/raid1/www/Hosts/bankrupt/TCR_Public/010910.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Monday, September 10, 2001, Vol. 5, No. 176
Headlines
360NETWORKS: Court Approves E&Y As Committee's Finance Advisor
ACNET: Strikes Settlement Pact with Murdoch Communications
AMERICAN TISSUE: Tight Liquidity Prompts Moody's to Junk Ratings
AMES DEPARTMENT: Gets Okay to Restrict Bond & Claim Trading
AMF BOWLING: Plan's Classification & Treatment of Claims
ARMSTRONG HOLDINGS: Signs Up Colonial as Local Tax Advisors
BRIDGE INFO: Employees Ask Court to Uphold Prepetition Policy
CELLSTAR CORP: Moody's Junks 5% Subordinated Notes Due 2002
COMDISCO INC: Court Allows Debtor to Pay Break-Up Fee to HP
COVAD COMMS: Overview & Summary of Debtor's Reorganization Plan
CRESCENT SERVICES: Court Orders Conversion to Chapter 7
DANBEL INDUSTRIES: JSL Files Assignment Under Bankruptcy Act
DC DIAGNOSTICARE: Shareholders Approve Warrant Issue to Lenders
DYLEX LTD: Court Approves Sale of 100 BiWay Leases to Dollarama
E-BIZ ENTERPRISES: Makes Voluntary Chapter 11 Filing in Phoenix
E-BIZ ENTERPRISES: Chapter 11 Case Summary
ELECTRIC LIGHTWAVE: Seeks Nasdaq Listing Panel Review
FEDERAL-MOGUL: Completes Three Divestitures of Non-Core Assets
GENESIS HEALTH: Small Shareholder Seeks Appointment of Trustee
HARNISCHFEGER: Ecolaire Resolves $9.7MM EPA Claim for Pennies
ICG COMMS: Gets Approval to Hire CDTI to Liquidate Excess Assets
IMPERIAL SUGAR: Holly to Lease Beet Factory to Washakie Growers
INTEGRATED HEALTH: Seeks Okay for Elkins Loan Probe Protocol
INTERDENT: Nasdaq Listing Continues, Subject to Conditions
IRVINE SENSORS: Violates Nasdaq Listing Requirements
METROMEDIA FIBER: Inks $150 Million Note Purchase Agreement
OWENS CORNING: Court Modifies Stay to Permit Customer Setoffs
PACIFIC AEROSPACE: Enters Lock-Up Agreement with Noteholders
PACIFIC GAS: Court Okays Engagement of Non-Bankruptcy Counsel
PAC-WEST TELECOMM: S&P Junks Senior Unsecured Debt Ratings
PAPER WAREHOUSE: Falls Below Nasdaq Public Float Value Minimum
PILLOWTEX CORP: Will Pay $500,000 Prepetition Trust Fund Taxes
PSINET INC: Recovers $5.5M from $10M TNS Holdings Escrow Fund
SCHWINN/GT: Direct Focus Submits Bid to Acquire Fitness Division
SCOTTSDALE TECHNOLOGIES: Completes Debt Restructuring
STONEBRIDGE TECH: Files Chapter 11 Petition in N.D. Texas
TAYLOR CAPITAL: Litigation Settlement Spurs Fitch Rating Actions
USG CORP: Creditors' Committee Taps Stroock as Lead Counsel
VIDEO UPDATE: Files Plan & Disclosure Statement in Delaware
WARNACO GROUP: Retains Dewey Ballantine as Audit Counsel
WASHINGTON GROUP: Court Okays Supplemental Disclosure Statement
WEBVAN GROUP: Asks To Extend Lease Decision Period To Dec. 10
WHEELING-PITTSBURGH: Jarvis Seeks Stay Relief to Enforce Lien
WINSTAR COMMS: Perot Systems Seeks Relief From Automatic Stay
ZILOG INC: Default on Notes Compels S&P to Drop Ratings to D
BOND PRICING: For the week of September 10 - 14, 2001
*********
360NETWORKS: Court Approves E&Y As Committee's Finance Advisor
--------------------------------------------------------------
"The Committee acts as if it is unaware of the economic
realities of these chapter 11 cases," Agents for the Secured
Lenders to 360networks inc. -- The Chase Manhattan Bank, Credit
Suisse First Boston Corporation and Goldman Sachs Credit
Partners L.P. -- observe in annoyance .
According to Seth Gardner, Esq., at Wachtell, Lipton, Rosen &
Katz, in New York, examples of such behavior are:
(a) the Committee seems determined to litigate even the most
routine matters;
(b) numerous projects unnecessarily involve multiple
representatives of each of the Committee's proposed
legal and financial advisory firms;
(c) Committee members and their professionals make expensive
trips when telephone calls would suffice; and
(d) in general, the Committee proceeds as if cost were no
object.
And now, Mr. Gardner notes, the Committee seeks to retain the
services of E&Y Capital Advisors for additionally financial
advisory services. The Agents for the Secured Lenders contend
that E&Y's services that are no different from the services to
be performed by Jefferies & Company, Inc., the Committee's
proposed investment bankers.
"The EYCA Application does not reflect any consideration of
reducing compensation levels to reflect the redundancy or the
unsecured creditors' questionable economic stake," Mr. Gardner
adds. "It has now become clear, Mr. Gardner says, that the
Committee cannot be relied upon to exercise appropriate self-
restraint in imposing costs on these estates for its
professionals."
Thus, the Agents for the Secured Lenders suggest that Judge
Gropper should condition the entry of any further order
authorizing the retention of any professionals by the Committee
upon establishment of a $150,000 per month aggregate cap on the
allowance against the estate of fees and disbursements of all
professionals retained by the Committee, subject to further
court order. The foregoing cap would not limit the ability of
the Committee members to pay the Committee's professionals from
their own funds, Mr. Gardner adds.
Debtors Don't Like It Either
The Debtors don't expect money to be left for the unsecured
creditors at the conclusion of these Chapter 11 cases. With
this in mind, Alan J. Lipkin, Esq., at Willkie Farr & Gallagher,
in New York, explains the Debtors cautioned the Committee to
keep a tight lid on their expenses, such as the retention of
professionals.
However, Mr. Lipkin says, the Committee ignored the Debtors'
advice. "Instead, they made it clear they had no intention to
tailor the scope of their work to limit their professional fees
based on potential recoveries for unsecured creditors in these
cases. In many instances, they made also emphasized they would
further seek to focus on the Debtors' affiliates outside the
United States," Mr. Lipkin notes.
Mr. Lipkin argues there is simply no reason for the Committee to
be incurring professional fees at anywhere near the current
rate, which could reach or exceed $10,000,000 annually. Perhaps
the simplest cost containment mechanism would be to limit the
Committee to one financial professional, Mr. Lipkin suggests.
Or another approach would be to limit the Committee's
professionals to three subject areas: (a) bank issues, (b) major
asset sales, and (c) chapter 11 plan issues.
The Debtors further suggest a budget cap of $150,000 per month.
Mr. Lipkin explains a budget cap is necessary, otherwise, the
Committee will continue to operate at a cost level totally out
of proportion to the value at stake, while wasting estate funds
in order to obtain negotiating leverage.
Accordingly, the Debtors request that the Court either:
(a) deny the Committee's application for an order
authorizing the Committee to retain and employ E&Y; or
(b) grant such applications solely on terms consistent with
these objections.
Unsecured Creditors Respond
Norman N. Kinel, Esq., at Sidley Austin Brown & Wood, LLP, in
New York, laments the pettiness of the Debtors' complaints and
reminds the Court that the Debtors once said that they have at
least $150,000,000 that is not subject to the alleged liens of
the Banks. Approximately $75,000,000 of this is potentially
available for distribution to the unsecured creditors, Mr. Kinel
argues. Aside from a distribution as a result of a sale of the
Debtors' businesses, Mr. Kinel adds, the unsecured creditors
have other avenues of recovery. According to Mr. Kinel, the
Committee has already begun to investigate various potential
causes of action for preferences, fraudulent conveyances and
lien avoidance.
Mr. Kinel assures Judge Gropper that E&Y and Jefferies have
worked closely together to ensure that there is no unnecessary
duplication of services performed or charged to the Debtors'
estates. The Committee also laughed off the suggestion to limit
their financial advisor to one. Mr. Kinel says the suggestion
is absurd considering that the Debtors and the Banks each have
two financial advisors of their own. Furthermore, Mr. Kinel
notes that the Committee has the undisputed right to obtain both
financial advisory and investment banking services.
Contrary to observation of the Agents for the Secured Lenders,
Mr. Kinel assures the Court that the Committee is well aware of
the economic realities of these cases that's why it is acting
prudently in the selection of its professionals.
As to the suggestion that the fees of all of the Committee's
professionals be capped at $150,000 per month, Mr. Kinel says
its quite inappropriate considering that:
(1) the Committee's application to retain Sidley Austin
Brown & Wood as its counsel has already been approved
and the order authorizing such retention does not
contain any cap on Sidley Austin Brown & Wood's fees,
and
(2) pursuant to the Second Cash Collateral Stipulation, the
fees of all the Committee's professionals are authorized
to be paid by the Debtors in the ordinary course, and in
the event of a "Termination Event" have the benefit of
an agreed carveout in an amount up to $1,500,000.
The Committee therefore asks Judge Gropper to overrule the
objections of the Debtors and the Banks, and approve its
application to employ E&Y as financial advisor.
* * *
Upholding the Committee's contention that the employment of E&Y
Capital Advisors is necessary, Judge Allan Gropper overruled the
objections of the Debtors and the Agents for the Secured
Lenders. The Court was convinced that E&Y's services as
financial advisors would be in the best interests of the
Committee.
Thus, Judge Gropper ordered that the Committee's application is
granted in all respects. The Committee is authorized to retain
the firm of E&Y Capital Advisors, nunc pro tunc as of July 18,
2001.
The compensation to be paid to E&Y for professional services
rendered and reimbursement for expenses incurred by it shall be
as determined by this Court upon proper application, Judge
Gropper ruled. (360 Bankruptcy News, Issue No. 6; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
ACNET: Strikes Settlement Pact with Murdoch Communications
----------------------------------------------------------
Murdock Communications Corporation (OTC Bulletin Board: MURC and
MURCW) announced a Compromise Settlement Agreement and Full and
Final Release with Intercarrier Transport Corporation, Ashton
Communications Corporation, AcNet USA, Entree 1P de Mexico, S.
de R. L. de C.V., formerly known as AcNet S.A. de C.V., and any
and all of their national or international predecessors,
successors, and/or affiliated entities.
Murdoch commenced legal action against the AcNet Entities in
April 2000 in Iowa state court to collect on loans made to the
AcNet Entities in 1998 and 1999 and the related interest.
On March 29, 2001, AcNet USA filed for bankruptcy protection and
the Company was informed that AcNet Mexico was in receivership.
On May 31, 2001, the AcNet Entities filed a motion with the Iowa
state court seeking permission to untimely file a counter-claim
against the Company, and asking for damages against the Company
of approximately $20 million plus punitive damages.
Under the terms of the Agreement, the AcNet Entities paid a
nominal consideration to Murdoch and both parties exchanged Full
and Final Releases on all claims against the other party.
AMERICAN TISSUE: Tight Liquidity Prompts Moody's to Junk Ratings
----------------------------------------------------------------
Moody's Investors Service lowered the ratings of American Tissue
Inc., and placed the ratings under review for possible further
downgrade while there is approximately $165 million of debt
securities Affected.
Ratings affected:
To From
-- ----
* $165 million senior guaranteed Caa2 Caa1
secured notes, due 2006
* Senior implied Caa2 Caa1
* Issuer rating Caa3 Caa2
According to Moody's, the rating action is prompted by continued
weak performance, financial stress and tight liquidity, and
newly arisen accounting issues.
In connection with the company's belief that the consolidated
financial statements contain material inaccuracies, the company
accepted the resignation of its Chief Financial Officer. Price
Waterhouse Coopers LLP is currently conducting an investigation
of which the company had engaged as financial advisors, at the
direction of its lenders.
Moody's review will focus on the scope of the announced
inaccuracies when disclosed and their effect on the likely
recoveries of the bondholders, Moody's said.
American Tissue Inc., is a manufacturer of tissue, office
products and pulp and paper. The company is headquartered in
Hauppauge, New York.
AMES DEPARTMENT: Gets Okay to Restrict Bond & Claim Trading
-----------------------------------------------------------
Finding that the Ames Department Stores, Inc.'s motion to
restrict debt trading to preserve NOLs is in the best interest
of their estates and their creditors, Judge Gerber rules that:
1. The Motion is granted and approved in all respects.
2. Any sale or other transfer in violation of the procedures
set forth in the Motion shall be null and void as an act in
violation of the automatic stay.
3. Any person and any entity is stayed, prohibited, and
enjoined, pursuant to sections 362 and 105(a) of the
Bankruptcy Code, (i) in the case of a person or entity who
does not Own any Senior Notes or Common Stock, or who Owns
less than 5% of each class of Senior Notes and less than 1.4
million shares of Common Stock, from purchasing, acquiring,
or otherwise obtaining Ownership of an amount which, when
added to such person's or entity's total Ownership, if any,
equals or exceeds 4.99% of such class of Senior Notes or 1.4
million shares of Common Stock or, and (ii) in the case of a
person or entity who Owns at least 5% of a class of Senior
Notes or at least 1.4 million shares of Common Stock, from
purchasing, acquiring, or otherwise obtaining Ownership of
any additional Senior Notes or Common Stock.
4. For the purposes of this Order, "Ownership" of a claim
against, or stock of, the Debtors shall be determined in
accordance with applicable rules under Section 382 and,
thus, shall include, but not be limited to, direct and
indirect ownership, ownership by members of such person's
family and persons acting in concert, and in certain cases,
the creation or issuance of an option, and (ii) any
variation of the term "Ownership" shall have the same
meaning.
5. Any person or entity who proposes or intends to sell,
acquire, trade, or otherwise transfer or effectuate any
transfer of any general unsecured claim against the Debtors
must before any such transaction file with this Court and
serve on the Debtors and their counsel a notice in the form
annexed as Exhibit "C" to the Motion at least thirty (30)
days prior to such transaction.
6. Upon receipt of a Claims Trading Notice, the Debtors will
have thirty (30) days to object to such transaction. If the
Debtors file an objection, then the transaction will not be
effective unless approved by a final and nonappealable order
of this Court. If the Debtors do not object within such
thirty (30) day period, then such transaction may proceed
solely as set forth in the Claims Trading Notice. Further
transactions must be the subject of additional Claims
Trading Notices as set forth in the Motion with an
additional thirty (30) day waiting period. The Debtors
shall serve a notice of the entry of this Order setting
forth the procedures authorized herein substantially in the
form annexed to the Motion as Exhibit "B" on (i) all known
creditors and (ii) any indenture trustee(s) or transfer
agent(s) for the Senior Notes or Common Stock, as
applicable. Upon receipt of such notice, any indenture
trustees and transfer agents shall send such notice to all
holders of the Senior Notes or Common Stock, as applicable,
registered with such indenture trustee or transfer agent.
Any such registered holder shall, in turn, provide such
notice to any holder for whose account such registered
holder holds Senior Notes or Common Stock, as applicable.
Any such holder shall, in turn, provide such notice to any
person or entity for whom such holder holds the Senior Notes
or Common Stock. Additionally, the Debtors shall serve such
notice on all parties who file notices of transfers of
claims under Fed. R. Bankr. P. 3001(e) and publish notice in
The Wall Street Journal and DNR. (AMES Bankruptcy News,
Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
AMF BOWLING: Plan's Classification & Treatment of Claims
--------------------------------------------------------
In accordance with Bankruptcy Code section 1122, the Plan of
Reorganization proposed by AMF Bowling Worldwide, Inc.,
provides for the classification of 12 Classes of Claims and
Equity Interests. Section 1122(a) permits a plan to place a
claim or an interest in a particular class only if the claim or
interest is substantially similar to the other claims or
interests in that class. The Debtor believes that its
classification of Claims and Equity Interests under the Plan is
appropriate and consistent with applicable law:
Class Description Treatment
----- ----------- ---------
1 Other Secured Claims Such treatment that either
A. leaves unaltered the legal,
equitable or contractual rights
to which the holder of such
Allowed Other Secured Claim is
entitled, or
B. leaves such Allowed Other
Secured Claim the Bankruptcy
Code. Any Allowed Claim based
on any deficiency Claim by a
holder of an Allowed Other
Secured Claim will be treated
as an Allowed Unsecured Claim
and will be classified as a
Class 4 Claim.
