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/raid1/www/Hosts/bankrupt/TCR_Public/010920.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, September 20, 2001, Vol. 5, No. 184 Headlines 360NETWORKS: Mosser Intends to Enforce Mechanic's Liens AIR CANADA: Cuts Approximately 30% of Flights AMERICAN AIRLINES: Slashes 20,000 Jobs Due to 20% Schedule Cut AMERICAN AIRLINES: Moody's Downgrades Debt Ratings AMERICAN TRANS: Plans to Cut 1,500 Jobs & Flights by 20% AMERICA WEST: Cuts Flight Schedule By 20% & 2,000 Jobs AMES DEPARTMENT: Continuing All Workers' Compensation Programs AUDIO VISUAL: Lenders Extend DIP Facility to December 14 COHO ENERGY: Taps JP Morgan to Explore Options to Raise Capital CONTINENTAL AIRLINES: Fitch Places BB Rating on Watch Negative COVAD COMMS: Seeks Approval of Plan Solicitation Procedures DAIRY MART: Misses $4.5MM Interest Payment on Subordinated Notes DELTA AIR: Mullin Urges Congress to Aid in Industry Bailout Plan DELTA AIRLINES: Moody's Lowers Ratings After Last Week's Attacks FRUIT OF THE LOOM: UST Calls For Scrutiny Of Proposed Lazard Fee FUTURELINK: US Trustee Appoints Unsecured Creditors Committee GLOBAL TELESYSTEMS: Bank Group Extends Waiver of Defaults ICG COMMS: Court Allows Debtor to Reject 18 Telecomms Property INNOVATIVE CLINICAL: Sells Oncology to Focus On Core Operations INTEGRATED HEALTH: Westhaven Seeks $3.3M Payment on Washoe Lease INTERLIANT INC: Over 75% of Noteholders Approve Restructuring KMART CORPORATION: Sales Decline 0.9% In 3 Months Ended Aug. 1 LAIDLAW INC: Court Approves Cross-Border Protocol Implementation LEISURE TIME: Andre Hilliou Appointed as New President and CEO LERNOUT & HAUSPIE: Moves to Sell Certain Assets to Dictaphone LITTLE SWITZERLAND: Additional Capital Needed to Ensure Survival MARINER POST-ACUTE: Treatment of Claims Under MHG Amended Plan METROMEDIA FIBER: Gets Extension on $150 Million Note Facility NATIONWIDE COMPUTERS: Committee of Unsecured Creditors Appointed NORTHWEST AIRLINES: Fitch Places BB+ Debt on Watch Negative OWENS CORNING: Seeks Approval of Hartford Claims Compromise PACIFIC GAS: Will Assume Amended PPA with Oildale Energy LLC RELIANCE GROUP: Lays-Out Dynamics of RIC Tax Allocation Pact SOURCE MEDIA: Pressed to Restructure Balance Sheet By Year-End SOUTHWEST AIRLINES: Fitch Places Debt Rating on Watch Negative SUN HEALTHCARE: Buyer Emerges, Saving Neuroflex From Winding-Up TRANSFINANCIAL: Intends to Liquidate Assets for $14 Million TRI-NATIONAL: Battles With Senior Care Over Involuntary Petition TRI-NATIONAL: Senior Care Refutes Debtor's Rejoinder to Petition UNITED AIRLINES: Will Furlough Around 20,000 Employees UNITED PETROLEUM: Hires Advisor as Bank Accelerates $23MM Loan UNIQUE BROADBAND: Downsizes Transmission & Waveguide Divisions VANGUARD AIRLINES: Weighing Options to Raise Additional Capital VLASIC FOODS: Court Extends Rule 9027 Removal Period to Nov. 30 WHEELING-PITTSBURGH: Intends to Sell 2 West Virginia Properties WINSTAR COMMS: Expects eAuction of Excess Assets to Fetch $20MM WORLD AIRWAYS: Requests Nasdaq Hearing to Review Delisting * Thacher Proffitt Relocates to 11 West 42nd Street ********* 360NETWORKS: Mosser Intends to Enforce Mechanic's Liens ------------------------------------------------------- Mosser Construction, Inc., a creditor and party-in-interest, gives its notice of its intention to continue to enforce its rights as a mechanic's lien claimant in the Chapter cases of 360networks inc. According to Louis J. Yoppolo, Esq., at Shindler, Neff, Holmes & Schlageter, in Toledo, Ohio, Mosser has a lien on the Debtors' real estate located at 1545 Clay Street, Detroit, Michigan. Mosser rendered services on the Rockey Peanut Company for a contract amount of $980,528.82. Since it already received payment of $636,513.47, Mosser claims a construction lien upon the real property in the amount of $344,015.35 or the balance. Mosser is also filing its proof of claim as a secured creditor. It perfected its mechanic's lien claim after Petition Date. To the extent that the mechanic's lien law of the State of Michigan may require the commencement of an action to continue the perfection, since the action had not already been commenced prior to Petition Date, and is stayed by section 362(b) of the Code, Mosser gives this notice of its intent to preserve its rights as a secured creditor. (360 Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) AIR CANADA: Cuts Approximately 30% of Flights --------------------------------------------- Air Canada advises its customers of the following in order to facilitate compliance with the enhanced security measures in place at Canadian airports: * Passengers should arrive no later than two hours prior to their departure for domestic flights and no later than three hours prior to their departure for transborder and international flights. The airline is requesting passengers not to arrive any earlier as currently many passengers are arriving earlier than these timeframes thereby adding to the congestion and slowing down the processing of passengers. * Passengers are requested to carry photo identification regardless of destination. The heightened level of security may include the requirement for passengers to present photo identification before boarding their flight regardless of the destination. * Passengers are requested to limit their carry-on baggage to one item. * Passengers are requested to leave at home all non- essential electronic devices (including such items as hair dryers and electric razors). * Although Air Canada recommends that customers not proceed to the airport without reservations, passengers will be accommodated on a stand-by basis at the airport if possible. Air Canada plans to operate over 80 percent of its schedule effective Monday September 17. The carrier had also resumed domestic and international cargo services. The airline has operated over 70 percent of its schedule over the weekend including all international and all U.S. transborder services with the exception of flights to/from Washington National Airport which remains closed. Within Canada, Air Canada is operating Rapidair flights in the Toronto-Montreal-Ottawa and Vancouver-Calgary-Edmonton triangles, as well as transcontinental flights serving Canada's largest cities: Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Ottawa, Montreal and Halifax. AMERICAN AIRLINES: Slashes 20,000 Jobs Due to 20% Schedule Cut -------------------------------------------------------------- American Airlines notified employees that it is forced to reduce jobs by at least 20,000. The employment losses result from the airline's 20 percent schedule reduction, the complexity of new security procedures, and a sharp reduction in passenger traffic - all creating a state of emergency at American and across the entire airline industry. American said employees would learn the specific status of their jobs in the next few days. American Chairman and Chief Executive Officer Don Carty said the day could only be described as 'heartbreaking'. "This is, without a doubt, the most difficult thing I have had to do in my two decades at American," said Carty in a letter to employees. "I have declared a state of emergency at American Airlines. This declaration is an official recognition that-hard as it may be to accept-our company's very survival depends on dramatic change to our operations, our schedule, and worst of all our staffing levels." American said staff would be reduced in management and support staff groups, and all other work groups across the company. These job cuts will impact American, American Eagle and TWA. The carrier said it would ordinarily provide some form of alternative to those who are being impacted. However, except for certain kinds of leaves, none of the traditional separation practices, such as early retirements and stand-in-steads, are financially feasible in light of the current crisis. American said that, given its current cash crunch, those programs would actually worsen its financial situation. American said its mission is to operate a safe and secure airline while it and the rest of the industry struggles to survive. In addition to the job cuts, American said it has identified significant product and service changes - especially those things that increase the amount of ground contact with airplanes and that ensure a more dependable operation given the new security regulations. The company will be announcing those changes shortly. "The events of September 11 will forever change our country, our industry and our company," said Carty. Carty is in Washington, D.C. to lobby for an airline relief package, which the industry believes is its only chance to survive the national tragedy and the financial crisis facing the industry. The following figures are the approximate numbers of employees across AMR Corp.'s airline divisions: American Airlines: 106,700 American Eagle: 12,650 TWA: 19,000 Total: 138,350 AMERICAN AIRLINES: Moody's Downgrades Debt Ratings -------------------------------------------------- Moody's Investors Service lowered the debt ratings of AMR Corporation and American Airlines, Inc. The rating actions reflect the increasing business and financial risks facing the company in the aftermath of last week's terrorist attacks in the United States. The ratings remain on review for further possible downgrade while there is approximately $13.9 billion of debt securities affected. Ratings lowered and remaining under review for possible further downgrade are: AMR Corporation To From Senior Unsecured Ba2 Baa3 Industrial Revenue Bonds Ba2 Baa3 American Airlines, Inc. Senior Unsecured Ba2 Baa3 Commercial Paper Not Prime P-3 Enhanced Equipment Trust Certificates, Series 1999-1, Class A A2 Aa2 Enhanced Equipment Trust Certificates, Series 1999-1, Class B Baa1 A1 Enhanced Equipment Trust Certificates, Series 1999-1, Class C Baa3 A2 Enhanced Equipment Trust Certificates, Series 2001-1, Class A A2 Aa2 Enhanced Equipment Trust Certificates, Series 2001-1, Class B Baa1 A1 Enhanced Equipment Trust Certificates, Series 2001-1, Class C Baa3 A3 Enhanced Equipment Trust Certificates, Series 2001-1, Class D Ba1 Baa2 Enhanced Equipment Trust Certificates, Series 2001-2, Class A A3 Aa3 Enhanced Equipment Trust Certificates, Series 2001-2, Class B Baa1 A1 Enhanced Equipment Trust Certificates, Series 2001-2, Class C Baa3 A3 Enhanced Equipment Trust Certificates, Series 2001-2, Class D Ba1 Baa2 Equipment Trust Certificates Baa3 Baa1 Regional Jet Equipment Trust 2000-1, Notes Baa1 A1 Regional Jet Equipment Trust 2000-1, Certificates Baa2 A2 Industrial Revenue Bonds Ba2 Baa3 During the days immediately following the attack, the industry lost significant revenues that will not be recouped, which Moody's expects that the Company will have to shoulder a higher cost burden in connection with increased security measures. It is also anticipated that intermediate-term business and leisure travel will decline significantly. These factors will result in a decline in the operating environment for the industry, and will further depress its already strained cash and financial flexibility, Moody's said. Moreover, the rating agency believes that the ongoing credit quality of AMR and other U.S. carriers will be weaker despite possible Federal assistance program. AMR Corp. and American Airlines are headquartered in Fort Worth, TX. AMERICAN TRANS: Plans to Cut 1,500 Jobs & Flights by 20% -------------------------------------------------------- ATA (American Trans Air, Inc.)(Nasdaq:AMTR) the nation's 10th largest airline based on passenger revenue miles announced plans to reduce its flight schedule by 20 percent, retire its entire fleet of 727-200s by next month, and furlough approximately 1,500 employees. These actions, which are a direct result of current and anticipated effects on the demand for air travel caused by last week's terrorist attacks in New York City and Washington, D.C., are being put in place beginning Monday. "The uncertainty of the U.S. economy and market had already weakened the airline industry," said John Tague, ATA President and CEO. "Last week's tragedy has accelerated dramatically this industry decline." "The airline industry is going to need an extraordinary effort from its employees, the business community and the government if it is to stabilize. It is imperative that the Federal Government takes significant and immediate decisive action to protect our nation's aviation system," he added. "In my roughly 30 years in this business, I have never witnessed a situation of this magnitude," said George Mikelsons, ATA Chairman and founder. "Recovery will require extraordinary efforts by the employees of the industry and, importantly, the government. I am confident of both." ATA's flight schedule is being updated continuously and is available at its website, http://www.ata.com through its reservations system, and through all travel agencies. AMERICA WEST: Cuts Flight Schedule By 20% & 2,000 Jobs ------------------------------------------------------ America West Airlines (NYSE: AWA) announced that it will reduce its flight schedule by approximately 20 percent based on available seat miles, and will also eliminate approximately 2,000 positions in connection with this reduction. The moves are in direct response to the current and anticipated adverse impact on air travel stemming from last week's terrorist attacks. "[Tuesday's] announcement is the direct result of the attacks on New York and Washington, D.C.," said W. Douglas Parker, chairman, president and chief executive officer. "Absent immediate intervention by the federal government, America West Airlines and its 14,000 employees are at risk because of these tragic occurrences. We strongly encourage the administration and congressional leadership to continue to work cooperatively with the airlines to, without delay, provide the relief necessary to stabilize the industry." The airline expects to have the new schedule implemented as early as Tuesday, September 18. The workforce reduction will be accomplished through the combination of attrition, deferred hiring and select reductions-in-force. "These actions are particularly distressing after the employees of America West have worked tirelessly to restore our airline to normal operating levels over the last few days," added Parker. "They have done an excellent job, and America West customers should know that we are back flying, albeit as a slightly smaller airline." Prior to the events of last week, America West Airlines, the nation's eighth largest carrier, served 92 destinations with more than 900 daily departures in the U.S., Canada and Mexico. America West will announce details of its revised flight schedule as they become available. AMES DEPARTMENT: Continuing All Workers' Compensation Programs -------------------------------------------------------------- In connection with the operation of their business, Ames Department Stores, Inc. maintain various workers' compensation programs, insurance policies, and related programs through several different insurance carriers. The Insurance Programs include coverage for claims currently or potentially involving workers' compensation, automobile, fiduciary liability, crime, kidnap and ransom, directors' and officers' liability and securities, general liability, excess liability, transit, and various property-related liabilities. By Motion, the Debtors seek authorization to continue the Workers' Compensation Programs and maintain the Insurance Policies on an uninterrupted basis, and pay when due in the all pre-petition premiums, administrative fees, and other pre- petition obligations to the issuers of Insurance Policies. To the extent a premium payment or other costs of the Insurance Programs relating to a period prior to the Commencement Date is outstanding, the Debtors seek authority to make such payment. David S. Lissy, Esq., Ames' Senior Vice President and General Counsel, discloses that the premiums on the property insurance policies, including transit and boiler and machinery coverage, are financed through American Financial Corporation. As of the Commencement Date, Mr. Lissy states that approximately $2,400,000 was owed to AFCO with respect to such financing, payable in monthly installments of $261,023 with last installment due on April 1, 2002. In addition, Mr. Lissy reveals that the Debtors' directors' and officers' liability insurance policies are financed through A.I. Credit Companies. As of the Commencement Date, Mr. Lissy relates that approximately $1,100,000 was owed to AICCO with respect to such financing, payable in monthly installments of $51,711 with last installment due on March 1, 2003. The Debtors estimate