection for the rating as Advance Holding integrates Discount Auto's operations. Advance Holding demonstrated improved operations in the first half of 2001 and in fiscal 2000, with same-store sales increases of 6.8% and 4.4%, respectively. Total debt to EBITDA is expected to remain in the high-3x area despite the addition of about $410 million of debt related to the Discount Auto acquisition. Financial flexibility is provided by a $150 million revolving credit facility. Debt maturities and term-loan amortization are expected to be funded through internally generated cash flow and borrowings under the revolver. The bank loan is rated the same as the corporate credit rating. The $680 million facility is comprised of a $150 million revolving credit facility and a $165 million term loan maturing in 2006, and a $365 million term loan maturing in 2007. The facility is secured by substantially all of the assets of the company. Under a distressed enterprise value scenario, Standard & Poor's believes there is a strong possibility of nearly full recovery of principal. OUTLOOK: STABLE Standard & Poor's will monitor Advance Holding's progress in integrating Discount Auto's operations and its impact on existing ratings. Adequate pro forma credit measures and sufficient liquidity provide downside support for the ratings. AMES DEPT.: Gets Okay to Honor Prepetition Customer Obligations --------------------------------------------------------------- Ames Department Stores, Inc. sought and obtained authority from the Court to honor their pre-petition obligations under all pre- petition Customer Programs and to maintain and continue such Customer Programs in the ordinary course of business without interruption in accordance with pre-petition practices. David H. Lissy, Esq., Senior Vice President and General Counsel of Ames Department Stores, Inc., relates that in the ordinary course of their business, the Debtors maintain certain customer- service programs designed to ensure customer satisfaction, including: (1) Returns and Exchanges - The Debtors traditionally have maintain return, refund, and exchange policies with respect to both cash and credit purchases (2) Gifts Cards and Cash Cards - The Debtors sell Ames gift cards, which allow recipients of the cards to apply the card's full value toward the purchase of any item in the Debtors' stores. (3) Layaways - The Debtors maintain a layaway program wherein customers may purchase merchandise on an installment plan basis. (4) Charities - In recognition of their responsibilities as corporate citizens and to enhance Ames' image with its customer base, the Debtors have long sought to support charitable institutions in the neighborhoods. Mr. Lissy contends that the viability and success of the Debtors' business is dependent upon the development and maintenance of customer loyalty. In the Debtors' business judgment, the uninterrupted continuation of their Customer Programs and the payment of any related pre-petition obligations is essential to the Debtors' ability to maintain the loyalty of their existing customer base and to attract new customers. Mr. Lissy asserts that failure to do this would result in irreparable harm to their operations and their prospects for successful rehabilitation will be severely impeded. Mr. Lissy relates that fulfilling their customer obligations and continuing their Customer Programs in the ordinary course of business is particularly important at this time. Mr. Lissy maintains that the Debtors' failure to meet their customers' expectations by not honoring their obligations under the Customer Programs would create doubt in the minds of customers as to the Debtors' ability to honor their future promises and obligations and would result in severe and irreparable harm to the positive customer relations the Debtors now enjoy. Mr. Lissy asserts that the Debtors undoubtedly would be at a competitive disadvantage in the marketplace if they did not continue their Customer Programs. Mr. Lissy states that failure to forward charitable contributions would generate substantial criticism and bad will among the Debtors' customers and employees and would severely impact the Debtors' operating performance. In light of the value of charitable contributions in the Debtors' possession, the Debtors submit that payment of such contributions in the ordinary course would be in the best interests of the Debtors, their estates, the creditors, and all parties in interest. (AMES Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMF BOWLING: Parent Gets Okay to Maintain Existing Bank Accounts ---------------------------------------------------------------- AMF Bowling Inc., sought and obtained the Court's authorization to maintain its existing bank accounts and continue use of its existing business forms. Kevin R. Huennekens, Esq., at Kutak Rock, relates that, as of the Petition Date, the Parent has three bank accounts, two with Citibank and one with the Calvert Group. Judge Tice granted the motion, ordering that: (a) The Parent is authorized to maintain and continue to use, with same account numbers, its existing bank accounts; (b) The Accounts shall be treated for all purposes as accounts of the Parent, in its capacity as Debtors-in-possession; (c) The Parent is authorized to use its existing checks relating to the Accounts in the same manner they were used during the pre-petition period; provided, however that the Parent manually mark such checks "Debtors-in-Possession" and new checks ordered for the Debtors are marked "Debtors- in-Possession"; (d) The Parent is authorized to use its existing business forms in the same manner they were used during the pre-petition period; provided that new forms which are ordered for the Debtors are marked "Debtors-in-Possession"; (e) The banks at which the Parent maintains its accounts shall be prohibited from offsetting, affecting, or otherwise impending any funds of the Debtors deposited in the Accounts, by reason of any pre-petition claim of any such bank against the Parent; (f) The banks at which the Debtors maintains its accounts shall be authorized and directed to continue to service & administer the Accounts of the Debtors, in its capacity as Debtors-in-possession, without interruption & in the ordinary course, & to receive, process, honor, & pay any & all checks and drafts drawn on the Accounts; provided however that no checks or drafts issued on the Accounts prior to the Petition Date shall be honored except as otherwise ordered by this Court. Judge Tice further ordered that nothing shall prevent the Parent from opening or closing bank accounts, as they may seem necessary and appropriate. (AMF Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMF BOWLING: Files Plan of Reorganization in E.D. of Virginia ------------------------------------------------------------- AMF Bowling Worldwide, Inc. filed its proposed plan of reorganization and disclosure statement with the U.S. Bankruptcy Court for the Eastern District of Virginia. For full-text copies of the plan and disclosure statement, go to http://researcharchives.com/bin/search?query=amf+bowling AMF Bowling Worldwide and its U.S. subsidiaries filed voluntary petitions for reorganization under Chapter 11 on July 2, 2001. "The filing of our reorganization plan is an important milestone in AMF Bowling Worldwide's financial restructuring," said Roland Smith, AMF's President and Chief Executive Officer. "We are particularly pleased that we were able to develop a plan that is supported by the steering committee of our senior secured lenders. We will now focus on securing the requisite approvals from the Court so that the plan can be confirmed and the company can emerge from Chapter 11 as quickly as possible." "When we emerge, we will have a much more appropriate debt level and an improved capital structure that will help us towards our goal of financial profitability," added Smith. "In the meantime, we are continuing to focus on serving our customers and improving our operations. I want to thank our customers, our vendors and our employees for their support since the Chapter 11 filing on July 2. Without them, we could not have come as far, as quickly, as we have." If confirmed, the plan of reorganization would provide the senior secured lenders with recovery of their approximately $ 620 million in claims through a combination of equity, subordinated notes, and either senior notes or cash in lieu of those notes. Unsecured creditors would receive warrants to acquire 12% of the equity in the reorganized company. AMF Bowling Worldwide would not make a distribution to AMF Bowling, Inc., the parent company. As previously announced, AMF Bowling, Inc. filed a separate petition under Chapter 11. It is unlikely that holders of the common stock or the zero coupon convertible debentures of AMF Bowling, Inc. will receive any recovery in that proceeding. Company officials noted that the disclosure statement is subject to the approval of the Court before being mailed to creditors for solicitation of their approval of the plan. Because bankruptcy law does not permit solicitation of an acceptance or rejection of a plan of reorganization until a disclosure statement relating to the plan is approved by the Court, this announcement is not intended to be, nor should it be construed as, a solicitation for a vote on the plan. AMF Bowling Worldwide will emerge from Chapter 11 once the plan receives the requisite creditor approvals and is confirmed by the Court. As the largest bowling company in the world, AMF owns and operates 516 bowling centers worldwide, with 399 centers in the U.S. and 117 centers in ten other countries. AMF is also a world leader in the manufacturing and marketing of bowling products. In addition, the company manufactures and sells the PlayMaster, Highland and Renaissance brands of billiards tables. Additional information about AMF is available on the Internet at http://www.amf.com, as well as on a new toll-free AMF Refinancing Hot Line at 866-743-2625. ARMSTRONG HOLDINGS: UST Appoints Official Property Damage Panel --------------------------------------------------------------- Pursuant to 11 U.S.C. Sec. 1102(a)(1), Patricia A. Staiano, the United States Trustee for Region III, appearing through Frederic J. Baker, Senior Assistant United States Trustee, appoints an Official Committee of Asbestos Property Damage Claimants to serve in Armstrong Holdings, Inc.'s chapter 11 cases. The committee members, who include one person who resigned from the Official Committee of Asbestos Personal Injury Claimants, are: Christine Wood c/o Seeger Weiss Attention Diogenes P. Kekatos, Esq. One William Street New York, NY 10004 (212) 584-0700 Trizechahn Office Properties, Inc. C/o Philip J. Goodman, PC Attn: Philip J. Goodman, Esq. 280 N. Old Woodward, Suite 407 Birmingham, MI 48009 (248) 647-9300 Fax: (248) 647-8481 Stephen Tancredi C/o Peter J. Wasylyk, Esq. 1307 Chalkstone Avenue Providence, Rhode Island 02908 (401) 831-7730 Fax: (401) 861-6064 (Armstrong Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) BOSTON CHICKEN: Trustee Proposes 0.274% Unsecured Dividend ---------------------------------------------------------- Gerald K. Smith, the Plan Trustee appointed under the chapter 11 plan confirmed by Boston Chicken, Inc., proposes to distribute $2.74 to each holder of a $1,000 bond or other unsecured claim against the Debtors' estates. In a Motion filed with the U.S. Bankruptcy Court in Phoenix last week, Mr. Smith asks Judge Care to rubber-stamp his plan make an initial distribution to holders of allowed claims -- probably before year-end. Although not all unsecured claims have been resolved, Mr. Smith tells the Court, and litigation to recover avoidable transfers is underway, "sufficient unsecured claims have been resolved to allow a partial distribution of the $2,000,000 so long as there is held back an appropriate percentage as to unresolved, unsecured claims." As the unresolved unsecured claims are resolved, pro rata payments can be made to holders of those resolved claims and, after all unsecured claims are resolved, any excess remaining out of the holdback can be added to the avoidance recoveries and distributed when $1,000,000 has been recovered or all avoidance actions are resolved. Allowed unsecured claims total $650,360,575. Unresolved, unsecured claims total $79,773,881. Objections have been filed to most of these unresolved claims and most, Mr. Smith suspects, will be resolved by negotiation. Landlords' rejection damage claims, Mr. Smith indicates, are taking time to resolve. "Mitigation information as well as information relating to security deposits has not been received in some instances," Mr. Smith says. Even though there are unresolved claims, the Plan Trustee believes sufficient progress has been made to allow a meaningful distribution to holders of allowed unsecured claims, based on their percentage of the $2,000,000 set aside for unsecured creditors. Under the Plan, the funds are to be distributed to unsecured creditors (excluding the deficiency claims of the 1996 and the 1995 Secured Creditors) on a pro rata basis, regardless of contractual subordination. The amount of the Indenture Trustee claims for the three issues of debentures has been resolved by stipulation. There is pending before this Court objections to claims filed by individual debenture holders. These individual claims are duplicative of the claims filed by the Indenture Trustees and have been or will be disallowed. The objections have raised concerns on the part of debenture holders. However, the Indenture Trustees filed claims and there is pending before this Court a stipulation to allow their claims in the amount of the outstanding debentures, along with interest accrued to the date of the filing of the petitions, October 5, 1998. The Plan Trustee proposes to determine the "distribution percentage" of the $2,000,000 to be distributed to the holders of allowed unsecured claims by dividing $2,000,000 by $730,134,456, the sum of the amount of the allowed unsecured claims and the amount of the unresolved, unsecured claims. The resulting distribution percentage is .00273922150032048. The amount to be distributed to each holder of an allowed, unsecured claim can be determined by multiplying the amount of the holder's allowed, unsecured claim by the "distribution percentage." The amount of the holdback to be reserved by the Plan Trustee for the unresolved, unsecured claims is $218,518. This is determined by multiplying the total of the unresolved, unsecured claims by the distribution percentage. There were three issues of debentures by Boston Chicken, Inc. Debentures bearing interest at 4.5% per annum were issued in 1994; Chase Manhattan Bank is the Indenture Trustee for this issue. The allowed amount of the unsecured claim of the Indenture Trustee for all the 4.5% debentures is $131,036,160.00. The second issue of debentures, the LYON's, was in 1995. Chase Manhattan Bank is the Indenture Trustee for this issue. The allowed amount of the unsecured claim of the Indenture Trustee for all of the outstanding LYON's is $209,704,792.00. The third issue of debentures, bearing interest at 7.75%, was in 1996; the Indenture Trustee is Marine Midland Bank, now known as HSBC Bank USA. The allowed amount of the unsecured claim of the Indenture Trustee for all of the 7.75% debentures is $296,907,875. HSBC has informed the Plan Trustee that it will charge $15,000 for distribution to the debenture holders of the funds it receives from the Plan Trustee, and it is likely that Chase Manhattan Bank will charge something for making the distributions. The Court should determine the amounts Indenture Trustees may charge and authorize these amounts to be paid from amounts received from the Plan Trustee before distributions to holders of debentures. The Third Modified Plan provided that no distribution of less than $25.00 would be made to an allowed unsecured claimant unless so specifically requested. There was no bar date set as to when the request must be made. The Plan Trustee assumes that the Indenture Trustees will make distributions to their debenture holders regardless of size. As to other unsecured creditors the Plan Trustee intends to delay any distribution until a holder is entitled to a cumulative distribution of more than $25.00. If the cumulative distribution of an unsecured claimant at the time of the final distribution is less than $25.00, funds be withheld and not disbursed to a particular claimant will be added to the amount available to be distributed in the final distribution. No requests for a distribution of less than $25.00 were received by the Plan Trustee from holders of unsecured claims; however, numerous debenture holders filed such requests. BRIDGE INFO: Kirkwood Seeks Relief from Stay to Perfect Lien ------------------------------------------------------------ Bridge Data Company was the owner of a parcel of real property known as Lot 1, Mallinckrodt HQ Campus at the City of Hazelwood in St. Louis County, Missouri. Kirkwood Excavating, Inc. was contracted to perform various work and to make substantial improvements to the property in 1999. After Kirkwood furnished and provided work, labor, equipment and materials to the satisfaction of the Debtor, Kirkwood wanted collect the payment due them -- $25,774.79. But, the Debtors refused to pay. Silence was the Debtors' response to Kirkwood's demands. Floyd T. Norrick, Esq., at Thurman, Howald, Weber, Senkel & Norrick, in Hillsboro, Missouri notes that the Debtors and any creditor otherwise secured by the property, has been unjustly enriched by the work, labor, equipment and materials furnished, provided and performed by Kirkwood. In an attempt to recover its costs, Kirkwood filed its mechanic liens with regard to the property. But in order to complete its perfection of the mechanic liens, Mr. Norrick says, Kirkwood must file a petition with the Circuit Court of St. Louis County to enforce such mechanic liens. Due to the automatic stay provision of the Bankruptcy Code, Mr. Norrick relates, Kirkwood has been unable to further enforce its claim and mechanic's liens against the Debtors' property. Mr. Norrick argues that the Court should vacate or modify the automatic stay to permit Kirkwood to proceed its perfection of its mechanic liens, and to further recover from the Debtor any additional sums (including interest accruing) owed for work, labor, equipment and materials furnished, provided or performed. (Bridge Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) COMDISCO: Court Okays Bidding Procedures for Leasing Asset Sales ---------------------------------------------------------------- Comdisco, Inc. (NYSE: CDO) announced that on August 30, 2001, the U.S. Bankruptcy Court for the Northern District of Illinois approved bidding procedures for the potential sale of the company's leasing businesses, excluding its European leasing operations. As part of the approval, the court accepted a proposed bid deadline of September 30, 2001, an auction date of October 10, 2001, and a sale hearing date of October 23, 2001. The court also approved a management incentive program for 43 senior managers of the company and the employment contract of Comdisco's Chairman and Chief Executive Officer, Norm Blake. These actions follow the prior approvals of employee retention and incentive programs for all Comdisco employees on August 9, 2001. Norm Blake, Chairman and Chief Executive Officer, said: "We are pleased that Comdisco continues to proceed through the reorganization process in an efficient and effective manner. Approval of the bidding procedures for the potential sale of our leasing operations is a major step in support of our evaluation of our strategic alternatives for maximizing the