2 Senior Lender Claims A pro rata share of the Senior
Lender Distribution, comprised of:
A. the Senior Lender Cash Payment
B. 10,000,000 shares of New AMF
common stock
C. the Senior Lender Facility
Notes
D. the New AMF Notes.
The Senior Lenders will also
receive a pro rata share of the
Senior Lender Origination Fee.
3 Priority Non-tax Unless otherwise agreed, cash in an
Claims amount equal to the claim.
4 Unsecured Claims pro rata share of the ratable class
4 portion of the New Warrants
5 Tort Claims To the extent that any portion of a
tort claim is not an insured claim,
a pro rata share of the ratable
class 5 portion of the new
warrants. Any portion of a tort
claim that becomes an allowed claim
and is an insured claim will be
paid in the ordinary course of
business directly or indirectly by
the applicable carrier to the
extent of such insurance.
6 Senior Subordinated pro rata share of the ratable class
Note Claims 6 portion of the New Warrants
7 Convenience Claims Unless otherwise agreed, cash in
the amount of the claim
8 Interdebtor Claims No distribution
9 AMF affiliate claims Allowed affiliates claims will be
reinstates on terms and conditions
reasonable satisfactory to
reorganized AMF.
10 Equity Interests No distribution. All Equity
Interests will be AMF Holdings and
WINC will cancelled as of the
effective date.
11 Existing Securities No distribution.
Law Claims
12 Claims No distribution
(AMF Bankruptcy News, Issue No. 7; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
ARMSTRONG HOLDINGS: Signs Up Colonial as Local Tax Advisors
-----------------------------------------------------------
Armstrong Holdings, Inc. asks Judge Farnan to authorize them to
employ Colonial Tax Compliance Company, Inc., as their state and
local tax consultants on a contingent fee basis in these chapter
11 cases. Colonial Tax is to perform necessary state sales and
use tax review consulting services that are incidental to the
administration of the Debtors' chapter 11 states.
Prior to the Petition Date, the Debtors employed Colonial Tax as
their state and local tax consultants.
If Judge Farnan approves this employment, Colonial Tax will
continue to provide its services
without interruption.
As state and local tax consultants, Colonial will:
(a) review state and local use tax accruals;
(b) review state and local sales tax remittance;
(c) review individual tax assessed by a vendor on
purchase invoices;
(d) review state and local income tax credits;
(e) review state and local manufacturing tax incentives;
(f) review state and local manufacturers investment
credits; and
(g) review any other available state and local tax
incentives, refunds and/or credits.
In accord with the ordinary course of business contingent fee
arrangement between Colonial Tax and the Debtors, within one
year prior to the Petition Date the Debtors paid Colonial Tax
approximately $4,000 in the aggregate in the ordinary course of
their business for services rendered and expenses related to tax
review consulting services.
In addition, the Debtors have accumulated approximately
$13,047.72 in unpaid prepetition fees owed to Colonial Tax,
which Colonial Tax has agreed to waive pending approval of its
retention by the Debtors.
However, due to the nature of a contingent fee arrangement,
Colonial Tax has not presented the Debtors with billings for
those consulting services that Colonial Tax has provided to the
Debtors under negotiated, fixed, contingent fee arrangements
prior to the commencement of these chapter 11 cases.
Given the nature of these services and the manner in which
Colonial Tax has historically billed the Debtors on these
assignments, the Debtors and Colonial Tax ask Judge Farnan to
excuse them from filing interim fee applications under his prior
Administrative Order. In addition, the Debtors ask authority to
pay Colonial Tax its contingent fee, as such fee may be earned
from time to time, without further application to or order of
this Court.
Colonial Tax's compensation for consulting services rendered on
behalf of the Debtors will be based upon fixed contingent fee
arrangements, and will be computed at the contingent fee rates
customarily charged by Colonial Tax for such services.
Specifically, the previously established contingency fee
arrangement between Colonial Tax and the Debtors with regard to
any recognized refund, rebate, credit and/or reduction of state
and local taxes, collected or paid, is 38% for sales and use
taxes and 25% for any other business taxes as specified in a
Tax Consulting Agreement. Neither the 38% sales and use tax
contingency fee rate, nor the 25% business tax contingency fee
rate is subject to fluctuation or adjustment.
Mr. Stephen Clarke, CEO and CFO of Colonial Tax, avers Colonial
Tax's disinterestedness and qualifications as a professional
under the Bankruptcy Code. To the best of Mr. Clarke's
knowledge Colonial Tax has not been retained to assist any
entity or person other than the debtors on matters relating to,
or in connection with, these chapter 11 cases. Colonial Tax
will, however, continue to provide professional services to
entities or persons that may be creditors of the Debtors or
parties in interest in these chapter 11 cases; provided,
however, that such services do not relate to, or have any direct
connection with, these chapter 11 cases. Mr. Clarke advises
that Colonial Tax has represented, currently represents, or may
represent in the future parties such as Womble, Carlyle,
Sandridge & Rice PLLC, and Wachovia Bank & Trust Company, NA.
(Armstrong Bankruptcy News, Issue No. 9; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
BRIDGE INFO: Employees Ask Court to Uphold Prepetition Policy
-------------------------------------------------------------
More employees of Bridge Information Systems, Inc. across the
United States and from various parts of the globe wrote letters
to Judge McDonald requesting that the Court deny the Debtors'
post-petition severance package and uphold the pre-petition
policy of two weeks of salary for each year of service.
Most of these employees, about 86 of them, are staff members of
Bridge News, New York City Bureau. Some 13 reporters and
editors of Bridge News Kansas City Bureau, two staff members of
the Bridge News Detroit Bureau, and four from Bridge News St.
Louis Bureau also echoed their objection.
About 15 more employees from New Jersey explained to Judge
McDonald that they agreed to continue their employment with
Bridge throughout its financial difficulties because they were
under the impression that they would be entitled to two weeks
severance pay per year of service.
Cody Lyon, who recently joined Bridge News, New York City Bureau
last March, relates that management told him the company was in
good shape -- so good that his unit, the Spot News Desk, was
allegedly in process of expansion. But they lied, Mr. Lyon
notes. Thus, at the very least, Mr. Lyon says, employees should
be entitled to severance and their 60 days of pay required by
law.
"Despite the cutthroat nature of the business world, (surely) it
is certainly not impossible to maintain common human decency and
fairness, even in the face of financial ruin," Lara Moon of New
York City Bureau appealed.
Mary Powers, correspondent for Bridge News Lima Bureau in Peru,
notes that they have nowhere to go considering today's tight job
market. Dorothy Walton, Robert Randolph and Camila Castellanos
of Bridge New Mexico City Bureau shared this observation.
Brian Harris, correspondent for Bridge News San Jose Costa Rica
Bureau, adds that throughout its existence, Bridge failed to
incorporate a local subsidiary, thus refusing him the guarantees
of Costa Rican labor law. According to Mr. Harris, those
guarantees stipulate that severance be equal to one month's pay
per 12 months employment. At this point, it would have meant
that Mr. Harris is entitled to severance pay that is equivalent
to five months salary.
Reporters and editors of Bridge News, Brazil Bureau have filed
severance claims under Brazilian law keeping in mind
management's assurances that outside severance issues would be
treated in accordance with local law. Thomas Murphy, Bridge
News Senior Correspondent, explains that as foreign journalists
in Brazil they are eligible for neither Brazilian nor U.S.
unemployment benefits. A few of their colleagues with prospects
of future employment face significantly lower salaries. "We ask
the Court to reconsider the post-petition filing and ask Bridge
to comply with its promise to treat overseas employees in
accordance with local laws," Mr. Murphy wrote.
Anthony Mercandetti, Keith Sawyer, and John D'Antona Jr. of
Bridge News, Toms River New Jersey Bureau, reveals that a senior
Bridge manager in New York made it clear a settlement of
severance has been reached with their U.K. counterparts. The
settlement of severance calls for an astounding compensation
package, they note. U.K. employees of Bridge will receive one-
month pay for each year of service, plus an additional six-week
salary payment. "Compare this to the meager amount the entire
U.S. workforce must divide which is capped at three weeks
maximum per worker," they told Judge McDonald.
Tony D. Ralf, managing editor for Latin America and Canada,
informs Judge McDonald that he has sat in on many management
meetings during which it has been stated that Bridge is in a
better cash position after the Chapter 11 filing than it has
been in some time. "Management has even boasted several times
that they have never found it necessary to use the $30,000,000
DIP financing approved by the court. So why are these funds now
not able to pay my severance?" Mr. Ralf asked. Mr. Ralf has
been a loyal employee of Bridge for 25 years.
Timothy D. Ross, who has been working for Bridge for "20 years
of diligent service", says he is entitled to 16 weeks pay of
pay, which is equivalent to $24,039.69, less applicable taxes.
"Three weeks offer is simply unacceptable!" Mr. Ross notes.
Elizabeth Festa, telecommunications reporter for Bridge News
Washington, says she's entitled to at least 5 weeks severance
pay under the pre-petition policy.
Mavis A. Flowers of New York observes that in America, companies
are allowed to get away with fraudulent behavior and manipulate
the lives of millions of people everyday. "Laws should be
enacted that prevent companies from stealing monies away from
average middle American citizens, those who need it most, and
from giving it to the rich and famous "Key Employees"," Ms.
Flowers commented.
Theopolis Waters, a livestock reporter of BridgeNews (Knight-
Ridder or Commodity News) for 26 years, tells Judge McDonald
that many veteran employees were under impression that they
would be provided up to 16 weeks of severance pay. But, Mr.
Waters says, they understand the constraints of the sale of
Bridge will not allow for the company to follow through on that
commitment.
However, Mr. Waters notes, something is very wrong if a few and
select Bridge managers are allowed to get away with millions
while remaining workers no fewer than 250 worldwide are left
fighting over $1,500,000. "I realize this letter may have no
effect on your decision whether to make Bridge or its entities
accountable for their mismanagement of this fine company and its
subsequent treatment of dedicated front-line employees. But, it
is also my opinion that the faintest of voices is still heard,"
Mr. Waters wrote.
Tara Chand, senior shipping correspondent for BridgeNews New
York, informs Judge McDonald that Bridge management is now
saying that severance will not be paid as New York comes under
the WARN Act and 60 days notice has to be given of a cessation
of employment. According to Ms. Chand, a letter was sent to
employees last August 15. "Bridge is also attempting to reduce
the amount of money it pays employees in the U.S. in lieu of
untaken vacation by only using whole months as counting for
accrual," Ms Chand adds.
Although this is in effect 80% of a day's pay per employee with
four weeks vacation allowance, Ms. Chand notes, it is still a
"couple of hundred bucks". (Bridge Bankruptcy News, Issue No.
15; Bankruptcy Creditors' Service, Inc., 609/392-0900)
CELLSTAR CORP: Moody's Junks 5% Subordinated Notes Due 2002
-----------------------------------------------------------
Moody's Investors Service downgraded the $150 million, 5%
Convertible Subordinated Notes due 2002 to Ca from B2 of
CellStar Corporation. This action is in response to the
company's proposal to exchange its convertible subordinated
notes for a combination of cash and CellStar common shares.
Moody's states that the company has been hurt by the severe
deceleration in the global market for the sale of handsets which
has compressed margins, and its exposure to emerging markets. In
exchange for tendering their convertible subordinated notes, the
company is offering a total of $20 million in cash and 60.1
million shares of CellStar common stock, which represents a
substantial discount to the face value of the convertible
subordinated notes, Moody's said.
CellStar is a provider of distribution and logistic services to
wireless communications operators and other retailers of
wireless handsets and accessories. CellStar is headquartered in
Carrollton, Texas and has operations in Asia, North America,
Latin America, and Europe.
COMDISCO INC: Court Allows Debtor to Pay Break-Up Fee to HP
-----------------------------------------------------------
Judge Barliant approved payment of the Break-Up Fee to Hewlett-
Packard in the event HP's bid is topped by a competing bidder.
The Court agrees with Comdisco, Inc. that the Termination
Payments are:
(a) an actual and necessary cost and expense of preserving
the Debtors' estates, within the meaning of section
503(b) of the Bankruptcy Code,
(b) of substantial benefit to the Debtors' estates,
(c) reasonable and appropriate, including in light of the
size and nature of the Sale and the efforts that have
been and will be expended by the Purchaser
notwithstanding that the proposed Sale is subject to
higher or better offers for the Business,
(d) was negotiated by the parties at arms' length and in
good faith, and
(e) necessary to ensure that the Purchaser will continue to
pursue its proposed acquisition of the Business.
The Court finds that the Termination Payments were a material
inducement for, and condition of, the Purchaser's entry into the
Agreement. Unless they are assured payment of Termination
Payments, Judge Barliant notes, the Purchaser is unwilling to
commit to hold open their offer to purchase the Business under
the terms of the Agreement.
According to Judge Barliant, the assurance of the Purchaser of
payment of the Termination Payments has promoted more
competitive bidding by inducing the Purchaser's bid that
otherwise would not have been made, and without which bidding
would have been limited.
In addition, the Court contends that the Purchaser has provided
a benefit to the Debtors' estates by increasing the likelihood
that the price at which the Business is sold will reflect its
true worth because the Termination Payments induced the
Purchaser to research the value of the Business and submit a bid
that will serve as a minimum or floor bid on which other bidders
can rely. Without the authorization of the Termination
Payments, the Court echoes the apprehension that the Debtors may
lose the opportunity to obtain the highest and best available
offer for the Assets.
Judge Barliant ruled that the Debtor's obligation to pay the
Termination Payments as provided by the Agreement shall survive
termination of the Agreement and, until paid, shall constitute
an administrative expense and shall be paid in accordance with
the terms of the Agreement without further order of the Court.
(Comdisco Bankruptcy News, Issue No. 5; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
COVAD COMMS: Overview & Summary of Debtor's Reorganization Plan
---------------------------------------------------------------
Without material deviation from the deal announced when Covad
Communications Group, Inc., filed for chapter 11 protection, the
Debtor presents its Plan of Reorganization to the Bankruptcy
Court.
The Plan provides that Covad will eliminate $1.4 billion
of long-term debt and deliver bondholders owed that amount $250
million in cash plus preferred equity convertible into a 15%
common equity stake. The Debtor projects that the Effective
Date can occur by January 2002. Confirmation, the Debtor hopes,
will be a breeze because holders of a majority of the principal
amount or accreted value of Covad's bonds have already agreed in
writing to vote in favor of the plan of reorganization that
The Debtor will obtain the funding necessary for consummation of
the Plan from:
(1) Covad's Cash on hand -- approximately $230,000,000 at
the Petition Date;
(2) insurance proceeds,
(3) a Reserve Fund described in the Plan,
(4) the MOU Settlement Fund -- the cash insurance
proceeds and Common Stock equaling 3.5% of the fully
diluted Covad Common Stock outstanding as of August
10, 2001, less plaintiffs' attorneys' fees and
expenses, as expressed in the Memorandum of
Understanding;
(5) the proceeds of the Note Claim Escrow -- already
funded with $256,800,000 in cash;
(6) the 1999 Reserve Note Fund -- which Covad funded with
approximately $26,900,000 on August 10, 2001, and
from which Bank of New York made a $13,437,500
distribution on August 15, 2001; and
(7) issuance of additional Stock.
Covad indicates that it plans to raise additional capital
through some of, but not limited to, the following methods:
investment in equity, preferred or debt by a financial investor,
investment in equity, preferred or debt by a strategic partner,
settling the SBC Communications contract or settling pending
litigation.