that as of the Commencement Date, approximately an additional $800,000 is owed in respect of the Insurance Programs, whether paid directly to the Broker or the Insurance Carriers. Mr. Lissy reveals that certain of the Insurance Policies contain deductible amounts for each claim that is submitted or for the policy as a whole. To the extent a deductible payment or reimbursement relating to a period prior to the Commencement Date is outstanding with respect to any Insurance Policy, the Debtors seek authority, to make such payments in the same manner as those made prior to Commencement Date. Mr. Lissy relates that Marsh has paid premiums under the Insurance Policies and has not collected these amounts from the Debtors. If a refund is payable to the Debtors from the Insurance Carriers, the Debtors believe any amounts received as a refund belong to Marsh and would not constitute property of the estates. However, in the exercise of utmost caution, the Debtors seek entry of an order authorizing Marsh to apply any refunds received against the pre-petition amounts due and outstanding to Marsh from the Debtors. The Debtors submit that such an allowance is both necessary and desirable because: (1) the continued use of Marsh's services will enable the Debtors to realize savings in the procurement of their future insurance policies; (2) the arrangement whereby Marsh extends credit to the Debtors in the form of premium payments and only bills them monthly provides the Debtors with increased liquidity and stabilized payment obligations; and (3) the use of an insurance broker provides an administrative convenience and cost savings to the Debtors in light of the large number of policies they hold. Furthermore, the Debtors believe that any refund amounts owing to the Debtors would be subject to a valid right of recoupment held by Marsh. The Debtors submit that entry of an order authorizing Marsh to apply its claims against any refunds that it may receive with respect to the Debtors' pre-petition insurance payments is in the best interests of the Debtors, their estates, and their creditors. Mr. Lissy maintains that it is essential to the continued operation of the Debtors' business and their efforts to reorganize that the Insurance Programs be maintained on an ongoing and uninterrupted basis. Mr. Lissy adds that the failure to pay premiums when due may affect the Debtors' ability to renew the Insurance Policies, some of which are set to expire as soon as November 1, 2001. If the Insurance Policies are allowed to lapse, Mr. Lissy states that the Debtors could be exposed to substantial liability for damages resulting to persons and property of the Debtors. Continued effectiveness of the directors' and officers' liability policies is necessary to the retention of qualified and dedicated senior management. Furthermore, pursuant to the terms of many of their leases, as well as the guidelines established by the United States Trustee, the Debtors are obligated to remain current with respect to certain of their primary insurance policies. The maintenance of the Workers' Compensation Programs is indisputably justified, Mr. Lissy states, as applicable state law mandates this coverage. Mr. Lissy adds that the risk that eligible claimants will not receive timely payments with respect to employment-related injuries could have a devastating effect on the financial well-being and morale of their employees, and their willingness to remain in the Debtors' employ. Departures by employees at this critical time may result in a severe disruption of the Debtors' business to the detriment of all parties in interest. Mr. Lissy claims that a significant deterioration in employee morale undoubtedly will have a substantially adverse impact on the Debtors, the value of their assets and businesses, and their ability to reorganize. Moreover, the workers' compensation carriers are in possession of approximately $45,000,000 in irrevocable letters of credit and bonds securing the workers' compensation insurance obligations. Mr. Lissy contends that failure by the Debtors to honor workers' compensation obligations would result in the drawing of these letters of credit in amounts in excess of outstanding obligations, and would unnecessarily deplete the assets of the estate. Mr. Lissy relates that the amounts the Debtors propose to pay in respect of the Insurance Programs are minimal in light of the size of the Debtors' estates and the potential exposure of the Debtors absent insurance coverage. * * * Finding the relief requested is necessary and in the best interest of the Debtors, their estates and their creditors, Judge Gerber grants and approves the motion requested by the Debtors. Judge Gerber further orders that: (1) The Debtors are authorized and empowered to maintain the Workers' Compensation Programs and the Insurance Policies without interruption, on the same basis, and in accordance with the same practices and procedures as were in effect prior to the commencement of the Debtors' chapter 11 cases; (2) The Debtors are authorized to pay, in their discretion, all premiums, administrative fees, deductible payments or reimbursements, Workers' Compensation Claims, and other pre- petition obligations in connection with the Workers' Compensation Programs and the Insurance Policies, as applicable, to the extent due and payable post-petition, whether or not such premiums or amounts relate to the pre- petition period or were due prior to the commencement of these chapter 11 cases; (3) Marsh USA, Inc., an insurance broker utilized by the Debtors, is authorized to apply any refunds received by it from any of the Debtors' Insurance Carriers (as defined in the Motion) against any pre-petition amounts due and outstanding to Marsh in respect of the Debtors' prepetition premium obligations in respect of the Workers' Compensation Programs and Insurance Policies; (4) The Debtors' banks are directed and authorized to process, honor, and pay, to the extent of funds on deposit, any and all pre-petition checks or wire transfer requests issued by the Debtors in respect of any pre-petition obligations with respect to the Workers' Compensation Programs, Insurance Policies, or Cure Payments prior to, or after, the commencement of these chapter 11 cases; (5) The Debtors are authorized to issue post-petition checks, or to effect post-petition fund transfer requests, in replacement of any checks or fund transfer requests in respect of pre-petition obligations with respect to the Workers' Compensation Programs, Insurance Policies, or Cure Payments that were dishonored or rejected as of the commencement of these chapter 11 cases. (AMES Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) AUDIO VISUAL: Lenders Extend DIP Facility to December 14 -------------------------------------------------------- Audio Visual Services Corporation(TM) (OTC Bulletin Board: AVSV) announced that the Company's lenders have extended the term of its main credit facility to December 14, 2001. In addition to the extension of the term of the credit facility, the lenders have agreed to defer interest payments until December 14th. Certain financial covenant requirements contained in the credit facility, including the requirement to achieve minimum levels of EBITDA (Earnings before interest, taxes, depreciation and amortization) for the twelve months ending September 30, 2001, have also been waived. This announcement comes after a period of discussions between Company representatives, the Company's financial advisor, The Blackstone Group, L.P., and representatives from the Company's bank group, lead by The Chase Manhattan Bank. Prior to this announcement, the Company's main credit facility expired on October 1, 2001. The Company also maintains a senior $16 million revolving credit facility that expires on March 31, 2002. Commenting on the announcement, Robert K. Ellis, Chairman and Chief Executive Officer of the Company stated, "The extension of the credit facility reflects the ongoing constructive dialogue with our bank group and provides the Company further time to sensibly restructure or refinance its outstanding indebtedness on a long term basis. The extension will also provide the Company with additional time to assess the impact of last week's events on the economy and on the Company's operating business units." Audio Visual Services Corporation is a leading provider of audiovisual equipment rentals, staging services and related technical support services to hotels, event production companies, trade associations, convention centers and corporations in the United States. In addition to its United States operations, the Company has operations in Canada, Mexico, the United Kingdom, Belgium, and the Caribbean. Audio Visual Services Corporation is listed on the OTC Bulletin Board and trades under the symbol AVSV. As of end of December 2000, the Company had total liabilities of $410.6 million and total assets of $409.3 million. Its current liabilities stood at $401.5 million, and total current assets at $62.1 million. The Company had cash of $7.4 million, while its short-term debts amounted to $365.5 million. COHO ENERGY: Taps JP Morgan to Explore Options to Raise Capital --------------------------------------------------------------- Coho Energy Inc. continues to have a high level of indebtedness following its reorganization. Its total consolidated indebtedness as of June 30, 2001 was $316.1 million and the ratio of total consolidated indebtedness to total capitalization was 84%. Management believes that forecasted operating revenues, assuming conservative growth in production and conservative commodity prices as compared to current commodity prices, and availability under the credit facility will be sufficient to fund revised forecasted expenditures through the end of the year 2001. Interest owed under our senior subordinated notes due 2007, also referred to as the standby loan, is currently required to be "paid-in-kind" by increasing the amount of principal outstanding through the issuance of additional standby loan notes." Based on its current cash flow projections and existing debt constraints, management does not believe the forecasted future capital expenditures will be adequate to provide sufficient working capital to materially improve its crude oil and natural gas production above current levels. The Company has entered into an agreement with JP Morgan, a division of Chase Securities, to act as its financial advisor in evaluating various strategic transactions including various potential recapitalization transactions, the sale of a portion of the company to provide more available working capital for its remaining properties or the sale of all of the company. There can be no assurance that this evaluation will result in one or more transactions for the company or a significant portion of its assets. Given the high level of indebtedness, if the Company elects to pursue any such transactions, there can be no assurance that, after giving effect to any required repayment or prepayment of our indebtedness, any significant amount will be available to provide additional working capital for its operations or, in the event of a sale of all of its assets, for distribution to its shareholders. Its only operating revenues are crude oil and natural gas sales with crude oil representing approximately 91% of production revenues and natural gas sales representing approximately 9% of production revenues during the six months ended June 30, 2001, compared to 93% from crude oil sales and 7% from natural gas sales during the same period in 2000. During the first six months of 2001, production revenues decreased 12% to $41.1 million as compared to $46.5 million for the same period in 2000. This decrease was primarily due to a 17% decrease in the price received for crude oil (net of hedging losses) and a 25% decrease in daily natural gas production, partially offset by a 4% increase in daily crude oil production and a 55% increase in the price received for natural gas (net of hedging losses). For the three months ended June 30, 2001, production revenues decreased 14% to $20.5 million as compared to $23.9 million for the same period in 2000. This decrease was primarily due to a 17% decrease in the price received for crude oil (net of hedging losses) and a 20% decrease in daily natural gas production, partially offset by a 3% increase in daily crude oil production and a 20% increase in the price received for natural gas (net of hedging losses). Production revenues for the six months ended June 30, 2001 included crude oil and natural gas hedging losses of $4.4 million ($2.39 per Bbl) and $1.1 million ($1.39 per Mcf), respectively, as compared to crude oil and natural gas hedging losses for the six months ended June 30, 2000 of $164,000 ($.09 per Bbl) and $20,000 ($.02 per Mcf), respectively. Production revenues for the three months ended June 30, 2001 included crude oil and natural gas hedging losses of $2.0 million ($2.10 per Bbl) and $208,000 ($.50 per Mcf), respectively, as compared to crude oil and natural gas hedging losses for the three months ended June 30, 2000 of $164,000 ($.18 per Bbl) and $20,000 ($.04 per Mcf), respectively. Due to the factors discussed above, Coho's net earnings for the six months ended June 30, 2001 were $3.8 million and its net loss for the three months ended June 30, 2001 was $2.5 million as compared to a net loss of $16.9 million and $2.3 million, respectively, for the same periods in 2000. CONTINENTAL AIRLINES: Fitch Places BB Rating on Watch Negative -------------------------------------------------------------- In the aftermath of last week's terrorist attacks, Fitch has placed the debt of Continental Airlines on Rating Watch Negative, affecting all of its rated debt obligations, including securitized aircraft transactions. Continental Airlines, Inc. (current Fitch unsecured debt rating- -`BB'): Continental has announced plans to furlough 12,000 workers and reduce system capacity by 20%. In a filing with the SEC, Continental has stated that it will miss $70 million in scheduled debt service payments on some of the company's enhanced equipment trust certificates (EETCs). Under terms of the credit agreement, however, Continental is not yet in default on these obligations. COVAD COMMS: Seeks Approval of Plan Solicitation Procedures ----------------------------------------------------------- On August 27, 2001, Covad Communications Group, Inc. filed its Disclosure Statement and Plan of Reorganization of and the Court subsequently set a confirmation hearing on the Plan on November 5, 2001. By Motion, the Debtor asks the Court to: A. Establish a Voting Record Date; B. Establish Procedures with Respect to Confirmation of the Plan of Reorganization of the Debtor under Chapter 11 of the Bankruptcy Code, as it may be amended from time to time; C. Approve Solicitation Procedures; D. Approve the Form of Ballot and Voting Procedures; and E. Permit the Debtor to File Objections to Claims Deemed to Be Informal Proofs of Claim. Laura Davis Jones, Esq., at Pachulski Stang Ziehl & Jones P.C. in Wilmington, Delaware, proposes that the Court establish the date the Disclosure Statement is approved as the record date for determining which creditors are entitled to vote. Furthermore, because of the difficulty in monitoring the frequent transfers and assignments of claims, the Debtor requests that if a Transfer/Assignment Notice form prescribed has not been filed with the Court by the Record Date, then only the record holder be entitled to vote the applicable transferred claim to accept or reject the Plan while the unrecorded transferee would not be entitled to vote the transferred claim. In accordance with Bankruptcy Rules, Ms. Jones tells the Court that the Debtor will mail to all known creditors and equity security holders a copy of the notice setting forth the Record Date, the Voting Deadline for the submission of ballots to accept or reject the Plan, the Objection Deadline, and the time, date and place for the hearing on the confirmation of the Plan on or before October 1, 2001. In addition, the Debtor proposes to publish the Confirmation Hearing Notice not less that 20 days before the Objection Deadline, believing that publication of the notice will provide sufficient notice of the Objection Deadline and the hearing on the confirmation of the Plan to persons who do not otherwise receive notice by mail. The Debtor also requests that the Court approve the form of the Confirmation Hearing Notice and deem the notice procedures adequate. The Debtor requests that this Court require that all objections to the Plan be filed with the Court and served on or before October 