value of our leasing business for our stakeholders. "The approval of the incentive program for 43 of our managers is important to ensure consistent leadership for our businesses. This approval, as with the approval of retention and incentive programs for all employees on August 9, recognizes the commitment and contributions employees are making to serve our customers and run the business as we move through the reorganization process." A potential sale of Comdisco's leasing businesses would have to meet the same criteria that was set forth in the proposed sale of the company's Availability Solutions (technology services) business to Hewlett-Packard Company (HP) announced July 16, 2001. The requirements include that a buyer have expertise and experience in the industry, a global presence, a reputation for outstanding customer service, a culture that values people and the development of employees, and the resources to grow the business that is purchased. On July 16, 2001, Comdisco, Inc. and 50 domestic U.S. subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois. The filing allows the company to provide for an orderly sale of some of its businesses, while resolving short-term liquidity issues and enabling the company to reorganize on a sound financial basis to support its continuing businesses. Simultaneous with the filing, Comdisco also announced the proposed sale of sell substantially all of its Availability Solutions business to HP for $610 million. This transaction is still subject to higher or otherwise better offers in a court- approved bidding process. The court approved bidding procedures for this sale on August 9. Comdisco's operations located outside of the United States were not included in the chapter 11 reorganization cases. All of Comdisco's businesses, including those that filed for chapter 11, are conducting normal operations. Comdisco is continuing to pursue other strategic alternatives to create value for its stakeholders, including the potential sale of its leasing businesses, as provided for under the court-approved bidding procedures, as well as the restructuring of its Ventures group. The company intends to reorganize on a "fast-track" basis and has targeted emergence from chapter 11 during early 2002. Comdisco -- http://www.comdisco.com -- provides technology services worldwide to help its customers maximize technology functionality, predictability and availability, while freeing them from the complexity of managing their technology. The Rosemont, (IL) company offers a complete suite of information technology services including business continuity, managed web hosting, storage and IT Control and Predictability Solutions SM. Comdisco offers leasing to key vertical industries, including semiconductor manufacturing and electronic assembly, healthcare, telecommunications, pharmaceutical, biotechnology and manufacturing. Through its Ventures division, Comdisco provides equipment leasing and other financing and services to venture capital backed companies. COMDISCO INC: Court Okays Bingham Dana as International Counsel --------------------------------------------------------------- Comdisco, Inc. sought and obtained authority from Judge Barliant to retain and employ Bingham Dana LLP as their international counsel in these Chapter 11 cases to provide strategic advice and assistance with respect to international contingency planning matters. Norman P. Blake, Jr., Comdisco's Chief Executive Officer, explains that Bingham is well suited for the type of representation required by the Debtors. Mr. Blake relates that Bingham has more than 500 lawyers in seven offices throughout the United States and in London and Singapore. According to Mr. Blake, Bingham has both a national and international practice, and has experience in all aspects of the law that may arise in these Chapter 11 cases. Bingham's Financial Restructuring Group is comprised of more than 75 attorneys practicing nationally and internationally, Mr. Blake notes. And Bingham's attorneys have played significant roles in many of the largest and most complex cases under the Bankruptcy Code, Mr. Blake adds. According to Mr. Blake, of particular relevance to this Application is: (i) Bingham's service as international bankruptcy counsel to The Singer Company N.V. in the restructuring of its 56 Chapter 11 debtors and its global operations in more than 150 countries, (ii) Bingham's service as international bankruptcy counsel to Owens Corning and its global operations, (iii) Bingham's service as international bankruptcy counsel to Outboard Marine Corporation and its global operations, (iv) Bingham's service as international bankruptcy counsel to Montgomery Ward, LLC and its global operations, and (v) Bingham's service as international bankruptcy counsel to Viatel, Inc. in the restructuring of its operations in Europe and North America. In these matters, Mr. Blake says, Bingham's roles have been to focus on international bankruptcy matters, in each case with Skadden, Arps as lead debtors' counsel. Through these cases, Mr. Blake notes, Bingham and Skadden, Arps have developed a unique and efficient working relationship. Because of the firm's extensive domestic and international experience and knowledge, particularly in foreign and cross- border insolvency proceedings, the Debtors chose Bingham as their international co-counsel. As an example, Mr. Blake notes that Bingham attorneys played primary roles in the negotiation and Court approval of "cross-border insolvency protocols" in the Loewen, Nakash and Maxwell cross-border insolvencies. Bingham's services will include, but not limited to: (i) advising the Debtors of the international aspects of their rights, powers and duties as debtors and debtors in possession continuing to operate and manage their businesses and properties under chapter 11 of the Bankruptcy Code while simultaneously continuing to operate in various foreign countries; (ii) assisting the Debtors in the formulating and approval of bankruptcy protocols, agreements or concordats, where appropriate, between the United States Bankruptcy Court and various foreign courts in which insolvency proceedings involving the Debtors may commence; (iii) advising and assisting the Debtors with respect to their seeking recognition and relief in various foreign countries and foreign insolvency proceedings; (iv) where needed, preparing on behalf of the Debtors all necessary and appropriate applications, motions, draft orders, other pleadings, notices, schedules and other documents, and reviewing all financial and other reports to be filed in these chapter 11 cases and in any related foreign countries or foreign proceedings; (v) advising the Debtors concerning, and preparing responses to, applications, motions, other pleadings, notices and other papers that may be filed and served in these chapter 11 cases in connection with foreign proceedings initiated, including by the Debtors; (vi) counseling the Debtors in connection with the formulation, negotiation and promulgation of a plan or plans of reorganization and any substantially similar schemes, compromises or plans which the Debtors may seek to propose in foreign insolvency proceedings; and (vii) performing all other necessary or appropriate legal services in connection with these chapter 11 cases for or on behalf of the Debtors consistent with the limited role as international counsel. Mr. Blake explains that the Debtors require knowledgeable and specially qualified and experienced counsel to render these essential professional services, particularly as they relate to foreign bankruptcy and insolvency expertise. According to Mr. Blake, Skadden, Arps has such expertise that's why the firm will be their overall lead counsel both in the United States and abroad. Since Bingham also has substantial expertise in the area of cross-border bankruptcies and workouts, Mr. Blake contends that Bingham is specially qualified to perform these services and represent their interest in these Chapter 11 cases as part of the team with Skadden, Arps. Mr. Blake further clarifies both Skadden, Arps and Bingham will each have their own respective well-defined roles as counsel to the Debtors: (a) Skadden, Arps will be primarily responsible for the overall legal management and supervisions of these Chapter 11 cases in the United States, while (b) Bingham's role will be limited to providing strategic advice and assistance with respect to international insolvency and restructuring matters. Mr. Blake assures Judge Barliant that Bingham and Skadden, Arps will not duplicate the services that they provide to the Debtors. In exchange for their legal services, Bingham will charge the Debtors on an hourly basis in accordance with its ordinary and customary hourly rates: Evan D. Flaschen (US)(Partner) $650 Anthony J. Smits (US)(Associate) $390 Patrick J. Trostle (US)(Associate) $390 Andrew Rotenberg (UK)(Associate) $335 Anna M. Boelitz (US)(Associate) $275 Michael H.M. Brown (US)(Associate) $250 Leonhard Plank (US)(Associate) $215 Bingham advised the Debtors that their rates might change from time to time in accordance with their established billing practices and procedures. Bingham promises to maintain detailed, contemporaneous records of time and any actual and necessary expenses incurred. Bingham has received a total of $875,000 as Retainer from the Debtors prior to Petition Date. Bingham has applied a portion of the Retainer for legal fees and expenses incurred. As of the Petition Date, $207,795 remained unapplied. On July 3, 2001, the Debtors paid Bingham a $350,000 Foreign Counsel Retainer to be used to pay retainers of foreign counsel engaged by the Debtors in connection with these chapter 11 cases. As of the Petition Fate, Bingham has exhausted this Foreign Counsel Retainer: Foreign Counsel Retainer --------------- -------- (1) Miller Thompson LLP $10,000 (2) CMS Cameron McKenna 10,000 (3) Arthur Cox 25,000 (4) Gianni, Origoni, Grippo & Partners 25,000 (5) Gardere Arena & Roblas 5,000 (6) De Brauw Blackstone Westbroek 73,000 (7) Pinsent Curtis Biddle 5,000 (8) Linklaters 75,000 (9) Mallesons Stephen Jacques 10,000 (10) Keuleneer, Storme, Vanneste, Van Verenbergh & Verhelst 5,000 (11) Gomez Acebo & Pombo 5,000 (12) Advokatfirman Lindahl 5,000 (13) Lalive & Partners 5,000 (14) Law Offices of Hideyuki Sakai 25,000 (15) Allen & Gledhill 10,000 (16) Tsar & Tsai 12,000 (17) DePardieu Brocas Maffei & Leygonie 20,000 (18) Kuebler, Pluta Rogier & Partner 25,000 Evan D. Flaschen, a partner in the firm of Bingham Dana, assures the Court that Bingham has no connection with the Debtors, their creditors, the United States Trustee for the District of Illinois, or any other party-in-interest, or their respective attorneys or accountants. From time to time, Mr. Flaschen admits that Bingham has provided advice to Hitachi Credit America Corporation in connection with certain lease financing transactions with the Debtors. But Mr. Flaschen emphasizes that the Bingham attorneys involved in the Hitachi engagement have at all times been on the other side of an internal "fire wall" from the Bingham attorneys involved in advising the Debtors. As of the Petition Date, Mr. Flaschen discloses that Bingham no longer represents or advises Hitachi in connection with any matter relating to the Debtors. However, Mr. Flaschen clarified that from time to time, Bingham has represented and likely will continue to represent certain creditors of the Debtors and various other parties potentially adverse to the Debtors in matters unrelated to these Chapter 11 cases. To check and clear potential conflicts of interest in these cases, Mr. Flaschen says they researched their client databases (including the former database of Hebb & Gitlin, a professional corporation, which merged with and into Bingham last July 1999) to determine whether they had any relationships with: (a) the Debtors and their non-debtor affiliates; (b) the Debtors' directors and officers and certain of their major business affiliations as provided by the Debtors to Bingham; (c) the Debtors' major vendors and trade creditors as provided by the Debtors to Bingham; (d) the Debtors' major lenders as provided by the Debtors to Bingham; (e) the Debtors' major shareholders as provided by the Debtors to Bingham; (f) the Debtors' major litigants as provided by the Debtors to Bingham; (g) certain attorneys and other professionals of the Debtors as provided by the Debtors to Bingham. Despite their efforts to identify and disclose Bingham's connections with the parties-in-interest in these cases, Mr. Flaschen admits they are still unable to state with certainty that every client representation has been disclosed considering the size of the international law firm. If Bingham discovers additional information that requires disclosure, Mr. Flaschen promises to file a supplemental disclosure with the Court as promptly as possible. But Mr. Flaschen assures the Court that Bingham is a "disinterested person" as defined in section 104(14) of the Bankruptcy Code because they don't hold or represent any adverse interest to the Debtors in matters for which they are to be retained. (Comdisco Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONSUMERS PACKAGING: June 30 Results Expected on Oct. 15 -------------------------------------------------------- Consumers Packaging Inc. (TSE: CGC) announced that its interim financial statements for the quarter ended June 30, 2001 which where due to be filed with regulatory authorities by August 29, are expected to be filed by October 15. The completion of these interim financial statements has been delayed by the Company's restructuring plans and by internal workloads associated with the previously announced proposed sale of substantially all of its assets to Owens-Illinois, Inc (NYSE: OI). Consumers Packaging is operating under an order of the Ontario Superior Court of Justice under the Companies' Creditors Arrangement Act (CCAA), which stays legal proceedings against the Company in respect of its Canadian operations. The Company is seeking necessary legal and regulatory approvals for the proposed sale of substantially all of its assets to Owens- Illinois. The Company acknowledges that the Ontario Securities Commission may impose (i) a management cease trade order (affecting directors, officers and insiders of Consumers Packaging at any time since March 31, 2001) and (ii) an issuer cease trade order if the financial statements are not filed by October 26, 2001. The Company confirms that it intends to comply with alternate information requirements as specified by securities regulators. The Company confirms that, until the interim statements are filed with regulatory authorities, it intends to file with regulatory authorities the same information it provides to its creditors as a material change report under the Securities Act (Ontario). This information will be filed with regulatory authorities at the same time that any information is provided to creditors. Consumers Packaging employs approximately 2,400 people in Canada. It manufactures and sells glass containers for the food and beverage industry. It supplies packaging products for the Canadian juice, food, beer, wines and liquor industries from three plants in Ontario (Toronto, Brampton and Milton), and one each in Quebec (Montreal), New Brunswick (Scoudouc) and British Columbia (Lavington). COVAD COMMS: Hires Arthur Andersen as Financial Consultants ----------------------------------------------------------- Covad Communications Group, Inc. seeks to employ and retain Arthur Andersen LLP to provide general accounting and financial consulting services during the chapter 11 proceedings. Laura David Jones, Esq., of Pchulski, Stang, Ziehl, Young & Jones, in Wilmington, Delaware relates that the Debtor needs the professional expertise of Andersen in accounting and other financial matters. The Debtor, Ms. Jones says, believe that Andersen's extensive experience in advising debtors, creditors, and other parties in bankruptcy proceedings will hasten the development and implementation of their reorganization plans. Ms Jones relates that Andersen is well qualified to represent the Debtor, having been retained in other prominent bankruptcy proceedings including those of Pacific Gas & Electric Corporation and Hexcel Corporation. Ms. Jones says that Andersen will render accounting and financial consulting services to the Debtor, including: a. Assisting in the preparation of a rolling thirteen-week cash receipts and disbursements forecast, if necessary; b. Assisting the Debtor's management in fulfilling requirements resulting from the chapter 11 filing, including but not limited to preparing bankruptcy statements and schedules, separating pre-petition and post-petition liabilities, restructuring the Debtor's treasury and accounting systems and preparing Monthly Operating Reports; c. Assisting in the preparation and/or analysis of business plans and other necessary and/or desirable special projects; d. Assisting in any negotiations or discussions with any Official Committee of Unsecured Creditors appointed in this case, the Committee's advisor, and other parties in interest; e. Assisting in the preparation of a plan of reorganization liquidation analysis; f. Providing litigation consulting services, including expert witness testimony if required; g. Assisting in analyzing the potential costs and liabilities of closing several of the Debtor's facilities; h. Assessing material executory contracts; i. Reviewing trust and employee-related payroll tax issues; j. Performing such other services as may be requested by the Debtor or its counsel to aid the Debtor in the operation and reorganization of the business. Ms. Jones says that all services performed by Andersen will be at the Debtor's direction so as to avoid duplication among the other professionals retained in this case. William C. Kosturos, a Partner of Arthur Andersen LLP, in San Francisco, California, affirms that neither Andersen nor any of the persons employed by it hold or represent any interest adverse to the Debtor's estates. Mr. Kosturos further affirms that Andersen has not had prior business connections with the Debtor, any creditor of the Debtor, or any other party in interest in this case. However, Mr. Kosturos says, the firm and some of its members may have represented, currently represent, or in the future represent creditors of the Debtor in matters wholly unrelated to this chapter 11 case. Mr. Kosturos assures the Court that a conflicts check is run through the Firm's database before any of its members represent a new client. He says that all pertinent information about new clients are entered and recorded in the database. Mr. Kosturos affirms that a review of Andersen's database reveal no actual or potential conflict of interest in this cases. Andersen, Mr. Kosturos tells the Court, has received $150,000 from the Debtor as a general retainer, in addition to $56,536 and $76,047. He says that Andersen will apply the unused retainer to post-petition fees and expenses. The Debtor proposes to pay Andersen its customary hourly rates in effect from time to time and to reimburse Andersen according to its customary reimbursement policies. Mr. Kosturos presents a schedule of Andersen's current hourly rates: a. Partners -- $450-600 b. Directors/Managers -- $350-525 c. Associates/Analysts -- $125-375 Mr. Kosturos says that Andersen will also charge the Debtor any other necessary expenses incurred in connection with these cases, such as mail and delivery charges. (Covad Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392- 0900) DANBEL INDUSTRIES: Has 120 Days to Meet Listing Requirements ------------------------------------------------------------ Danbel Industries said the second quarter