The Company believes the primary factors that increase the
likelihood of raising such additional capital include:
* Commercial and consumer demand for broadband services
continues to grow.
* Covad is the only DSL provider with a national footprint
and a scalable network.
* Covad's two largest national competitors have recently
ceased to operate.
* The company is operationally strong and has built a
sound platform for growing line additions to attain
profitability.
* Recent changes in line economics have significantly
improved recurring margins.
* Emerging value-added services offer potential for
increasing average revenue and margins per user.
Covad makes it clear that the ability of its Subsidiaries to
continue in operation is also dependent upon Covad's ability to
attract additional funding of up to $200 million. (Covad
Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
CRESCENT SERVICES: Court Orders Conversion to Chapter 7
-------------------------------------------------------
The United States Trustee, Richard W. Simmons successfully
argued for conversion of Crescent Services Corporation's Chapter
11 case to a Chapter 7 liquidation.
Judge Greendyke agrees with the U.S. Trustee that conversion is
warranted because:
A. Crescent failed to file their reorganization plan and
disclosure statement by the May 8, 2001 deadline;
B. The Debtor filed a motion to sell the business itself as a
going concern on May 1, 2001 for the purchase price of only
$150,000;
C. The Debtor failed to file Monthly Operating Reports for the
months subsequent to March 2001;
D. The Debtor failed to pay the quarterly fee to the US Trustee
for the first quarter of fiscal year 2001 amounting to
$1,250; and
E. The Debtor is not making payments to post-petition creditor
as they become due.
DANBEL INDUSTRIES: JSL Files Assignment Under Bankruptcy Act
------------------------------------------------------------
Danbel Industries Corporation has been advised by the Interim
Receiver that J.S.L. Lighting (2000) Corp., a wholly-owned
subsidiary of the Corporation, filed an assignment under section
49 of the Bankruptcy Insolvency Act by Richter & Partners Inc.,
solely in its capacity as Court appointed Interim Receiver of
J.S.L Lighting (2000) Corp. on August 31, 2001.
Richter & Partners Inc. has been appointed Trustee.
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.
DC DIAGNOSTICARE: Shareholders Approve Warrant Issue to Lenders
---------------------------------------------------------------
DC DiagnostiCare Inc. announced that at an extraordinary
meeting, shareholders approved the issue of warrants to the
Company's banking syndicate in accordance with the agreement
with its lenders on a new $37.2 million credit facility expiring
April 30, 2003.
As announced earlier, under the terms of the refinancing
agreement, DiagnostiCare's lenders received warrants to acquire
common shares of DC DiagnostiCare Inc. Effective July 31, 2001
the lenders were issued warrants to acquire 6,015,106
DiagnostiCare common shares at $0.25, which was the closing
share price on the Toronto Stock Exchange on July 30th.
These warrants constituted the "Acceptance Warrants" and
"Closing Warrants" described in DiagnostiCare's press release
dated July 18, 2001. Shareholders Wednesday approved the issue
of warrants to Diagnosticare's lenders to acquire a further
43,311,397 DiagnostiCare common shares at $0.20, which was 75%
of the closing share price on May 29th, the day before the
warrants were priced.
The "Acceptance Warrants" to acquire 4,687,133 common shares
have already vested while the remaining warrants to acquire a
further 44,639,370 common shares vest in equal tranches
commencing January 1, 2002 and every 6 months thereafter until
January 1, 2004.
Any unvested warrants will be cancelled once the lenders are
repaid in full. Shareholders also approved the issue of anti-
dilution warrants, which allow the lenders to acquire a further
4,293,714 DiagnostiCare common shares at $0.20 under certain
circumstances.
Shareholders' approval was also obtained for the expansion of
DiagnostiCare's stock option plan from its current limit of 10%
of the issued and outstanding shares to 15% so that options can
be offered to employees and radiologists as a meaningful
incentive to achieve its restructuring plan.
Based in Edmonton, DC DiagnostiCare Inc. provides a
comprehensive suite of medical imaging services through a
network of over 140 diagnostic imaging centres across Canada.
The common shares of DC DiagnostiCare trade on the Toronto Stock
Exchange under the symbol DCE.
DYLEX LTD: Court Approves Sale of 100 BiWay Leases to Dollarama
---------------------------------------------------------------
Dylex Ltd. has sought and obtained the approval of a Toronto
bankruptcy court for the sale of around 100 BiWay leases to
Dollarama Inc. and an unidentified company, InBusiness Media
Network reports.
According to the report, the sale of Dylex's largest group of
stores is the company's first asset sale since it filed for
bankruptcy in August.
After that first transaction, Dylex still has 160 BiWay store
leases to divest, the report says.
E-BIZ ENTERPRISES: Makes Voluntary Chapter 11 Filing in Phoenix
---------------------------------------------------------------
E-BIZ Enterprises, Incorporated (OTCBB:EBIZ), a manufacturer of
specialized servers and vendor-neutral provider of Open Source
products and solutions, filed a Voluntary Petition in the State
of Arizona for Order and Relief under Chapter 11 of Title 11 of
the United States Bankruptcy Code.
In addition, Jones Business Systems Inc., a wholly owned
subsidiary of EBIZ, filed a separate Chapter 11 Voluntary
Petition in Phoenix.
For additional information, please visit the EBIZ Enterprises,
Incorporated Web site at http://www.ebizenterprises.comand the
Letter from Dave Shaw, EBIZ CEO, at
http://www.ebizenterprises.com/cl20010907.htm
E-BIZ ENTERPRISES: Chapter 11 Case Summary
------------------------------------------
Debtor: E-BIZ Enterprises, Inc.
15695 North 83rd Way
Scottsdale, AZ 85260
4807781000
Debtor affiliates filing separate chapter 11 petitions:
Jones Business, Inc.
Chapter 11 Petition Date: September 7, 2001
Court: District of Arizona (Phoenix)
Bankruptcy Case No.: 01-11843 and 01-11844
Judge: Charles G. Case II
ELECTRIC LIGHTWAVE: Seeks Nasdaq Listing Panel Review
-----------------------------------------------------
Electric Lightwave, Inc. (Nasdaq: ELIX) received a Nasdaq Staff
Determination on August 31, 2001 indicating that Electric
Lightwave (ELI) has failed to comply with the shareholders'
equity, market capitalization, market value/total assets and
revenue and minimum bid price requirements for continued listing
set forth in accordance with Marketplace Rules 4450(a)(3) and
4450(b)(1)(3)(4) respectively, and that its securities are,
therefore, subject to delisting from the Nasdaq National Market.
ELI has requested a hearing before a Nasdaq Listing
Qualifications Panel to review the Staff Determination. There
can be no assurance that the Panel will grant ELI's request for
continued listing.
Electric Lightwave, Inc. is a facilities-based competitive local
exchange carrier providing Internet, data, voice and dedicated
access services to communications-intensive businesses and the
e-commerce market. The company owns and operates high-speed
fiber-optic networks that interconnect major markets in the West
and operates a leading national Internet and data network. The
company is 85 percent owned by Citizens Communications
(NYSE:CZN, CZB). More information about Electric Lightwave, Inc.
may be found at http://www.eli.net
FEDERAL-MOGUL: Completes Three Divestitures of Non-Core Assets
-------------------------------------------------------------
Federal-Mogul Corporation (NYSE: FMO) reported the completion of
three recent divestitures of non-core operations with facilities
in the United States, Europe and Japan. In total, the divested
operations accounted for approximately $35 million in annual
sales. Terms were not disclosed.
"These divestitures are part of an ongoing effort to sharpen our
focus on growing our core automotive aftermarket and original
equipment businesses," said Chip McClure, president and chief
operating officer of Federal-Mogul, which had sales of $6
billion in 2000.
The divestitures included:
(A) Blazer Lighting Products - Aftermarket - Federal-Mogul
sold the aftermarket operations of Blazer Lighting Products to
Clean-Rite Products LLC, an automotive aftermarket supplier
based in Buffalo Grove, Illinois. Blazer's aftermarket lighting
sales were approximately $22 million in 2000. Blazer's exterior
vehicle lighting product lines, which consist primarily of fog
and projector lamps, accounted for nearly 90 percent of its
annual sales. Blazer also distributes interior lighting
products, replacement bulbs and non-lighting accessories, such
as horns.
No Federal-Mogul manufacturing operations were divested
as part of this transaction, as the Blazer line is primarily
sourced from other manufacturers. Federal-Mogul will continue
its manufacturing and sales support of Blazer Lighting Products
for original equipment (OE) customers. Federal-Mogul also will
continue to manufacture and provide lighting products to OE and
aftermarket customers under the Wagner(R), Signal-Stat(R)
and Rossi(R) brand names, and to OE customers under the Zanxx(R)
brand.
(B) Pontotoc, Mississippi - Federal-Mogul completed the
sale of its Pontotoc, Mississippi, operation to Union Spring and
Manufacturing Corp., based in Pittsburgh, Pennsylvania. The
leased plant and manufacturing operation, which has about 70
employees, will continue to supply coil springs and metal
stampings to Federal-Mogul for sale to automotive aftermarket
customers under a long-term supply agreement.
(C) Large and Industrial Bearings - Federal-Mogul
restructured its equity positions in several large and
industrial bearing manufacturing joint ventures with its
partner, Daido Metal Company Ltd. of Japan. The restructuring
transactions included the transfer of controlling interest in
manufacturing facilities in Ilminster, United Kingdom, and
Nagoya, Japan. The facilities have about 150 employees and
contributed approximately $13 million toward Federal-Mogul's
consolidated sales in 2000.
Headquartered in Southfield, Michigan, Federal-Mogul is an
automotive parts manufacturer providing innovative solutions and
systems to global customers in the automotive, small engine,
heavy-duty and industrial markets. The company was founded in
1899. Visit http://www.federal-mogul.comfor more information.
* * *
In August, Fitch junked the ratings of Federal-Mogul's senior
unsecured debt from 'B-', and lowered its secured bank debt from
'B+' to 'B-', maintaining a Negative Rating Outlook.
According to Fitch, operating under-performance and mounting
pressures from the asbestos-related claims continue to weaken
the credit with no significant sign that either an operating
turnaround or legal remedies to help deal with the asbestos
situation are forthcoming in the near term.
In addition, with most of the major asbestos-related defendants
in court protection, the pressure on Federal-Mogul continues to
mount to join the others as a legal and financial strategy in
dealing with the situation.
At June 30, 2001, due in part to better working capital
management but due more to asset disposition ($179 million of
business and asset disposition), cash increased to $153 million
from $107 million at Dec. 31, 2000.
Lacking an operating turnaround and/or other cash building
developments, Fitch expected that liquidity will likely
dry up in the next several quarters.
GENESIS HEALTH: Small Shareholder Seeks Appointment of Trustee
--------------------------------------------------------------
Todd W. Martin, III, the holder of 137,500 share of common stock
in Genesis Health Ventures, Inc., moves the Court to appoint a
trustee in the GHV cases to consider, among other things,
(a) whether the GHV cases should be converted to a
proceeding under Chapter 7 of the Bankruptcy Code,
(b) whether the proposed joint Plan of Reorganization is
in the best interest of the Debtors as opposed to the
best interest of the officers and directors of the
Debtors,
(c) whether the Debtors should prosecute claims against
the current and former officers and directors of the
Debtors.
Martin points out that under the Plan, the shareholders of the
Debtors would receive nothing while the officers and directors
would receive valuable benefits.
Martin tells the Court that a substantial portion of the
Debtors' financial problems appear to have resulted from the
Debtors' continuing a course of business that the operators of
other businesses in the same field had abandoned because the
potential revenue from the course of business was less than the
cost of pursuing that course of business.
If the Debtors continued their course of business for the
benefit of the officers and directors as opposed to the benefit
of the Debtors' shareholders, as Martin believes, the Debtors
have claims against the officers and directors.
However, the Debtors cannot objectively assess the desirability
of pursuing claims against the officers and directors because
the officers and directors of the Debtors continue to manage the
affairs of the Debtors, Martin notes.
In addition, the Debtors cannot objectively assess the
desirability of the Plan, Martin further observes, because the
officers and directors will receive benefits under the Plan.
Martin believes that the Plan fails to take into account a fair
value of the assets of the Debtors, including, without
limitation, the value of the real property owned by the Debtors
or in which the Debtors own an interest, further indicating that
the Plan is not proposed in the best interest of the Debtors as
opposed to its officers and directors.
Therefore, Martin suggests appointing an independent trustee to
objectively assess the various options available to the Debtors.
(Genesis/Multicare Bankruptcy News, Issue No. 13; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
HARNISCHFEGER: Ecolaire Resolves $9.7MM EPA Claim for Pennies
-------------------------------------------------------------
The United States, on behalf of the Environmental Protection
Agency, filed proof of claim # 10285 against Ecolaire
Incorporated for at least $9,667,827. The Claim was filed
pursuant to the Comprehensive Environmental Response,
Compensation and Liability (CERCLA), 42 U.S.C. sections 9601 et
seq., for unreimbursed environmental response costs incurred by
the United States at the Welsh Road Site (a/k/a Walsh Road and
Barkman Landfill), located in Honey Brook Township, Chester
County, Pennsylvania, and for response costs to be incurred inn
the future by the United States at the Site.
Ecolair and the United States then settled for the amount of
$13,277.00 (the EPA Settlement) and accordingly sought and
obtained the Court's approval of (i) the Settlement Agreement
and Release between National Union Fire Insurance Company and
Ecolaire pursuant to which National Union will pay the EPA
$9,277.00 and (ii) the Settlement Agreement and Release between
ACE USA Environmental Coverage Group and Ecolaire pursuant to
which ACE will pay the EPA $4,000.00.
Pursuant to the National Union Settlement and the ACE
Settlement, the EPA has received an aggregate of $13,277.00.
Therefore, Ecolaire and the EPA stipulate and agree that the
Proof of Claim is considered withdrawn by the EPA and the other
terms of the EPA Settlement remains effective.
Judge Walsh has given his stamp of approval to the Stipulation.
(Harnischfeger Bankruptcy News, Issue No. 47; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
ICG COMMS: Gets Approval to Hire CDTI to Liquidate Excess Assets
----------------------------------------------------------------
ICG Communications, Inc. announces to Judge Walsh that, as part
of their restructuring efforts, and to maximize the value of
their estates, the Debtors have streamlined operations in many
respects.
As a result, the Debtors currently own certain excess
telecommunications equipment. Because the excess equipment is
not utilized in the Debtors' operations, the Debtors have
determined to seek to sell this excess equipment.
The Debtors have also concluded that, in their business
judgment, the potential value of the excess equipment realized
by their estates will be enhanced by the assistance of a third-
party liquidator. Accordingly, with the assistance of their
financial advisors, Zolfo Cooper, LLC, the Debtors contacted
various companies regarding the submission of competing bids for
potential liquidators.
Toward this end, the Debtors have engaged in a thorough round of
information-gathering and negotiations with the
telecommunications community to determine an arrangement that
would provide the Debtors with the best opportunity to maximize
their returns. As a result, the Debtors received bids from four
different telecommunications and/or liquidating companies.
After carefully considering all proposals received, subject to
this Court's approval, the Debtors selected CTDI as their
liquidator to assist the liquidation of the excess equipment and
provide a number of related services to the Debtors in
connection therewith. Accordingly, by this Motion, the Debtors
seek authority under section 363 of the Bankruptcy Code to enter
into an agreement under which CTDI will manage the liquidation
of the excess equipment.
The Debtors tell Judge Walsh that CTDI is a leading provider of
"one stop" telecommunications asset management, equipment sales,
and monitoring services. If retained, CTDI will provide the
Debtors logistical services, inventory management, invoicing,
and marketing services.
More specifically, CTDI will:
(a) pick up and transport the Excess Equipment to CTDI
regional distribution centers;
(b) sell the excess equipment from such centers;
(c) coordinate all invoicing and accounts receivable
activity related to such sales;
(d) manage the inventory of the excess equipment; and
(e) coordinate the disposition of all excess equipment that
cannot be sold.