26, 2001, to: Brad Godshall of Pachulski, Stang, Ziehl, Young & Jones P.C. in Los Angeles, CA; Laura Davis Jones of Pachulski, Stang, Ziehl, Young & Jones, P.C. in Wilmington, Delaware; Joseph MacMahon of the Office of the United States Trustee in Wilmington, Delaware. The Debtor further requests that: A. the Court consider only timely filed and served written objections, B. that the Court require all objections to state with particularity the grounds for such objection, and C. that objections not timely filed and served in accordance with the provisions of this Motion be overruled. Ms. Jones informs the Court that the Solicitation Package, including copies of the Disclosure Statement Order, the Solicitation Procedures Order, Confirmation Hearing Notice, the Disclosure Statement, the Plan, and the Ballot, will be mailed to creditors entitled to vote on the Plan on or before October 1, 200 to be served to: A. all persons or entities that have filed proofs of claim or Transfer/Assignment Notice forms on or before the Record Date, except to the extent a claim has been objected to by the Debtor and such claim has not been allowed for voting purposes or was expunged or disallowed by prior or der of the Bankruptcy Court; B. all persons or entities listed in the Schedules as holding liquidated, noncontingent or undisputed claims as of the Record Date, except to the extent a claim was objected to by the Debtor and not has not been allowed for voting purposes or was disallowed or expunged by prior order of the Bankruptcy Court; C. other known creditors against the Debtor, if any, as of the Record Date; D. any parties in interest that have filed a notice in accordance with Bankruptcy Rule 2002. E. the Office of the United States Trustee; F. the Securities and Exchange Commission; and G. contract counter-parties To avoid duplication and reduce expenses, the Debtor proposes that creditors who have more than one claim should receive only one Solicitation Package and one ballot for each claim. Ms. Jones states that the Solicitation Packages will not be sent to creditors or equity holders of the Debtor that hold claims or equity securities that are in a Class that is unimpaired to avoid significant unnecessary cost. These Classes are Class 2A - Secured Claims, Class 2B-Other Secured Claims, Claim 5 - Contingent Indemnity Claims, Class 8 - Securities Claims - IPO Allocation and Class 9 - Equity Interests. Instead, Ms. Jones asks the Court's approval that these creditors and equity security holders will be sent the Confirmation Hearing Notice and the Notice of Non-Voting Status with Respect to Unimpaired Classes Deemed to Accept the Plan. Ms. Jones contends that these creditors and equity security holders cannot vote on the Plan because their claims or interests are unimpaired and the class is deemed to have accepted the Plan, therefore, sending a Solicitation Package would be confusing and wasteful. The Debtor will provide additional materials in the Solicitation Packages, specifically: (a) if approved by the Court, a letter from the Debtor recommending acceptance of the Plan, (b) and such other materials as the Court may direct. The Debtor anticipates that some of the Solicitation Packages or Confirmation Hearing Notices may be returned as undeliverable and seeks the Court's approval for a departure from the strict notice rule, excusing the Debtor from re-mailing Solicitation Packages or the Confirmation Hearing Notice to those entities whose addresses differ from the addresses in the database as of the Record date. The Debtor requests that the Court approve the Solicitation Package that will be mailed to the stated persons, the notice to be sent to creditors deemed to have accepted the Plan and the procedure for distribution of the materials and deem the Solicitation Package sufficient notice to allow parties to cast votes on the Plan. Ms. Jones relates that the Debtor is in the process of identifying additional members of Class 4 and 6 Claims and anticipates that it may not have completed this process on or before October 1, 2001. The Debtor proposes to serve the Solicitation Package on newly identified holders of those claims on October 15, 2001, 21 days prior to the Confirmation Hearing and 11 days prior to the date ballots must be cast. The Debtor further proposes to include with the Solicitation Packages a Notice of Bar Date previously approved, a proof of claim form and a notice, advising such creditors desiring to vote that they must file a proof of claim by October 29, 2001. The Debtor submits that such notice is sufficient due to the previous publication of the Bar Date Notice and the Confirmation Notice and will give those creditors an additional opportunity to vote on the Plan. The Debtor therefore requests approval of the procedure of serving the Solicitation Packages on later identified creditors as sufficient notice to those creditors. The Debtor request approval to mail a ballot to each holder of a claim in the Voting Classes under the Plan modified to address the particular needs of these cases. Ms. Jones states that the Balloting Agent will customize each Ballot to include the Creditor's name, address and claim information. The Debtor proposes that all Ballots must be properly executed, completed and delivered to the Balloting Agent (a) by first class mail, in the return envelope provided with each Ballot, (b) by overnight courier, or (c) by personal delivery so that they are received by the Balloting Agent no later than November 2, 2001. Ms. Jones assures the Court that the Debtor will complete the mailing to the currently known creditors by no later than October 1, 2001 and will complete its mailing to later identified creditors by no later than October 15, 2001. Ms. Jones asks the Court's approval of the solicitation process after the Court finds that the solicitation period, in conjunction with the publication of the Confirmation Notice, should be sufficient time within which creditors can make an informed decision to accept or reject the Plan. The Debtor proposes that no Ballot cast by a creditor holding a claim to which the Debtor has filed an objection on or before November 1, 2001, shall be counted unless the creditor has filed a motion seeking temporary allowance of the claim for voting purposes and the Court grants such Motion. Notwithstanding the above stated procedure, the Debtor also proposes these procedures to determine the voting rights of the Litigation Plaintiffs in the Pending Litigation: A. To the extent the Litigation Plaintiffs have not filed proofs of claim on or before September 21, 2001, the complaints filed or sent to Covad in respect of such Pending Litigation shall be treated as informal claims against the Debtor solely for the purpose of determining those alleged creditors' voting rights; B. The Debtor shall have until October 10, 2001 to file an objection to those informal claims on or for the purposes of determining the plaintiffs voting status only and any such objection shall not be deemed a waiver of any other objection or objections the Debtor may have to the claims of the Litigation Plaintiffs, which objections may be raised at a later date; C. Any Litigation Plaintiff shall have until October 20, 2001, to file any 3018 Motion; and D. Any 3018 Motions filed by the Plaintiffs shall be heard by the Court prior to the Confirmation Hearing. The Debtor believes that due to the time constraints in this case the objection procedures for voting purposes are appropriate and requests that the Court approve the above objection procedures for voting purposes as reasonable under the circumstances and for the purpose stated. The Debtor proposes that, for purposes of voting, the amount of a claim used to tabulate acceptance or rejection of the Plan shall be the lesser of: A. the amount set forth on the Ballot received for that particular creditor or B. the following: 1. the amount set forth as a claim in the Schedules as not contingent, unliquidated or disputed; 2. the amount set forth on a filed proof of claim which has been timely filed and has not been objected to, disallowed, disqualified, suspended, reduced or estimated and temporarily allowed for voting purposes prior to computation of the vote on the Plan; or 3. the amount estimated and temporarily allowed with respect to a claim pursuant to an order of this Court. To the extent authorized by order of the Court in the Securities Class Action, Debtor also requests that the Representative be authorized to submit Ballots on behalf of accepting members of class treatment in such Securities Class Action. With respect to Ballots submitted by a creditor, Debtor requests that the Court direct as follows: A. any Ballot received after the Voting Deadline, unless the Debtor extends the Voting Deadline with respect to such Ballot, shall not be counted; B. any Ballot that is illegible or contains insufficient information to permit identification of the creditor shall not be counted; C. any Ballot cast by a person or entity that does not hold a claim in a Class that is entitled to vote on the Plan shall not be counted; D. any Ballot which is properly completed, executed and timely returned to the Balloting Agent that does not indicate an acceptance or rejection of the Plan shall be deemed to be a vote to accept the Plan; E. any Ballot which is returned to the Balloting Agent indicating acceptance or rejection of the Plan but which is unsigned shall not be counted; F. whenever a creditor casts more than one Ballot voting the same claim prior to the Voting Deadline, only the last timely Ballot received by the Balloting Agent shall be counted; G. if a creditor casts simultaneous duplicative Ballots voted inconsistently such Ballots shall count as one vote accepting the Plan; H. each creditor shall be deemed to have voted the full amount of its claim; I. creditors shall not split their vote within a claim, thus each creditor shall vote all of its claim within a particular class either to accept or reject the Plan; J. if a single creditor holds disparate claims, that creditor must cast a separate Ballot for each such disparate claim and each properly cast Ballot shall be counted as an acceptance or a rejection of the Plan. K. any Ballot that partially rejects and partially accepts the Plan shall not be counted; and L. any Ballot received by the Balloting Agent by telecopier, facsimile or other electronic communication shall not be counted. Ms. Jones additionally suggests that if no Ballots are cast with respect to a particular Class, then such Class will be deemed to have accepted the Plan. The Debtor believes that the foregoing proposed procedure provides for a fair and equitable voting process and in necessary to avoid any confusion resulting from incomplete or inconsistently executed ballots and will simplify the voting and tabulation process. (Covad Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) DAIRY MART: Misses $4.5MM Interest Payment on Subordinated Notes ---------------------------------------------------------------- Dairy Mart Convenience Stores, Inc. (AMEX:DMC) announced that it did not make an interest payment due Monday of approximately $4.5 million on its 10 1/4% Senior Subordinated Notes due 2004. There are currently $88.5 million of Senior Subordinated Notes outstanding. The missed interest payment does not constitute an event of default under the bond indenture unless Dairy Mart fails to make the payment within 30 days of the due date. Dairy Mart is in active discussion with an ad hoc committee of bondholders representing a substantial majority of the principal amount of the bonds, and has advised the committee that the company is exploring potential financing and strategic alternatives to address its liquidity shortfall and to maximize the company's value for its constituencies. There can be no guarantee that these efforts will be successful or that additional financing will be obtained. Dairy Mart Convenience Stores, Inc. owns or operates approximately 550 retail stores in seven states located in the Midwest and Southeast. For more information, visit Dairy Mart's website at http://www.dairymart.com DELTA AIR: Mullin Urges Congress to Aid in Industry Bailout Plan ---------------------------------------------------------------- Without immediate and significant U.S. government financial support, most of the airlines that make up the nation's commercial air transportation system will go bankrupt, Delta Air Lines (NYSE: DAL) Chairman and CEO Leo F. Mullin told members of Congress Wednesday. "We face an enormous problem with potentially devastating repercussions for our nation's full recovery," said Mullin, testifying on behalf of the Air Transport Association and its member airlines before the House Transportation and Infrastructure Committee. "Under current circumstances and without immediate financial support from the government, a number of carriers could be driven to bankruptcy within 60 days and the future of aviation could be severely threatened." Mullin asked Congress to help in the development and approval of a package of transition aid so that, as Transportation Secretary Norman Mineta said recently, "We do not allow the enemy to win this war by restricting our freedom of mobility." Mullin told legislators that the several day shutdown of the airline industry, the projected long-term reduction in passenger demand and airline revenues, significantly increased costs. This, in addition to the consequences from the liability issues resulting from the events on September 11th, will generate crushing losses for the industry. Passenger demand and associated revenue, Mullin said, is not expected to return to previously anticipated levels before the third quarter of 2002. The proposed government support package is valued at $17.5 billion, based on anticipated revenue declines and cost increases associated directly with the impact on the U.S. airline industry from the September 11th attack. Although a handful of air carriers may be able to survive without government support, the vast majority of U.S. carriers have no means of obtaining the necessary cash to support continued operations, noted Mullin, even within the bounds of a Chapter 11 bankruptcy proceeding. Already, U.S. air carriers have taken steps to shrink in size and are expected to announce the layoff of more than 100,000 employees. To forestall this, the airline industry is urging Congress to immediately adopt a package of cash grants and other measures. Mullin outlined the commercial aviation industry's concept of a recovery program that would ensure the security, safety, and stability of this critical industry. The program is composed of three components. The first addresses the financial underpinning required to maintain the industry's capacity to serve. The second relates to the liability issues arising out of the tragic role cast on aviation in this brutal attack on America. The third deals with the need to provide resources for the enhanced aviation security programs which our nation is undertaking. Mullin also reminded the House committee members that the U.S. commercial airline transportation system is vital to the U.S. economy. During calendar year 2000, U.S. commercial airline operations generated more than $30 billion in government revenues. During calendar year 2000, the 1.2 million U.S. airline employees served approximately 670 million passengers traveling over 700 billion miles and provided over 25 billion ton miles of freight delivery. Although the terrorist attacks dealt a crippling blow to U.S. commercial airline transportation, Mullin told the Committee members that, "We are grateful for the opportunity to join you in the important work of rebuilding from this enormous tragedy, and just as importantly, the work of restoring our nation's confidence." * * * Delta Air Lines' cash, cash equivalents and short-term investments totaled $1.5 billion at June 30, 2001, compared to $1.6 billion at December 31, 2000. The Company's principal sources and uses of cash during the six months ended June 30, 2001 are summarized below: Sources: . Borrowed $800 million under our 1997 Bank Credit Agreement. . Generated $551 million of cash from operations. . Generated $239 million from the sale of short-term investments. . Issued $151 million in long-term debt for the purchase of aircraft at ASA and Comair. . Generated $53 million from the sale of priceline common stock. . Generated $26 million from the sale of flight equipment. Uses: . Invested $1.2 billion in flight equipment. . Invested $303 million in ground property and equipment. . Used $93 million for payments on long-term debt and capital lease obligations. . Paid $20 million in cash dividends on preferred and common stock. Delta may prepay its long-term debt and repurchase its common stock from time to time. As of June 30, 2001, the Company had a negative working capital position of $3.2 billion, compared to negative working capital of $2.0 billion at December 31, 2000. The change in the Company's working capital position during the six months ended June 30, 2001 was primarily the result of our $1.5 billion investment in capital assets and lower revenues due to the slowing U.S. economy and pilot labor issues. The Company borrowed $800 million under our 1997 Bank Credit Agreement, and that borrowing is included in current liabilities in the Company's Consolidated Balance Sheets. A negative working capital position is normal for the company, primarily due to our air traffic liability, and does not indicate a lack of liquidity. "We expect to meet our obligations as they become due through available cash, short-term investments and internally generated funds, supplemented as necessary by borrowings and proceeds from sale and leaseback transactions," the Company says in its financial statements. Long-term debt and capital lease obligations (including current maturities) totaled $6.8 billion at June 30, 2001, compared to $6.0 billion at December 31, 2000. Shareowners' equity was $5.0 billion at June 30, 2001 and $5.3 billion at December 31, 2000. Our net debt-to-capital position was 74% at June 30, 2001 and 71% at December 31, 2000. DELTA AIRLINES: Moody's Lowers Ratings After Last Week's Attacks ---------------------------------------------------------------- Due to the increasing business and financial risks facing the company after last week's terrorist attacks in the United States, Moody's Investor's Service lowered the debt ratings of Delta Air Lines. The ratings remain on review for further possible downgrade while there is approximately $12.9 billion of debt securities affected. Ratings lowered and remaining under review for possible further downgrade are: Delta Air Lines, Inc.: To From Issuer Rating Ba2 Baa3 Unsecured notes Ba2 Baa3 Industrial Revenue Bonds Ba2 Baa3 B1 Ba2 Revolving Credit Facility Ba2 Baa3 Equipment Trust Certificates Baa3 Baa1 Enhanced Equipment Trust Certificates, Series 2000-1, Class A A2 Aa2 Enhanced Equipment Trust Certificates, Series 2000-1, Class B A3 Aa3 Enhanced Equipment Trust Certificates, Series 2000-1, Class C Baa3 A3 Enhanced Equipment Trust Certificates, Series 2001-1, Class A A2 Aa2 Shelf registration for secured (P)Baa3 (P)Baa1 and unsecured Ba2 (P)Baa3 issuance Enhanced Equipment Trust Certificates, Series 2001-1, Class B A3 Aa3 Enhanced Equipment Trust Certificates, Series 2001-1, Class C Baa2 A2 Moody's believes that last week's events will result in severe operating and financial burdens for Delta despite the possibility of Congress intervention to provide some form of relief to the sector. Moody's review of Delta's ratings will focus on: 1) the degree to which future developments will erode the industry's revenue outlook or raise its cost structure; 2) the ability of Delta to protect its relative competitive position and restructure its operating model in the face of new industry fundamentals; 3) the cash flow, liquidity and financial flexibility of the company over the near term and, 4) the size and scope of any Congressional assistance program. Moody's stated that in response to the eroding outlook for the industry, most carriers have announced plans to significantly reduce their employment levels and flight schedules. Moreover, it is likely that some carriers to seek bankruptcy protection during the near term in the absence of an effective government bail-out plan. Delta Air Lines, Inc. is headquartered in Atlanta, Georgia. FRUIT OF THE LOOM: UST Calls For Scrutiny Of Proposed Lazard Fee ---------------------------------------------------------------- Joseph J. McMahon, Jr., Esq., on behalf of the U.S. Trustee for Region 3, Patricia A. Staiano, comments on Lazard Freres Reimbursement of Actual and Necessary Expenses Incurred from April 1, 2001 through April 30, 2001. Mr. McMahon tells Judge Walsh that Section 330(a)(3) of the Code provides that, in determining the amount of compensation to be awarded, the court shall consider the nature, the extent, and the value of such services, taking into account all relevant factors, including: (A) the time spent on such services; (B) the rates charged for such services; (C) whether the service was rendered toward the completion of, or beneficial at the time at which the service was rendered toward the completion of, a case under this title; (D) whether the services were performed within a reasonable amount of time commensurate with the complexity, importance, and nature of the problem, issue, or task addressed; and (E) whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than cases under this title. During the interim period covered by the Application, Lazard is seeking $150,000 for 160.5 hours of work, for a blended rate of $934.58/hour. Given that a Lazard Director and Vice-President with a reported 10 and 7 years of business experience, respectively, billed approximately 75% of the total request, the amount of compensation sought warrants scrutiny by the Court. The UST will continue to monitor Lazard's interim compensation requests and may object to Lazard's final fee application on grounds identified in this Comment. (Fruit of the Loom Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-0900) FUTURELINK: US Trustee Appoints Unsecured Creditors Committee ------------------------------------------------------------- The United States Trustee announces that the Official Committee of Unsecured Creditors has been appointed for the chapter 11 cases of FutureLink Corporation, composed of: A. Cathy Thacker of RSA Security 20 Crosby Drive, Bedford, Massachusetts 01730 Tel: (781) 301-5134 B. Ingram Micro 1675 Broadway, New York, New York 10019 Tel: (212) 506-2643 C. Robert Feigen of Benes Brand Imaging 1840 Mass Ave., Lexington, Massachusetts 024204 Tel: (781) 674-2327 H. Sharon Kelly 1441 3rd Ave., #19A, New York, New York 10028 I. Steven W. Oxman of Oxko Corporation 175 Adm. Cochrane Drive, North Lobby, Annapolis, Maryland Tel: (410) 266-1671 J. Nokia, Inc. 313 Fairchild Drive, Mountain View Connecticut 94043-2215 Tel: (650) 625-2758 K. Wendy W. Huang of Olen Commercial Realty 7 Corporate Plaza, Newport Beach, California 92660 Tel: (949) 719-7211 Subsequently, the Committee submits an application to employ and retain Olshan Grondman Frome Rosenzweig & Wolosky LLP to represent it before the Court in FutureLink's chapter 11 cases. GLOBAL TELESYSTEMS: Bank Group Extends Waiver of Defaults --------------------------------------------------------- Global TeleSystems, Inc. (GTS) (OTC:GTLS; NASDAQ EUROPE:GTSG; Frankfurt:GTS) announced that Deutsche Bank, Dresdner Bank and Bank of America (Bank Group), which are providing financing to GTS's Global TeleSystems Europe Holdings B.V. subsidiary, have agreed to further extend the waiver of any defaults under their facility caused by GTS's election to not make interest payments on GTS Europe's publicly-traded debt while the company works toward a debt restructuring plan with bondholders. The current waiver has now been extended through 24 September 2001. On a going forward basis, GTS will only advise investors in the event that such waiver, or any future waivers, are not renewed by the Bank Group. GTS and the Bank Group continue their discussions, aimed at replacing the current financing agreement with a longer-term financing facility. ICG COMMS: Court Allows Debtor to Reject 18 Telecomms Property -------------------------------------------------------------- Judge Walsh granted the ICG Communications, Inc.'s Motion to reject 18 leases of commercial real property used for telecommunications sites. In their motion, the Debtors said they had determined that the said sites were no longer necessary to their operations, or in their best interests to maintain these sites. By rejecting these leases and/or contracts, the Debtors can minimize administrative expenses. The leases which the Debtor seeks to reject are: Address Lessor Lessee/Debtor ------- ------ ------------- 1329 Broad Street Roland Maddalena ICG NetAhead, Inc. Suites D & D1 1329 Broad Street San Luis Obispo, CA San Luis Obispo, CA Clear Creek Office Plaza C. D. Stimson Co. ICG NetAhead, Inc. 10049 Kitsap Mall Blvd. C/o Metzler Realty Adv. Suite 202B 700 Fifth Ave., Ste. 6175 Silverdale, WA Seattle, WA 2918 Colby Avenue Quintet Investments ICG NetAhead, Inc. Suite B101 P. O. Box 5267 Everett, WA Everett, WA 522 N. Colorado St. J. R. Halford ICG NetAhead, Inc. Suite 116 4101 Bear Mountain Rd. Kennewick, WA Chelan, WA 111 SW Columbia Columbia Square LLC ICG NetAhead, Inc. Suite 255 111 SW Columbia, Ste 1380 Portland, OR Portland, OR 1939 Commerce F.R.R. Harmon LLC ICG NetAhead, Inc. Suite 206 1944 Pacific #900 Tacoma, WA Tacoma, WA 343 Main Street Daniel E. Cort ICG NetAhead, Inc. Suites 420 & 421 343 E. Main St., Stockton, CA 10th Fl. Stockton, CA 10637 N.E. Coxley Orchard Center LLC ICG NetAhead, Inc. Suite 202 c/o OPCMC Vancouver, WA 1800 SW First Ave., Ste. 60 Portland, OR 3221 N.W. Yeon Avenue Pacific Realty Assoc. ICG NetAhead, Inc. Bldg. D, Davis Ind. Pk. 15350 SW Sequoia Portland, OR Pkway #300-WPMC Portland OR 9001-9015 Brittany Way Liberty Property LP ICG Equipment Inc. Suite 9001 65 Valley Stream Tampa, Fl Suite 100 Malvern PA 19355 101B Patrick Street Sycon Corporation ICG NetAhead, Inc. Suite B P. O. Box 1701 Frederick, MD Rockville, MD 222 High Street Equity Financial Corp. ICG NetAhead, Inc. Suite 212 and 214 222 High Street Hamilton, OH Hamilton, OH 286 Genesse Street Giavonnone Realty Co. ICG NetAhead, Inc. Suite 1 284 Genesse St. Urica, NY Utica, NY 1160 S. State St. Vista Enterprise ICG NetAhead, Inc. Suite 40 1156 S. State St. Orem, UT Orem, UT 625 57th St. Firstar Facilities ICG NetAhead, Inc. Suite 311 1 South Pinckney Kenosha, WI Suite 305 Madison, WI 550 24th St. Executive Management ICG NetAhead, Inc. Suite 205 550 24th St., Ste 103 Ogden, UT Ogden, UT 15401 Anacapa Rd. Edward L. Friehoff ICG NetAhead, Inc. Suite 2 c/o Desert Stationers Victorville, CA 15401 Anacapa Rd. Victorville, CA (ICG Communications Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) INNOVATIVE CLINICAL: Sells Oncology to Focus On Core Operations --------------------------------------------------------------- Innovative Clinical Solutions Ltd. announced that its Chief Operating Officer - Clinical Studies, Dr. Adrian Otte, has tendered his resignation and the Company has accepted his resignation. Dr. Otte resigned to pursue an opportunity as a senior manager for a major pharmaceutical company. Dr. Otte's resignation was effective September 14, 2001. Gary S. Gillheeney, the Company's Chief Financial Officer will serve as interim Chief Operating Officer - Clinical Studies until a suitable replacement for Dr. Otte can be retained. Sale of Oncology On August 31, 2001, the Company sold certain of its assets, specifically its oncology clinical studies (OCS) network of 23 sites across the country. The Company received $2.5 million in cash for the OCS network and plans to use that cash to focus on its core competencies. Innovative Clinical Solutions, Ltd. (formerly PhyMatrix Corp.) operates two business lines: pharmaceutical services, including investigative site management, clinical and outcomes research and disease management and single-specialty provider network management. The Company began its operations in 1994 and closed the initial public offering of its then existing common stock in January 1996. Its primary strategy was to develop management networks in specific geographic locations by affiliating with physicians, medical providers and medical networks. The Company affiliated with physicians by acquiring their practices and entering into long-term physician practice management agreements with the acquired practices and by managing independent physician associations and specialty care physician networks through management service organizations in which the Company had ownership interests. In order to expand its service offerings and to take advantage of the higher margins resulting from clinical studies, the Company acquired Clinical Studies Ltd. in October 1997. By 1998, the Company had become an integrated medical management company that provided medical management services to the medical community, certain ancillary medical services to As of January 31, 2001, the Company had total current assets of $21.7 million, while its total current liabilities stood at $30.4 million. The Company's short-term debts totaled $9.7 million. INTEGRATED HEALTH: Westhaven Seeks $3.3M Payment on Washoe Lease ---------------------------------------------------------------- Westhaven Reno, LLC seeks to compel Integrated Health Services, Inc. payment of an Administrative Priority Claim for actual damages in the approximate amount of $3,310,000 and interest, plus punitive damages and attorney's and court fees in relation to rejected lease (the Washoe Lease) for a 129 bed nursing facility in Sparks, Nevada, known as the Washoe Convalescent Center. Movant is an assignee of the lease entered into by Westhaven Healthcare Partnership (Westhaven) and Horizon Healthcare in July 1991. IHS 151 assumed Horizon's obligations under the Lease, as amended, and IHS guaranteed the obligations of IHS 151 under the Lease pursuant to agreements dated December 31, 1997. By amendment, the term of the Washoe Lease was extended until June 30, 2004. On July 18, 2000, Debtors filed their Motion for an Order Authorizing the Rejection of Eight Unexpired Leases of Non- Residential Real Property Relating to Certain Skilled Nursing Facilities, which included the Washoe Lease. Westhaven filed a limited objection voicing that any rejection should be conditioned on protective measures to insure an orderly transition of operations. While the motion to reject the Washoe Lease was pending, Westhaven began the due diligence process to find a suitable management company or operator to replace the Debtors upon turnover of the Washoe Facility. In doing so, Westhaven discovered a pattern of acts and omissions on the part of Debtors, which irreparably harmed, if not destroyed the value of the Washoe Facility, especially as an ongoing business enterprise, the Movant tells the Court. In particular, the Movant tells the Court that Westhaven discovered: (1) significant and extensive deferred maintenance, pre- petition and post-petition, which would require at least $300,000 for remedy and repair, and which further resulted in lower occupancy and private pay rates. (2) a history of noncompliance with rules and regulations of governmental agencies, which resulted in the imposition of civil monetary penalties in the approximately amount of $300,000 constituting an assessment or encumbrance against the Washoe Facility because operations cannot be transferred or assumed until these penalties are paid. (3) through a central administrative office, Debtors had apparently begun diverting new residents from the Washoe Facility to other facilities in the vicinity under their own operation. (4) in the process of winding down the operations of the Washoe Facility, Debtors converted supplies, equipment and inventory which was legally owned by Westhaven under the terms of the Washoe Lease. (5) in contravention of covenants in the Washoe Lease and the orders of the Court, Debtors closed the Washoe Facility, transferred all of the residents or patients to their other facilities in the vicinity, and removed equipment, supplies and key personnel. By way of an amended limited objection filed on February 15, 2001, Westhaven advised the Court of the foregoing acts and omissions, which would effectively preclude anyone from assuming operations of the Washoe Facility. The Washoe Lease was subsequently rejected pursuant to the terms of a stipulation between the parties, approved and entered by the Court on May 3, 2001. From the filing date until entry of the stipulation, Debtors had not tendered a postpetition rent payment, the Movant tells the Court. The Movant notes that, under the terms of the stipulation, Debtors paid the administrative rent due but draws the Court's attention to the term in the Stipulation: "Nothing herein shall be construed so as to waive, prejudice or impair any claims or defenses of any of the parties hereto under the [Washoe Lease], except claims by Westhaven ... for administrative rent, the amounts of which are liquidated herein." Accordingly, the movant accuses Debtors of Postpetition Breach of Lease Agreement