of 2001 reflected a major decrease in gross sales due in part to the declining economy, but for the most part was caused by the restricted cash flow available to the Company. The Company posted sales of $12,707,000 in the quarter, down 27.3 percent from $17,478,000 in the comparable quarter of 2000. For the six months, sales decreased by 26.4 percent to $24,592,000 compared to $33,415,000 for the same period in 2000. This decline is largely due to JSL Lighting (2000) Corp. and its wholly-owned U.S. subsidiary's inability to obtain merchandise from its suppliers. Consequently, the Company has been forced to wind down its operations in an orderly manner with a view of closing its facilities. Notwithstanding this, the Company on an overall basis was able to maintain its gross margin percentage levels for the quarter. Net loss for the second quarter was ($1,123,000) from $186,000 in net earnings in 2000. For the six months, net loss increased to ($2,059,000) from $1,077,000 profit in 2000. The Company's financial statements have been prepared on the basis of accounting principles applicable to a "going concern", which assume that the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company's continued existence is dependent upon obtaining profitable operations and/or its ability to secure additional financing necessary to meet its obligations. Should the Company be unable to become profitable, to secure financing or realize any of its other alternatives that may become available, it may have to, at any time, cease all or part of its operations. Accordingly, readers are cautioned that these financial statements do not reflect adjustments that would be necessary if the "going concern" basis were not appropriate. On June 1, 2001, the GMAC revolving credit facility was amended. The updated credit agreement reduced the Company's facility from $30,000,000 to $17,000,000 and the interest rate was increased from prime plus 1.25 % per annum to prime plus 2.25 % per annum. The Company is in violation of certain bank covenants. The Company is also in default of its Trade Finance facility with HSBC Bank Canada. The unutilized portion of the credit facility has been canceled and the facility is available on a non-revolving basis until such time as it is repaid in full. The Company suspended interest payments to certain of its subordinated debt holders effective June 1, 2001. Effective August 23, 2001, pursuant to a court order, Danbel Inc., American Lantern (1998) Inc., Danbel Security Lighting Inc., JSL Lighting (2000) Corp. and JSL Lighting (2000) Inc., all wholly owned subsidiaries, were put into interim receivership by the Company's senior lender. The senior lender made demand under the terms of the Credit Agreement in place between the senior lender and certain of its Subsidiaries and served Notices of Intention to Enforce Security pursuant to the Bankruptcy and Insolvency Act. Management has been informed by the Interim Receiver that they intend to operate the Companies on a "going concern" basis. However, due to appointment of an Interim Receiver, management has no control over the continued operations of these Subsidiaries and there is no assurance that these Subsidiaries and accordingly the Corporation, will continue to be operated on a "going concern" basis. On August 23, 2001, the TSE announced they are reviewing the common shares of Danbel Industries Corporation (DDI) with respect to meeting continued listing requirements. The Company has been granted 120 days in which to regain compliance with these requirements, pursuant to the Remedial Review Process. DELSOFT CONSULTING: Files Chapter 11 Petition in New York --------------------------------------------------------- DelSoft Consulting, Inc. (OTC: DSFT) filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United Stated Bankruptcy Court for the District of New York on August 28, 2001 in re: Delsoft Consulting, Inc. Case No. 01-14782. As required the Company has already advised the NASD and expects that its trading symbol will be changed to "DSFTQ." Contact information: Investor Relations Department, DelSoft Consulting, Inc., 50 Broadway, New York NY 10004 DELSOFT: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------ Debtor: Delsoft Consulting, Inc. 50 Broadway Suite 2300 New York, NY 10004 Chapter 11 Petition Date: August 28, 2001 Court: Southern District of New York (Manhattan) Bankruptcy Case No.: 01-14782-ajg Judge: Arthur J. Gonzalez Debtor's Counsel: Marilyn Simon, Esq. Marilyn Simon & Associates 280 Madison Avenue, 5th Floor New York, NY 10016 Tel: (212) 751-7600 Fax: (212) 686-1544 Email: msimon@msimonassoc.com Total Assets: $107,238 Total Liabilities: $1,737,625 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Hallmark Global Solutions $103,741 Advanta Leasing Services $89,326 Pyramids Management $87,843 Briskin & Associates, L.C. $84,626 Bondy & Schloss $83,687 CompuSoft Integrated $81,564 Solutions, Inc. Forte Communications, Inc. $80,437 a/k/a Capstone Group Giacchino, Ben $80,000 Citicorp Vendor Finance, Inc. $70,958 College Life Development Corp. $60,687 First York Partners Inc. $50,000 Key Lease Plus $49,861 Mastech $46,576 J.H. Cohn Accountants & $42,668 Consultants LLP Copelco Capital, Inc. $31,343 Marlin Leasing $28,467 Marketview Financial Group, $28,400 Inc. First Call $24,797 Inskeep & Associates, Inc. $19,416 Nexeon International Corp. $17,680 ENITEL ASA: S&P Drops Ratings to SD after Seeking Court Shield -------------------------------------------------------------- Following the announcement that Norway-based telecommunications company Enitel ASA is seeking protection from creditors, Standard & Poor's lowered its corporate credit ratings on Enitel to 'SD' (selective default) from triple-'C'-minus. Enitel's single-'C' senior unsecured debt rating remains on CreditWatch with negative implications, where it was placed on Sept. 1, 2000. The rating action follows the announcement that Enitel is seeking court protection from creditors while negotiating a refinancing pact with bondholders and creditor banks. Enitel must undertake a refinancing of the company, according to Norwegian law, as its equity will be wiped out by the end of September amid mounting losses. At this stage, it is uncertain whether Enitel will make interest payments, covered by escrowed cash, on its rated EURO250 million ($227 million) bonds, falling due on Oct. 15, 2001. Enitel will not pay any of its other creditors, including interest payments on bank loans, during a three-month grace period according to Norwegian bankruptcy law. Only creditors taken on, in order to be able to run the business on a day-to- day basis, after the start of this grace period will be paid. Standard & Poor's will closely monitor the outcome of Enitel's balance-sheet restructuring. At this stage, the terms and conditions associated with discussions with bondholders are unknown. If these terms and conditions are viewed as being inimical to the interest of bondholders, or if Enitel fails to make a scheduled interest payment on its bonds, Enitel's senior unsecured rating will be lowered to 'D'. FOXMEYER: Reliance Insurance Tries to Stall Andersen Litigation --------------------------------------------------------------- Bart A. Brown, Jr., the chapter 7 trustee for Foxmeyer Corporation, Foxmeyer Drug Company, et al. (Case No. 96-1329 Bankr. D. Del), sought and obtained an interim order from Bankruptcy Judge M. Bruce McCullough enforcing the automatic stay applicable in Foxmeyer's cases against Reliance Insurance Company and Pennsylvania Insurance Commissioner Diane Koken, as Rehabilitator for Reliance, pending a final hearing on Sept. 14. At that final hearing, Judge McCullough will hear argument from David M. Friedman, Esq., at Kasowitz, Benson, Torres & Friedman, arguing that the automatic stay applicable in Foxmeyer's cases should not in any way stall the Trustee's prosecution of his 1998 lawsuit against Andersen Consulting (Bart A. Brown, et al. v. Andersen Consulting, Cause No. 1998-30416) pending before the 270th Judicial District of Harris County, Texas. Jerome R. Richter, Esq., at Blank Rome Comisky & McCauley LLP, suggests that, as Andersen's insurer, orders obtained by Ms. Koken from the Commonwealth Court of Pennsylvania stay continued prosecution of the Texas lawsuit and there is no basis to find that the Foxmeyer stay somehow nullifies the stay applicable to Reliance. HARNISCHFEGER: Asks for Extension of Rule 9027 Removal Period ------------------------------------------------------------- Harnischfeger Industries, Inc. requests for an Order from the Court, pursuant to Rule 9006(b) of the Bankruptcy rules: (1) further extending the period by which they may file notices of removal through and including January 7, 2002 with respect to civil actions pending as of the Petition Date. (2) clarifying that Rule 9027(a)(3) applies as written to claims that arose before the Confirmation Date even if the related civil action is filed after the Confirmation Date. The Debtors believe that it is prudent to seek an extension to protect their right to remove those Pre-Petition Actions that are discovered through their investigation and the claims review process, to give them the opportunity to make fully-informed decisions concerning removal of each PrePetition Action and will assure that they do not forfeit valuable rights under Section 1452. Further, the rights of the Debtors' adversaries will not be prejudiced by such an extension, given that any party to a Pre- Petition Action that is removed may seek to have it remanded to the state court pursuant to 28 U.S.C. section 1452(b). The Debtors submit that the relief requested is in their best interest and in the best interest of their estates and their creditors because it will maximize the likelihood of a successful reorganization. (Harnischfeger Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-0900) LEINER HEALTH: Lenders Agree to Forbear Until Sept. 28 ------------------------------------------------------ Leiner Health Products Inc. today announced that it has reached an agreement in principle with its lenders to extend the previously announced forbearance period until September 28, 2001. The previous forbearance agreement that Leiner had entered into with its bank lenders terminated on August 31. Before entering into the first forbearance agreement, the Company had been operating under a series of waivers as a result of covenant breaches under its bank credit agreement. The second forbearance agreement will allow the Company additional time to complete its financial restructuring proposal. Robert Kaminski, Chief Executive Officer, said, "I am pleased to report that as a result of the progress we have made on the development of our restructuring plan, our bank lenders have agreed to continue to work with us in our restructuring efforts. With our recent positive earnings results and the continued support and assistance of our bank lenders throughout this process, we are optimistic about arriving at a consensual plan of reorganization for Leiner." Under the terms of the second forbearance agreement, Leiner's bank lenders will continue not to exercise remedies available to them during the forbearance period. As in the first forbearance agreement, the second forbearance agreement will terminate if the company fails to make any payments as required thereunder or fails to remedy any other default within two business days of notice of such default. Termination of restructuring discussions between the company and its various constituencies would result in a termination of the second forbearance agreement. The second forbearance agreement will continue to require, through the end of the forbearance period, a one-percent increase in the applicable margin and use of the proceeds of any antitrust litigation to prepay outstanding bank debt. The agreement also requires the company to pay $ 300,000 in forbearance fees and to place in escrow the interest on the bank debt for October. In addition, during the second forbearance period, the Company continues to be subject to certain material obligations and covenants contained in the first forbearance agreement. Leiner Health Products Inc., headquartered in Carson, California, is one of America's leading vitamin, mineral, nutritional supplement and OTC pharmaceutical manufacturers. The company markets products under several brand names, including Natures Origin(TM), YourLife(R) and Pharmacist Formula(R). For more information about Leiner Health Products, visit http://www.leiner.com LOEWEN GROUP: Enters Deal with LLC to Sell Michigan Assets ---------------------------------------------------------- Nothwithstanding the commencement of the Adversary Proceeding and the The Loewen Group, Inc.'s filing of nine motions to reject agreements relating to the 15 Michigan Cemeteries in which certain rights had been transferred to LLCs, discussions went on between the Debtors and the LLCs to resolve disputes between the parties on a consensual basis. As a result of negotiations, TLGI entered into a non-binding Letter of Intent with the LLCs summarizing the general terms and conditions under which the LLCs would purchase the Debtors' right, title and interest in the assets of the Michigan Cemeteries and certain related assets. With the involvement of the mediator, who held mediation sessions on July 24, 2001 and July 30, 2001 (in which the Creditors' Committee was involved), the parties soon entered into the Purchase Agreement which has now received the Court's blessing. In brief terms, the Purchase Agreement provides for, among other things: (1) Sale and Transfer The Selling Debtors agree to sell, and the LLCs agree to purchase, Assets (which includes certain real property, real property leases, personal property, inventory, contract rights, accounts receivable, permits and intangible assets except certain Retained Assets), and the Selling Debtors agree to assign, and the LLCs agree to assume, Agreements (the Assignment Agreement). (2) Consideration The LLCs will (a) pay the Selling Debtors $23,450,000 in cash plus a prorated amount of the monthly payment received by the LLCs under the Cemetery Transaction documents for the month of the closing of the transactions contemplated by the Purchase Agreement; (b) assume certain of the liabilities and obligations of the Selling Debtors, including those related to claims asserted in Letherer Action. LGII remains liable for up to $23,000 of legal fees and expenses reasonably incurred by the LLCs in connection with the Letherer Action prior to the date of the Purchase Agreement and all other legal fees of the LLCs reasonabley incurred in connection with the lawsuit between the date of the Purchase Agreement and the closing of the transaction contemplated. As directed by Judge Walsh, nothing in the Court's order, the Purchase Agreement, the Termination Agreement or any documents entered into in connection with the motion will have any effect on: (a) the validity or enforceability of the lien granted to Kenny Letherer pursuant to the amended order entered by the Circuit Court for the County of Saginaw, Michigan on or about December 4, 2000, or on any other order entered, in the cases captioned Kenny Letherer, et al. vs. Alger Group, L.L.C., et al., Case No. 99-29046-CK-2 and Kenny Letherer, et al vs. Alger Group, L.L.C., Case No. 00-36337-CZ; or (b) any appeals, including, but not limited to, Court of Appeals Docket No. 233042, or motions to vacate, reconsider or any order in the Letherer Actions. (3) Deposit The LLCs have paid $1 million into an escrow account. This Escrow Amount will be disbursed to the Selling Debtors at the closing of transactions and will be applied to the Purchase Price. (4) Retained Assets "Retained Assets" is defined in the Purchase Agreement as: (a) all cash and proceeds from the Related Businesses and the Michigan Cemeteries received by Acquirors, TLGI or LGII or any Affiliate of TLGI or LGII from January 1, 2001 to the Closing subject to amounts received between January 1, 2001 and the Closing that were required by applicable Law to have been trusted for such payments, (b) all cash and cash equivalents, whether on deposit or in transit, including all cash on deposit or in transit to the New Operating Account or the New Central Account, (c) all caskets, casket warehouses and Casket Contracts, (d) all Casket Trusts, (e) the name "Loewen" and any name containing the "Loewen" or any variation thereof, (f) any trademarks, copyrights, marketing materials, brands names or similar intellectual property rights that are also used by TLGI, LGII, or any Affiliates of TLGI or LGII outside of the Related Businesses and the Michigan Cemeteries; provided, however, Acquirors will be entitled to use sales material located at the Michigan Cemeteries for a period not to exceed sixty days after the Closing Date if all markings on such material containing the name "Loewen" and any variations thereof and any logo or other mark of any Sellers or TLGI are removed or completely concealed, (g) any accounting or other administrative systems that are also used by TLGI, LGII or any Affiliates of TLGI or LGII outside of the Related Businesses and the Michigan Cemeteries, (h) any contracts or agreements that benefit TLGI's, LGII's or any of their respective Affiliates' other operations outside the Related Businesses and the Michigan Cemeteries including, without limitation, merchandise supply agreements and any master vehicles leases, (i) all software or other related intellectual property rights used by TLGI, LGII or any Affiliates of TLGI or LGII outside of the Related Businesses and the Michigan Cemeteries, (j) any accounts or payments receivable of TLGI or LGII or any Affiliate of TLGI or LGII owed by TLGI or LGII or any Affiliate of TLGI or LGII, including, without limitation, any receivables related to Tax refunds, and (k) all defensive rights and counterclaims against William Eldridge in connection with the Claims retained by LGII and Sellers pursuant to Section 2.3(b)(iv). (5) Retained Liabilities The Selling Debtors will retain certain litigation-related liabilities, including liabilities related to two lawsuits commenced by William Eldridge against the LLCs in a Michigan state court in respect of Eldridge's claims against the LLCs. (6) Eldridge Claim Escrow Deposit It is a condition of the LLCs' obligations to consummate the transactions contemplated by the Purchase Agreement that LGII will have deposited $1 million (the "Eldridge Claim Escrow Deposit") into an escrow account pursuant to an escrow agreement between the parties, to partially secure the Selling Debtors' obligations for the Eldridge Claim. LGII is entitled to the return of the Eldridge Claim Escrow Deposit upon receipt by the escrow agent of certification by LGII that the Selling Debtors' retained liability relating to the Eldridge Claim and the indemnity obligations of the Purchase Agreement relating thereto have been fully satisfied, released or discharged. (7) Termination Agreement The obligations of the Selling Debtors and the LLCs to consummate the transfer of the Assets are subject to the delivery and execution of the Termination Agreement. The primary terms of the Termination Agreement include: (a) Termination of Cemetery Transaction Documents The Cemetery Transaction documents and the other agreements and instruments entered into by and among the Selling Debtors and the LLCs in connection with the Cemetery Transactions (collectively, the "Prior Documents") are terminated and of no further force or effect. (b) Termination of Settlement Agreement The Settlement Agreement is terminated and of no further force or effect. (c) Release by the LLCs, Bush and Mead; Deemed Withdrawal of Claims; Covenant