Under this Agreement, ICG will receive 65% of the gross revenues
generated from CTDI's sale and/or disposition of the Excess
Equipment, and CTDI will receive 35% of such gross revenues. All
costs associated with the warehousing, transporting, tracking,
administration, marketing, configuration, testing, order
processing, sale and disposition of the Excess Equipment will be
borne by CTDI.
The Debtors assert their belief that CTDI is well equipped to
assist the Debtors in liquidating the excess equipment. CTDI has
substantial experience in the telecommunications industry, and
thus is extremely knowledgeable with regard to the fair market
value of the excess equipment and possesses a global network for
re-marketing the excess equipment. Moreover, the other firms
that the Debtors contacted were either uninterested in
performing the comprehensive services requested by the Debtors
or unable to offer the vast warehousing network or competitive
rates offered by CTDI.
The Debtors believe that the net value derived for their estates
from liquidation of the Excess Equipment will be maximized by
hiring CTDI. As a result of CTID's resources and industry
contacts, CTDI is uniquely qualified to liquidate the Excess
Equipment, and CTDI's fee compares favorably with those of its
competitors. Moreover, the Debtors presently are incurring
substantial storage costs with respect to the excess equipment.
Thus, the sooner CTDI's liquidation process can begin, the
greater the benefit to the Debtors' estates, creditors and
other parties in interest. Under these circumstances,
contracting with a third- party to liquidate the excess
equipment under the terms provided by CTDI is a sound exercise
of the Debtors' business judgment. Accordingly, the Debtors tell
Judge Walsh he should authorize them to enter into the Agreement
with CTDI to liquidate the excess equipment.
The Debtors are, pursuant to this Motion, only requesting
authority to retain CTDI as liquidator. The Debtors are not, by
this Motion, seeking approval of any sale of any portion of the
excess equipment. To the extent any such proposed sale involves
assets or group of related assets with a sale price of $3
million or less, the Debtors will comply with the requirements
and procedures set forth in this Court's order Approving
Procedures to Sell Certain Assets Free and Clear of Liens,
Claims and Encumbrances Without Further Court Approval, dated
January 31, 2001. In addition, in the event any such proposed
sale involves assets or groups of related assets with a sale
price exceeding $3 million, the Debtors will seek Judge Walsh's
approval of such sale under section 363 of the Bankruptcy Code
after notice and a hearing in compliance with all relevant
statutes and rules.
The Debtors submit that ample authority exists to authorize them
to enter into the Agreement and to allow CTDI to liquidate the
Excess Equipment. Section 363 of the Bankruptcy Code provides
that the Debtors "after notice and a hearing, may use, sell or
lease, other than in the ordinary course of business, property
of the estate." To approve the use, sale or lease of property
out of the ordinary course of business, this Court must find
"some articulated business justification." By virtue of the
Debtors' cessation of operations at certain premises, the
Debtors presently have no need for the excess equipment.
Moreover, the Debtors do not possess CTDI's experience in and
resources for selling used telecommunications equipment. Thus,
to achieve the best possible result for the estates, the Debtors
require CTDI's services to assist them in liquidating the excess
equipment. The Debtors therefore wish to retain CTDI as a
liquidator to sell the Excess Equipment.
Finding that the Debtors' Motion is well taken, Judge Walsh
approves of CTDI's employment. (ICG Communications Bankruptcy
News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
IMPERIAL SUGAR: Holly to Lease Beet Factory to Washakie Growers
---------------------------------------------------------------
Holly Sugar Corporation, Debtor, appearing through M. Blake
Cleary, James L. Patton, Jr., Brendan Linehan Shannon of the
Wilmington firm of Young Conaway Starglatt & Taylor LLP, as
local counsel, and Jack L. Kenzie and Brenda T. Rhoades of the
Dallas office of Baker Botts LLP, and Tony M. Davis of the
Houston office of that firm, as lead counsel, asks Judge
Robinson for her authorization to enter into (a) an
agreement with the Washakie Beet Growers Association for the
lease of Holly's Worland, Wyoming, beet processing factory to
the Washakie cooperative for the 2001 processing season, and (b)
related management and marketing agreements.
The Worland factory is one of nine sugar beet factories
currently operated by the Debtors in Michigan and the western
United States, in addition to three sugar cane factories in the
southern United States. Worland is the second smallest of these
factories, with an average daily slicing capacity of 3600 tons
of sugar beets. Like all of the Debtors' beet processing
factories, the Worland factory operates on a seasonal schedule,
processing sugar beets continuously during the roughly five-
month Wyoming sugar beet harvest and processing campaign,
but idle or operating at a reduced capacity during the remainder
of the year.
Because of the highly perishable nature of sugar beets, sugar
beets for the Worland factory must be purchased from growers
operating in close proximity to the factory. To operate
efficiently, the Worland factory contracts annually with local
growers for a minimum of 19,500 acres of sugar beets. A
substantial number of these growers are members of the
Washakie Cooperative, a not-for-profit association of local beet
growers.
After negotiations with the Washakie Cooperative following
commencement of this case, Holly entered into an agreement with
the Washakie Cooperative, subject to Judge Robinson's approval,
under which the Washakie Cooperative will lease the Worland
factory for the 2001 processing season from Holly Sugar.
The principal terms of the proposed lease are:
(a) Term: Through March 1, 2002 or end of 2001 crop campaign.
(b) Rent and Related Fees: Lease, marketing, and management
fee of $500,000 payable in five equal monthly
installments commencing October 2001.
(c) Ownership of Sugar Beets. The growers will be owners of
all sugar beets harvested during the 2001 campaign and
all refined sugar and byproducts produced from those
sugar beets. Holly will not take title to any sugar beets
harvested during the 2001 campaign.
(d) Repair and Maintenance: Actual repair and maintenance
expenses incurred during the inter-campaign which began
on March 1,2001 are the responsibility of the growers.
Holly will continue to be responsible for all repair and
maintenance items incurred prior to March 1, 200 1,
except to the extent incurred in connection with the 2001
crop campaign.
(e) Adjustments to Payments Related to 2000 Crop. Only one-
half of the payments due April 7, 2001 and October 31,
2001 relating to the 2001 crop have or will be paid to
growers. The remaining payments will be used to offset or
reimburse Holly for intercampaign repair and maintenance
items and operating expenses.
(f) Reimbursement of Expenses. All expenses incurred prior
to October 31, 2001, and not previously reimbursed must
be paid by October 31, 2001. Expenses not paid by such
time will bear interest and be paid out of proceeds of
refined sugar products after such time.
(g) Handling and Delivery Costs. Costs of handling and
delivering inventory of sugar and by-products for the
2001 crop will be the responsibility of the growers.
Holly will be responsible for costs of handling and
delivering inventory produced from the 2000 crop.
(h) Indemnification. If the Washakie Cooperative causes
injury or damage to another party it will indemnify,
defend, and hold harmless Holly from any loss, attorneys
fees, court costs, or other costs or claims arising from
use of the leasehold premises. The Washakie Cooperative
also agrees to indemnify Holly and various affiliated
persons and entities for any liability arising out of the
deposit, spill, discharge, or release of hazardous
substances during the term of the lease, the Washakie
cooperative's use of the premises, or the
Washakie cooperative's failure to comply with
environmental laws. Holly has agreed to indemnify the
Washakie cooperative and certain affiliated parties for
any liability related to the deposit, spill, discharge,
or other release of Hazardous Substances during Holly's
use of the premises or from Holly's failure to provide
information, or make submissions required to comply with
applicable environmental laws.
(i) Insurance. The Washakie cooperative will maintain public
liability insurance for the leasehold premises and
conduct of the Washakie cooperative's business. Such
insurance will name Holly as an additional insured for up
to $2,000,000 for death and bodily injury and $1,000,000
for property damage. The Washakie cooperative
additionally will maintain insurance on any of its
personal property stored or used on the premises.
(j) Representations and Warranties. The Washakie Cooperative
represents and warrants, among other customary terms,
that it will comply with all federal and state
regulations and guidelines with respect to use of the
premises and will not create any public or private
nuisance and will not permit any hazardous substances to
be brought onto, kept, or manufactured on the leasehold
premises and will bear all responsibility for costs
associated with compliance with laws regulating the use,
generation, storage, transportation, or disposal of
hazardous substances.
(k) Assignability. Permitted only with consent of Holly.
The Management and Marketing Agreements
Subject to Judge Robinson's further approval, Holly also has
entered into agreements with the Washakie cooperative to provide
the Washakie cooperative with management and marketing support
during the term of the proposed lease. The principal terms of
the management and marketing agreements are:
(a) Factory Management Agreement
(i) Term. Through March 1, 2002 or end of 2001 crop
campaign.
(ii) Management Fee: The combined lease, marketing, and
management fee are combined under Worland Lease above.
(iii) Responsibilities of Manager. Holly will have exclusive
authority for the supervision and management of the
day-to-day operations of the Worland factory, in
consultation with the growers, including, without
limitation, responsibility for budgeting, negotiating
and entering into contracts on behalf of the growers,
purchasing necessary supplies, maintaining the current
risk management program for the factory, performing
required repair and maintenance, and paying expenses.
Holly will manage the factory in a prudent manner,
consistent with generally accepted standards of sugar
beet processing for a facility of similar size.
(iv) Limitation of Liability. The management agreement
provides that Holly's liability to the Washakie
cooperative is limited to acts or omissions in bad
faith or in substantial disregard of substantial risk
of harm to the Washakie cooperative where such risk
was known to Holly and where the disregard of such
risk was a gross deviation from conduct that a
reasonable person would have exercised in the same
situation. The agreement also provides that Holly will
have no liability for damages caused by the acts or
omissions of any officer, employee, or agent of the
growers.
(v) Indemnification of the Washakie Cooperative.
Notwithstanding the immediately preceding paragraph,
Holly will indemnify the Washakie cooperative and
certain affiliated parties from any claims, causes of
action or liability to any person incurred by the
growers as a result of Holly's operation of the
Washakie cooperative's business at the Worland factory
or deriving from Holly's ownership or operation of the
Worland factory. Holly has the obligation to defend
the indemnified parties in the any such action.
(vi) Reimbursement of Expenses. The Washakie cooperative
will reimburse Holly for all necessary expenses
incurred by Holly in the course of performance of its
obligations under the management agreement.
(vii) Non-Assumption of Liabilities. Holly does not assume
any liabilities, debts, or obligations of the growers
or arising out of the operation of the growers'
business.
(viii) Relationship of Parties. The agreement provides that
the relationship of the parties is to be one of
principal and agent.
(ix) Choice of Law. Wyoming
(x) Resolution of Disputes. Disputes under the management
agreement will be resolved under the Commercial
Arbitration Rules of the American Arbitration
Association at a proceeding to be held in Denver,
Colorado.
(b) The Marketing Agreement
(i) Term. September 30, 2002
(ii) Marketing Fee. The combined lease, marketing, and
management fee are described under Worland Lease
above.
(iii) Responsibilities of Marketer. Holly will have
exclusive authority to market sugar and sugar by-
products produced at the Worland factory during the
2001 crop season and will provide such services in a
prudent manner consistent with generally accepted
standards of refined sugar and sugar byproduct
marketing, sales, and distribution business,
including, without limitation:
(a) to maintain and operate a customer tracking
system, sales management information system and
sales order processing system,
(b) provide traffic services, transportation
management services, customer services, order
entry services, credit management, distribution
services, and warehouse management services,
(c) maintain a comprehensive marketing plan;
(d) take actions necessary to comply with applicable
laws; and
(e) submit monthly reports to the growers. Holly will
be responsible for determining the numbers and
qualifications of employees needed for such
services and will be responsible for recruiting,
hiring, supervising, training, promoting,
assigning, and discharging employees needed to
perform services. All employees retained by Holly
in its capacity as marketer will be employees of
Holly.
(iv) Ownership of Product. All product will be owned by the
growers.
(v) Limitation of Liability. Holly will be liable to the
Washakie cooperative only for acts or omissions in bad
faith or for acts or omissions in disregard of a
substantial risk of harm of risk to the Washakie
cooperative where such risk was known by Holly and
where such risk was a gross deviation from conduct
that a reasonable person would have exercised in the
same situation.
(vi) Indemnification of the Washakie Cooperative.
Notwithstanding the immediately preceding paragraph,
Holly will indemnify the Washakie cooperative and
certain affiliated parties from any claims, causes of
action or liability to any person incurred by the
growers as a result of Holly's operation of the
Washakie Cooperative's business at the Worland. Holly
has the obligation to defend the indemnified parties
in the any such action.
(vii) Labels. Sugar marketed under the marketing agreement
will be marketed under one or more of Holly's
trademarked labels.
(viii) Choice of Law. Wyoming
(ix) Resolution of Disputes. Disputes under the management
agreement will be resolved under the Commercial
Arbitration Rules of the American Arbitration
Association at a proceeding to be held in Denver,
Colorado.
The Debtor's Arguments
The Debtor argues in support of this lease that Section
363(b)(1) of the Bankruptcy Code permits a trustee, and, by
operation of section 1107(a), a debtor-in-possession, to use,
sell, or lease property of the estate outside of the course of
business. Implicit in section 363(b) is a requirement of
justifying the proposed use, sale, or lease. When applying
section 363(b) in the context of a lease agreement with the
debtor, "there must be some articulated business justification
for leasing the property outside the ordinary course of
business". The Worland lease continues the Debtors' efforts to
rationalize capacity, reduce cash flow volatility and operating
risks, and shift the focus of the Debtors functions to high-
value-added functions such as marketing and distribution. Lease
of the Worland factory and entry into the related agreements
will benefit Holly by limiting the risk it currently assumes
when it purchases and takes title to sugar beets for processing,
thus reducing cash flow volatility.
Holly assures Judge Robinson that the terms of the lease and
related agreements are reasonable, fair, and customary for
similar agreements in the industry. The terms were negotiated
at arms' length between parties with considerable knowledge of
both the sugar industry in general and the Wyoming sugar beet
market in particular. The single-season nature of these
arrangements enable Holly to revisit and adjust its arrangements
with respect to the Worland factory if the need arises.
Judge Robinson Grants the Motion, But . . .
Judge Robinson quickly signs an Order granting the Motion, but
conditions it upon a requirement that the Washakie cooperative
obtain financing commitments for the lease year in an amount
sufficient to meet its obligations under the agreements, or
otherwise provide assurance to the Debtors, in a form acceptable
to the Debtors' Bank Group as described in the Plan, of its
ability to perform and satisfy all obligations under the
Agreements.
Judge Robinson further ordered that the proceeds of the
agreements to Holly were subject to the liens and encumbrances
of the Bank Group and are those parties' collateral, to secure
the Debtors' obligations under the Senior Credit Agreement, as
amended, and the DIP facility, and the terms and conditions of
these agreements. (Imperial Sugar Bankruptcy News, Issue No. 9;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
INTEGRATED HEALTH: Seeks Okay for Elkins Loan Probe Protocol
------------------------------------------------------------
The Official Unsecured Creditors' Committee and Integrated
Health Services, Inc., in consultation with their
professionals, have started to review certain matters related to
the pre-petition compensation of the Debtors' current and former
directors and officers. Among other things, the Committee will
investigate the circumstances under which certain funds
aggregating approximately $56.2 million were loaned by the
Debtors to certain members of management.
As previously reported, loans were made by IHS before the
petition date in connection with:
(a) a $16 million executive loan program instituted for the
benefit of its officers and approved in 1997 by the Board
of Directors of the Debtors; and
(b) an additional $25 million loan program approved by the
Board in 1999, also for the benefit of the Debtors'
officers.
It is the Debtors' position, to which the Committee reserves all
rights, that the Loan Programs were implemented to enable the
Debtors' directors and officers, among other things, to acquire
or hold shares of the Debtors' common stock.
Upon information and belief, a majority of the recipients of the
loans under the Loan Program did not use the loan proceeds
exclusively for the purchase or holding of the Debtors' stock.