as follows: (1) conversion of supplies and equipment in contravention of the terms of the Washoe Lease; (2) closure of the Washoe Facility and transferring the residents to other IHS owned, operated or controlled facilities in the area; (3) abandonment of the Washoe Facility by the Lessee in default of the Washoe Lease. (4) committing waste to the Washoe Facility, both intentionally and by their failure to use reasonable care in preserving the property. (5) Negligence in exercising ordinary care so as not to injure the leased property entrusted to their care and possession. (6) Conversion in wrongfully exercising dominion and control over the property in denial of and inconsistent with the rights of Movant, including but not limited to equipment, supplies, inventory and contractual relationships with residents of the Washoe Facility, and in committing a "taking" of the Washoe Facility by the intentional or negligent damage. (7) with respect to Accounting, Movant is entitled to an accounting of all revenue received from patients or residents diverted or transferred to other facilities owned or operated by Debtors. Movant asserts that IHS is liable to it for the numerous breaches of the Washoe Lease pursuant to the terms of its guaranty, and additionally or alternatively, directly liable for its own participation in the decision making, intentional and negligent acts, errors and omissions which proximately caused substantial damage to Movant. IHS is directly liable, Movant asserts, on an alter-ego basis, because IHS exercises actual control over IHS 151 and operates it and hundreds of other subsidiaries as mere instrumentalities, tools or conduits through which IHS conducts its business. Movant further seeks Punitive Damages and Sanctions on the bases that Debtors were not only negligent but grossly negligent, that Debtors commit willful, intentional and malicious acts of waste and conversion which resulted in extensive damage to Movant's interest in the property, and most importantly, Debtors' acts and omissions were committed with apparent disregard for the Court's orders directing them to perform all obligations under the Washoe Lease under section 365(d)(5) of the Bankruptcy Code. Movant asserts that it is entitled to payment of its damages on an administrative priority basis because the diminution and destruction of the value of the Washoe Facility and the value of the converted equipment and supplies are damages resulting from postpetition acts and omissions in flagrant violation of the orders of the Court expressly directing the Debtors to perform all obligations under the Leases and section 365(d)(3) of the Bankruptcy Code, and because Debtors and their estates have been significantly and unjustly enriched by the diversion of the income and revenues from residents transferred to other facilities and the value of equipment, supplies and other assets converted to the Debtors' use and benefit. (Integrated Health Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900) INTERLIANT INC: Over 75% of Noteholders Approve Restructuring ------------------------------------------------------------- Interliant, Inc. (Nasdaq:INIT), a leading global application service provider (ASP), announced progress in its negotiations with note holders to restructure the debt from a February 2000 7% Convertible Notes issue, which has an aggregate face amount of $164.8 million. After discussions with a small number of note holders representing more than 75 percent of the outstanding principal value of the Notes, Interliant believes it can achieve a restructuring of substantially all of its debt represented by the Notes on or about October 31, 2001. Interliant also announced that it is in default of the terms of the Notes and related Indenture due to the fact it did not make the interest payment due under the Notes within the grace period that ended September 15, 2001. However, the note holders with whom Interliant has been negotiating have agreed not to take any action with respect to such default until at least October 31. While there is no assurance that the balance of the note holders or the Trustee of the Indenture similarly will take no action regarding such default, Interliant believes they will not, given the discussions to date with the note holders and the Trustee. While the negotiations with the bondholders are ongoing, the company anticipates no impact on its ability to continue with its operations and execute its business plan while serving its more than 60,000 customers. "We believe we have made significant progress towards completing this restructuring," said Bruce Graham, Interliant's president and CEO. "We anticipate we will be stronger financially and far better positioned for continued growth, with considerably reduced debt, thereby enabling us to carry out our business plan." Interliant, Inc. (Nasdaq:INIT) is a leading global application service provider (ASP) and pioneer in the ASP market. Interliant's INIT Solutions Suite includes managed messaging, managed hosting, security, Web hosting (Branded Solutions/OEM and retail), and professional services. Interliant, headquartered in Purchase, NY, has forged strategic alliances with the world's leading software, networking and hardware manufacturers including Microsoft (Nasdaq:MSFT), Dell Computer Corporation (Nasdaq:DELL), Oracle Corporation (Nasdaq:ORCL), Verisign/Network Solutions (Nasdaq:VRSN), IBM (NYSE:IBM), Sun Microsystems Inc. (Nasdaq:SUNW), and Lotus Development Corp. For more information about Interliant, visit http://www.interliant.com KMART CORPORATION: Sales Decline 0.9% In 3 Months Ended Aug. 1 -------------------------------------------------------------- Kmart's sales decreased 0.9% and increased 0.4% for the 13 and 26 weeks ended August 1, 2001, respectively, versus the same period of the previous year. Comparable store sales increased 1.0% and 1.3% for the 13 and 26 weeks ended August 1, 2001, respectively. Divisions showing particular strength on a year-to-date basis included pharmacy, beauty and health care, home entertainment and food and consumables. The Company opened 12 stores and closed 4 stores during the 26 weeks ended August 1, 2001. Net loss for the thirteen weeks ended August 1, 2001, was $(95), as compared to a net loss of $(448) in the same period of 2000. The twenty-six week period ended August 1, 2001 saw a net loss of $(120), as compared to the net loss of $(426) for the same period in the year 2000. * * * Fitch has rated Kmart Corporation's proposed $400 million issue of senior notes `BB+'. The proceeds of the proposed issue would be used to prepay $260 million of commercial mortgage pass-through certificates, and the balance to repay borrowings under its credit facilities. The Rating Outlook is Stable. The rating reflected the company's weakened operations and competitive position balanced against the expectation for improvement as the company makes continued progress in implementing its strategic initiatives. Kmart Corporation is a near-$40 billion company that serves America with more than 2,100 Kmart and Kmart Supercenter retail outlets and through its e-commerce shopping site http://www.bluelight.com LAIDLAW INC: Court Approves Cross-Border Protocol Implementation ---------------------------------------------------------------- Judge Kaplan granted Laidlaw Inc. and its affiliates the final approval to implement its proposed cross-border insolvency protocol. The implementation of the procedural protocol between the New York Bankruptcy Court and the Ontario Superior court of Justice in Toronto, Canada, is deemed necessary to address certain administrative issues expected to arise in coordinating the insolvency proceedings. Together, the insolvency proceedings involve the restructuring of six affiliated debtors and impact the rights of numerous creditors and interested parties in the United States, Canada and other jurisdictions. Moreover, Laidlaw Inc., a Canada corporation and the ultimate parent corporation of the other Debtors, and Laidlaw Investment Ltd., an Ontario corporation, each a debtor in both the United States and Canadian cases, may be required in certain instances to seek relief jointly in this court and the Canadian court. As a result, an administrative protocol is required to ensure that: (a) the United States cases and the Canadian cases are coordinated to avoid inconsistent, conflicting or duplicative activities; (b) all parties are adequately informed of key issues in both insolvency proceedings; (c) the substantive rights of all parties are protected; and (d) the jurisdictional integrity of each court is preserved. The protocol is designed to achieve these various objectives by implementing a framework of general principles to address the basic administrative issues arising out of the cross-border nature of the insolvency proceedings. In particular, the protocol is designed to achieve three goals: * First, the protocol is designed to harmonize and coordinate activities in the insolvency proceedings before the New York and Canadian courts, thus promoting the orderly and efficient administration of these proceedings. Such coordination is essential and will, among other things, maximize the efficiency of the insolvency proceedings, reduce costs associated with them and avoid duplication of effort. * Second, the protocol is designed to (a) honor the integrity and independence of the insolvency Courts and other courts and tribunals of the United States and Canada, and (b) promote international cooperation and respect for comity among the Courts. * Finally, by providing for appropriate notice to all key constituencies of matters arising in both insolvency proceedings, an opportunity for all parties in interest to be heard in both courts, and the express preservation of all parties' substantive rights, the protocol is designed to facilitate the fair, open and efficient administration of the insolvency proceedings for the benefit of all of the Debtors' creditors and parties in interest, wherever located. To ensure that the protocol will appropriately resolve the key administrative issues in the insolvency proceeding, and protect the rights and interests of all interested parties, the terms of the protocol were developed jointly by counsel to the Debtors and counsel to the Canadian debtors. The principal terms of the protocol are: (a) Comity and Independence of the Courts. The protocol expressly preserves the independent jurisdiction and sovereignty of this Court and the Canadian Court. (b) Cooperation. The protocol provides that: (i) the Debtors and the Committee will cooperate with each other in coordinating the administration of the United States cases and the Canadian cases, and subject to overriding principles of comity and independence, the Courts will use their best efforts to coordinate activities in the insolvency proceedings. (c) Retention and Compensation of Professionals. The protocol generally preserves the independent jurisdiction of each court over the retention and compensation or professionals in the respective insolvency proceedings. Under the terms of the protocol, this Court generally will have sole and exclusive jurisdiction over the retention and compensation of any professional retained by the Debtors or the Noteholders' Committee. Likewise, the protocol provides that the Canadian court generally will have sole and exclusive jurisdiction over the retention and compensation of any professional retained by the Canadian debtors or any committee for activities performed in connection with the Canadian cases. (d) Notice. Under the protocol, notice of any motion, application or other pleading or paper filed in the insolvency proceeding, and notice of any related hearings or other proceedings mandated by applicable law will be given to: (i) all creditors and other interested parties in accordance with the practice of the jurisdiction where the papers are filed or the proceedings are to occur, and (ii) to the extent not otherwise entitled to receive notice, counsel to the committee, the United States trustee, and such other parties as may be designed by either court. (e) Joint Recognition of Stays of Proceedings under the Bankruptcy Code and the Canadian Companies' Creditors Arrangement Act Order. To preserve the Debtors' estates for the benefit of all stakeholders, the protocol provides that each Court will extend and enforce the applicable stays of proceedings established under the laws of the jurisdiction of the other court. In particular, the protocol provides that: (i) this Court will extend and enforce the stay of proceedings and actions against the Canadian debtors, their directors and their assets under the CCAA Order sought by the Debtors to determine that LINC and LIL are entitled to seek relief under the CCAA, and grant certain other relief necessary to preserve the value of their estate and business, in the United States to the same extent that such stay of proceedings and actions is applicable in Canada, and (ii) the Canadian court will extend and enforce the stay of proceedings and actions against the Debtors and their assets under the Bankruptcy Code in Canada to the same extent that such stay of proceedings and actions is applicable in the United States to prevent adverse actions against the assets, rights and holdings of the Debtors in Canada. (f) Effectiveness and Modification. The protocol provides it (i) will become effective only upon approval by both this Court and the Canadian court, and (ii) subsequently may be modified upon approval by both this Court and the Canadian court after appropriate notice to interested parties. (g) Preservation of Rights. To preserve all parties' substantive rights in the insolvency proceedings, the protocol expressly provides that neither the terms of the protocol nor any actions taken under the terms of the protocol will prejudice or affect the powers, rights, claims and defenses of the Debtors or other parties in interest under applicable law, including the Bankruptcy Code and the CCAA. (Laidlaw Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) LEISURE TIME: Andre Hilliou Appointed as New President and CEO -------------------------------------------------------------- Leisure Time Casinos & Resorts, Inc. (OTC Bulletin Board: LTCR) announced a major step in the reorganization of the Leisure Time that is currently under Chapter 11 bankruptcy protection. Mr. Andre' Hilliou was appointed President and CEO of Leisure Time. Mr. Hilliou brings over 20 years of experience in the gaming industry to Leisure Time. He replaces Mr. Alan Johnson who had previously resigned his positions as a Director and as the Chairman, President and CEO of Leisure. Mr. Hilliou was previously appointed a director and Chairman of the Leisure Time. At the Board meeting held by teleconference September 4, 2001 Ken Adams and James Hall were appointed to the Board and the resignations of Richard Sly, Lester Bullock and Gerald Boyle as directors were accepted. Ken Adams is the principal in a gaming consulting firm, Ken Adams and Associates. Formed in 1990, the company specializes in information, analysis and strategic planning for Native American Tribes, Casino operations and Gaming manufacturers. He is a member of the Executive Committee and President of the Downtown Improvement Association in Reno, Nevada and has served on several gaming, educational and advisory boards. Mr. Adams is currently a partner in Johnny Nolan's Casino in Cripple Creek, Colorado. James L. Hall graduated from VPI & SU with a BS in Business in 1963. He served in the United States Air Force as a supply and Services officer where he attained the rank of Captain. Mr. Hall worked for AT&T and Bell Atlantic for 25 years. His last position before retirement was Director of Operations for the Southern Division. Mr. Hall served as a Director and Chairman of the Audit Committee for American Bingo & Gaming and is currently President and Director of Southwestern Telco Federal Credit Union. >From 1998 through 1999 Mr. Hilliou served as CEO of American Bingo and Gaming located in South Carolina, and from 1996 through 1997 he was CEO of Aristocrat, Inc. of Reno, NV. From 1986 until 1996 Mr. Hilliou was employed with Showboat, Inc. of Las Vegas, NV achieving the position of CEO of Showboat Australia in 1994. Mr. Hilliou stated, "I look forward to the opportunity to move Leisure Time into a position of leadership and strength within the regulated gaming market as well as adding value for our creditors. We will immediately begin actively seeking licenses in several key markets where we believe our current array of games can find immediate market acceptance. We plan on