Not to Sue The LLCs, Bush and Mead release the Selling Debtors and their respective past, present and future successors, assigns, officers, directors, shareholders, members, employees, agents, attorneys, representatives, divisions, affiliate direct and indirect parent and subsidiary entities (and the past, present and future officers, directors, shareholders, employees, representatives and agents of such divisions, direct and indirect parent and subsidiary entities) from any and all claims related to: (i) the Prior Documents or the transactions contemplated by the Prior Documents, (ii) the operation of the Michigan Cemeteries, (iii) the Michigan Cemeteries, (iv) any sale of preneed or at need cemetery merchandise or services in Michigan or relating to the Michigan Cemeteries or any trust fund relating thereto and (v) the Settlement Agreement. In addition, the Selling Debtors release the LLCS, Bush, Mead and their affiliates from all claims that were asserted or could have been asserted up to and including the date of the Termination Agreement. The Selling Debtors covenant not to institute any action against LLCs, Bush, Mead or their affiliates in connection with the matters covered by this release. (8) Release By Comerica Bank Comerica Bank releases the Selling Debtors and their affiliates from any and all claims relating to: (i) the Michigan Cemeteries, (ii) any loans made to the LLCs or Bush and (iii) the Settlement Agreement. Judge Walsh makes it clear that, notwithstanding any other provision set forth in the Motion, the Purchase Agreement or the Court's Order, the LLCs are not relieved by the subject motion and order of any obligations that they would have under applicable non-bankruptcy law outside bankruptcy with respect to prepaid funeral contracts being acquired from the Selling Debtors. Judge Walsh also specifies that, the Debtors' indemnification obligations to the LLCs imposed by the Purchase Agreement (a) will be deemed to be an administrative expense entitled to priority under sections 503(b) and 507(a) of the Bankruptcy Code and (b) will survive confirmation of any plan of reorganization proposed by the Debtors or otherwise and will not be discharged or enjoined in connection with such confirmation. This does not apply to any indemnification obligations of the Debtors to the LLCs under any documents other than the Purchase Agreement. Pursuant to the Court's order, all of the proofs of claim or scheduled claims held by the LLCs or Bush will be deemed withdrawn, waived, released and discharged upon the closing of the transactions contemplated by the Purchase Agreement, with the exception of director and officer indemnification proofs of claim filed by Bush and proofs of claim filed by Birch and Bush, P.C. (Loewen Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-0900) LTV CORP: Equity Committee Seeks to Retain Bell as Lead Counsel --------------------------------------------------------------- The Official Committee of Equity Security Holders of LTV Steel Company, Inc., asks Judge Bodoh to authorize their employment of the Chicago firm of Bell Boyd & Lloyd LLC as counsel for the Committee nunc pro tunc to July 17, 2001. The services which Bell Boyd will provide to the Committee are: (a) advising the Committee as to its rights, powers and duties; (b) advising the Committee in connection with proposals and pleadings submitted by the Debtors or others to the Court; (c) investigating the actions of the Debtors and the assets and liabilities of the estates; (d) advising the Committee in connection with negotiation and formulation of any plans of reorganization; (e) reviewing all applications and motions filed by parties other than the Committee and to represent the interest of the Committee in and outside of court with respect to all applications and motions; (f) generally advocating positions that further the interests of the equity holders represented by the Committee; and (g) performing such other services as are in the interests of the Debtors' equity holders. Bell Boyd announces that it is willing to act in these cases subject to satisfactory payment arrangements and render the necessary professional services to the Committee. Bell Boyd changes its billing rates from time to time, but the current hourly rates in effect for Bell Boyd professionals potentially involved in these cases are: Professional Hourly Rate ------------ ----------- David F. Heroy $500 Steven L. Harris $400 Robert V. Shannon $320 Rosanne Ciambrone $250 John S. Delnero $250 Michael Yetnikoff $250 Erik W. Chalut $180 Mr. David F. Heroy, a member of Bell Boyd, assures Judge Bodoh that he and Bell Boyd are disinterested and neither hold nor represent any interest adverse to the Debtors' estates with respect to the matter on which Bell Boyd is to be employed. However, Bell Boyd may have and may continue to represent some creditors of these Debtors, but only in matters unrelated to these cases. (LTV Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-00900) LTV CORPORATION: Thomas Garrett Appointed as Senior VP and CFO -------------------------------------------------------------- The LTV Corporation (OTC Bulletin Board: LTVCQ) announced the appointment of Thomas L. Garrett, Jr. to the position of senior vice president and chief financial officer, effective September 4, 2001. Before joining LTV, Mr. Garrett was senior vice president and chief financial officer of the Service Merchandise Company, treasurer of Magma Copper Company, and director, treasury of the Goodyear Tire and Rubber Company. Mr. Garrett is a 1974 summa cum laude graduate of the University of Akron. He will report to William H. Bricker, chairman and chief executive officer. Mr. Garrett will replace George T. Henning, vice president and chief financial officer. "Tom Garrett has a broad range of professional experience in manufacturing and metals production. He also is familiar with the challenges facing companies operating in chapter 11. We are very pleased to add a professional of Tom's caliber to the dedicated team of managers working to restore LTV to viability and success," said William H. Bricker. "We are very grateful to George Henning for his outstanding leadership and service to LTV at a most critical time in its history," Mr. Bricker said. He added that Mr. Henning, who will retire at the end of 2001, had agreed to remain with LTV through the end of the year as vice president-finance to affect a smooth transition of the CFO function. 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. LTV STEEL: Loan Guarantee Filing for Debtor Extended to Sept. 30 ---------------------------------------------------------------- The Federal Emergency Steel Loan Guarantee Program has granted a 30-day extension for the filing of the application for a $250 million loan guarantee for LTV Steel, which is currently in bankruptcy. KeyCorp (NYSE: KEY) and National City Corp. (NYSE: NCC), the co- agent banks, say the filing process is complex because of the number of agencies involved, and because the federal guarantee program never contemplated loan guarantees to companies in bankruptcy. The new deadline is now September 30, 2001. METRICOM: Receives Another Filing Deficiency Notice from Nasdaq --------------------------------------------------------------- Metricom, Inc. (Nasdaq:MCOQE), a high-speed wireless data services company, received an additional Nasdaq staff determination letter indicating that, as a result of its failure to timely file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, Metricom is currently not in compliance with Marketplace Rule 4310(c)(14), as required for continued listing on The Nasdaq Stock Market. As a consequence of the filing deficiency, Metricom's trading symbol has been changed to MCOQE. Trading in Metricom's Common Stock has been suspended since July 2, 2001, following its announcement that it had filed for protection under Chapter 11 of the U.S. Bankruptcy Code. As a result of the bankruptcy filing, on July 26, 2001, Metricom received an initial Nasdaq staff determination letter regarding delisting of its Common Stock and has requested a hearing before a Nasdaq Listing Qualifications Panel. Metricom cannot provide any assurances that its Common Stock will continue to be listed on The Nasdaq Stock Market. NEWCOR INC: Will Delay Interest Installment Payment on Sub Notes ---------------------------------------------------------------- Newcor, Inc. (Amex: NER) will be unable to timely pay the semi- annual installment of interest of approximately $ 6.1 million due September 4, 2001, on its 9-7/8% Senior Subordinated Notes due 2008. The Company reported that presently it does not have available funds to make payment without causing a default under its bank credit agreement. The Company also indicated that it would continue to actively explore available alternatives to access the funds to meet its obligations to pay interest under the notes. Newcor, headquartered in Bloomfield Hills, Michigan, designs and manufactures precision machined and molded rubber and plastic products, as well as custom machines and manufacturing systems. Newcor is listed on the AMEX under the symbol NER. OWENS CORNING: RLC Moves to Compel Decision on Equipment Lease -------------------------------------------------------------- Raymond Leasing Corporation files a motion for an order compelling Owens Corning to immediately assume or reject an equipment master lease, directing the Debtors to immediately perform their obligations, granting Raymond an allowed administrative expense claim, and directing Debtors to pay such administrative expense claim. Richard Hannum at Phillips Goldman & Spence in Wilmington, Delaware discloses that on September 16, 1999, Carolina Handling LLC entered into a Master Lease No. 8545 with the Debtors, which lease Carolina subsequently assigned to Raymond. Pursuant to such lease, the Debtors are obligated to pay Raymond lease payments of $748.52 plus sales tax every month. The Debtors however, have failed to make post-petition payments amounting to a total of $1,660.29 and post-petition proof of insurance has not been provided by the Debtors. Mr. Hannum contends that more than ample cause exists for the Court to direct the Debtors to immediately decide whether to assume or reject the Master Lease. Mr. Hannum states that the Debtors have continued to use the equipment leased without adequately compensating Raymond. Mr. Hannum asserts that it would be inherently unfair if the Debtors were provided unlimited time to decide whether to assume or reject the contract when it is not meeting the most basic requirement under the lease. (Owens Corning Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC AEROSPACE: Defaults on $63.7MM Senior Subordinated Notes ---------------------------------------------------------------- Pacific Aerospace & Electronics, Inc. (Nasdaq: PCTH) announced that the 30-day grace period expired Friday on the semi-annual interest payment on its $63.7 million in aggregate principal amount of 111/4% senior subordinated notes that was due on August 1, 2001. Due to the default on the Notes, the Company also is in default under its 18% senior secured debt. As a result of the defaults, the holders of both the Notes and the senior secured debt have the right to demand payment of all amounts outstanding to them and to pursue additional recourse against the Company. The Noteholders have advised the Company that they have formed an informal committee comprising over 95% of the aggregate principal amount of the Notes. The Committee is represented by Michael J. Sage of Dewey Ballantine LLP in New York, 212-259- 7920. The Company and the lenders are currently in the process of negotiating an out-of-court restructuring plan. While there can be no assurance that the Company and the lenders will agree upon a mutually satisfactory restructuring plan, it is likely that any such plan will result in the lenders receiving substantially all of the equity of the Company in exchange for a substantial portion of the Company's debt obligations. The Company does not yet know whether such a restructuring would take place inside or outside of a bankruptcy setting. Pacific Aerospace & Electronics, Inc. is an international engineering and manufacturing company specializing in technically demanding component designs and assemblies for global leaders in the aerospace, defense, electronics, medical, telecommunications, energy and transportation industries. The Company utilizes specialized manufacturing techniques, advanced materials science, process engineering and proprietary technologies and processes to its competitive advantage. Pacific Aerospace & Electronics has approximately 1,000 employees worldwide and is organized into three operational groups -- U.S. Aerospace, U.S. Electronics and European Aerospace. More information may be obtained by contacting the Company directly or by visiting its Web site at http://www.pcth.com PACIFIC GAS: Williams Files $591 Million Claim Against Debtor ------------------------------------------------------------- Williams (NYSE: WMB) filed a proof of claim Friday in U.S. Federal Bankruptcy Court for $591 million in unpaid account receivables through April 6, 2001, for power sold to Pacific Gas & Electric in California through the California Independent System Operator and the California Power Exchange Corp. Company officials said the claim reflects the maximum amount PG&E could owe Williams for the time period and that some material portion of the $591 million claim may be found to be the responsibility of Southern California Edison. "The $591 million claim represents our gross receivables through April 6 and the amount we are required to file to ensure that the courts have a full picture of the monies owed to Williams as bankruptcy proceedings filed by PG&E last April progress," said Steve Malcolm, president of Williams' energy services unit. "Williams' reported revenues have previously included the estimated effect of these bankruptcy proceedings and other ongoing credit issues." Williams sold power through the CA ISO and Cal PX; those entities hold the sales figures that can be attributed to PG&E and SoCal Edison. Consequently, Williams does not know the exact sales amounts made to PG&E. In the claim filed today, Williams itemizes power sales to the CA ISO for $557,654,670 and $32,705,539 to the Cal PX. One invoice of power sold directly to PG&E for $747,900 is also included in the claim. "Williams is committed to serving the California power market and continues to work toward finding equitable solutions to the energy problems facing this state," Malcolm said. "Our claim filed today is in accordance with the legal measures Williams must take to ensure our interests are protected." Williams does not believe its credit exposure to this bankruptcy will result in material adverse effect on its results of operations or financial condition. PG&E Corp., California's largest electric utility and a unit of Pacific Gas & Electric, filed for Chapter 11 bankruptcy protection on April 6, 2001. About Williams Williams, through its subsidiaries, connects businesses to energy, delivering innovative, reliable products and services. Williams information is available at http://www.williams.com PACIGIC GAS: Court Okays Settlement Stipulation of CellNet Claim ---------------------------------------------------------------- Pacific Gas and Electric Company, pursuant to Bankruptcy Rule 9019, sought and obtained the Court's approval of a stipulation of settlement of PG&E's claim against CellNet Data Systems, Inc., a debtor in possession in a chapter 11 case pending before United States Bankruptcy Court for the District of Delaware. The claim arose from alleged royalties for the sale of data generated by technology under a contract with PG&E to other utilities. The Stipulation allows PG&E an undisputed $500,000 general unsecured claim in CellNet's Chapter 11 case without the expense, risk and delay that would result if PG&E were forced to litigate CellNet's objection to its claim. In December 1990, PG&E entered into a Fixed Price Contract for Consulting Services with CellNet's predecessor, Domestic Automation Company. The purpose of the contract was to develop a cellular network technology one of the goals of which was to develop a system that would allow a utility to remotely obtain information on the status of its gas or electric meters, instead of incurring the time and expense of sending a reader to the meter. Pursuant to the Contract, PG&E paid DAC $2,540,000. In return, DAC was to develop the technology, install equipment in PG&E's service area and test the equipment. In addition, DAC agreed to pay PG&E royalties of up to $4 million if the technology "leads to commercial products or if DAC receives any Net Technology Revenue." The term "commercial products" is not defined in the Contract. "Net Technology Revenue" is defined to exclude amounts received for "project management, training, maintenance, or other services." DAC successfully developed the technology required by the Contract. Over the first several years of the Contract, DAC and CellNet sold equipment to utilities Other than PG&E and paid royalties on those sales. From 1993 through 1997, PG&E received $84,098.63 in royalties from these sales. In 1994, DAC became CellNet Data Systems, Inc. and changed its marketing strategy. Instead of solely selling equipment, CellNet began selling the data generated by its Automated Meter Reading technology to other utilities, including Kansas City Power & Light. PG&E attempted to collect royalties arising from CellNet's revenues from KCP&L but to no avail. On February 4, 2000, CellNet commenced a Chapter 11 bankruptcy case in the United States Bankruptcy Court for the District of Delaware. PG&E filed a Proof of Claim in the Delaware Bankruptcy Court on May 16, 2000. At the time, PG&E was unsure of the amount of royalties to which it was entitled. So it claimed the maximum amount allowable under the Contract and asserted a general unsecured claim in the amount of $4,062,000 for royalties and prepetition interest. After discovery, PG&E reduced its claim to $1,280,000. CellNet objected to the PG&E's claim on the ground that it did not "(i) create commercial products based upon the jointly-developed technology, (ii) receive revenue from the sale of such products, or (iii) receive revenue from the further licensing of the jointly-developed technology." PG&E responded and the matter was pending at the time PG&E filed for chapter 11 relief. PG&E estimates that it might cost between $40,000-$50,000 to litigate its proof of claim in CellNet's bankruptcy. Discovery has yet to be completed and further costs will be incurred before a trial is conducted in Delaware. Taking into account such costs among other things, PG&E reckons that the Stipulation is fair and equitable and is in the best interest of the bankruptcy estate. PG&E believes that the Stipulation falls within the class of claims that PG&E has been authorized to settle in the ordinary course of business by Order of the Court entered on June 29, 2001. The Debtor has filed a separate order on the Stipulation for two reasons: (1) the claim is a pre-petition claim, and (2) the Stipulation was executed on May 9, 2001, prior to the filing of the motion for order establishing parameters for settlement authority, and the Stipulation expressly provides that it becomes effective as to PG&E only upon the Court's issuance of an order approving the Stipulation. (Pacific Gas Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) PENTASTAR: Gets Defaults Waiver & Maturity Extension to Sept. 30 ---------------------------------------------------------------- PentaStar Communications, Inc. (Nasdaq: PNTA), the