Further, the promissory notes issued in connection with the
loans under the Loan Programs contained terms under which in
certain circumstances, the loans were forgiven in full. As a
result of such "forgiveness of debt" provisions, the Loan
Programs have resulted in significant post-petition tax
liabilities to the Debtors' estates and may continue to result
in tax liabilities.
The Committee advised the Debtors that it believes that (a) it
is appropriate to investigate the acts and conduct of current
and former officers and directors of the Debtors and their
professional advisors relating to the loans to management made
by the Debtors, and other compensation issues, to determine
whether causes of action exist (the "Investigation"), and (b)
the Committee is an appropriate party to conduct the
investigation. Among other things, the Investigation will review
whether the decisions of the Board related to the Loan Programs
were made in the proper exercise of Directors' fiduciary duties
and whether the advice given to the Board was competent. The
Debtors agree that, in accordance with Section 1103 of the
Bankruptcy Code, the Committee is a proper party to conduct the
Investigation, but assert that the Debtors are also proper
parties. In order to expeditiously conclude the Investigation,
the Committee and the Debtors have agreed that, in view of their
common interest in maximizing the Debtors' estates, the Debtors
and the Committee will each conduct the Investigation as set
forth in the Protocol.
The Committee and the Debtors note that similar stipulations
have been approved in other bankruptcy cases as In re Venture
Stores, Inc., United States Bankruptcy Court for the District of
Delaware, Case No. 98-101 (RRM) (Docket No. 936); In re Service
Merchandise Co., Inc., United States Bankruptcy Court for the
Middle District of Tennessee, Case No. 3 99-02649 (Docket No.
1757); In re The Singer Company N.V., et al., United States
Bankruptcy Court for the Southern District of New York, Case
Nos. 99-B-10578 (BRL) through 99-B-10605 (BRL) and 00-B-10423
(BRL) (Docket No. 311).
The Committee, by and through its co-counsel Otterbourg,
Steindler, Houston & Rosen, P.C. and Klehr, Harrison, Harvey,
Branzburg & Ellers LLP, and the Debtors, by and through their
co-counsel, Kaye Scholer LLP and Young, Conaway, Stargatt &
Taylor LLP, submit their Joint Application for approval,
pursuant to 11 U.S.C. sections 105(c) and 1103(c) and Rule 2004
of the Federal Rules of Bankruptcy Procedure, of the
"Stipulation and Order Establishing Protocol of Investigation"
between the Committee and the Debtors.
A Brief Description of the Protocol
Among other provisions, and without limitation, the Protocol
provides that:
(1) Subject to their right to object as set forth in the
Protocol, the Debtors shall produce documents to the Committee
and make their officers and directors and other persons under
their control available for interview or deposition by the
Committee as the Committee reasonably requests;
(2) The Committee and the Debtors shall be permitted to
issue subpoenas under Rule 2004 without further order of
the Court, but subject to the rights of the subpoenaed
party to object;
(3) All information received by either the Committee or the
Debtors in connection with the Investigation (except for
public information) will be held in strict confidence,
used solely in connection with the Investigation or the
prosecution of claims (or settlements arising
therefrom), and the disclosure of such information is
restricted accordingly;
(4) In view of the common interest of the Committee and the
Debtors in maximizing the value of the Debtors' estates,
the Debtors may furnish the Committee with documents,
and witnesses may divulge to the Committee information,
in each case that may be subject to the Debtors'
privilege or protection without waiver of such privilege
or protection; and
(5) The attorneys' fees and related expenses of current
members of the Debtors' Board relating to the
Investigation that may be subject to reimbursement by
the Debtors' estates are restricted to certain limited
items, and such fees and expenses are subject to
objection by the Committee.
Both the Committee and the Debtors believe that approval of the
Protocol will be beneficial to the Debtors' estates and that it
will expedite the Investigation and permit a more cost effective
and complete review of the matters subject to the Protocol.
(Integrated Health Bankruptcy News, Issue No. 19; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
INTERDENT: Nasdaq Listing Continues, Subject to Conditions
----------------------------------------------------------
InterDent, Inc. (NASDAQ NM: DENT) announced that the Nasdaq
Listing Qualifications Panel determined to continue the listing
of the company's common stock on the Nasdaq National Market,
subject to certain conditions regarding the value of the
company's public float set forth below.
On August 9, 2001, the panel heard an appeal by InterDent
regarding a prior notice that Nasdaq had intended to delist the
company's shares from the Nasdaq National Market for reasons
including the failure to comply with the $1.00 minimum bid price
requirement. On September 4, 2001, the company received
notification of the results of the hearing.
The panel noted that the company recently implemented a one for
six reverse stock split, which resulted in the minimum bid price
of the company's common stock meeting the minimum bid price
requirement. However, the panel noted that the company is not
currently in compliance with the market value of public float
requirement. Thus, the panel has indicated that the company's
shares would continue to be listed on the Nasdaq National
Market, subject to the company regaining compliance with the
MVPF, which requires that the value of the shares of the
company's common stock held by non-affiliates equals at least
$5,000,000.
The panel indicated that on or before September 10, 2001, the
company must demonstrate compliance with the MVPF requirement
for one trading day. In the event the company fails to do so, it
will be provided a 90-day grace period to comply with the MVPF
requirement for a minimum of ten consecutive trading days, as
well as maintain its compliance with all of the other applicable
requirements for continued listing.
In connection with the recent reverse stock split and the
delisting hearing before the panel, the symbol for the company's
common stock recently changed to from its original "DENT"
designation to "DENTD" and then to "DENTE".
Nasdaq has informed the company that, effective as of September
5, 2001, the Company's symbol reverted to "DENT".
InterDent provides dental management services in 153 locations
in California, Oregon, Washington, Nevada, Arizona, Hawaii,
Idaho, Oklahoma, and Kansas with total annualized patient
revenues under management of approximately $250 million. The
company is continuing to build an integrated support environment
utilizing information technologies to enable dental
professionals to provide patients with high quality,
comprehensive, convenient and cost-effective care. InterDent
also owns a stake in Dental X Change, an advanced Internet
portal servicing the professional dental community. More
information about Dental X Change is available on their web
site, http://www.dentalxchange.com
IRVINE SENSORS: Violates Nasdaq Listing Requirements
----------------------------------------------------
Irvine Sensors Corporation (Nasdaq: IRSN; Boston: ISC) received
notification from Nasdaq that it is not currently in compliance
with market capitalization, net worth or stockholder equity
listing requirements and must cure one or more of these criteria
to maintain its Nasdaq SmallCapMarket(R) listing.
If the Company can demonstrate such compliance before October 1,
the Nasdaq notice will be satisfied. After that date, the
Company may receive a delisting notice that the Company would
have the right to appeal based on a plan of re-compliance.
However, there is no guarantee that Nasdaq would approve such a
plan.
As previously disclosed, Nasdaq has also given notice that the
Company's stock must trade above $1 per share for 10 consecutive
trading days before October 10 in order to avoid a delisting
notice. The Company has scheduled a Special Stockholders'
Meeting on September 24 in Costa Mesa, California to
obtain stockholder authority to meet the price per share
requirement by way of a reverse split.
Robert G. Richards, President and Chief Executive Officer of
Irvine Sensors, said, "Both the $1 per share issue and the
market capitalization issue are the direct result of the recent
market decline in the price of our stock. Our net worth
deficiency and stockholders' equity is the result of many
factors, including the accounting rules that require us to
consolidate the development expenses of our subsidiaries without
being able to consolidate their net worth.
"We are taking action in an effort to maintain our Nasdaq
listing," continued Richards. "We have proposed the reverse
split since we believe that will enable us to meet Nasdaq's
price per share criterion. Simultaneously, we are exploring ways
to meet Nasdaq's balance sheet criteria. Neither stockholder
approval of the reverse split or our success in balance sheet
improvement is guaranteed, but both must be accomplished if
we are to continue trading on Nasdaq."
Irvine Sensors Corporation, headquartered in Costa Mesa,
California, is primarily engaged in the development and sale of
high density electronics and interconnects,
MicroElectroMechanical systems (MEMS), sensors and sensor
readout circuits, miniature cameras, electro-optical switches,
image processing hardware and software, wireless infrared
communications products, and low-power analog and mixed-signal
integrated circuits for diverse systems applications. It
generally seeks to commercialize its technologies through
independently financed and managed subsidiaries.
METROMEDIA FIBER: Inks $150 Million Note Purchase Agreement
-----------------------------------------------------------
Metromedia Fiber Network, Inc. (MFN) (Nasdaq: MFNX), the leader
in deployment of optical IP Internet infrastructure within key
metropolitan areas domestically and internationally, announced
that it has signed a secured note purchase agreement for a $150
million note facility led by Citicorp USA.
Pursuant to the agreement, which will terminate on September 17,
2001 if the closing does not occur on or prior to such date,
Citicorp agreed to purchase $62.5 million of notes with other
lenders (including an affiliate of the Company) agreeing to
purchase the remaining $87.5 million. The closing of the $150
million note facility is subject to conditions including:
* The closing of $230 million of convertible debt financing,
$180 million of which has been committed to by affiliates
of the Company, and $50 million of which has been
committed to by an investor.
* The closing of $235 million of vendor financing, for which
the Company has received a commitment.
* Agreements from other Company vendors to defer payment of
the Company's obligations to such vendors.
* The note purchasers being satisfied with their due
diligence investigation of the Company.
The Company also announced that it received an extension until
September 12, 2001 of the commitment for the $235 million of
vendor financing.
The Company cannot provide any assurances that it will be able
to consummate any of the financings it is pursuing. Each of the
financings is contingent upon the consummation of the other
financings. In the event that the Company does not consummate
the financings, it will need to seek protection under the
bankruptcy laws.
In the event that the Company does consummate the financings,
the Company's stockholders will be significantly diluted as a
result of the issuance of equity to the parties providing
financing.
Metromedia Fiber Network, Inc., the leader in deployment of
optical IP Internet infrastructure within key metropolitan areas
domestically and internationally, is revolutionizing the fiber-
optic industry. By offering virtually unlimited, unmetered
metro-area communications capacity at a fixed cost, Metromedia
Fiber Network is eliminating the bandwidth barrier and
redefining the way broadband capacity is sold.
MFN's optical network enables its customers to implement the
latest data, video, Internet and multimedia applications.
Through its subsidiaries AboveNet Communications, Inc., the
architect of the Internet Service Exchange (ISX), PAIX.net,
Inc., the first and leading neutral Internet exchange, and
SiteSmith, a leader in delivering comprehensive Internet
infrastructure managed services, MFN is a leading provider of
Internet connectivity, co-location and managed services
solutions for high-bandwidth and business-critical applications.
The Company offers a world-class network that provides co-
location services and Internet connectivity for content
providers, ISPs and application service providers. Its global
optical Internet uses open peering and "best exit" technology to
deliver fast, scaleable and reliable connections to the
Internet, and improves the Internet experience for end-users.
OWENS CORNING: Court Modifies Stay to Permit Customer Setoffs
-------------------------------------------------------------
Owens Corning sought and obtained an order from the Court
modifying the automatic stay to effectuate setoff.
Prior to the Petition Date, the Debtors in the ordinary course
of business sold and bought goods to certain companies. As a
result of such transactions, such companies owes the Debtors and
the Debtors also owes obligations to such companies as pre-
petition claims:
Amount Due Amount Owed Net
to Debtors to Customer Receivables
---------- ------------ ------------
Tag Chemical, Inc. $ 3,953.40 $ 21,335.10 $ (17,381.70)
Bay Industries, Inc. 266,974.35 80,921.32 186,053.03
Koch Materials Co. 1,336,002.63 232,849.73 1,103,152.90
J. Kate Stickles, Esq., at Saul Ewing LLP in Wilmington,
Delaware states that the Debtors believe that the set-off of its
pre-petition obligations against pre-petition obligations of
companies mentioned above is in the best interest of the Debtors
estate and unsecured creditors and appropriate under these
circumstances.
The set-off of pre-petition obligations will allow the Debtors
to:
a) realize amounts owing and reconcile its books and records
without further dispute;
b) maintain amicable relationship with its customers/vendors
c) continue the free flow of goods and services to and from its
customers/vendors. (Owens Corning Bankruptcy News, Issue No.
15; Bankruptcy Creditors' Service, Inc., 609/392-0900)
PACIFIC AEROSPACE: Enters Lock-Up Agreement with Noteholders
------------------------------------------------------------
Pacific Aerospace & Electronics, Inc. (OTC Bulletin Board: PCTH)
entered into a lock-up agreement with the holders of
approximately 98% of its 11.25% senior subordinated notes
regarding a planned restructuring of the Company's debt and
equity outside of bankruptcy.
The lock-up agreement provides that the Noteholders will waive
the Company's existing and future defaults under the Notes. The
Company is currently in default under the Notes for failure to
make its semi-annual interest payment prior to the expiration of
a 30-day grace period on August 31, 2001.
This default also caused an event of default to occur under the
Company's 18% senior secured loan. The lock-up agreement
contemplates the Company completing the sale of Aeromet
International PLC, the Company's U.K. subsidiary, and using the
proceeds of the sale to pay off the Company's 18% senior secured
loan.
Under the terms of the lock-up agreement, the Noteholders would
exchange their Notes, including accrued interest, for a
combination of common stock, convertible preferred stock, and
new notes. After conversion of the preferred stock, which would
occur immediately after shareholder approval of an increase in
the number of authorized shares of common stock, the Noteholders
would own approximately 95% of the Company's common stock on a
fully diluted basis.
The notes to be issued to the Noteholders in the exchange would
include $12.5 million of 10% pay-in-kind notes and $17.5 million
of 10% senior subordinated notes. The new senior subordinated
notes would be redeemable out of the proceeds from the sale of
Aeromet. The lock-up agreement also provides for approximately
$5 million of working capital financing for the Company. As part
of the restructuring, the Company's Board of Directors would be
reconstituted to consist of five directors, four of whom would
be designated by the Noteholders.
The Company will undertake to effect the restructuring as
quickly as possible by making the appropriate SEC filings and
obtaining the approvals necessary to consummate the exchange.
"We are pleased to announce this transaction," said Don Wright,
President and CEO of the Company. "It will allow the Company to
go forward with a greatly reduced debt load. We have worked very
hard to restructure the Company's operations around our
strongest businesses over the past year, and we feel that we
have accomplished what we set out to do in that respect. By
reducing our debt load, we expect to be in a better position to
capitalize on what we have done operationally. Assuming that
this transaction is accomplished as expected, the capital
restructuring should allow us to continue to serve our customers
and do business with our vendors in the normal course, without
the disruption that might have been caused by a bankruptcy
filing."
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. The
Company has approximately 800 employees worldwide and is
organized into three operational groups -- U.S. Aerospace, U.S.
Electronics and European Aerospace.
PACIFIC GAS: Court Okays Engagement of Non-Bankruptcy Counsel
-------------------------------------------------------------
Prior to filing for bankruptcy, Pacific Gas and Electric Company
regularly employed a large number of law firms and other
professionals in the ordinary course of business to assist it in
conducting its business affairs and to render legal services on
a wide variety of subjects, including regulatory matters,
environmental and land use matters, legislative matters,
plaintiff's matters (such as PG&E's rights on commercial,
insurance coverage, intellectual property, credit and
collection, subrogation, business practices, antitrust, U.S.
Court of Federal Claims), defense matters (such as personal
injury and property damage matters, employment etc.) and other
and miscellaneous matters.
By way of an Application and Amended Application, PG&E sought
and obtained the Court's approval to employ the law firms as
PG&E's Non-Bankruptcy Counsel, nunc pro tunc to April 6, 2001,
according to PG&E's standard terms, which include monthly
billing for professional services rendered and reimbursement of
expenses incurred on behalf of PG&E, subject to Court approval.
The Court's order authorizes PG&E to file under seal and serve
solely upon the UST and counsel to the Committee, declarations
of Special Counsel containing information on hourly rates.
Counsel will be compensated at such hourly rates, subject to
ultimate allowance by the Court after hearing, on notice to
creditors of appropriate applications for compensation and
reimbursement of expenses.