introducing our superior products in new markets as well as developing new games which should help Leisure Time obtain a significantly larger share of the regulated markets." On March 16, 2001 Leisure Time Casinos & Resorts, Inc. and Leisure Time Technology, Inc., one of its subsidiaries, filed with the United States Bankruptcy Court, Northern District of Georgia, Atlanta Division to seek protection under Chapter 11 of the Bankruptcy Code. At this time, Leisure Time and its subsidiary are still under Chapter 11 protection. Leisure Time is a diversified gaming company that develops, manufactures and sells multi-game, touchscreen video gaming machines and software upgrades. Leisure Time also generates recurring revenue via its recent entrance into the video pulltab market. LERNOUT & HAUSPIE: Moves to Sell Certain Assets to Dictaphone ------------------------------------------------------------- Lernout & Hauspie Speech Products N.V., a world leader in the development of technologies relating to computerized speech recognition and production, files a motion to sell certain assets to Dictaphone Corporation and execution of a license agreement in conjunction with the foregoing sale. The price contemplated for the asset sale is $16,165,000 and, in addition, the license agreement stipulates that Dictaphone will pay L&H $3,350,000 for up-front license fees. Included in the assets to be sold to Dictaphone are the assets related to PowerScribe, Computer Based Medicine (CBM), & Clinical Language Understanding (CLU) technologies, and the rights and title in the Clinical Reporter assets. Excluded in the asset sale are the receivables relating to the respective assets to be sold. The agreement also stipulates that L&H grant licenses and rights for Dictaphone to use L&H's intellectual property in MREC Speech Recognition Engine, MREC Language and Acoustic Model Building Tools, MREC data, Clinical Reporter Product, ISE and CLU Data. LITTLE SWITZERLAND: Additional Capital Needed to Ensure Survival ---------------------------------------------------------------- Little Switzerland Inc. has had substantial operating losses in its recent fiscal years. For the fiscal years ended May 26, 2001, May 27, 2000 and May 29, 1999, the Company's net losses were approximately $7.6 million, $15.5 million and $11.1 million, respectively. If the Company is unable to generate sufficient revenue from operations to cover its costs, its business, financial condition and results of operations will be materially and adversely affected. The Company requires additional capital to finance its growth and working capital needs. The Company can provide no assurance that it will obtain additional financing sufficient to meet its needs on commercially reasonable terms or otherwise. Little Switzerland's revenues depend upon tourism in the Caribbean and Alaska. During periods of economic slowdown, fewer tourists may travel to these destinations and those who do may make fewer purchases of luxury items. Tourist travel to these destinations depends upon the development of cruise ship, airline and hotel operations, the continued attractiveness of the Caribbean and Alaska compared to other leisure travel destinations and the efforts of local governments to promote tourism. Other factors such as poor weather, airline strikes, political and economic instability in the Caribbean and the availability of duty-free shopping could also affect tourism. Net sales for fiscal 2001 were $56.3 million, an increase of $1.25 million, or approximately 2.3%, from $55.0 million in fiscal 2000. Net sales in comparable stores increased $5.9 million, or approximately 11.7% in fiscal 2001, compared to fiscal 2000. Gross profit as a percentage of net sales was 43.7% in fiscal 2001 compared to 35.1% for fiscal 2000. In both the current and the prior year, the Company took write-downs in connection with slow-moving merchandise. The Company recorded a write-down in fiscal 2001 of $1.0 million compared to a $1.3 million write- down in fiscal 2000. These adjustments were taken to liquidate older, slow-turning merchandise, which may be sold to a third party liquidator for immediate cash. Excluding these charges, the gross profit percentage in fiscal 2001 and fiscal 2000 would have been 45.4% and 37.5%, respectively. The Company focused on stabilizing margins in fiscal 2001 through controlled discounting and leveraging marketing tools to drive traffic into stores. In prior years, the Company relied heavily on clearance sales to generate cash. As a result of the above, there was a net loss for fiscal 2001 of $7.6 million compared to a net loss of $15.5 million for fiscal 2000. MARINER POST-ACUTE: Treatment of Claims Under MHG Amended Plan -------------------------------------------------------------- The Plan for Mariner Post-Acute Network, Inc. provides for the distribution of cash, securities and other property in respect of certain Classes of Claims as summarized below. No distributions will be made to holders of Class G MPAN Claims, Class H Punitive Damage Claims, Class I Securities Litigation Claims or Class J Equity Interests. Description /Entitlement Class to Vote Treatment ----- ------------ --------- A Priority Non- Except to the extent that a holder of Tax Claims an Allowed Priority Non-Tax Claim Unimpaired. against any of the Debtors has agreed Not entitled to a different treatment of such Claim, to vote each such holder will receive, in (deemed to full satisfaction of such Claim, accept) Cash in an amount equal to such Claim. B Mortgage Except to the extent that a holder of a Claims Mortgage Claim against any of the (Subclasses B1 Debtors has agreed to a different - B9) treatment of such Claim, each holder Impaired. of a Mortgage Claim will receive, Entitled to in full satisfaction of such Claim, Vote either (i) (i) New Senior Notes in an amount specified in the Plan or (ii) such other treatment as the Court may determine; provided that if the Bankruptcy Court determines that the Allowed amount of such Claim is greater than the amount set forth in the Plan, or the Plan Proponents determine, in the sole discretion, not to provide the treatment dictated by the Court, the Plan Proponents reserve the right to return the Collateral securing such Allowed Mortgage Claim. C Other Secured Except to the extent that a holder of an Claims Allowed Other Secured Claim against any (Subclasses B1 of the Debtors has agreed to a - B10) different treatment of such Claim, Impaired. each holder of an Allowed Other Entitled to Secured Claim will receive, in full Vote satisfaction of such Claim, at the option of the Plan Proponents either (i) the Collateral securing such Allowed Other Secured Claim, (ii) Cash in an amount equal to the amount of such Allowed Other Secured Claim, (iii) a new secured promissory note with the terms specified in the Plan; or (iv) such other treatment as will leave the holder unimpaired according to section 1124 of the Bankruptcy Code. D Senior Bank The Senior Bank Claims shall be deemed Claims (and Allowed in the aggregate amount of Intercompany approximately $440,000,000. Except to Claims against the extent that a holder of an Allowed Subsidiary Senior Bank Claim against any of the Debtors) Debtors has agreed to a different Impaired. treatment of such Claim, each holder Entitled to of a Senior Bank Claim will receive Vote. its Ratable Proportion of (i) Excess Cash, (ii) New Senior Notes in an amount equal to the difference between $100 million and the aggregate amount of Cash distributed on or prior to the Effective Date on account of the Senior Bank Claims (including any Excess Cash distributed on the Effective Date); (iii) the APS Proceeds (which shall constitute a mandatory prepayment on the Senior Bank Claim holders' New Senior Notes); (iv) $48 million in New Subordinated Notes; (v) 80,000 shares of New Common Stock, representing 100% of the New Common Stock to be initially issued by Reorganized MHG (subject to dilution by the issuance of New Common Stock to New Management); and (vi) any distributions otherwise payable to holders of the Subordinated Note Claims to the extent such subordination rights are not waived pursuant to Section 5.5 of the Plan. E-1 General Except to the extent that a holder of an Unsecured Allowed General Unsecured Claim against Claims any of the Debtors has agreed to a Impaired. different treatment of such Claim, Entitled each holder of an Allowed General to vote. Unsecured Claim will receive, in full satisfaction of such Claim, its Ratable Proportion, in Cash, of the GeneraL Unsecured Fund, which will consist of the lesser of (a) $7,500,000 or (b) the amount necessary to fund a 5% distribution to holders of Allowed Class E-l Claims and Allowed Class E-2 Claims. E-2 Non-MPAN Except to the extent that a holder of Subordinated an Allowed Non-MPAN Subordinated Note Note Claims Claim has agreed to a different Impaired. treatment of such Claim, each holder Entitled of a Non-MPAN Subordinated Note to vote. Claim will receive, in full satisfaction of such Claim, such holder's Ratable Proportion of the General Unsecured Fund if, but only if, the Plan is accepted by Class E-2 and such holder does not vote to reject the Plan. F United States Each holder of a United States Claim Claims will, in full satisfaction of such Impaired. Claim, be treated according to the Entitled terms of a settlement agreement, as to vote. contemplated in Section 9.1(c) of the Plan; provided that, if no settlement agreement is reached, under Section 7.7 of the Plan the Plan Proponents or Reorganized MHG may seek to have the Bankruptcy Court conclusively estimate and limit such Claims, and will, according to Section 4.7 of the Plan, satisfy such Claims by a distribution of 5% of each Allowed Claim if by Final Order of the Court such Claims are determined to be unsecured Claims, or such treatment as is afforded by the Plan to a Secured Claim, Administrative Expense Claim, or cure amount to the extent the United States Claims are determined by Final Order to fall within such Class. G MPAN Claims MPAN shall neither receive nor retain Impaired. any property or interest in property Not entitled under the Plan on account of any to vote. Claims it may hold against any of the (deemed to Debtors, including without reject) limitation Subordinated Note Claims. H Punitive Each holder of a Punitive Damage Claim Damage Claims. against any Debtor will neither Impaired. receive nor retain any property or Not entitled interest in property under the Plan on to vote. account of such Claim. (deemed to reject) I Securities Each holder of a Securities Litigation Litigation Claim against any Debtor will neither Claims receive nor retain any property or Impaired. interest in property under the Plan on Not entitled account of such Claim. to vote. (deemed to reject) J Equity Each holder of an Equity Interest shall Interests neither receive nor retain any property Impaired. or interest in property under the Plan Not entitled on account of such Equity Interest. to vote. (deemed to reject) (Mariner Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900) METROMEDIA FIBER: Gets Extension on $150 Million Note Facility -------------------------------------------------------------- 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 received an extension of the secured note purchase agreement for the $150 million note facility led by Citicorp, USA. As extended, the note purchase agreement will terminate on October 1, 2001 if the closing has not occurred on or prior to such date. In connection with the extension the obligations of the note purchasers to purchase the notes are now subject to the following additional conditions: - The destruction of the World Trade Center on September 11, 2001 and the collapse of the neighboring buildings and market disruptions as a consequence thereof (and any damage that may have been caused to the fiber-optic networks of the Company and its subsidiaries in that area) will not result in a material adverse effect on the business, assets, results of operations, financial condition or liabilities of the Company and its subsidiaries. - Subsequent to September 6, 2001 no adverse change in financial, banking or capital market conditions will have occurred that, in the judgment of the note purchasers, could materially impair the ultimate syndication or distribution of commitments or notes issued under the note purchase agreement or otherwise render the purchase of the notes inadvisable. The Company also announced that it has received an extension until September 19, 2001 of the commitment letter for $235 million of vendor financing and an extension until September 21, 2001 of a commitment from an investor for a $50 million convertible debt investment. The Company cannot provide any assurances that it will be able to consummate any of the financings it is pursuing. Each of the financings (including the $180 million convertible debt investment by certain of the Company's affiliates) 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. For more information about Metromedia Fiber Network, please visit the company's Web site at http://www.mmfn.com NATIONWIDE COMPUTERS: Committee of Unsecured Creditors Appointed ---------------------------------------------------------------- The United States Trustee appoints the Official Committee of Unsecured Creditors in the Chapter 11 case of Nationwide Computers & Electronics, Inc. (pending before the U.S. Bankruptcy Court for the Southern District of New York), made up of: A. John Smallwood of Hitachi America Ltd. 1855 Dornoch Court, San Diego, California 92154 B. Nick Talisma of Thomson Multimedia, Inc. 10330 N. Meridian Drive, Indianapolis, Indiana 46290 C. James L. Benedict of Newark Morning Ledger Co. One Star-Ledger Plaza, Newark, New Jersey 07102-1200 D. Sakar International 195 Carter Drive, Edison, New Jersey 08817 E. Merisel America, Inc. 200 Continental Blvd., El Segundo, California 90245-4510 F. Actech Group, Inc. 67 Mall Drive, Commack, New York 11725 G. Richard Colefield of Olympus America, Inc. 2 Corporate Center Drive, Melville, New York 11747 The Committee is represented in the chapter 11 cases by Traub, Bonacquist & Fox LLP in New York, New York, as its counsel. In addition, the Committee retained Davis Graber & Nasberg LLP as its accountants and financial advisors. NORTHWEST AIRLINES: Fitch Places BB+ Debt on Watch Negative ----------------------------------------------------------- In the aftermath of last week's terrorist attacks, Fitch has placed the debt of Northwest Airlines, Inc. on Rating Watch Negative. This rating action affected all of its rated debt obligations, including securitized aircraft transactions. Northwest Airlines, Inc. (current Fitch unsecured debt rating-- `BB+'): Northwest Airlines faces a similarly difficult cash flow situation. After drawing on its $1.1 billion credit facility, the company now has a cash balance of $2.6 billion. Northwest is in a position to immediately park a large number of high-cost older aircraft, and the company has already announced plans to reduce jobs and pull back capacity in response to slowing business traffic. Given the large number of new aircraft deliveries that Northwest is expected to take by 2006, the airline may elect to work with both Boeing and Airbus to defer the arrival of new aircraft. * * * At June 30, 2001, the Company had cash and cash equivalents of $1.30 billion and borrowing capacity of $1.12 billion under its revolving credit facilities, providing total available liquidity of $2.42 billion. Net cash provided by operating activities for the six months ended June 30, 2001 was $259 million, a $431 million decrease compared with the six months ended June 30, 2000, due primarily to decreased operational performance. Investing activities in the six months ended June 30, 2001 consisted primarily of the January sale of 6.7 million shares of Continental Class A Common Stock held by the Company for $450 million and the subsequent sale of the remaining shares of Continental Class B Common Stock held by the Company for $132 million, partially offset by the purchase of eight Airbus A319 aircraft, one Boeing 757-200 aircraft, costs to commission aircraft before entering revenue service, aircraft modifications and aircraft deposits. Investing activities in the six months ended June 30, 2000 consisted primarily of the purchase of seven AVRO RJ85 aircraft and six Airbus A319 aircraft, costs to commission aircraft before entering revenue service, aircraft modifications and aircraft deposits, partially offset by the sale of a portion of the Company's investment in priceline.com Financing activities in the six months ended June 30, 