nation's largest communications services agent, announced it has received a waiver of defaults and extension of loan maturity until September 30, 2001, on its credit agreement with Wells Fargo Bank West, National Association. "We are pleased to have secured a waiver and extension under our credit agreement with Wells Fargo. This will allow us to continue discussions with the objective of negotiating a restructured credit agreement. In addition, we have begun a cost reduction program that we expect to be fully implemented by September 30, 2001. This will have a positive impact on our third quarter results and provide us with annualized cost savings, once fully implemented, of approximately $ 2 million," said Bob Lazzeri, Chief Executive Officer of PentaStar. "As we discussed in our August 14, 2001 conference call, we experienced abnormally high levels of order cancellations and deferrals in the second quarter due to the economy's impact on our customers. However, we are pleased to report that recent performance indicates positive revenue and order trends compared to the Company's second quarter results. Although the waiver and extension does not allow for additional borrowings, based upon our new cost structure and revenue trends, we expect to generate sufficient cash flow to fund our operations," added Lazzeri. As a result of the waiver and extension granted by Wells Fargo, the Company is no longer in cross-default under the Reducing Revolver Loan and Security Agreement with Merrill Lynch Business Financial Services, Inc. Any failure of the Company to successfully negotiate a restructured credit agreement with Wells Fargo would result in the loan amount becoming due and payable on September 30, 2001. Further, if the Company's cash flow from operations becomes insufficient to fund its activities, additional financing would be required. The Company has not identified replacement financing for the loan. There can be no assurance that replacement or adequate additional financing would be available to the Company. PentaStar designs, procures and facilitates the installation and use of communications services solutions that best meet customers' specific requirements and budgets. PentaStar was formed in March 1999 to become a national communications services agent and specializes in being the single source provider of total communications solutions for its business customers. PentaStar's common stock is traded on the Nasdaq National Market under the ticker symbol PNTA. For more complete information about PentaStar, contact PentaStar Communications, Inc., 1660 Wynkoop St., Denver, Colorado 80202, 303-825-4400, visit the Company's website at http://www.pentastarcom.comor send an email to info@pentastarcom.com. PILLOWTEX CORP: Moves to Set-Up De Minimis Asset Sale Procedures ---------------------------------------------------------------- In connection with the day-to-day operation of their businesses, Pillowtex Corporation maintains a diverse array of assets, including real, personal and intangible property. Certain of these assets are no longer necessary for the successful operation and reorganization of their businesses. As a result, the Debtors anticipate the sale of a number of these unproductive or nonessential assets that are of relatively de minimis value compared to the Debtors' total asset base. Eric D. Schwartz, Esq., at Morris, Nichols, Arsht & Tunnell, in Wilmington, Delaware, states that many of these asset sales nevertheless constitute transactions outside of the ordinary course of the Debtors' businesses and would typically require individual Court approval. This would be burdensome to the Court and costly for the Debtors' estates. To lessen these burdens and costs, the Debtors sought and obtained Judge Sue Robinson's approval of these procedures: (a) The Miscellaneous Sale Procedures shall apply only to sset sale transactions involving, in each case, (i) the transfer of less than $750,000 in total consideration, and (ii) aggregate cure costs of less than $200,000. The Debtors shall be permitted to sell assets that are encumbered by liens, claims, encumbrances or other interests only if those liens and other interests are capable of monetary satisfaction or the holders of those liens and interests consent to the sale. Further, the Debtors shall be permitted to sell assets co-owned by a Debtor and a third party only to the extent that the sale does not violate section 363(h) of the Bankruptcy Code. (b) Other than with respect to De Minimis Sales (as defined below), after a Debtor enters into a contract or contracts contemplating a transaction that is subject to the Miscellaneous Sale Procedures (a Proposed Sale), the Debtor shall file a notice of the Proposed Sale (the Sale Notice) with the Court and serve the Sale Notice by overnight delivery or telecopier on: (i) the U.S. Trustee, (ii) counsel to the Creditors' Committee, (iii) counsel to the Secured Lenders, (iv) counsel to BTM Capital Corporation, (v) all known parties holding or asserting liens on or other interests in the assets that are the subject of the Proposed Sale and their respective counsel if known and if applicable, and (vi) the non-debtor parties to all executory contracts and unexpired leases that the Debtors propose to assume and assign in connection with the Proposed Sale and their respective counsel if known (collectively, the Interested Parties). (c) The Sale Notice shall include the following information with respect to the Proposed Sale: (1) a description of the assets that are the subject of the Proposed Sale and their locations, and, if available, the appraised value or book value of the assets; (2) the identity of the non-debtor party or parties to the Proposed Sale and any relationships or the party or parties with the Debtors; (3) the identities of any parties holding liens on or other interests in the assets and a statement indicating that all such liens or interests are capable of monetary satisfaction; (4) the major economic terms and conditions of the Proposed Sale; (5) the executory contracts and unexpired leases, if any, that the applicable Debtor or Debtors propose to assume and assign in connection with the Proposed Sale and the related cure amounts that the applicable Debtor or Debtors propose to pay with respect to each such contract or lease; and (6) instructions consistent with the terms described below regarding the procedures to assert objections to the Proposed Sale (Objections). (d) Interested Parties shall have 10 business days (the Notice Period) to object to the Proposed Sale pursuant to the objection procedures described below. If no Objections are properly asserted prior to expiration of the Notice Period, the applicable Debtor or Debtors will be authorized, without further notice and without further Court approval, to consummate the Proposed Sale in accordance with the terms and conditions of the underlying contract or contracts. In addition, the applicable Debtor or Debtors may consummate a Proposed Sale prior to expiration of the applicable Notice Period if each Interested Party consents in writing to the Proposed Sale. Upon either (i) the expiration of the Notice Period without the assertion of any Objections or (ii) the written consent of all Interested Parties, the Proposed Sale, including the assumption and assignment of executory contracts and unexpired leases proposed in connection with the Proposed Sale, will be deemed final and fully authorized by the Court. (e) If any significant economic terms of a Proposed Sale are amended after transmittal of the Sale Notice, but prior to the expiration of the Notice Period, the applicable Debtor or Debtors must send a revised Sale Notice to all Interested Parties describing the Proposed Sale, as amended. If a revised Sale Notice is required, the Notice Period will be extended until the expiration of 10 business days following the date of transmittal of the revised Sale Notice. (f) Any Objections to a Proposed Sale must be in writing, filed with the Court and served on the Interested Parties and counsel to the Debtors so as to be received prior to expiration of the Notice Period. Each Objection must state with specificity the grounds for objection. If an Objection to a Proposed Sale is properly filed and served, the Proposed Sale may not proceed absent: (a) withdrawal of the Objection, (b) entry of an order of the Court specifically approving the Proposed Sale or (c) the submission of a Consent Order (defined below) in accordance with the procedures described below. Any Objections may be resolved without a hearing by an order of the Court submitted on a consensual basis by the applicable Debtor or Debtors and the objecting party (a Consent Order); provided, however, that if any significant economic terms of the Proposed Sale are modified by the Consent Order, the applicable Debtor or Debtors must, prior to submission of the Consent Order: (i) provide the Interested Parties with 5 business days' prior notice of the Consent Order and an opportunity to object to the terms of the Consent Order by providing a written statement of objection to the Debtors' counsel, and (ii) certify to the Court that: (A) such notice was given and (B) no Interested Party asserted an objection to the Consent Order. If an Objection is not resolved on a consensual basis, the applicable Debtor or Debtors or the objecting party may schedule the Proposed Sale and the Objection for hearing at the next available omnibus hearing date in these cases by giving at least 10 days' written notice of the hearing to each of the Interested Parties. (g) Notwithstanding the notice procedures described above, for an asset sale transactions involving (i) the transfer of less than $10,000 in total consideration, (ii) no proposed assumption and assignment of any executory contracts, and (iii) no known parties other than the Secured Lenders holding or asserting liens or other interests in the assets that are the subject of the transaction (a De Minimis Sale), the applicable Debtor or Debtors will be authorized, without following the notice procedures otherwise required under the Miscellaneous Sale Procedures and without further notice and further Court approval, to consummate the De Minimis Sale, and the De Minimis Sale shall be deemed final and fully authorized by the Court. Notwithstanding the foregoing, without the advance written consent of counsel for the Secured Lenders and counsel for the Creditors' Committee, the Debtors' consummation of De Minimis Sales shall not in the aggregate exceed $1,000,000. Every 3 months the Debtors shall provide to counsel for the Secured Lenders, counsel for the Creditors' Committee, counsel for BTM Capital Corporation and the U.S. Trustee a report itemizing the assets sold and consideration received for each De Minimis Sale completed during the prior 3 months. (h) All buyers shall take assets sold by the Debtors pursuant to the Miscellaneous Sale Procedures "as is" and "where is," without any representations or warranties from the Debtors as to the quality or fitness of such assets for either their intended or any particular purposes. (i) All buyers shall take assets sold by the Debtors pursuant to the Miscellaneous Sale Procedures (including any De Minimis Sales) free and clear of liens, claims, encumbrances and other interests. All such liens, claims, encumbrances, and other interests will attach to the proceeds of the sale. (j) All sales pursuant to the Miscellaneous Sales Procedures are deemed to be "approved by the Bankruptcy Court after a hearing" as that phrase is used in the Post-petition Credit Agreement. (k) Where required by the terms of the Post-petition Credit Agreement, the Debtors shall use the net cash proceeds of asset sales completed under the Miscellaneous Sale Procedures to reduce the Debtors' obligations to the Secured Lenders in accordance with the Final Financing Order, as required by sections 4.3 and 8.5(b) of the Post-petition Credit Agreement. If the Secured Lenders are paid by the Debtors pursuant to this paragraph and it subsequently turns out that all or a portion of the proceeds paid to the Secured Lenders are from sales of assets not owned by the Debtors, the Debtors and/or any trustee subsequently appointed in these cases shall pay to the owner(s) of the asset(s) an amount equivalent to that portion of the proceeds to which the owner(s) of the assets would have been entitled under their applicable agreement, lease or contract with the Debtors. (l) To the extent the Debtors assume or assume and assign any leases with BTM Capital Corporation in connection with an asset sale in accordance with this Order, any cure amounts owed to BTM Capital Corporation in connection therewith shall be paid at or before closing of the asset sale. All other sale transactions outside of the ordinary course of the debtors' businesses would remain subject to individual Court approval. (Pillowtex Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) PILLOWTEX: Gets Court Approval to Complete Blanket Division Sale ---------------------------------------------------------------- Pillowtex Corporation has received U.S. Bankruptcy Court approval necessary to complete the sale of its blanket division, Beacon Manufacturing Company to Beacon Acquisition Corporation, an investment group comprised of current managers and a private investor. The sale of the blanket division includes two Beacon Manufacturing plants - an acrylic blanket manufacturing plant in Swannanoa and a cotton blanket manufacturing plant located in Westminster, S.C. A distribution facility in Mauldin, S.C. will be leased from Pillowtex. Approximately 700 people are employed at the three Beacon facilities. Beacon designs, manufactures and markets blankets. Pillowtex President Tony Williams said, "We are pleased with the court's approval of the sale and will move forward with plans to close the deal in September. This is truly a win-win situation that will help us to reduce our debt while at the same time, preserve the jobs of those working at the Beacon facilities." Pillowtex Corporation, with corporate offices in Kannapolis, N.C., is one of America's leading producers of household textiles including towels, sheets, rugs, pillows, mattress pads, feather beds, comforters and decorative bedroom and bath accessories. Pillowtex employs approximately 11,500 persons at its facilities in the United States and Canada. The Company's brands include Cannon, Fieldcrest, Royal Velvet, Charisma, and private labels. The Company filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code on November 14, 2000. PSINET INC: Court Okays FTI as Committee's Financial Advisor ------------------------------------------------------------ The Unsecured Creditors Committee of PSINet, Inc., sought and obtained the Court's authority, pursuant to sections 328 and 1103(a) of the Bankruptcy Code, and rule 2014 of the Bankruptcy Rules for the employment and retention of FTI Consulting Inc. as its financial advisors during the PSINet Chapter 11 case effective, nunc pro tunc to June 8, 2001, the date the Committee selected FTI. In the application, the Committee submits that it needs a financial advisor to assist it in the evaluation of the Debtors' businesses during these Chapter 11 cases. The Committee has selected FTI based on its experience and expertise in providing financial advisory services in Chapter 11 cases. FTI had provided similar services, prior to June 8, 2001, to an unofficial committee of holders of the Debtors' senior notes. The Committee believes that FTI is well qualified and uniquely able to provide financial advisory services to them in this case in an efficient manner. Upon the Committee's application and the declaration of Peter R. Nurge, managing director in the firm of FTI/Policano& Manzo, an operating unit of FTI, the Court is satisfied that FTI represents no interest adverse to the Debtors, their creditors, or the estates with respect to the matters upon which it is to be engaged, that FTI and its professional personnel are disinterested persons within the meaning of the Bankruptcy Code Section 101(14), as modified in Section 1107(b), that its employment is necessary and in the best interests of the Debtors, their creditors and the estates. Mr. Nurge declares that while FTI or its professionals may have from time to time provided and may continue to provide various services to certain of the Debtors' creditors, attorneys or other parties in interest in matters unrelated to this Chapter 11 case, to the best of his knowledge, FTI is a "disinterested person" as that term is defined in section 101(14), as modified by section 1107(b) of the Bankruptcy Code. The Committee tells the Court that these matters have no bearing on the services for which FTI is to be retained in this case. Pursuant to the retention, FTI will provide financial advisory services to the Committee including, but not limited to: (a) Review, analysis and monitoring of the financial and operating statements of the Debtors; (b) Evaluation of the assets and liabilities of the Debtors; (c) Review and analysis of the Debtors' business and financial projections; (d) Determination of a theoretical range of values for the Debtors and their operating assets; (e) Analysis and review of claims made against the estate; (f) Assistance in developing, evaluating, structuring and negotiating the terms and conditions of all potential plans of reorganization, and if requested, assistance in developing alternative plans including contacting potential plan sponsors; (g) Expert testimony with regard to valuation and recoveries to unsecured creditors under any such plan; (h) Analysis of potential divestitures of the Debtors' operations; (i) Advisory services including valuation and general restructuring. Mr. Nurge discloses in his declaration that FTI received from the Debtors a retainer in the amount of $100,000. Through May 31, 2001, FTI incurred and was paid $313,673.85 for fees and expenses, and subsequently incurring fees and expenses in the amount of $35,597.75 in connection with services provided for the period from June 1 through June 7, 2001. Net of these latter fees and expenses, FTI currently holds a retainer balance of $64,402.25. After consultation with the U.S. Trustee, FTI has agreed to immediately return the Retainer in the amount of $100,000 to the Debtors. FTI expressly its right to make, at the conclusion of the PSINet chapter 11 cases, application to the Court, under Section 503 or any other applicable provisions of the Bankruptcy Code, for approval and allowance of the $35,597.75 for services performed and expenses incurred by FTI during the period of June 1, 2001 through June 7, 2001. FTI will be compensated at its normal hourly rates, which currently are as follows: Members $430 - $525 Staff $220 - $395 Support Staff $ 50 - $130 FTI intends to apply to the Court for allowance of compensation and reimbursement of expenses in accordance with applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Rules, and the United States Trustee's Section 330 Fee Guidelines. FTI has advised the Committee that it does not as a general practice keep detailed time records similar to those customarily kept by attorneys, and represents that it does not have the systems and procedures in place to follow the timekeeping practices generally followed by attorneys who regularly practice before this Court. Nevertheless, FTI has agreed to provide time records in a streamlined or summary format, which shall set forth a description of the services rendered by each professional and the aggregate amount of time spent by such individual in rendering services to or on behalf of the Committee. (PSINet Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) QUEENSWAY FINANCIAL: A.M. Best Places Rating Under Review Status ---------------------------------------------------------------- A.M. Best Co. maintained the under review status with developing implications for the following subsidiaries of Queensway Financial Holdings Limited, Toronto, Ontario: North Pointe Insurance Company, Hermitage Insurance Company, Kodiak Insurance Company, Consolidated Property & Casualty Insurance Company and Universal Fire and Casualty Insurance Company. This action follows the announcement that the agreement between Queensway and the Argonaut Group, Inc., for the purchase and sale of North Pointe Financial Services, Inc., Hermitage Insurance Company, Consolidated Property & Casualty Insurance Company and Universal Fire and Casualty Insurance Company has been terminated. An alternative plan has been proposed through a re-organization whereby Queensway's senior lenders will exchange their debt for all of the economic ownership of the aforementioned Queensway companies. Concurrently, Ernst & Young Inc., the interim receiver of Queensway Financial Holdings Limited, has indicated that discussions have been advanced with several interested purchasers for certain Queensway companies. Queensway's senior lenders are cooperatively working with Queensway and the various State Regulatory Agencies to ensure the sale process continues without disruption to the ongoing operation of the insurance companies. The current financial strength ratings of the Queensway insurance companies reflect A.M. Best's opinion that the reorganization and sale process will be completed expeditiously. Any delay beyond reasonable expectations will heighten A.M. Best's concern that the plan will not be approved, prompting downward rating action. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com RESPONSE USA: Enters Global Agreement Spinning-Off Health Watch --------------------------------------------------------------- Health Watch, Inc., an operating subsidiary of Response USA, Inc. (OTC Bulletin Board: RSPN), has entered into a Global Agreement with Response USA, its affiliates and their lenders. Under the terms of the Agreement, Jeffrey Queen and Andrew Queen, the principals of Health Watch, will reacquire all the issued and outstanding capital stock of Health Watch that they sold to Response USA in September 1998. Following the reacquisition, Health Watch will become a stand-alone privately held company. "We plan to continue to build on the strengths of Health Watch as a leader in the personal response industry," said Jeffrey Queen, who will continue as chief executive officer of Health Watch. "Health Watch is and will remain a healthy and growing company and will continue to provide and develop new state-of- the-art technologies." Pursuant to the Agreement, Jeffrey Queen and Andrew Queen have resigned their positions as officers and directors of Response USA and its affiliates. In addition, in accordance with the Agreement, Response USA and its affiliates are expected to file voluntary bankruptcy petitions under Chapter 11 of the United States Bankruptcy Code. Subject to approval of the Bankruptcy Court, 100% of the outstanding capital stock of Health Watch will be transferred to Jeffrey and Andrew Queen, who will in connection therewith transfer the capital stock of Response USA they hold, totaling approximately 46% of the outstanding stock, to Response USA. Health Watch will not be a party to any bankruptcy proceedings. The Agreement provides that all the assets that Health Watch needs to operate its business will remain with Health Watch such as the facilities located in Florida, operating equipment, monitoring equipment, intellectual property and other assets that Health Watch uses in its operations. Health Watch is in the business of supplying personal response systems and monitoring services to providers throughout the United States who in turn provide the Health Watch services to their subscribers. Health Watch is a leading vertically integrated manufacturer and supplier of state-of-the-art personal response systems and monitoring services to the Home Care industry as well as hospitals throughout the United States. RIVERWOOD INTERNATIONAL: Proposes 10-5/8% Note Exchange Offer ------------------------------------------------------------- Riverwood International Corporation issued a prospectus of an Offer To Exchange Any and all Outstanding 10-5/8% Senior Notes Due 2007 Issued on June 21, 2001 for Registered 10-5/8% Senior Notes Due 2007. The Old Notes $250,000,000 aggregate principal amount of 10 5/8% Senior Notes due 2007 were originally issued and sold by Riverwood International Corporation on June 21, 2001 in a transaction that was exempt from registration under the Securities Act of 1933, and resold to qualified institutional buyers in compliance with Rule 144A. The New Notes The terms of the new notes are identical to the terms of the old notes except that the new notes are registered under the Securities Act and will not contain restrictions on transfer or provisions relating to additional interest, will bear a different CUSIP number from the old notes and will not entitle their holders to registration rights. The Exchange Offer Riverwood International Corporation's offer to exchange old notes for new notes will be open until 5:00 p.m., New York City time, on September 28, 2001, unless it extends the offer. Each broker-dealer that receives the new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of the new notes received in exchange for the old notes where such old notes were acquired by the broker-dealer as a result of market-making activities or other trading activities. Riverwood has agreed that, starting on the expiration date of the exchange offer and ending on the close of business 90 days after the expiration date, it will make this prospectus available to any such broker-dealer for use in connection with any such resale. No public market currently exists for the notes. The Company's a leading provider of paperboard and paperboard packaging solutions, either directly or through independent converters, to multinational beverage and consumer products companies, such as Anheuser-Busch Companies, Inc., Miller Brewing Company, numerous Coca-Cola and Pepsi bottling companies, Kraft Foods, Nestle, Unilever and Mattel, Inc. In the United States, the Company is one of two major manufacturers of coated unbleached kraft paperboard, or CUK board, which, together with white lined chip board production and our packaging machinery business, comprise our coated board business segment. The Company, under its senior secured credit facilities, is required to comply with specified financial ratios and tests, including consolidated debt to EBITDA leverage ratio and interest coverage ratio requirements. Compliance with these covenants for subsequent periods may be difficult given current market and other economic conditions. The Company's ability to comply in future periods will depend on its ongoing financial and operating performance, which in turn will be subject to economic conditions and to financial, business and other factors, many of which are beyond control, and will be substantially dependent on the selling prices for the Company's products, raw material and energy costs, and the Company's ability to successfully implement its overall business strategy. Although the Company expects its 2001 full year EBITDA to be slightly lower than our 2000 EBITDA, no assurances can be given that the Company will meet such expectations. The indentures governing the 1996 notes, the 1997 notes and the notes also contain restrictive covenants. The Company's ability to comply with the covenants and restrictions contained in its senior secured credit facilities or its various indentures may be affected by events beyond control, including prevailing economic, financial and industry conditions. The breach of any such covenants or restrictions could result in a default under either its secured credit facilities or the relevant indenture that would permit the applicable lenders or noteholders, as the case may be, to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest, and the commitments of its senior secured lenders to make further extensions of credit under the credit facilities could be terminated. If the Company was unable to repay its indebtedness to senior secured lenders, these lenders could proceed against the collateral securing such indebtedness. The Company's ability to make scheduled payments or to refinance its obligations with respect to its indebtedness will depend on its financial and operating performance, which, in turn, is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond its control, including: - operating difficulties; - increased operating costs; - increased raw material and energy costs; - market cyclicality; - product prices; - the response of competitors; - regulatory developments; and - delays in implementing strategic projects. If its cash flow and capital resources are insufficient to fund its debt service obligations, the Company may be forced to further reduce or delay capital expenditures, sell additional assets, or seek to obtain additional equity capital, or to restructure our debt. There can be no assurance that its cash flow and capital resources will be sufficient for payment of interest on and principal of its indebtedness in the future, or that any such alternative measures would be successful or would permit the Company to meet its scheduled debt service obligations. In the absence of such operating results and resources, the Company could face substantial liquidity problems and might be required to dispose of material assets or operations to meet its debt service and other obligations, and there can be no assurance as to the timing of such sales or the proceeds that could be realized therefrom. SCHWINN/GT CORP: Court Approves Employee Retention Program ---------------------------------------------------------- Schwinn/GT Corp. said that the Court has approved the Company's employee retention program, which commits benefits in the aggregate of $1.9 million to 61 employees of the Cycling and Fitness Divisions and corporate staff. The Court also set September 17, 2001, as the date for the final hearing on the Company's proposed debtor-in- possession (DIP) post-petition financing arrangement. The Court noted that because the sale of the Cycling Division appears imminent, it has authorized $1.1 million of the proceeds from the sale of the Cycling Division to be used to fund the payment of incentive bonuses when due to eligible Cycling participants and certain corporate employees. The Court deferred a decision on the funding of the remaining $800,000 of the retention program, pending finalization of the DIP post-petition financing arrangement. Commenting on today's ruling, Jeff Sinclair, Schwinn/GT's Chief Executive Officer, "We are very pleased that the Court has approved the employee retention program in its entirety and that he characterized it as 'acceptable and fair'. The judge further noted that none of the parties to the case had filed an objection to the plan and that they had all stated their approval." "While today's action by the Court will provide a great sense of relief to the program's participants, we are somewhat disappointed by the decision to make the names of the individual participants public. The retention program has been a matter of public record since the Company filed to reorganize under Chapter 11, and we are not trying to hide its contents. Our concern is that the disclosure of the names of individual participants is an unnecessary invasion of their personal privacy. For that reason we hope to be able to demonstrate compelling reasons to the judge to re-address this issue and to stay his order," Sinclair continued. In a related matter, representatives of the secured lenders and the creditors' committee reported to the Court that they had made significant progress in resolving the one remaining issue on the DIP financing arrangement, and that they were confident they would have an agreement in place on or before the final hearing which has been scheduled for September 17, 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. SCHWINN/GT: Court Allows Employee Details to Stay Under Wraps ------------------------------------------------------------- Schwinn/GT Corp. said that the Court has issued a temporary stay of its previous order which would have released the individual details of its employee retention program. A hearing has been set for September 17, 2001, at which time the Court will consider additional testimony and evidence on the matter. "We greatly appreciate the Court's decision to grant us an opportunity to further demonstrate the need for confidentiality," said Jeff Sinclair, Schwinn/GT's Chief Executive Officer. "The structure and cost of our employee retention plan has been a matter of public record for some time. Our concern all along has been to protect the interests both of the company and of the individual participants, and we are hopeful that we will be able to convince the Court of the need to preserve confidentiality." 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. SUNTERRA CORP: Incurs $1.6 Million Net Loss in June --------------------------------------------------- Sunterra Corporation's Consolidated Debtor and Non-Debtor Entities Income Statement For the Month Ended June 30, 2001, shows total revenues of $15,646,855, total costs and operating expense of $15,862,656. Consequently, loss from operations was $(215,801). After provision for income taxes, bankruptcy processing costs, etc., the Company's net loss for the month was $(1,625,494). The Company is one of the world's largest time-share vacation companies, with about 90 resort locations in the Caribbean, Europe, and North America. About 300,000 families own interests in the company's resorts, entitling them to a one-week stay at a resort each year, as well as "vacation points," which may be redeemed at participating resorts. Sunterra also offers financing services and develops and manages resort properties. It markets properties under the Sunterra name and, through licensing agreements, the Embassy Vacation Resorts name. The company has filed for Chapter 11 and hired CEO Greg Rayburn in an effort to improve its financial standing. TELEGEN: Ability to Meet Capital Requirement Still Uncertain ------------------------------------------------------------ Telegen has incurred significant operating losses in every fiscal year since its inception, and, as of June 30, 2001, had an accumulated deficit of $38,719,089. As of June 30, 2001, Telegen had a working capital of $2,052,090. Telegen expects to continue to incur substantial operating losses through 2001. In order to become profitable, Telegen must successfully develop commercial products, manage its operating expenses, establish manufacturing capabilities, create sales for its products and create a distribution capability. Telegen has made significant expenditures for research and development of its products. In order to become competitive in a changing business environment, Telegen must continue to make significant expenditures in these areas. Therefore, Telegen's operating results will depend in large part on development of a revenue base. On August 9, 2001, the Company's Board of Directors authorized a cost reduction program intended to bring expenses further in line with the Company's current product development expectations and financial resources. Although the Company expects that the cost reduction program will materially reduce operating expenses from their current levels and will result in a material reduction in staff, the scope and details of the Company's cost reduction program have not yet been finalized. The Company currently intends to continue to focus its efforts on the development of its initial flat panel and datacasting products, and currently does not anticipate that any material reduction in staff or allocated development resources will occur in its research and product development programs. Sales and marketing expenses were $66,878 for the second quarter of 2001 compared to $0 for the second quarter of 2000. All of the sales and marketing expenses for the second quarter of 2001 were attributable to Telegen and consisted primarily of salaries and tradeshow expenses. Sales and marketing expenses were $66,878 for the six months ended June 30, 2001 compared to $0 for the six months ended June 30, 2000. All of the sales and marketing expenses for the six months ended June 30, 2001 were also attributable to Telegen and consisted primarily of salaries and tradeshow expenses. Research and development expenses were $655,472 for the second quarter of 2001 compared to $64,058 for the second quarter of 2000. Increased research and development expenses for the second quarter of 2001 resulted from increased development activities related to the Company's HGED flat panel display and Telisar's development efforts related to its datacasting technology; of the 2001 research and development expenses, $454,305 was attributable to Telegen and $201,167 was attributable to Telisar. Decreased research and development expenses for the second quarter of 2000 resulted from reduced staffing and availability of funds; all of the research and development for the second quarter of 2000 was attributable to Telegen. Research and development expenses were $1,155,692 for the six months ended June 30, 2001 compared to $144,265 for the six months ended June 30, 2000. Increased research and development expenses for the first six months of 2001 resulted from increased development activities related to the Company's HGED flat panel display and Telisar's development efforts related to its datacasting technology, of the research and development expenses for the first six months of 2001, $812,368 was attributable to Telegen and $343,324 was attributable to Telisar. Decreased research and development expenses for the six months ended June 30, 2000 resulted from reduced staffing and availability of funds; all of the research and development for the six months ended June 30, 2000 was attributable to Telegen. General and Administrative expenses were $996,167 for the second quarter of 2001 compared to $439,850 for the second quarter of 2000. The increase in the second quarter of 2001 was related to increased staffing and corporate activities; of the 2001 general and administrative expenses, $970,631 was attributable to Telegen and $25,536 was attributable to Telisar. Decreased general and administrative expenses for the second quarter of 2000 resulted from reduced staffing and availability of funds; all of the general and administrative expenses for the second quarter of 2000 were attributable to Telegen. The primary components of general and administrative expenses for the second quarters of 2000 and 2001 were employee salaries and accounting and legal expenses. General and Administrative expenses were $2,606,354 for the six months ended June 30, 2001 compared to $799,491 for the six months ended June 30, 2000. The increase in the six months ended June 30, 2001 was related to increased staffing and corporate activities; of the 2001 general and administrative expenses, $2,552,338 was attributable to Telegen and $54,016 was attributable to Telisar. Decreased general and administrative expenses for the six months ended June 30, 2000 resulted from reduced staffing and availability of funds; all of the general and administrative expenses for the six months ended June 30, 2000 were attributable to Telegen. The primary components of general and administrative expenses for the first six months of 2000 and 2001 were employee salaries and accounting and legal