In response to the U.S. Trustee's objection over this issue,
PG&E explains in the Amended Application that keeping such
information confidential is necessary because PG&E has typically
engaged outside counsel through formal or informal competitive
processes resulting in negotiated rates for legal services.
PG&E typically spreads out its outside legal work, particularly
in such high volume areas as commercial and personal
injury/property damage defense, among a number of firms and
engage multiple firms for similar types of legal services,
within single geographic areas. In some cases, negotiations have
resulted in discounted rates below what the law firms in
question charge other similarly situated clients. Because of its
concerns regarding the confidentiality of these agreements, PG&E
treats the agreements as attorney-client privileged.
PG&E represents that, while it can be substantially harmed if it
files the hourly rates of Non-Bankruptcy Counsel, no important
public policy would be served by such a filing.
The Court's order also provides that PG&E may file under seal
the hourly rates of any other counsel that PG&E is authorized to
employ pursuant to the order.
Mindful of the fact that many if not most of the Non-Bankruptcy
Counsel are firms which do not regularly represent debtors in
chapter 11 bankruptcy cases, and which, accordingly, are not
experienced with the delay in payment which typically occurs in
a chapter 11 case, PG&E sought and obtained the Court's approval
to pay the Non-Bankruptcy Counsel for the fees and expenses
incurred on a monthly basis, subject at all times to the
approval of the Court, as follows:
PG&E will prepare and file as a supplement to its "Monthly
Operating Report," a schedule showing charges incurred by each
Non-Bankruptcy Counsel for the prior month. If the fees and
disbursements (a) for any of the Non-Bankruptcy Counsel do not
exceed 110% of the historical monthly average amount, or (b) for
any of the Non-Bankruptcy Counsel performing services on matters
subject to the automatic stay, 110% of the amount estimated as
the monthly average, or (c) for any of the Non-Bankruptcy
Counsel whose fees are listed on an "as needed" basis, such fees
and disbursements do not exceed the sum of $10,000 in any one
month, then the fees and expenses may be paid in full without
further notice.
If the amounts are exceeded, then Applicant will provide to
the United States Trustee and to counsel for the Committee with
the invoice or statement received from such Non-Bankruptcy
Counsel prior to making any payment to it for such month.
If the US Trustee or the Committee question or object to any
portion of the fees or disbursements set forth in such invoice
or statement, they must provide PG&E with a written objection
specifically detailing the grounds for their objection and that
portion of the fees or disbursements to which they object. Such
objection must be received by Applicant within 10 days after
delivery of the invoice or statement to the US Trustee or the
Committee's counsel.
Upon submitting such an objection, the US Trustee and/or the
Committee will work with PG&E in good faith to resolve any
disputes concerning the invoice or other statement. If no
resolution is reached within 5 business days, the US Trustee or
the Committee will be entitled to file a motion requesting that
the Court resolve such disputes on not less than 5 days notice
to PG&E.
If any objection is submitted, the utility will not pay the
disputed amounts set forth on such invoice or statement until
any disputes have been resolved except as otherwise authorized
by the Court after notice and a hearing. If no objection is
submitted within the 10 day period, PG&E may, but will not be
obligated to, immediately pay the amounts set forth on the
invoice or statement. (Pacific Gas Bankruptcy News, Issue No.
13; Bankruptcy Creditors' Service, Inc., 609/392-0900)
PAC-WEST TELECOMM: S&P Junks Senior Unsecured Debt Ratings
----------------------------------------------------------
Standard & Poor's lowered its ratings on Pac-West Telecomm Inc.
The ratings remain on CreditWatch with negative implicationsL:
Pac-West Telecomm Inc. TO FROM
Corporate credit rating B- B
Senior secured bank loan B- B+
Senior unsecured debt CCC B
Standard & Poor's will closely monitor Pac-West's financial and
operating metrics. Any deterioration in these metrics could
result in a further downgrade.
Pac-West is a facilities-based competitive local exchange
carrier (CLEC) that operates in seven states in the West. The
company provides bundled voice, collocation, and data services
to Internet service providers (ISPs) and small and medium
enterprises (SMEs).
The downgrade is based on Standard & Poor's heightened concerns
that Pac-West's substantial dependence on revenues from ISPs and
reciprocal compensation has significantly raised execution risks
for the company. Sales generated from these two sources, which
represent more than 65% of Pac-West's revenues, are unstable
given deterioration in the credit quality of many ISPs and that
future reciprocal compensation will be impacted by both ISP
consolidation and a 50% decline in reciprocal compensation rates
over the next two years.
Pac-West may already be experiencing the impact of these
developments through weakness in recent financial performance.
Gross margin declined to 63% in the second quarter of 2001 from
71% in the fourth quarter of 2000, reflecting lower reciprocal
compensation and access rates. Worsening revenue quality has
caused bad debt expense to reach nearly 8% of sales, up from
about 6% in fourth quarter of 2000, and EBITDA margin declined
to 16% from 29% over the same period. Reflecting turmoil among
ISPs, minutes of use actually declined by about 4.5% during
second quarter of 2001 from the previous quarter.
Actual cash and available bank credit of about $120 million at
the end of the second quarter of 2001 provides Pac-West with
limited financial flexibility in the near term. Although it is
scaling back capital expenditures to conserve capital, the
degree to which this can be done may be limited given Pac-West's
plan to penetrate the SME segment more aggressively.
Given weak capital market sentiment towards CLECs and increased
execution risks, the company's liquidity could become an
increasing concern in 2002.
The rating on the unsecured notes is two notches below the
corporate credit rating because the concentration of bank debt
and capital lease obligations relative to Standard & Poor's
assessed realizable value of assets exceeds 30%.
The bank loan rating, formerly one notch higher than the
corporate credit rating, is now the same as the corporate credit
rating because of concerns over recovery from CLEC assets in a
theoretical distress scenario.
PAPER WAREHOUSE: Falls Below Nasdaq Public Float Value Minimum
--------------------------------------------------------------
Paper Warehouse, Inc., (Nasdaq: PWHS) reported that it received
notification from The Nasdaq Stock Market that it is not in
compliance with the Nasdaq SmallCap Market's maintenance
standard. This standard requires that the company maintain a
minimum market value of public float. The company has
until November 27, 2001 to comply with this maintenance
requirement.
In order to comply, Paper Warehouse's common stock must trade
above $1.49 for at least 10 consecutive trading days prior to
November 27, 2001. If Paper Warehouse does not trade at this
level for the required time period, Nasdaq could delist Paper
Warehouse's common stock as early as the opening of business on
November 28, 2001.
If Paper Warehouse does not satisfy the maintenance requirement,
the company may decide to apply for quotation of its common
stock on the Nasdaq Bulletin Board, or any other organized
market on which its shares may be eligible for trading, or it
may decide to appeal the decision by Nasdaq to delist its common
stock.
Paper Warehouse specializes in party supplies and paper goods
and operates under the names Paper Warehouse, Party Universe,
and http://www.partysmart.com can be accessed at
http://www.partysmart.com
Paper Warehouse stores offer an extensive assortment of special
occasion, seasonal and everyday party and entertainment
supplies, including paper supplies, gift wrap, greeting cards
and catering supplies at everyday low prices.
As of August 3, 2001, the company had 152 retail locations (99
company-owned stores and 53 franchise stores) conveniently
located in major retail trade areas to provide customers with
easy access to its stores. Paper Warehouse's headquarters are in
Minneapolis.
PILLOWTEX CORP: Will Pay $500,000 Prepetition Trust Fund Taxes
--------------------------------------------------------------
Judge Robinson gave Pillowtex Corporation authority to pay Trust
Fund Taxes collected prior to the Petition Date, but not yet
remitted by the Debtors to the applicable Taxing Authorities.
Eric D. Schwartz, Esq., at Morris, Nichols, Arsht & Tunnell, in
Wilmington, Delaware, relates that the Debtors collect certain
Trust Fund Taxes from their employees or customers, as
applicable, and hold them for a period of time before remitting
them to the Taxing Authorities. Mr. Schwartz explains that the
Pre-petition Trust Fund Taxes are held in trust for the benefit
of those third parties to whom payment is owed or on behalf of
whom such payment is being made.
As such, Mr. Schwartz argues, the Pre-petition Trust Fund Taxes
are not property of the Debtors' estates within the meaning of
section 541 of the Bankruptcy Code, and paying them will not
adversely affect the Debtors' estates and creditors. In
addition, Mr. Schwartz says that if any Pre-petition Trust Fund
Taxes remain unpaid, the Debtors' officers and directors may be
subject to lawsuits or even criminal prosecution, and Taxing
Authorities may cause the Debtors to be audited. These would
divert attention and resources from the reorganization process.
The Court also authorized and directed all applicable banks and
other financial institutions to receive, process, honor and pay
any and all checks drawn on the Debtors' accounts to pay the
Pre-petition Trust Fund Taxes, whether the checks were presented
prior to or after the Petition Date, provided that sufficient
funds are available in the applicable accounts to make the
payments. (Pillowtex Bankruptcy News, Issue No. 12; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
PSINET INC: Recovers $5.5M from $10M TNS Holdings Escrow Fund
-------------------------------------------------------------
In connection with PSINet, Inc. prepetition sale of PSINet
Transaction Solutions, Inc. to TNS Holdings, Inc. for
approximately $285 million, the Debtors seek the Court's
approval of a Settlement Agreement with TNS that would result in
the release of $4.5 million to the TNS from a $10 million escrow
amount and the release of the other $5.5 million to the Debtors
and will resolve all claims arising from a reduction in the
purchase price and indemnification amounts paid in relation to
the transaction.
Pursuant to the Purchase Agreement, the Purchase Price was
subject to adjustment after the closing based on a final
determination of the amount of the Company's Cash and Net
Working Capital on the close of business the day before the
closing, as compared to the amounts on such date that were
estimated by the parties at the time of closing.
Prior to entering into the Settlement Agreement, the Purchaser
asserted claims against the Escrow Amount in a total amount of
approximately $6.3 million, including:
(1) a claim of approximately $5.6 million relating to a
reduction in the Purchase Price based on the Purchaser's
determination of the Closing Balance Sheet, which PSINet
disputed.
(2) a claim for indemnification in the amount of approximately
$0.6 million relating to amounts paid by the Purchaser in
settlement of a claim asserted by a former employee of the
Company arising out of the employee's termination (the
"Peters Claim");
(3) a claim in the amount of approximately $0.1 million for
indemnification for asserted breaches of representations
and covenants in the Purchase Agreement resulting from the
payment out of the Company's funds of retention bonuses to
various employees of the Company between signing and
closing of the Purchase Agreement (the "Bonus Claim").
Following a review with the parties' respective professional
advisors, PSINet and the Purchaser ultimately reached agreement
on a final adjustment to the Purchase Price of approximately
$3.8 million.
Pursuant to the cost-sharing provision, PSINet would indemnify
the Purchaser for the first $100,000 and 70% of any additional
amounts paid in settlement of such claim, subject to a cap of
$0.6 million. Following a review of the basis underlying this
claim, including additional documentation submitted by the
Purchaser evidencing the Purchaser's payment in excess of $1.0
million in settlement of such claim, the parties agreed to
resolve the Peters claim in the amount of $0.6 million.
Following a review of the basis underlying this claim, including
verification of the source of funds used to pay the retention
bonuses and the disclosures and covenants relating to the
payment of employee compensation between signing and closing,
the parties agreed to resolve the Bonus Claim for $0.1 million.
After taking into account the complexity and likely outcome of
litigation based on its investigation of the factual and legal
basis underlying the Purchaser's claims and PSINet's defenses
thereto, and in order to avoid the uncertainties and expense
inherent in arbitration or other litigation and to speed the
release of funds from the Escrow Amount, PSINet agreed to settle
all of the Purchaser's claims against the Escrow Amount for a
total distribution to the Purchaser from the Escrow Amount of
$4.5 million. The remaining $5.5 million of the Escrow Amount
would be released at the same time to PSINet for the benefit of
its estate.
The Settlement Agreement would also provide for mutual releases
between PSINet and the Purchaser with respect to the
distribution of the Escrow Amount and any adjustments to the
Purchase Price. In addition, the Purchaser would release PSINet
with respect to the Peters Claim and the Bonus Claim.
The Settlement Agreement would not release other potential
claims or defenses any of the parties might have arising out of
the Purchase Agreement. The Purchaser has alleged breaches of
certain representations relating to the alleged exclusion from
the Financial Statements of certain obligations of the Company
under certain equipment leases (the "Equipment Lease Claims"),
which the Debtors dispute.
The parties acknowledge in the Settlement Agreement that the
Equipment Lease Claims do not exceed the Threshold Amount but
that nothing therein restricts the Purchaser from seeking
indemnification for the Equipment Lease Claims or other
indemnification claims (except for the Peters Claim and the
Bonus Claim) or from aggregating such claims for purposes of the
Threshold Amount.
In addition, the Debtors do not release or waive any other
potential claims they might have against the Purchaser or the
Company, including any potential claims relating to the payment
by the Debtors of telecommunication services used by the
Purchaser and/or the Company.
The Debtors do not seek by this Motion to assume the Purchase
Agreement or the Escrow Agreement and reserve all rights under
Section 365 of the Bankruptcy Code and applicable law to assume
or reject either Agreement.
The Debtors believe that the Settlement Agreement represents the
most efficient resolution of these claims and the quickest
recovery of funds from the Escrow Amount for the benefit of the
Debtors' estates. It will also allow the Debtors to obtain the
release of $5.5 million from the Escrow Amount without further
delay. The Debtors therefore believe the Settlement Agreement is
fair and equitable and in the best interests of their creditors
and estates.
In addition, the Debtors have reviewed the principal terms of
the Settlement Agreement with the Official Committee of
Unsecured Creditors and believe that the Committee does not
oppose the relief sought in this Motion. (PSINet Bankruptcy
News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
SCHWINN/GT: Direct Focus Submits Bid to Acquire Fitness Division
----------------------------------------------------------------
Direct Focus, Inc. (NASDAQ:DFXI), a marketing company for
fitness and healthy lifestyle products with a direct business
model, has submitted a bid for an upcoming bankruptcy auction to
acquire substantially all of the assets of Schwinn/GT's fitness
equipment division.
The Direct Focus bid is linked to a bid submitted by Pacific
Cycle LLC for the purchase of substantially all of the assets of
Schwinn/GT's bicycle division.
In August of 2001, the U.S. Bankruptcy Court for the District of
Colorado approved a bid and auction procedure for all of the
assets of Schwinn/GT's bicycle division. Although the bankruptcy
court's bid and auction procedure directly addresses sale of the
bicycle division, it also allows bids for the entire Schwinn/GT
business, including both the bicycle and fitness assets.
Therefore, Direct Focus has submitted this joint bid with
Pacific Cycle for consideration by Schwinn/GT at the upcoming
auction to be held on September 10, 2001, in Denver, Colorado,
under the supervision of Bankruptcy Judge Sidney B. Brooks.
The purchase price for such an acquisition has not yet been
determined and will be subject to court approval.
"We have a strong interest in Schwinn's fitness division
assets," said Brian Cook, CEO of Direct Focus. "We have linked
our bid to that of Pacific Cycle, which is interested in
acquiring the bicycle division assets. Acceptance of our joint
bid will provide Direct Focus and Pacific the best opportunity
to protect the integrity of the Schwinn brand, and will provide
Schwinn with the option of selling substantially all of its
assets in one transaction."
"Like our purchase of the assets of Nautilus International, Inc.
in January 1999 and the subsequent turnaround and growth of
those operations, expansion through acquisitions is an important
part of our strategy. We feel that the bankruptcy auction
provides us with a unique opportunity to expand our business.
Our management team is very familiar with Schwinn, and we
believe its strong brand name and quality fitness products can
be an excellent fit with our growing portfolio of fitness and
healthy lifestyle products."
Direct Focus, Inc. is a marketing company for fitness and
healthy lifestyle products with a direct business model. The
Company currently markets its Bowflex line of home fitness
equipment and Nautilus Sleep Systems directly to consumers,
using an effective combination of television advertising, 800-
call centers and Web sites.