2001 consisted primarily of the Company's draw in March and subsequent repayment in May of $1.095 billion under its revolving credit facilities, the issuance of $300 million of 8.875% unsecured notes due 2006, the financing of eight Airbus A319 aircraft, seven of which were financed with funds from pass-through certificates and one with long-term bank debt, and the payment of debt and capital lease obligations. Financing activities for the six months ended June 30, 2000 consisted primarily of the sale and leaseback of ten Airbus A319 aircraft and three AVRO RJ85 aircraft and payment of debt and capital lease obligations. In addition to the purchased aircraft discussed above, the Company took delivery of ten Bombardier CRJ200 aircraft during the six months ended June 30, 2001. These aircraft were financed with long-term leveraged operating leases provided by the manufacturer. In June 2001, the Company completed an offering of $581 million of pass-through certificates due in 2022 at a blended fixed coupon rate of 7.18% to finance the acquisition of nine new Airbus A319 aircraft, three new Boeing 757-300 aircraft and two new Boeing 747-400 aircraft scheduled to be delivered from February 2002 through October 2002. In June 2001, the Company completed an offering of $396 million of floating rate European Enhanced Equipment Trust Certificates due in 2013 at a blended floating rate of 60 basis points over LIBOR (initially set at 4.45%) to finance the acquisition of nine new Airbus A319 aircraft and five new Airbus A320 aircraft scheduled to be delivered from November 2001 through July 2002. The cash proceeds from the two issues of certificates are invested and held in escrow with a depositary bank and enable the Company to finance the acquisition of these aircraft through secured debt financing. If leveraged leases are obtained for these aircraft, under which the aircraft will be sold and leased back to Northwest, the pass-through certificates will not be direct obligations of the Company or Northwest. The current aircraft delivery schedule provides for the acquisition of 108 aircraft over the next five years, all with committed financing. In the second quarter, the Company completed two long-term airport bond financings of $136 million and $64 million related to airport improvements in Minneapolis/St. Paul and Seattle, respectively. These financings were for periods of 25 and 29 years at fixed rates of 7.27% and 7.49%, respectively, and will be recorded as other property and equipment and long-term obligations under capital leases when the funds are drawn for construction purposes. OWENS CORNING: Seeks Approval of Hartford Claims Compromise ----------------------------------------------------------- Owens Corning files a motion for approval of the compromise of claims with Hartford Steam Boiler Inspection and Insurance Company. J. Kate Stickles, Esq., at Saul Ewing LLP in Wilmington, Delaware discloses that in 1993, the Debtors purchased the Sierra-at-Tahoe ski resort in California. Ms. Stickles adds that the resort utilized three high-speed detachable ski lifts which posed unacceptable risks of catastrophe. In addition, state regulatory agency ordered one of the lifts closed until appropriate repairs were made. Ms. Stickles relates that a specialist employed to examine the problem recommended the closing of the lifts. The consultant also concluded that repairing the lifts is not feasible and that would have to be replaced. Ms. Stickles relates that the problems associated with the lifts caused the resort to suffer significant lost revenue as a result of the shut down in the middle of the 1996-97 ski season and incur additional costs associated with the demolishing and replacement of the lifts. As a result of the losses, Ms. Stickles reveals that the Debtors tendered insurance claims with Hartford and five other insurers which all denied the Debtors claims. The Debtors then commenced Court action against the insurers but the Courts granted summary judgment in favor of the insurers. The Debtors then appealed the decision with the Court of Appeals, which ruled in favor of the other insurers as well. The appeal against Hartford is still pending with the Court of Appeals but the Debtors feel that the Court will likely rule in favor of the insurer as well. As a result, in order to avoid further expense in prosecuting the appeal, the Debtors and Hartford agreed to settle the appeal. Under the terms of the settlement, Hartford agreed to pay the Debtors $40,000 and both sides agreed to waive any claims for costs related to the Hartford appeal. The Debtors submits that the settlement is in the best interests of their estates and creditors given the uncertainties of continued litigation. (Owens Corning Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC GAS: Will Assume Amended PPA with Oildale Energy LLC ------------------------------------------------------------ Pursuant to an Order of the Court governing the amendment and assumption of Power Purchase Agreements with QFs, Pacific Gas and Electric Company gives Notice, dated August 24, 2001 of its intention to amend and assume, the Power Purchase Agreement of the Qualifying Facility Oildale Energy, LLC, pursuant to 11 U.S.C. Section 365 and Rules 6006 and 9019 of the Federal Rules of Bankruptcy Procedure: Oildale operates a co-generation facility identified by PG&E Log No. 25C170. Oildale and PG&E are parties to a PPA, which provides for the purchase of power by PG&E from Gaylord. Prior to the commencement of its bankruptcy case, PG&E failed to pay in full the amounts due under the PPA between PG&E and Oildale, Inc., resulting in pre-petition claims for payment to Oildale in the amount of $10,515,842.81 (the Pre-Petition Payables). PG&E now proposes to enter into an Agreement to assume the PPA on terms including but not limited to: (1) PG&E's increase of the amounts payable to Oildale to $11,015,842.81 (the "Payables"), excluding interest thereon, in consideration of various waivers set forth in the Assumption Agreement, including Oildale's waiver of: (a) its right to assert claims to recover "pecuniary loss" damages in connection with assumption of the PPA pursuant to Bankruptcy Code section 365(b)(1)(B); (b) any right to assert claims from any alleged breach of the PPA arising from non-payment by PG&E prior to the Effective Date of this Agreement, including but not limited to claims arising from Oildale's asserted force majeure claim; and (c) its right to assert claims to receive the difference between the market price and the contract price for energy and capacity delivered to PG&E from and after April 6, 2001 through August 31, 2001, the effective date that PG&E assumes the PPA, pursuant to Bankruptcy Code sections 365 and 503(b); and (2) PG&E' s payment of: (a) $2,203,168.56 to Oildale, within five business days following the later of (i) the Term Commencement Date or (ii) the date on which Oildale's option to terminate the Assumption Agreement under Section 1.3 thereof expires or is waived in writing by Oildale (the "Option End Date"); and (b) $220,316.86 on the thirtieth day of each month beginning with the first full month following the later of the Term Commencement Date and the Option End bate until the Cure Amount is paid in full. (Pacific Gas Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) RELIANCE GROUP: Lays-Out Dynamics of RIC Tax Allocation Pact ------------------------------------------------------------ Andrew N. Berg, Huey-Fun Lee and Vadim Mahmoudov, on behalf of Reliance Group Holdings, Inc., explain to the Bankruptcy Court how the Tax Allocation Agreement between RIC and RGH works and relates details about the series of payments for the tax year 2000. The Agreement provides that RIC calculates its federal income tax liability on a stand-alone basis- i.e. as if RIC were not part of a consolidated group with RGH. RIC then makes tax payments to RGH as if RGH were the IRS for periods in which RIC has a stand-alone federal income tax liability. RIC is entitled to refunds from RGH for periods in which RIC would have been entitled to refunds from the IRS on a stand- alone basis. Generally, a corporation with a calendar year as its taxable year is required to make quarterly estimated income tax payments to the IRS with respect to each taxable year on April 15, June 15, September 15, and December 15. Pursuant to the Agreement, RIC was required to make quarterly estimated income tax payments to RGH (instead of the IRS) with respect to each taxable year. Over the years, RIC generally computed the quarterly estimated income tax payments payable by RIC to RGH on the basis of estimated tax information for the full taxable year available as of the date of the estimated tax payment. As a result, certain significant events, for example loss reserve strengthening in the aggregate of approximately $815,300,000, which occurred during the year 2000 subsequent to the dates of the payments discussed herein, were not taken into account in determining the payments discussed herein. As of January 1, 2001, RGH owed RIC $203,747,000 under the Agreement. During the first quarter of 2000, RIC generated significant income through sales of stock in Symbol Technology and anticipated a significant amount of additional income on the account of the imminent sale of the Reliance Surety business. Consequently, RIC was expected to owe to RGH under the Agreement an amount far in excess of the $203,747,000 outstanding tax receivable from RGH. For that reason, RGH retained the tax refund of $45,651,000 it received from the IRS on April 3, 2000. On June 23, 2000, based upon information available at that time, RIC estimated that its tax liability under the Agreement exceeded the $203,747,000 outstanding tax receivable from RGH by more than $50,000,000. Accordingly, on June 23, 2000, RGH offset RIC's $203,747,000 tax receivable from RGH against RIC's estimated federal income tax sharing liability under the Agreement and received a $50,000,000 cash payment from RIC. On June 23, 2000, the IRS sent RGH a notice of tax due of $17,764,000 against the RGH consolidated tax group. Since tax projections at that time continued to show a tax liability for RIC at year end, RIC paid to RGH $26,383,000, which was RIC's liability (computed on a stand-alone basis) as a result of the adjustments contained in the IRS assessment. This payment was made on July 12, 2000. RGH immediately paid $17,764,000 to the IRS. In mid-August, 2000, and in late October, 2000, RIC strengthened its loss reserves by $484,900,000 with respect to its second quarter operations and in the amount of $330,400,000 to its third quarter operations, respectively. As a result of the loss reserve strengthenings, RIC is now projected to have a taxable loss for the year 2000 and RIC will as a result have a tax receivable from RGH of approximately $268,000,000 as of December 31, 2000. (Reliance Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) SOURCE MEDIA: Pressed to Restructure Balance Sheet By Year-End -------------------------------------------------------------- Monetary revenues of Source Media Inc. decreased 34% to $3.1 million for the three months ended June 30, 2001 from $4.6 million for the same period in 2000. The decrease was primarily driven by $1.3 million of decreased advertising sales, advertising services and systems management sales primarily due to the Company's exiting the FOB advertising and internet advertising businesses and $0.4 million of decreased information services revenue from the same period in the prior year. These decreases were partially offset by $0.2 million of increased revenue from new content product sales over the same period in 2000. Monetary revenues decreased 26% to $6.8 million for the six months ended June 30, 2001 from $9.1 million for the same period of 2000. This decreased is primarily due to decreases of $2.0 million in advertising sales, advertising services and systems management sales primarily due to the same causes as listed above, plus decreased revenue of $0.7 million in information services offset by an increase of $0.4 million in revenue from new content product sales over the same period in 2000. Source Media continues to experience substantial operating losses and net losses as a result of its efforts to develop, deploy and support its IT Network business and to develop, conduct trials and commercially launch its Interactive TV business. The Company has reported both an operating loss and a net loss each year since inception, including an operating loss of $3.3 million and a net loss attributable to common stockholders of $11.4 million for the six months ended June 30, 2001. As of June 30, 2001, Source Media had an accumulated deficit of $224 million and had used cumulative net cash in operations of $120.5 million; $5.0 million of cash was used in operating activities for the six months ended June 30, 2001. The difference at June 30, 2001 between the accumulated deficit and cumulative net cash used in operations reflects nonmonetary charges. The Company did not make its interest payment of $5.3 million due on May 1, 2001, triggering a default on its Notes. As a result of its continued default on the Notes, the indenture trustee of the Notes declared the entire unpaid principal amount of the Notes in the amount of $88.5 million and all accrued interest due and payable immediately. Accordingly, the entire face amount of the outstanding Notes has become a current liability. The Company has engaged financial advisors to help it evaluate strategic alternatives, including possible merger, sale of assets and restructuring its balance sheet. Source Media is cooperating with the holders of the Notes who have formed an informal committee as the Company works through this process. Source Media indicates that it will continue to incur significant operating losses through 2002. In addition, the Company will be required to make additional capital contributions to SourceSuite to continue its operations. Since the indenture trustee has accelerated the Notes, the consent of the holders of the Notes is required for the Company to use the proceeds from a sale of all or part of its Liberate shares. On August 13, 2001, the unofficial committee of the holders of the Notes and the Company agreed in principle that the Company would sell its 886,000 shares of Liberate common stock over the next few months. The proceeds of the sale, with the exception of $2 million, are to be placed into an escrow account for the benefit of the Company and the Note holders, on terms subject to further discussion. The funds that are not placed into the escrow account will be added to the cash available to the Company to fund its activities and for investment in SourceSuite. The Company and Insight have determined to commit aggregate financing to SourceSuite of $1.6 million ($0.8 million each), to be advanced in increments through the balance of 2001. Source Media says it believes its current capital resources will be sufficient to fund aggregate capital expenditures and working capital requirements, including operating losses, through December 2001 as it evaluates its strategic alternatives. If it is unable to successfully restructure its balance sheet prior to December 31, 2001, it may be very difficult for the Company to obtain sufficient additional funding to continue operations. In particular, in such event, the Company would have to have the agreement of its Note holders to obtain additional funds from the escrow. There is no assurance that the holders of the Notes will agree to release any escrowed funds or take any other steps with a view toward continuing Company operations. If Source Media merges, sells a significant portion of its assets, raises additional funds through the issuance of equity or convertible debt securities, or reachs an agreement to restructure its balance sheet with the holder of its Notes, the percentage ownership of its existing stockholders will be reduced significantly or eliminated. In order to consummate a merger, sale or financing transaction or to restructure its balance sheet the Company must satisfy its obligations to the holders of the Notes in a manner agreeable to them. The holders of the Notes, as Source Media's senior creditors, have significant influence in the restructuring process and may seek to use this leverage to obtain a significant ownership interest in the Company. There can be no assurances that Source Media will be successful in these efforts or come to an agreement on any plan of restructuring with the holders of the Notes or that the Company will be able to restructure its balance sheet on terms acceptable to Source