expenses. Net interest income for the second quarter of 2001 was $83,952 as compared with net interest income of $141,896 for the second quarter of 2000. Of the second quarter of 2001 interest income and expense, $97,206 was interest income and $13,254 was interest expense. The interest income for the second quarter of 2001 resulted from interest earned on deposits; $91,242 of interest income was attributable to Telegen and $5,964 was attributable to Telisar. All of the interest expense for the second quarter of 2001 was attributable to Telegen and consisted primarily of interest paid to investors in a prior offering. The decrease in interest income for the second quarter of 2001 resulted from decreased interest earned on deposits held in financial institutions. Of the second quarter of 2000 interest income and expense, $156,896 was interest income and $15,000 was interest expense. All of the interest income and expense for the second quarter of 2000 was attributable to Telegen and consisted of interest earned on deposits held in financial institutions and interest expense related to notes outstanding during the period. Net interest income for the six months ended June 30, 2001 was $154,113 as compared with net interest income of $126,896 for the six months ended June 30, 2000. Of the interest income and expense for the first six months of 2001, $167,368 was interest income and $13,255 was interest expense. The interest income for six months ended June 30, 2001 resulted from interest earned on deposits; $152,309 of interest income was attributable to Telegen and $15,059 was attributable to Telisar. All of the interest expense for the six months ended June 30, 2001 was attributable to Telegen and consisted primarily of interest paid to investors in a prior offering. The increase in net interest income for the six months ended June 30, 2001 resulted from increased interest earned on deposits held in financial institutions. Of the interest income and expense for the six months ended June 30, 2000, $156,896 was interest income and $30,000 was interest expense. All of the interest income and expense for the first six months of 2000 was attributable to Telegen and consisted of interest earned on deposits held in financial institutions and interest expense related to notes outstanding during the period. Liquidity and Capital Resources Telegen has funded its operations primarily through private placements of its equity securities with individual and institutional investors. From the inception of the Company through June 30, 2001, Telegen and its subsidiaries have raised a total of $41,504,654 in net capital through the sale of Telegen common stock, preferred stock and subsidiary common stock. Telegen did not issue any shares of common stock during the second quarters of 2001 and 2000 in lieu of cash as payment for certain operating expenses, legal fees and employee services. Telegen's future capital requirements will depend upon many factors, including the extent and timing of acceptance of Telegen's products in the market, the progress of Telegen's research and development, Telegen's operating results and the status of competitive products. Additionally, Telegen's general working capital needs will depend upon numerous factors, including the progress of Telegen's research and development activities, the cost of increasing Telegen's sales, marketing and manufacturing activities and the amount of revenues generated from operations. Although Telegen believes it will obtain additional funding in 2001, there can be no assurance that Telegen will be able to obtain such funding or that it will not require additional funding, or that any additional financing will be available to Telegen on acceptable terms, if at all, to meet its capital demands for operations. Telegen believes it will also require substantial capital to complete development of a finished prototype of the flat panel display technology, and that additional capital will be needed to establish a high volume production capability. There can be no assurance that any additional financing will be available to Telegen on acceptable terms, if at all. If adequate funds are not available as required, the results of operations from the flat panel technology will be materially adversely affected. Telegen does not have a final estimate of costs nor the funds available to build a full-scale production plant for the flat panel display and will not be able to build this plant without securing significant additional capital. Telegen plans to secure these funds either (1) from a large joint venture partner who would then be a co-owner of the plant or (2) through a future public or private offering of securities. Even if such funding can be obtained, which cannot be assured, it is currently estimated that a full-scale production plant could not be completed and producing significant numbers of flat panel displays before early 2003. Telegen is also currently contemplating entering into license agreements with large enterprises to manufacture the displays. The Company expects that the manufacturers would also have the attributes of established manufacturing expertise, distribution channels to assure a ready market for the displays and established reputations, enhancing market acceptance. Further, Telegen might obtain front-end license fees and ongoing royalties for income. However, Telegen does not currently expect to have any such manufacturing license agreements in place before 2002, or any significant production of displays thereunder before early 2003. Telegen is currently planning to establish a limited production/prototype line in early 2002, which will have the capacity to manufacture a limited number of marketable displays to produce moderate revenues. The cost of that production line is estimated to be about $10 million. Telegen does not have the capital resources to build a limited production/prototype facility, and no assurance can be given that Telegen will be successful in securing such funding. Telegen's future capital infusions will depend entirely on its ability to attract new investment capital based on the appeal of the inherent attributes of its technology and the belief that the technology can be developed and taken to profitable manufacturing in the foreseeable future. Telegen's actual working capital needs will depend upon numerous factors including the progress of Telegen's research and development activities, the cost of increasing Telegen's sales, marketing and manufacturing activities and the amount of revenues generated from operations, none of which can be predicted with certainty. Telegen anticipates incurring substantial costs for research and development, sales and marketing activities. Management believes that development of commercial products, an active marketing program and a significant field sales force are essential for Telegen's long-term success. Telegen estimates that its total expenditures for research and development and related equipment and overhead costs could aggregate to over $2,500,000 during 2001. Telegen estimates that its total expenditures for sales and marketing could aggregate to over $200,000 during 2001. Telegen, along with its subsidiaries, has a limited operating history in developing and commercializing its products, has generated no revenues since the year ended 1998, and it is difficult to evaluate the Company's business and prospects. The Company has been engaged in lengthy development of its flat panel display technology since 1995, as well as other technologies, and has incurred significant operating losses in every fiscal year since its inception. The cumulative net loss for the period from May 3, 1990 (inception) through June 30, 2001 is $38,719,089. The Company expects to continue to incur operating losses until at least the year 2003 as the Company continues expenditures for product development, continued United States and international patent prosecution and enforcement, marketing and sales, and establishment and expansion of manufacturing and distribution capabilities. Telegen Corporation and its subsidiaries engage in the development of flat panel display technology. Through Telegen's majority owned subsidiary, Telisar Corporation, the Company also engages in the development of a proprietary high-speed network for the delivery of digital content. Telegen is organized as a holding company with two wholly owned active subsidiaries, Telegen Display Corporation, a California corporation, and Telegen Communications Corporation, a California corporation; a wholly owned inactive subsidiary, Telegen Display Laboratories, Inc., a California Corporation; and a majority owned subsidiary, Telisar. Filing for Bankruptcy Protection Under Chapter 11 On October 28, 1998, the Company filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code (Case No. 98-34876-DM-11) in the United States Bankruptcy Court for the Northern District of California. On April 22, 2000, the Company filed its plan of reorganization and related disclosure statements with the Bankruptcy Court. On May 26, 2000, the Bankruptcy Court approved as adequate the Disclosure Statement, thereby enabling the Company to solicit votes on the plan of reorganization from the Company's creditors and shareholders. From the Filing Date until the effective date, the Company operated its business as a debtor-in-possession, subject to the jurisdiction of the Bankruptcy Court. During such time, all claims against the Company in existence prior to the Filing Date were stayed and have been classified as a bankruptcy liability in the consolidated balance sheet. On June 28, 2000, the Company's Second Amended Plan of Reorganization was confirmed and became effective on June 30, 2000. The Plan of Reorganization also affects the debtor's subsidiaries, Telegen Communications Corporation, and Telegen Display Laboratories, Inc. All options and warrants outstanding prior to the Effective Date were subsequently canceled pursuant to the Plan of Reorganization and have been reflected as such in the financial statements as of the Filing Date. At June 30, 2001, the bankruptcy liability was comprised of accounts payable to unsecured creditors. THERMADYNE: Cash Sources Not Enough to Meet Debt Servicing Need --------------------------------------------------------------- Net sales of Thermadyne Holdings Inc. for the second quarter of 2001 were $112.0 million compared to $135.1 million for the same quarter in 2000, or a decrease of 17.1%. Domestic sales for the three months ended June 30, 2001, were down 18.6% while international sales were off 14.6%. Weak economic conditions in all of the Company's key markets is the main contributing factor in the sales decline. Net sales through the six months ended June 30, 2001, were $231.7 million, a 13.6% decrease from reported sales of $268.3 million for the same period one year ago. Domestic sales, hurt by a weak economy, were $144.9 million for the first half of 2001, or a decline of 15.2% compared to the first six months of 2000. International sales were also hampered by weak economic conditions in all of the Company's major markets and were $86.8 million for the six months ended June 30, 2001, a drop of 10.8% from the same period last year. At June 30, 2001, the Company has $794.6 million of outstanding indebtedness including $354.3 million in secured indebtedness owed under the New Credit Facility. At March 31, 2001, and continuing at June 30, 2001, the Company was in violation of certain covenants with respect to the New Credit Facility. On May 24, 2001, the Company obtained a third amendment and forbearance agreement to the New Credit Facility from its bank lenders, which was due to expire on July 31, 2001. On July 24, 2001, the Forbearance Agreement was extended to September 28, 2001. Under the terms of the Forbearance Agreement the Company's bank lenders agreed to forbear from taking any action or exercising any right or remedy permitted under the New Credit Facility with respect to the Specified Events of Default, as defined, which included the non-payment of interest owed under the Senior Subordinated Notes and Subordinated Notes due on June 1, 2001 and May 1, 2001, respectively. The Company did not make these payments and is now in violation of both of the related Indentures. During the period of the Forbearance Agreement, the Company will continue to evaluate its existing capital structure and consider alternatives to strengthen its balance sheet, including postponing or restructuring debt service payments, refinancing the indebtedness, or obtaining additional waivers or amendments to its debt agreements. The Company has determined it is probable it will not be able to cure the defaults under the New Credit Facility, the Senior Subordinated Notes and the Subordinated Notes in the near term. The Company also has current amounts outstanding under the Debentures and Junior Notes, both of which contain cross-default provisions related to the acceleration of indebtedness prior to its maturity. The New Credit Facility also restricts the Company's ability to incur additional indebtedness. Cash on hand and operating cash flow are expected to be the Company's principal sources of liquidity in the near term. While the Company expects these sources to be sufficient to meet working capital and capital expenditure needs, they would not be adequate to meet the Company's debt service requirements in the event of an acceleration of indebtedness and will likely be insufficient to meet the debt service requirements of the New Credit Facility. UNIVERSAL AUTOMOTIVE: Closes $2.8M Investment with Wanxiang Unit --------------------------------------------------------------- Universal Automotive Industries, Inc. (Nasdaq: UVSL) announced that Thursday it closed a definitive agreement with an affiliate of Wanxiang America Corporation and has issued $2,800,000 of Series A Preferred Stock, convertible into 2,014,380 shares of Common Stock, subject to standard weighted average antidilution protection, and representing approximately 20% of the Company's capital stock on a post- closing basis. According to Universal's CEO, Arvin Scott, "We are very excited about Wanxiang America having become a major investor in the Company. The Wanxiang Agreement provides us with a strategic partnership with China's largest auto parts manufacturer." The Company met on August 17, 2001 with a Delisting Panel authorized by the NASDAQ Stock Market, Inc., which was convened due to the Company's failure to maintain net tangible assets of at least $2,000,000 (as of the dates covered by its most recent Form 10-K and Form 10-Q filings) and its need to demonstrate an ability to meet this requirement in the future. The Company's pro forma net tangible assets as of July 31, 2001, after giving effect to the Agreement, and before accounting for the associated legal and closing costs total approximately $3,395,000. The Wanxiang Agreement contains a "put" right, enabling Wanxiang to effectively put back its shares for a return of its funds, and to terminate the various agreements covered by the Wanxiang Agreement, in the event the Company is unable to demonstrate within 90 days following closing that NASDAQ has confirmed that the Company has corrected its net tangible assets deficiency to NASDAQ's satisfaction. The Company will be providing formal notice to NASDAQ of the aforesaid equity infusion. While the Company believes that this will demonstrate net tangible assets substantially in excess of the minimum required amounts, the Company cannot presently determine whether the above actions, without additional equity enhancement, will cure the net tangible assets deficiency to NASDAQ's satisfaction. VENCOR INC: Bel Air Seeks Payment of Administrative Expenses ------------------------------------------------------------ Bel Air Convalescent Home, Inc. asks the Court to authorize and require Vencor, Inc. to compensate it for: (1) rent for the Facility used by Debtor during its chapter 11 case (including real estate and healthcare facilities); (2) the replacement of a broken water heater discovered after Debtor vacated the Facility; (3) Bel Air's actual losses caused by Debtor's failure to maintain the Facility as contratually agreed. Bel Air claims that it was required to accept a $136,900 reduction in rental payments from the Debtors' successor lessee due to the Debtor's failure to maintain the Facilities. Bel Air futher alleges that the value of the Facility should not be measured by Debtor's performance during the summer of 2000, after it had allowed the Facility to deteriorate in violation of the Lease. Rather, the value should be based on the actual monthly payment of at least $31,200 for which Bel Air negotiated in March 2000 with the successor tenant. The Debtors assert that because the leased premises are used as nursing care facilities, they are residential property and therefore outside the scope ot 11 U.S.C. section 365(d)(3). The Debtors therefore objected on the basis that the Bankruptcy Code does not authorize such payment. The Debtors also contend that the damages are attributable to an alleged delay in notice of the proposed new tenant. Bel Air points out that the Debtors have used the premises for commercial purposes. Moreover, the Lease addresses Debtor's use of personal property such as the water heater, Bel Air tells Judge Walrath. Bel Air therefore asserts that it is entitled to the benefits of section 363(d)(3) and section 365(d)(10) of the Bankruptcy Code. Bel Air also reminds Judge Walrath of Vencor's inclusion of the lease in its repeated requests for extensions of time for assumption/rejection of leases under section 365(d)(4). Bel Air thus argues that there is no merit to the Debtors' position that the lease is not an unexpired lease in denying Bel Air payment of administrative expenses. (Vencor Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) VLASIC FOODS: Claims & Causes of Action Preserved Under the Plan ---------------------------------------------------------------- The First Amended Plan preserves all of the rights of Vlasic Foods International, Inc. in respect of Causes of Action and transfers them to VFI LLC. The LLC Manager will be empowered on behalf of VFI LLC to prosecute, collect, and/or settle the same as deemed appropriate. The Debtors and the Creditors' Committee disclose that they are continuing to investigate and analyze these potential Causes of Action: (A) Claims Against Pinnacle and/or PFC For breaches in the Asset Purchase Agreement, the Debtors believe that Pinnacle be liable to the Debtors because of: (i) Warrants Dispute. The Warrants Formula of the Pinnacle Asset Purchase Agreement provides: "In addition to the Purchase Price, Purchaser, in consideration of the Purchases Assets, shall issue, within 5 Business Days, of the later to occur of the Plan Effective Date or the Order Date, warrants to purchase at an exercise price of $3.00 per share (assuming that Purchaser, or its successor as provided below, has issued its shares of Common Stock at $1.00 per share) the lesser of (x) 22,500,000 shares of common stock, or (y) such lesser numbers of shares of common stock as shall represent 15% of the shares of common stock issued under the terms of the Equity Commitment Letter." The Debtors contend that the Warrants Formula mandates that Pinnacle issue Warrants to purchase 22,500,000 shares. But Pinnacle only issued an aggregate of 160,000,000 shares of its common stock to its stockholders. Under the formula, multiplying 160,000,000 shares by 15% million yields 24 million shares. However, Pinnacle asserts that the Warrants Formula permits them to base the number of Warrants upon the shares of Pinnacle stock issued to Hicks, Muse, Tate & First Fund