The Company also sells its Nautilus commercial fitness equipment
directly to health clubs and other institutions, and its
Nautilus consumer fitness products through retail athletic
stores. The Company is headquartered in Vancouver, Washington.
Direct Focus is located on the Web at
http://www.directfocusinc.com
SCOTTSDALE TECHNOLOGIES: Completes Debt Restructuring
-----------------------------------------------------
Scottsdale Technologies Inc. (OTC:SDNI) announced that it has
completed a restructuring plan to settle prior debt obligations
and to fund the marketing of the company's proprietary
technology.
The company has secured this "new" investment capital from
accredited investors and anticipates royalty revenues that will
be derived from the licensing of the company's proprietary
technology.
"Scottsdale Technologies Inc. is now structured to begin to
build substantial equity in the company through the recent
addition of new investment capital and also through the revenues
derived from the licensing of its proprietary Light-Link(TM)
technology," said Stuart Rubin, president.
"The company will utilize this restructuring as a springboard to
obtain financial credibility. The near-term objective is for the
company to become a fully reporting SEC company and meet the
NASDAQ small-cap company requirements. This financial
progression will also give the company visibility and enable it
to grow through strategic acquisitions of other proven
technologies."
Scottsdale Technologies is the developer and patent holder of
Digital-IR(TM) and Light-Link(TM) technology used in remote
control systems. This technology allows remote controls to be
"optically" programmable from the Internet to work with all
brands of products. Its Light-Link data transfer software and
extensive home entertainment device code database provide the
framework for the company's licensing program.
STONEBRIDGE TECH: Files Chapter 11 Petition in N.D. Texas
---------------------------------------------------------
Stonebridge Technologies, a provider of technology consulting
and enterprise integration services, announced that the
company's plan to sell substantially all of its assets. A buyout
group led by the company's current CEO, James Ivy, is preparing
an offer.
Terms of the proposed sale were not disclosed.
To facilitate the asset sale and realize the highest value for
its creditors, Stonebridge has voluntarily filed a petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. The
petition was filed Thursday in the U.S. Bankruptcy Court for the
Northern District of Texas in Dallas.
"The proposed asset sale and subsequent recapitalization provide
an excellent opportunity for realizing the underlying value of
Stonebridge Technologies' business solutions and strong customer
base," said James Ivy, president and chief executive officer of
Stonebridge, and leader of the buyout group. "Effecting the sale
through a Chapter 11 filing is necessary to relieve our balance
sheet of the high debt burden we have been carrying over the
past few years."
Ivy said ensuring that customer and vendor relationships will
remain intact and that Stonebridge associates will continue to
be paid and receive benefits during the Chapter 11 process is
critical.
"We are arranging sufficient post-petition financing to
facilitate the process," Ivy said. "With this financing, our key
offices will remain open as usual and our services will proceed
in the ordinary course of business. Our associates will continue
to receive salary and benefits using our current policies and
procedures. Our customers should see no disruption of our
services. Suppliers and partners will be paid for all post-
petition goods and services, and should take great comfort in
the financial prospects of Stonebridge Technologies."
Stonebridge Technologies is a technology consulting company
serving businesses in the South Central and Southeast United
States. Stonebridge collaborates with clients to architect,
develop and deploy enterprise integration solutions that
leverage rapid advances in Web-enabled technologies and devices
to transform and extend the life of existing business-critical
systems.
Built on the latest innovations of leading technology partners
such as Sun Microsystems and Oracle, Stonebridge's core skills
in enterprise relationship management, business intelligence,
and enterprise resource planning help clients increase revenues,
gain operational efficiencies and create sustained competitive
advantage. The company's corporate headquarters is located in
Dallas. More information about Stonebridge is available at
http://www.sbti.com
STONEBRIDGE TECHNOLOGIES: Chapter 11 Case Summary
-------------------------------------------------
Debtor: Stonebridge Technologies, Inc.
15305 Dallas Pkwy
Suite 1100, Tower III
Addison, TX 75001
Chapter 11 Petition Date: August 6, 2001
Court: Northern District of Texas (Dallas)
Bankruptcy Case No.: 01-37474
Judge: Robert C. McGuire
Debtor's Counsel: Mark X. Mullin, Esq.
Haynes and Boone
901 Main St., Ste. 3100
Dallas, TX 75202-3789
214-651-5000
TAYLOR CAPITAL: Litigation Settlement Spurs Fitch Rating Actions
----------------------------------------------------------------
Fitch, the international rating agency, has placed ratings of
Taylor Capital Group Inc., and its subsidiaries, on Rating Watch
Negative. The action is in response to Taylor's announcement of
an agreement to settle outstanding litigation. The litigation
arose from a 1997 restructuring which separated ownership of
Taylor's primary operating subsidiary, Cole Taylor Bank, from an
affiliated subprime automobile lender, Reliance Acceptance Group
(Reliance, now defunct).
Ratings Affirmed, placed on Rating Watch Negative:
Taylor Capital Group
* Long-term senior 'BBB-'
* Preferred stock 'BB+'
* Individual 'B/C'
* Rating Watch Negative
Cole Taylor Bank
* Long-term deposits 'BBB'
* Long-term senior 'BBB'
* Short-term 'F3'
* Short-term deposits 'F2'
* Individual 'B/C'
* Rating Watch Negative
Reliance declared bankruptcy in early 1998, and has since ceased
operations. Reliance's investors, creditors, and bankruptcy
trustee sued Taylor, its owners, and other parties involved in
the restructuring, alleging that the defendants violated
securities laws and breached their fiduciary duty to
shareholders.
The litigation has been ongoing since 1998, and has resulted in
considerable expense to Taylor.
Taylor and the plaintiffs have agreed to settle the litigation
for a combination of newly issued common stock, newly issued
trust preferred securities, and cash. Taylor will issue to the
litigants 15% of outstanding common shares.
$30 million is to be paid through a new issue of trust preferred
securities, and $15 million is to be paid in cash. Taylor plans
to seek a public listing for both the stock and the trust
preferred, although initial issuance may either be through a
private placement or a public offering.
The agreement is subject to a number of contingencies and
requires court approval. Management expects the settlement to
become final during the first half of 2002.
The proposed settlement will substantially dilute Taylor's
common equity capital base. Fitch's calculations show that
tangible common equity is likely to decline from 4.08% of
tangible assets at Dec. 31, 2000 to roughly 2.5%. Double
leverage (based on tangible common equity only) would increase
from 159% to approximately 220%. These ratios would result in an
excessive degree of leverage at current rating levels.
If the litigation is settled as proposed, Fitch anticipates that
Taylor's implied senior debt rating would decline from 'BBB-' to
'BB', its preferred stock rating would decline from 'BB+' to
'BB-', and its individual rating would decline from 'B/C' to
'C'. New trust preferred securities would be rated 'BB-'. The
Support Rating for Taylor will remain unchanged at '5'.
Fitch notes that the capital levels of Cole Taylor Bank would
not be affected by the settlement as proposed. Cole Taylor Bank
remains well capitalized and Fitch believes it should be able to
service its deposit obligations at the investment grade level.
However, in Fitch's opinion, Cole Taylor Bank's creditworthiness
could be negatively impacted by the potential need to support a
highly leveraged parent.
Therefore, Fitch has also placed securities issued by Cole
Taylor Bank on Rating Watch Negative. When the settlement is
consummated, Fitch anticipates that Cole Taylor Bank's long-term
deposit ratings would be one rung lower, at 'BBB-', and short
term-deposits would be adjusted downward from 'F2' to 'F3'. Cole
Taylor's long-term senior ratings would change from 'BBB-' to
'BB+', and short-term non-deposits would change from 'F3' to
'B', The individual rating would fall from 'B/C' to 'C', and the
support rating will remain at '5'.
Longer-term, there are potential positives to the settlement.
Management would be freed from the expense and distraction of
the litigation and would be able to focus on improving Taylor's
strategic focus and operational efficiency. Also, public
ownership may allow management to offer more attractive
incentives to employees.
USG CORP: Creditors' Committee Taps Stroock as Lead Counsel
-----------------------------------------------------------
The Official Committee of Unsecured Creditors of USG Corporation
ask the Court for permission to retain Stroock & Stroock & Lavan
LLP as counsel to the Committee.
Mr. David Barse, President and Chairman of Third Avenue Trust,
on behalf of Third Avenue Value Fund and Chair of the Committee,
explains it will be necessary to employ counsel pursuant to 11
U.S.C. Secs. 328 and 1103(a) to:
- advise the Committee with respect to its right, duties and
powers in these chapter 11 cases;
- assist and advise the Committee in its consultations with
the Debtors relative to the administration of these cases;
- assist and advise the Committee in its consultations with
the Asbestos Claim Committee;
- analyze and advise the Committee as to intercompany
claims, and claims or causes of action by or against one
or more of the Debtors, their non-debtor domestic and
foreign subsidiaries and affiliates, and other third
parties;
- assist the Committee in analyzing the claims of the
Debtors' creditors, and in negotiating with the Debtors
creditors and equity security holders;
- assist with the Committee's investigation of the acts,
conduct, assets, liabilities, and financial condition and
prospects of the Debtors and of the operation of the
Debtors' businesses, including negotiations with the
Debtors, the Asbestos Claims Committees, and all third
parties concerning the terms of a plan of reorganization
for the Debtors and matters related thereto;
- assist and advise the Committee as to its communications
to the general creditor body regarding significant matters
in these cases;
- represent the Committee at all hearings and other
proceedings;
- review and analyze all applications, orders, statements of
operations and schedules files with the Court and advise
the Committee as to their propriety;
- assist the Committee in preparing pleadings and
applications as may be necessary in furtherance of the
Committee's interests and objectives; and
- perform such other legal services as may be required and
are deemed to be in the interests of the Committee in
accordance with the Committee's powers and duties as set
forth in the Bankruptcy Code.
Mr. Barse goes on to say the Committee believes that Stroock
possesses extensive knowledge and expertise in the areas of law
relevant to the Debtors' chapter 11 cases, and is therefore well
qualified to represent the Committee in these proceedings.
He states the Committee sought out representation with
considerable experience in representing unsecured creditors' and
noteholders' committees in Chapter 11 reorganization cases and
other debt restructuring scenarios and Stroock has that
experience. Strook has represented cases entailing significant
asbestos-related liabilities such as W.R. Grace & Co. Inc. and
Armstrong World Industries, Inc.
Mr. Barse continues that Stroock's representation of official
creditors' and noteholders' committees is nationally recognized
including committees in such cases as Acme Metals Incorporated,
Freuhauf Trailer Corporation, Northwestern Steel & Wire Company,
and Orion Pictures Corp., to name a few. Stroock has also
represented debtors in Chapter 11 reorganizations including many
large, complex cases such as Anchor Glass Container Corporation,
JWP, Inc. and Planet Hollywood International, Inc.
Mr. Barse states to the best of the Committee's information and
belief, Stroock does not represent and does not hold any
interest adverse to the Debtors' estates or their creditors in
the matters for which Stroock is to be hired. However, as
Stroock is a large firm with a national practice, it may
represent or may have represented certain parties-in-interest
who are not known at this time in matters unrelated to these
cases.
Stroock will disclose any sort of representations, if it becomes
aware of them. It is believed that Stroock is a "disinterested
person" as defined by section 101(14) of the Bankruptcy Code.
The Committee is certain Stroock is an appropriate choice for
representation in these Chapter 11 proceedings.
Stroock will bill the Debtors' estates for services rendered to
the Committee based on its customary hourly rates:
- Partners: $425 to $675 per hour
- Associates/Special Counsel: $160 to $450 per hour
- Legal Assistants/Aides: $ 75 to $200 per hour
Subject to the approval of the Court, Stroock will also seek
reimbursement for all out-of-pocket expenses incurred in
rendering services to the Committee in accordance with these
authorities. (USG Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
VIDEO UPDATE: Files Plan & Disclosure Statement in Delaware
-----------------------------------------------------------
Video Update, Inc., filed its Plan of Reorganization and
Disclosure Statement with the United States Bankruptcy Court for
the District of Delaware. Full-text copies of the
Reorganization Plan and Disclosure Statement are available at
http://researcharchives.com/bin/search?query=Tinseltown
The cornerstone of the Plan is a recapitalization of the Debtors
with financial support from Movie Gallery, Inc., an Alabama-
based chain of more than 1,050 retail video stores.
Specifically, under the Plan, the Debtors' financial affairs
will be completely restructured under circumstances where Movie
Gallery will:
(a) exchange its $5 million superpriority administrative
claim for newly issued common stock in the Reorganized
Video Update.
(b) contribute cash to enable the Reorganized Debtor to
satisfy certain Priority, Administrative and Tax-related
Claims,
(c) agree to provide the Reorganized Debtor future working
capital financing, and
(d) assign its unsecured deficiency claim totaling
approximately $100 million to a Court appointed
Disbursing Agent for the benefit of certain other
unsecured creditors.
All existing shares of stock, including any warrants and
options, in VUPDA will be cancelled under the Plan.
Movie Gallery is one of the most profitable competitors in the
retail video industry and is able to consummate the proposed
Recapitalization of the Debtors by drawing down on readily
available credit lines, without which, the Debtors would likely
be forced to cease operations and liquidate their assets under
Chapter 7 of the Bankruptcy Code.
Prior to filing for Chapter 11 bankruptcy protection from its
creditors on September 18, 2000, Video Update was the fourth
largest specialty retail video chain in North America, with
nearly 600 stores in the US and Canada.
Since the bankruptcy filing, Video Update has closed more than
200 underperforming stores in the US. In May, 2001, Movie
Gallery, Inc. of Dothan, Alabama purchased 92% of Video Update's
senior secured debt and, with approval from the Bankruptcy
Court, extended a $5.0 million debtor-in-possession or DIP loan
facility.
WARNACO GROUP: Retains Dewey Ballantine as Audit Counsel
--------------------------------------------------------
The Warnaco Group, Inc. and its debtor-affiliates seek the
Court's authority to employ and retain Dewey Ballantine as
special counsel, effective as of July 23, 2001.
Warnaco Vice-President Stanley P. Silverstein tells Judge
Bohanon they intend to utilize the services of Dewey Ballantine
as special counsel for the purposes of:
(i) assisting the Audit Committee in evaluating an expected
charge to earnings and restatement of Warnaco's financial
results for the last three fiscal years preliminarily
estimated to aggregate $43,000,000 to correct certain
errors discovered in Warnaco's recording of its
intercompany pricing arrangements and accounts payable
and account liabilities; and
(ii) providing legal advice to the Audit Committee in support
of the Audit Committee's ongoing oversight responsibility
for the integrity of the Debtors' financial statements.
Prior to the Petition Date, Mr. Silverstein relates that the
Audit Committee of the Boards of Directors of Warnaco and
Warnaco Inc. consulted with Dewey Ballantine regarding certain
issues relating to the Debtors' financial statements including
certain restatements.
Also, Mr. Silverstein notes that since December last year Dewey
Ballantine has been retained by Joseph A. Califano, Jr. and
Stuart D. Buchalter, two of the three current members of the
Audit Committee, to represent them in a derivative action
brought against them in matters unrelated to such financial
statements. This action has since been dismissed, Mr.
Silverstein adds.
As a result, Mr. Silverstein says, Dewey Ballantine has:
(a) acquired knowledge of the Debtors and their businesses, and
(b) developed familiarity with the Debtors' operations and
financial statements.
Thus, the Debtors believe Dewey Ballantine is ideally situated
to assist them and their general bankruptcy counsel on these
specific matters. "We believe the employment of Dewey
Ballantine will enhance, and will not be duplicative of, the
employment General Bankruptcy Counsel and other professionals
previously retained in these chapter 11 cases," Mr. Silverstein
asserts.