V., L.P. (the Fund) under the terms of the Equity Commitment Letter. Because they sold equity interests to other investors not affiliated with the Fund and not pursuant to the Equity Commitment Letter, Pinnacle contends that the Warrants Formula permits them to exclude shares issued to such other investors before multiplying the number of shares by 15%. This results in a total of 19.5 million Warrants to be issued. The Debtors believe that Pinnacle's position, taken to its logical conclusion, would mean that if, prior to closing, [Pinnacle][Hicks Muse] had assigned all of its interests to outside investors, the Debtors would not be entitled to receive any Warrants, notwithstanding the extensive reliance by the Debtors and creditors on the value of the Warrants in choosing among bids during the competitive sale process and the obvious inconsistency between that interpretation and the Pinnacle Bid, as approved by the Bankruptcy Court. Although the Debtors believe that Pinnacle's interpretation of the formula lacks merit, there can be no assurance that the Debtors' position will prevail if the issue is litigated. (ii) Employee Matters. Under the Asset Purchase Agreement, Pinnacle was also obligated to offer employment to some of the Debtors' employees upon the closing of the Debtors' sale to Pinnacle of the Grocery Products and Frozen Foods Businesses. Although Pinnacle made offers of employment to many of the Debtors' employees, Pinnacle's offer to certain plant-level employees provided for only short-term, temporary employment. The Debtors view such offers as a breach of the Pinnacle Asset Purchase Agreement. (B) Claims Against Campbell Soup Company At one time, Campbell Soup Company owned all of the businesses that became part of VFI's collective business operations. As part of a tax-free spin-off transaction, Campbell transferred such businesses and assets to VFI last March 1998. At the time of the Spinoff, VFI assumed $500 million of bank debt previously owned by Campbell together with considerable additional debt and other obligations of Campbell. Within less than 2 months after the Spinoff, VFI's financial performance was substantially poorer than expected. This caused VFI to be out of compliance with certain requirements of the Senior Credit Facility. As time went by, VFI's financial performance continued to fall short of expectations. This prompted the Debtors to seek repeated default waivers from the Bank Group (a syndicate of banks led by the Chase Manhattan Bank, as Administrative Agent, and Morgan Guaranty Trust Company of New York, as Collateral Agent) between September 1998 and June 2000. The Debtors also reported a net loss of $126.3 million in fiscal 1999. Based upon its preliminary investigation, the Official Committee of Unsecured Creditors told the Debtors that they believe the Spinoff gave rise to actionable fraudulent conveyance claims against Campbell and other with a potential value in the tens of millions of dollars. Thus, the Committee anticipates that the LLC Manager will prosecute these claims for the benefit of the members of VFI LLC. (C) Claims Against the Dorrance Family & the Bank Group Prior to the Petition Date, certain members of the Dorrance Family entered into a transaction with the Bank Group. The Creditors' Committee believes that the DF Participation may give rise to an actionable claim against the DF Participants to, among other things, void the liens and subordinate the debt obtained by the DF Participants as a result of the DF Participation. The Committee shared this observation with the Debtors. On the other hand, the DF Participants have advised the Debtors that the Committee's claim is without merit. (Vlasic Foods Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) W.R. GRACE: Ex-Employees Seek to Compel Employee Benefit Payment --------------------------------------------------------------- Jean-Paul Bolduc, Brian J. Smith, Richard N. Sukenik, and Philip J. Ryoan, III, former employees of W. R. Grace & Co., ask Judge Farnan to enter his order; (a) authorizing and requiring the Debtors to reimburse the former employees for certain prepetition legal expenses; and (b) directing the Debtors to reimburse the former employees for certain postpetition legal fees and disbursements that will be incurred during the pendency of the Debtors' chapter 11 cases in the ordinary course of the Debtors' businesses. At certain times prior to the Petition Date, the former employees were either corporate officers and/or employees of W.R. Grace & Co. Jean-Paul Bolduc served as Grace's President and Chief Operating Officer from August 1990 to January 1993, at which time he became President and Chief Executive Officer, the positions in which he served until March 1995. Brian J. Smith served as Grace's Chief Financial Officer from July 1989 to July 1995. Richard N. Sukenik was employed as Grace's Controller from December 1991 to March 1996. Philip J. Ryan, III, an assistant officer, was Assistant Controller, Financial Reporting, of Grace from August 1991 to January 1996, at which time he became a Vice President of Grace Container Products and Specialty Polymers (and, as of July, 1996, upon the integration of the Container Products business with the Cryovac packaging business, Vice President, Finance, Grace Packaging), and remained in such position until the Cryovac business was spun off from Grace and combined with Sealed Air Corporation. On April 11, 1996, the United States Securities and Exchange Commission issued a formal order of investigation in "In the Matter of W.R. Grace & Co.", pursuant to which the SEC thereafter commenced an investigation into whether Grace, certain present and/or former officers, directors, employees, affiliates, and other persons or entities, may have filed or caused to be filed periodic reports with the SEC containing false and misleading financial statements that misrepresented, among other things, Grace's revenues, earnings, and assets. In connection with the investigation, each of the Former Employees retained separate legal counsel, which in light of the different positions and roles of each of these employees, appeared to be mandated by ethical requirements. Pursuant to certain letter agreements, Grace agreed to indemnify the Former Employees with respect to all legal fees and disbursements. The Indemnification Letters for Smith, Sukenik and Ryan provided, in pertinent part, that "Grace will pay the reasonable expenses, including attorneys' fees and disbursements incurred by [the Former Employees] in the defense of the [SEC] investigation through its final conclusion." Mr. Bolduc is currently represented by Rosenman & Colin LLP; Mr. Smith by Dechert; Mr. Sukenik by Heller Ehrman White & McAuliffe LLP; and Mr. Ryan by Swidler Berlin Shereff Friedman, LLP. Mr. Smith's indemnification letter is dated March 13, 1997; Mr. Sukeniles indemnification letter is dated March 12, 1997; and Mr. Ryan's indemnification letter is dated June 24, 1997. Mr. Bolduc's indemnification letter, dated March 22, 1995, supplemented indemnification rights granted to Bolduc pursuant to his Resignation Arrangements, effective as of March 3, 1995. Indemnification obligations pursuant to the Indemnification Letters confirm the broad indemnification rights granted the Former Employees pursuant to the Grace Amended and Restated By-Laws (the "By-Laws") which provide: Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she . . . is or was a director or officer of [Grace] or is or was serving at the request of the Corporation as a director [or] officer, . . . whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by [Grace] to the fullest extent authorized by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended ... against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such indemnification shall continues as to a person who has ceased to be a director, officer, employees or agent and shall inure to the benefit of his or her heirs. . . . Amended and Restated By-Laws of W.R. Grace & Co. at Section 6.7 Grace, upon receipt of an itemized invoice from the various counsel for the Former Employees, remitted payment directly to counsel to indemnify the Former Employees for legal fees and disbursements incurred in connection with the Investigation. It was the usual practice for counsel for the Former Employees to submit invoices on a monthly basis to Grace's then general counsel, Robert H. Beber (and, upon Mr. Beber's retirement as General Counsel, to Mr. Beber in his capacity as a consultant to Grace) for payment and approval. Pursuant to an Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Section 2 1 C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission's Rules of Practice, dated December 11, 199 8, the SEC commenced an administrative proceeding against the Former Employees alleging that, during the period 1991 through 1996, the Former Employees (except for Ryan, who is charged only with causing books and records violations) caused Grace to engage in fraudulent conduct by filing false and misleading periodic reports with the Commission, and making false statements in press releases and at analyst teleconferences, by allegedly using certain "excess" reserves maintained at Grace's subsidiary, National Medical Corporation, to manipulate Grace's income. Each of the Former Employees has denied all charges of wrongdoing. Simultaneously with the issuance of the Order Instituting Proceedings, the SEC filed a civil injunctive action against Grace in the United States District Court for the Southern District of Florida alleging violations of the federal securities laws by Grace based on allegations substantially identical to those asserted against the Former Employees. In or about June 1999, the SEC dismissed with prejudice the federal court action in connection with the institution and settlement of an administrative proceeding against Grace. As of the date hereof, the Administrative Proceeding remains pending, and no hearing date has been scheduled. In connection with preparation for, and participation in, a hearing, the Former Employees have incurred and will continue to incur legal expenses until a final adjudication of the Administrative Proceeding. If the Former Employees are denied their indemnification rights and are therefore unable to mount an adequate defense of the charges in the Administrative Proceeding, there is an increased likelihood of an adverse finding by the Commission against the Former Employees. Such an adverse finding would be detrimental to the Debtors as well because of the resulting negative publicity, and would penalize the individual Former Employees for conduct they performed as officers or assistant officers of, and on behalf of, Grace that was fully known to, inter alia, the Grace Audit Committee and Grace's independent auditors. As of the Petition Date, outstanding legal fees and disbursements of the Former Employees' retained counsel totaled approximately $81,072.45. Mr. Bolduc's prepetition unpaid legal fees are $4,164.87; Mr. Smith's are 6,216.24; Mr. Sukenik's are $36,555.25, and Mr. Ryan's are $34,136.09. By motion, dated April 2, 2001, the Debtors sought entry of an order authorizing the Debtors to, inter alia, pay certain prepetition wages, salaries, incentive pay, bonus plans and other compensation and pay certain severance benefits to former employees. The Debtors sought authority to continue and to pay a wide range of benefits including, among other things, executive tax planning, tuition reimbursement, expense reimbursement on corporate credit cards, incentive bonuses, relocation expenses and key life insurance plans. On April 4, 2001, the Court entered an order approving the Employee Benefit Motion. The benefits accruing to the Former Employees pursuant to Grace's indemnification obligations were not specifically included in the Employee Benefit Motion but fall within the general scope of benefits and expenses covered by the Employee Benefit Motion. By motion, dated April 2, 2001, the Debtors sought entry of an order (a) authorizing the Debtors to operate their businesses and (b) implementing the automatic stay. The Debtors sought authority to continue to operate in the ordinary course to reassure third parties that the Debtors were so authorized. In particular, the Debtors requested that this Court authorize the entry of an order notifying parties in interest that the Debtors "have the power to enter all transactions ... that they could have entered into in the ordinary course of business had there been no bankruptcy filing" and that "suppliers and other parties may continue to engage in transactions with the Debtors in the ordinary course of business in the same manner and upon the same terms and conditions as they did before the filing." On April 4, 2001, the Court entered an order approving the Ordinary Course Motion. The Former Employees' indemnification rights were not specifically included in the plain language of the Ordinary Course Order but clearly fall within the general range of transactions contemplated by the motion. At present, the Administrative Proceeding is stayed pending the determination by the SEC of a certain interlocutory appeal filed by the Commission. As a result, the Former Employees are not currently incurring substantial legal fees. However, a determination of the appeal and a lifting of the stay may occur at any time thereby resulting in the scheduling of a hearing that would require the Former Employees again to begin hearing preparations and incur significant legal fees. Notably, the Debtors' continued payment of the Former Employees' legal fees in connection with the Administrative Proceeding would have a de minimus impact on any distribution to creditors pursuant to a Confirmed Plan of Reorganization. In stark contrast, the denial of the Former Employees' indemnification rights would have a devastating financial impact on the Former Employees. Moreover, an adverse resolution of the Administrative Proceeding resulting from the Former Employees' inability to finance an adequate defense would also adversely impact the goodwill of the Debtors because of the resulting negative publicity. The Ordinary Course Order was intended to reassure all parties doing business with the Debtors that the Debtors are conducting their businesses and managing their properties as if the bankruptcy had not occurred. Pursuant to the Ordinary Course Order, the Debtors have the authority to "maintain all prepetition business relationships" and "enter into all transactions that they could have entered into" as if there had been no Chapter 11 case commenced. Clearly, the Former Employees' right to indemnification falls within the scope of the Ordinary Course Order. Accordingly, by this Motion, the Former Employees request that Judge Farnan compel the Debtors to honor the Indemnification Letters and the Former Employees' indemnification rights pursuant to the By-Laws postpetition in the ordinary course of the Debtors' businesses. Specifically, the Former Employees request that this Court (i) authorize the Debtors to pay the prepetition legal fees and expenses of the Former Employees incurred in the SEC matters, and to pay all future fees and costs as well. (W.R. Grace Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) WHEELING-PITTSBURGH: Needs to Give Ryder a Decision Today --------------------------------------------------------- Ryder Integrated Logistics, Inc. f/k/a Ryder Distribution Resources, inc., asks Judge Bodoh to compel Wheeling-Pittsburgh Steel Corp. to assume or reject an executory contract entered into by RIL and Wheeling Corrugating Company, a division of WPSC, from August 1998, by which RIL provides transportation services for the Debtors. As of the date of the Motion, Kristin Going, Esq., at Weltman Winberg & Reis, and Joseph L. Steinfeld, Jr., and Deborah C. Swenson of ASK Financial of Eagan, Minnesota, relate, RIL has approximately 23 drivers, 2 dispatchers, and 90 vehicles dedicated solely to the Debtor's account. The initial term of this contract was for five years commencing on August 17, 1998, and ending August 17, 2003. After the initial term, the contract continues in full force and effect until validly terminated by written notice of termination not less than 60 days prior to the anniversary date of the contract. WPSC has not rejected this contract, and RIL continues to perform under it. Yet the Debtors have not paid the contract amounts as due. The Debtors have incurred $119,389.52 in postpetition charges and continue to use RIL's services so that the charges continue to accrue each day and are billed on a weekly basis. RIL has determined that the Debtors still need the personnel and vehicles dedicated to providing services to the Debtors, and the Debtors continue to use and derive benefit from these services and vehicles. In the event that the Debtor rejects the contract, the Debtors are obligated to pay for de-identification of the vehicles and prepayment of licenses, permits and taxes under the Contract. The cost for de-identification and prepayment of taxes, licenses and permits has not yet been determined. However, if the Debtors reject the contract, RIL will incur damages as: (i) $308,017.74 for prepetition damages for non- payment of charges due and owing under the contract; (ii) non- payment of postpetition charges; (iii) termination damages in an amount to be determined at the time of rejection, and (iv) additional sums for unpaid fuel costs and other costs which have not yet been billed. If the Debtors reject the contract, RIL's interests would be best served by immediately recovering the use of the dispatcher, drivers and vehicles for other business. The Agreed Extension Ryder and WPSC announce their agreement that the Debtors may have until September 4, 2001, to object or otherwise respond to the Motion, with a hearing on the Motion to follow on September 13, 2001. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) WINSTAR COMMS: SBC Demands Adequate Assurance of Future Payments ---------------------------------------------------------------- SBC Communications previously entered into an interconnection and service agreement to provide telecommunications services to Winstar Communications, Inc. SBC continues to provide telecommunications services to the Debtors due to the Interim Utilities Order issued by the Court. SBC objects to this Order and demands adequate assurance payment from Winstar. William Hazeltine, Esq., at Potter, Anderson & Corron, LLP in Wilmington, Delaware discloses that the Debtors owe SBC approximately $11.6 million, of which, $8.7 million was overdue in connection with the agreement. The Debtors continue to receive telecommunications services from SBC and incur approximately $2.9 million per month in charges for use of such services. (Winstar Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) BOND PRICING: For the week of September 4 - 7, 2001 --------------------------------------------------- Following are indicated prices for selected issues: Algoma Steel 12 3/8 '05 18 - 20(f) Amresco 9 7/8 '05 41 - 43(f) Arch Communications 12 3/4 '05 1 - 2(f) Asia Pulp & Paper 11 3/4 '05 26 - 28(f) Bethelem Steel 10 3/8 '03 38 - 40 Chiquita 9 5/8 '04 66 - 68 Conseco 9 '06 86 - 88 Friendly Ice Cream 10 1/2 '07 70 - 75 Globalstar 11 3/8 '04 4 - 5(f) Level III 9 1/8 '04 48 - 49 Owens Corning 7 1/2 '05 34 - 35(f) PSINet 11 '09 6 - 7(f) Revlon 8 5/8 '08 49 - 51 Trump AC 11 1/4 '06 72 - 74 USG 9 1/4 '01 75 - 77 Westpoint Stevens 7 3/4 '05 39 - 41 Xerox 5 1/4 '03 89 - 90 ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L. Metzler, Bernadette de Roda, Ronald Villavelez and Peter A. Chapman, Editors. Copyright 2001. All rights reserved. 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