The Debtors will look to Dewey Ballantine in:
(a) advising the Audit Committee in connection with a review
and analysis of, and making recommendations with respect
to, the financial reporting of the Debtors;
(b) attending meetings with third parties, conducting
interviews and document review with respect to the above
matters;
(c) appearing before the Bankruptcy Court, any district or
appellate courts and the U.S. Trustee with respect to the
matters referred to above;
(d) performing the full range of services normally associated
with the matters referred to above; and
(e) advising the Audit Committee in respect of any matter
under consideration by such Committee.
Stuart Hirshfield, member of the firm of Dewey Ballantine,
assures the Court that they do not hold any interest adverse to
the Debtors, the Debtors' estates, creditors, and other parties-
in-interest.
Mr. Hirschfield admits that Dewey Ballantine and its members,
counsel and associates have in the past represented, currently
represent, and may in the future represent entities that are
creditors of the Debtors or other parties-in-interest in the
Debtors' chapter 11 cases, as a part of their practice.
However, Mr. Hirschfield swears these representations are only
in matters unrelated to these cases.
Mr. Hirschfield informs the Court that Dewey Ballantine will
seek compensation based on its normal hourly billing rates in
effect for the period in which services are performed. The firm
will also seek reimbursement of necessary and reasonable out-of-
pocket expenses in accordance with the applicable provisions of
the Bankrutpcy Code, Mr. Hirschfield adds.
Dewey Ballantine's regular hourly rates range from:
$475 to $650 - members
$225 to $475 - counsel and associates
$130 to $195 - paraprofessionals
According to Mr. Hirschfield, these rates are set at a level
designed to fairly compensate Dewey Ballantine for the work of
its attorneys and paraprofessionals, and to cover fixed and
routine overhead expenses. Mr. Hirschfield emphasizes that such
hourly rates do not include charges for non-legal personnel, who
also record time spent working on matters for particular
clients, including word processing, clerical, proofreading and
secretarial staff.
Mr. Hirschfield also relates that it is Dewey Ballantine's
policy to charge its clients for all other services provided and
for disbursements and expenses incurred in connection with these
cases. These disbursements and expenses include: charges for
telephone and facsimile usage, photocopying, travel, business
meals, computerized research, messengers, couriers, postage,
witness fees and fees related to trials and hearings, among
other things.
Within the one year period prior to Petition Date, Mr.
Hirschfield says, the Debtors paid Dewey Ballantine compensation
in the amount of $84,544.30 on account of services rendered to
the Audit Committee and on account of services rendered to Mr.
Califano and Mr. Buchalter in connection with the derivative
actions. As a result, Mr. Hirschfield notes, Dewey Ballantine
has a pre-petition claim against the Debtors in the amount of
$12,384.92. (Warnaco Bankruptcy News, Issue No. 8; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WASHINGTON GROUP: Court Okays Supplemental Disclosure Statement
---------------------------------------------------------------
Washington Group International, Inc., sought and obtained
approval from the United States Bankruptcy Court for the
District of Nevada of a Modification of their Second Amended
Joint Plan of Reorganization and a Motion seeking a finding that
certain supplemental disclosure concerning the Modification is
adequate for distribution to certain creditors. Full-text
copies of Second Amended Joint Plan and court-approved
Supplemental Disclosure are available at
http://researcharchives.com/bin/search?query=washington+group
The Court has entered an order approving the Supplement and
extending the deadline for certain creditors to vote on the Plan
to September 10, 2001.
The Supplement contains, among other things, revised year-by-
year projections of operating profit, free cash flow and
specified other items for the Company and its subsidiaries, on a
consolidated basis, through November 30, 2004. These
Projections supercede in their entirety the projections included
in the July 24, 2001 Disclosure Statement.
WGI's Reorganization Plan provides for restructuring of the
company's balance sheet by converting the obligations of the
Pre-petition Secured Lenders to equity, and by discharging the
unsecured Claims of holders of the Old Notes and other general
unsecured creditors.
In addition, the Plan provides that all Employee Claims will be
Reinstated and for the continued payment in the ordinary course
of business of Claims authorized to be paid during the Chapter
11 Cases pursuant to orders entered by the Bankruptcy Court,
such as the Claims of Critical Vendors.
Under the Plan, WGI will issue New Common Shares for
distribution to the Pre-petition Secured Lenders, and the Old
Notes and Old Common Stock will be cancelled.
The distribution under the Plan of 100% of the New Common Shares
of Reorganized WGI to the Pre-petition Secured Lenders is
premised upon the valuation of the Company prepared by the
Debtors' financial advisors, who established the enterprise
value of the Company as $555 million.
WEBVAN GROUP: Asks To Extend Lease Decision Period To Dec. 10
-------------------------------------------------------------
Webvan Group, Inc., asks the U.S. Bankruptcy Court for the
District of Delaware for an extension of its deadline to assume
or reject leases of non-residential real property through and
including December 10, 2001.
Webvan assures the Court that none of the landlords of the
Unexpired Leases will be harmed by the requested extension
because the Debtors are paying their post-petition rent.
WHEELING-PITTSBURGH: Jarvis Seeks Stay Relief to Enforce Lien
-------------------------------------------------------------
In November, 1999, Jarvis, Downing & Emch, Inc., and Wheeling-
Pittsburgh Steel Corporation entered into a "General Agreement
Covering Work Performed on behalf of Wheeling-Pittsburgh Steel
Corporation for construction of a building, housing and the
design and construction of embedded structures and concrete
foundations necessary for the installation of a second paint
line at WPSC's Beech Bottom Plant located in Brooke County,
West Virginia.
Under the terms of the contract, Jarvis furnished materials and
provided the labor necessary for the construction and design for
this project, and has not been paid some $1,134,974.42. Jarvis
recorded a Notice of Mechanic's Lien in November, 2000. By
state law, this filing created and perfected a lien in favor of
Jarvis against WPSC's interest in the real estate upon which the
improvements were constructed, with perfection relating back to
the date on which Jarvis began construction. However, state law
also requires that the mechanic's lien will be discharged unless
suit to enforce it is commenced within a specific time.
Jarvis, appearing through Michael L. Bray and Donald J. Epperly
of the law firm of Steptoe & Associates in Clarksburg, West
Virginia, now asks Judge Bodoh to modify the automatic stay of
creditor action only to the extent necessary to permit the state
court to determine the validity of Jarvis's mechanic's lien
claim, as well as the mechanic's lien claims of any other entity
relating to paint line construction and installation at WPSC's
Beech Bottom plant.
This necessary "preserving action" is purely a state law cause
of action and can be commenced by Jarvis and timely adjudicated
in the Circuit Court of Brooke County, West Virginia. Jarvis
argues that the interests of justice, comity with state courts,
and judicial economy would also be furthered by allowing Jarvis
to prosecute its preserving action for the limited purpose of
having the validity and the amount of its mechanic's lien claim
determined under state law in the forum in which any attorney
conducting a title search relating to WPSC's Beech Bottom Plant
would go to determine if the action had been filed to preserve
the lien.
Messrs. Bray and Epperly assure Judge Bodoh that Jarvis in no
way seeks to enforce the sale of WPSC's real estate, nor in any
manner attempt to enforce its claim against WPSC outside of the
Bankruptcy Court, but merely seeks to maintain the perfection of
its mechanic's lien interest in the Beech Bottom plant as
contemplated by statute.
The Debtor says Jarvis Agreed to No Lien Rights
WPSC, appearing through Scott N. Opincar and James M. Lawniczak
of the Cleveland firm of Calfee Halter & Griswold LLP, joined by
lead counsels Michael E. Wiles and Richard F. Hahn of the New
York firm of Debevoise & Plimpton, tell Judge Bodoh that WPSC
opposes the relief requested by Jarvis.
The Debtors say that in April, 2000, Jarvis and WPSC entered
into a Restated Unit Agreement Paint Line Installation which
supplements the General Agreement with respect to certain terms
and conditions specific to the paint line project, including
labor, materials, equipment and tools to be employed.
Section 3.1 of the General Agreement provides that Jarvis
"irrevocably waives any rights it may now have or which it may
acquire to file liens or chares against WPSC or its property
with respect to [Jarvis]'s performance of Work governed by" the
General Agreement. Section 3.2 of that Agreement provides that
Jarvis will pay, satisfy and discharge all mechanic's,
materialman's and other liens and claims asserted by Jarvis's
subcontractors, suppliers and other third parties in connection
with work performed by Jarvis for WPSC and that Jarvis will
indemnify, hold harmless and defend WPSC from and against such
liens and other claims.
Section 3.3 of the General Agreement provides that it is the
agreed intention of the parties that all work performed by
Jarvis and other third parties would be performed on a "no lien"
or waiver of mechanic's lien basis. Under Section 3.3, Jarvis
undertook to obtain binding and enforceable waivers regarding
the rights of each of its subcontractors and/or materialmen to
file mechanic's liens in connection with any of the work
contemplated by the General Agreement.
"Cause" for stay modification generally requires that the moving
party show whether (i) prejudice to either the bankruptcy estate
or the debtor will result from modification of the stay; (ii)
the hardship to the plaintiff by maintenance of the stay
outweighs against the hardship to the debtor from its
modification or termination, and (iii) the plaintiff has a
probability of prevailing on the merits of the case.
Jarvis Suit "Futile and Unnecessary"
WPSC tells Judge Bodoh that Jarvis has not made, and cannot
make, the showing of cause required by the Bankruptcy Code
because Jarvis seeks to burden WPSC and its estate with the
expense and distraction of defending a futile and unnecessary
legal action. First and foremost, Jarvis has already waived the
right to pursue the very relief it seeks. In view of this
waiver, Jarvis can neither demonstrate any prospect for
success on the merits of the action it seeks to pursue nor carry
its burden of showing that the balance of the equities in this
case tips in favor of granting relief from the stay.
Moreover, even if Jarvis had not waived its right to a
mechanic's liens, the relief that Jarvis seeks is unnecessary.
The Bankruptcy Code provides that if applicable non-bankruptcy
law fixes a period for commencing or continuing a civil action
in a court other than a bankruptcy court on a claim against the
debtor, and such period has not expired before the debtor's
petition date, then the period does not expire until the later
of (i) the end of such period, or (ii) 30 days after notice of
the termination or expiration of the stay, as the case may be,
with respect to such claim.
Several courts have held that this Code section tolls statutes
of limitations for commencing actions to enforce mechanic's
liens, citing In re Concrete Structures, 2001 WL 336495*13 (E.D.
Va. 2001; In re national Oil Company, 112 B.R. 1019 (Bankr. D.
Colo. 1990)(quoting In re Hunters Run Ltd., 875 F.2d 1425 (9th
Cir. 1989).
Consequently, the West Virginia statute of limitations cited by
Jarvis has been tolled by WPSC's bankruptcy filing and the
relief sought by Jarvis is unnecessary. WPSC therefore asks
Judge Bodoh to deny the requested relief. (Wheeling-Pittsburgh
Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
WINSTAR COMMS: Perot Systems Seeks Relief From Automatic Stay
-------------------------------------------------------------
Since 1996, Perot Systems has provided information technology
services to Winstar Communications, Inc. under the Master
Services Agreement (MSA) reached between both parties. Perot is
a leading international provider of information technology
services headquartered in Dallas, Texas.
Thus, Perot Systems seeks approval from the Court to set-off the
remaining pre-payment for billing services of $1.2 million with
the indebtedness of Winstar to Perot Systems for other services
amounting to $1.8 million.
Stephen Logue, Account Manager for Perot Systems discloses that
the MSA states that "Winstar may from time to time require the
services of Perot" and specifics of the project are memorialized
in a document called the "Work Order." The MSA stipulated that
any work order issued under the MSA would become part of the
MSA. Since 1996, Mr. Logue adds that there were approximately 30
work orders issued under the MSA.
As of petition date, nine work orders that had unpaid balances
amounting to a total of $1.8 million are:
1. Work Order 5 - CUBES system Production Billing Services
2. Work Order 21 - Application Programming Interface (API)
Support for CUBES System for 2000
3. Work Order 22 - New City Testing for Switch Roll-outs for
2000
4. Work Order 25 - CUBES Electronic Billing Presentment (EBP)
Feed
5. Work Order 26 - New City Testing for Switch Roll-outs for
2001
6. Work Order 27 - CUBES Modifications
7. Work Order 28 - API Support for CUBES System for 2001
8. Work Order 29 - CUBES EBP Feed Processing
9. Work Order 30 - CUBES EBP Feed Enhancements
The largest of these work orders was Work Order No. 5, initiated
in December 1996. Under this agreement, Mr. Logue states that
Perot Systems agreed to provide comprehensive billing services
to Winstar.
In addition Perot Systems licenses and supports the CUBES
client/server billing information management system, which
provides online access to customer billing information to
Winstar. Perot currently produces and mails approximately
20,000 bills per month to Winstar's customers.
Among the services to be provided by Perot Systems under Work
Order No. 5 was to:
a. receive information, including all call detail records
(CDRs), from Winstar concerning its customers' use of
Winstar's network;
b. process the CRD and other information to generate
individual customer bills for Winstar customers
c. mail the bills to Winstar customers
Mr. Logue discloses that Winstar was charged per-CDR processed
on a sliding scale based on monthly volume. Rates under this
scheme start at $0.009688 for the first 4 million CDRs declining
to $0.003 for over 150 million CDRs. When specific services of
Perot System's personnel were required to provide billing system
support, they were billed at agreed hourly rates.
At the beginning of 2000, Mr. Logue states that Winstar and
Perot Systems negotiated a prepaid volume for 874 million CDRs
for $4,151,500 or a rate of $0.00475 to be consumed though
December 2001. As of the petition date, Perot Systems had
processed 574 million CDRs under the agreement. Based on that
usage, he adds that Winstar had a credit of approximately 300
million CDRs equivalent to $1.2 million.
Thomas G. Macauley at Zuckerman Spaeder LLP in Wilmington,
Delaware discloses that Winstar has asked Perot Systems to
provide the said services, and Perot Systems has continued to do
so. Mr. Macauley believes that Perot System's services are
crucial to Winstar's operations and those services account for
monthly revenues to Winstar of approximately $30 million.
Mr. Macauley contends that under the law, Perot Systems is
entitled to setoff the $1.2 million. He also adds that Perot
Systems lacks adequate protection since Winstar continues to
require services of Perot Systems. Furthermore, he contends
that Winstar is not entitled to a refund of the prepayment under
the agreement and also because the claims against the offset
exceed the prepaid amount. (Winstar Bankruptcy News, Issue No.
9; Bankruptcy Creditors' Service, Inc., 609/392-0900)
ZILOG INC: Default on Notes Compels S&P to Drop Ratings to D
------------------------------------------------------------
Standard & Poor's lowered its corporate credit and senior
secured debt ratings on Zilog Inc. to 'D', following Zilog's
failure to pay approximately $14 million in interest on the
notes, due on Sept. 4, 2001.
Zilog has been facing declining revenues and operating
profitability for several quarters; sales in the June 2001
quarter were 28% below the corresponding quarter of the prior
year.
EBITDA in the June 2001 quarter was negative $1.5 million,
indicative of near-term performance. Cash balances were $23
million in June. The company had been seeking a restructuring of
its notes, in addition to pursuing operational and financial
restructuring alternatives with its investment bankers.
BOND PRICING: For the week of September 10 - 14, 2001
-----------------------------------------------------
Following are indicated prices for selected issues:
Algoma Steel 12 3/8 '05 16 - 18(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 32 - 34
Chiquita 9 5/8 '04 70 - 71(f)
Conseco 9 '06 84 - 86
Friendly 10 1/2 '07 70 - 74
Globalstar 11 3/8 '04 3 - 4(f)
Level III 9 1/8 '04 46 - 48
Owens Corning 7 1/2 '05 32 - 34(f)
PSINet 11 '09 7 - 8(f)
Revlon 8 5/8 '08 48 - 49
Trump AC 11 1/4 '06 72 - 74
USG 9 1/4 '01 76 - 78(f)
Westpoint 7 3/4 '05 38 - 40
Xerox 5 1/4 '03 88 - 89
*********
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For copies of court documents filed in the District of Delaware,
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of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
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Chapman, Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
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