Media, or at all. SOUTHWEST AIRLINES: Fitch Places Debt Rating on Watch Negative -------------------------------------------------------------- In the aftermath of last week's terrorist attacks, Fitch has placed the debt of Southwest Airlines Co. on Rating Watch Negative. This rating action affects all rated debt obligations, including securitized aircraft transactions of Southwest Airlines. Southwest Airlines Co. (current Fitch unsecured debt rating- - `A'): Southwest enters this crisis in a position of relative financial strength. While the revenue impact of the current situation will be no less severe for Southwest, the company has enjoyed EBITDAR margins of 28% over the last twelve months, and should have an adequate cash buffer to survive a protracted fall-off in revenues. Given its low cost structure and the high percentage of owned Boeing 737 aircraft in its fleet, Southwest should be able to take steps to reduce capacity quickly. Its high-productivity, low-cost strategy, however, will be seriously challenged by operational inefficiencies at the nation's airports resulting from heightened security measures. SUN HEALTHCARE: Buyer Emerges, Saving Neuroflex From Winding-Up --------------------------------------------------------------- NeuroFlex, Inc. was formed as a subsidiary of SunDance Rehabilitation in early 1999, primarily through an asset acquisition of Trestles Healthcare, Inc. and Restorative Medical, Inc., and certain patent rights held by John Kenney on February 1, 1999. NeuroFlex is in the business of manufacturing, marketing, selling and distributing orthotic products, providing orthotic braces for more chronic joint and spinal problems related to immobility or neurological underlying disease states. Previous Motion Previously, to stop the substantial and persistent losses that NeuroFlex was suffering as a result of continued business operations, Sun Healthcare Group, Inc. filed a motion seeking authorization to sell the assets or wind up the business operations of NeuroFlex, Inc. in accordance with section 363(b) of the Bankruptcy Code. NeuroFlex had experienced poor performance historically and amassed nearly two years worth of inventory. Over the near term, NeuroFlex had incurred negative EBITDA of $593,148 for the year to date period ending May 30, 2001. NeuroFlex will also enter an additional bad debt expense of roughly $200,000 during 2001. Furthermore, NeuroFlex is currently awaiting the results of an updated evaluation of its accounts receivable, which it believes will show additional bad debt expenses of approximately $200,000 to $500,000. Moreover, NeuroFlex's business was further weakened when, on January 1, 2001, the federal government reduced the fee screens for most orthotic devices. Due to the fact that approximately 50% of NeuroFlex's sales are subject to Medicare reimbursement, such rate reductions have a significant impact on NeuroFlex's business. The result was an overall reimbursement rate cut of approximately 15% for NeuroFlex's Medicare business, which at times exceeded 40% for specific NeuroFlex products. Although NeuroFlex could attempt to obtain special and/or higher screen coding classifications for its products, any such attempt would incur significant legal costs and would carry no guarantee of success. The Debtors were prepared for a wind up of the NeuroFlex business which would entail a closure of operations with a subsequent orderly sale of NeuroFlex' s assets, primarily patents and inventory because the Debtors had not yet been able to identify a purchaser and it does not make good business sense to continue to incur substantial losses each month while conducting an ongoing search for a prospective purchaser. In fact, the Debtors believe that given NeuroFlex's poor performance and the need for a substantial infusion of capital to turn around the business, it is unlikely that NeuroFlex has any substantial going concern value. The Debtors previously approached their primary medical supplier regarding a sale of the NeuroFlex business operations. It expressed no serious interest. To avoid prematurely winding up the affairs of NeuroFlex, the Debtors will entertain offers for the purchase of the business operations, and will explore whether certain regional suppliers of orthotic products that are purchasers of NeuroFlex's product may be interested in such an acquisition. In addition, the Debtors propose to market a sale of NeuroFlex further, by publication in The Wall Street Journal (National Editiofl) and/or in an appropriate trade journal with national distribution. If a party contacts the Debtors expressing an interest in purchasing the NeuroFlex business operations, the Debtors will file a subsequent motion seeking the Court's approval of any such sale, subject to higher and better offers, pursuant to section 363 of the Bankruptcy Code. In the event that no prospective purchaser is identified after such marketing and publication, the Debtors do not believe that it makes good business sense to incur ongoing losses which have averaged in excess of $100,000 in negative EBITDA monthly during the 2001 calendar year. The Debtors will then Wind Up the NeuroFlex business operations. Any proceeds from such a Wind Up will be segregated for the benefit of the creditors of NeuroFlex or otherwise, used in connection with a plan of reorganization that satisfies the provisions of section 1129 of the Bankruptcy Code. Buyer Emerged and Amended Motion Filed Neuroflex was saved from a winding-up when a Buyer (John Kenney, an individual, Trestles Healthcare, Inc., and Restorative Medical, Inc.) emerged for the purchase of the Assets in exchange for a settlement and release of claims filed against the Debtors. Buyer has filed claims with the Court in the Neuroflex's bankruptcy case which cumulatively total approximately $4,950,000. Buyer has also filed a claim in the related bankruptcy case of SunDance Rehabilitation Corporation for approximately $166,000. These Claims arise from (1) a certain Purchase and Sale Agreement executed by Buyer and Seller which contained certain requirements relating to the payment to Buyer of specified earn- out amounts based on Seller's financial performance; and (2) a purchase by SunDance of certain products from THI. The amounts sought in the Claims are disputed by Seller and SunDance. The parties desire to compromise and settle the Claims against Seller and SunDance by selling the assets of Seller (less those specified) to Buyer or its designee in exchange for release of the Claims of Buyer against Seller and SunDance. Buyer and Seller (NeuroFlex, Inc.) entered into a Settlement and Asset Purchase Agreement on July 31, 2001, which provides for the transfer of Purchased Assets to Buyer free and clear of any claim, lien, encumbrance, or interest of any other party or person. In consideration of the premises and the mutual covenants of the parties, the parties agreed as follows: (I) Purchase of Assets and Assumption of Liabilities On the Closing Date, Seller will sell, assign, transfer, grant, bargain, deliver and convey to Buyer in accordance with joint written direction of Buyer to be submitted to Seller prior to the Closing Date, the following assets: (1) Patents and Property Rights; (2) the Trademarks; (3) the "Kentucky Assets" comprising of all dies, molds, equipment, and fixtures in Seller's Brandenburg, Kentucky facility or otherwise controlled by Seller elsewhere; and (4) the Remaining Assets, to the extent owned by Seller and located other than at Seller's corporate offices: (a) finished goods, inventory and supplies; (b) machinery and equipment, including all of the computer equipment; (c) office furniture, office supplies and office equipment (including the phone system located at the Mission Viejo location) which are located other than at Seller's corporate offices; (d) all of Seller's right, title and interest in and to all fixtures and leasehold improvements; (e) Seller's accounts receivable arising from a date of service on or prior to the Closing Date (the "Accounts") that remain uncollected as of July 16, 2001 (the "Cutoff Date"), provided, however, that, -- except as otherwise provided below, Seller shall continue to receive 100% of all collections on the Accounts through the later to occur of (x) July 31, 2001 or (y) $77,000.00 which shall represent the approximate amount of the Reimbursed Expenses, such date being referred to as the "Reimbursement Date"); -- except as otherwise provided below, in the event that the Reimbursement Date is prior to September 30, 2001, Seller shall be entitled from the Reimbursement Date through September 30, 2001, to receive from Buyer or its designee 60% of collections on the Accounts; -- except as otherwise provided below, after October 1, 2001, Seller shall be entitled to receive from Buyer or its designee 50% of collections on the Accounts. The amounts collected on the Accounts will be referred to as the "Receivables Proceeds." -- Notwithstanding the foregoing, Seller shall not be entitled to receive any collections on the Accounts after it has received from and after the Cutoff Date the sum of $275,000.00 plus the Reimbursed Expenses. -- The Reimbursed Expenses shall consist of the sum of (i) the salaries and benefits paid by Seller up to two Seller employees to assist in Accounts collection; (ii) Proclaim costs incurred in collection efforts at the rate of $16.00 per claim; (iii) the Mission Viejo rent paid pursuant to the Asset Purchase Agreement to a date no later than October 31, 2001; (iv) the amount of the Diane Landrath-Schmidt severance payment paid by Seller; and (v) any and all costs associated with an assumption and assignment of any Medicare and/or Medicaid Provider Agreement as set forth in the Asset Purchase Agreement. In the event that the Reimbursed Expenses exceed $77,000.00, Seller shall be entitled to additional reimbursement equal to such excess. In the event that Seller does not receive the sum of $275,000.00 plus the Reimbursed Expenses by December 31, 2001, Seller shall have the right, in its sole discretion, to either receive an accounting from Buyer or conduct an audit of Buyer's records; provided, however, that such actions shall be taken at Seller's sole costs and such costs shall not constitute Reimbursed Expenses. The parties acknowledge and agree that any accounts receivable generated by the Business on or after the Closing Date shall be the sole and exclusive property of Buyer and are not affected by or relevant to the operation of this provision. (f) telephone numbers, websites, copies of business records and files, customer lists, and promotional materials; (g) the "Intangible Assets" including product specifications, drawings, and prototypes and intangible items, copyrights, copyright applications and registrations, service marks, software and firmware, know-how and any and all other common law or similar rights of ownership or use, whether foreign or domestic and all intellectual property rights related to the Business; (h) all rights under all contracts, leases, licenses, permits and other agreements relating to the Business other than leases related to Excluded Assets, including without limitation, all Seller's provider numbers for Medicare, Medicaid, and other governmental or regulatory programs pursuant to the limitations set forth in the Agreement, and the real estate lease dated January 1, 1999 between Ruth Ackerman, as landlord, and Seller, as tenant, with respect to Seller's location in Brandenburg, Kentucky; (i) all regulatory filings, including Food and Drug Administration ("FDA") filings, and device registrations filed by Seller prior to the Closing Date; and (j) subject to the provision as described in (e) above, all cash, funds in deposit accounts, or proceeds in any other form attributable to sales or dispositions of any item constituting Purchased Assets which occur on or after the date hereof. The Purchased Assets include all such assets, wherever located and whether or not reflected on Seller's balance sheet. It is understood and agreed that Buyer shall not purchase those assets of Seller which are subject to true leases from third parties, the Mission Viejo Lease (as defined below), the conference room table located at the Mission Viejo facility, and certain computer equipment (the "Excluded Assets"), as set forth on Exhibit B to the Agreement. * Excluded Assets Period: Notwithstanding the foregoing, after Closing, Seller shall pay the rent and otherwise maintain in effect all leases on the Excluded Assets for the period requested by Buyer; provided, however, that the period shall not exceed 90 days following the Closing Date (the "Excluded Assets Period"). During the Excluded Assets Period, Buyer and Seller shall have possession and use of the Excluded Assets. Buyer shall be required to maintain the same in good condition and repair, ordinary wear and tear excepted, and to fulfill the obligations imposed on the tenant under the leases related to the Excluded Assets (other than payment of the rent due) for the Excluded Assets Period. Seller may reject any leases related to the Excluded Assets in its bankruptcy case after the expiration of the Excluded Assets Period. Irrespective of the transfer of the Patents to Buyer herein, any affiliate of the Seller and Sun Health Care Group, Inc. shall retain the right to use and/or sell the inventory purchased in the ordinary course of business consistent with past practices from the Seller prior to the July 16, 2001. * Mission Viejo Lease Seller shall continue to pay the rent and otherwise maintain in effect the real estate lease on Seller's office in Mission Viejo, California until the first to occur of (1) 90 days from the Closing Date; or (2) Seller's discontinuation of participation in collection of the Accounts (the "Mission Viejo Lease Period"). During that period, THI and Seller shall have possession and use of the leased property which is the subject of the Mission Viejo Lease and shall be required to maintain the same in accordance with the terms of the Mission Viejo Lease and comply with the obligations imposed on the tenant (other than payment of the rent due). THI and Seller will use their commercially reasonable efforts to obtain a termination of the Mission Viejo Lease in exchange for entry by THI in a new lease with the Mission Viejo Lease landlord for a shorter time period on a smaller space. * Liabilities Subject to any express assumption of liability, Buyer is not assuming or agreeing to discharge any obligations or liabilities of Seller arising before or after the Closing Date with respect to the Business, the Purchased Assets, the Excluded Assets or otherwise, whether accrued or contingent or due or not due, which shall be and remain the sole obligations and liabilities of Seller to pay and discharge. * Provider Agreements Seller shall assist Buyer in the completion of a Form 855S, change of ownership application. Seller shall use its commercially reasonable efforts to effectuate an assumption and assignment of the Medicare and Medicaid Provider Agreements to THI; provided, however, that it shall not be a condition to closing that Seller has assumed and assigned such Provider Agreements. In the event Seller assumes and assigns the Medicare Provider Agreement, Seller shall obtain written acknowledgement from Medicare whereby Buyer is released from all successor liability for overpayment liability arising on or before the Closing Date. Notwithstanding anything to the contrary contained in the Agreement, Seller shall have no obligation to assume and assign its Medicaid Provider Agreements to THI unless prior to the Closing Date (i) it is able to secure from the applicable Medicaid agencies a written agreement confirming that the assignment and assumption of such Medicaid Provider Agreements will not elevate the priority of any claims which Medicaid may have against Seller or impose any successor liability on Buyer, (ii) Seller shall have no obligation to transfer its Medicare Provider Agreements unless Seller is able to obtain a written agreement from the Center for Medicare and Medicaid Services (formerly, the Health Care Financing Administration) confirming that the assignment and assumption of such Medicare Provider Agreements will not elevate the priority of any claims which Medicare may have against Seller or impose any successor liability on Buyer, and (iii) the cost to Seller of securing such Medicaid and Medicare Provider Agreements and any cure amount arising from any default relating to assumption and assignment of such Provider Numbers has been paid by Buyer. Consistently, Seller shall be entitled to withhold from receipts on the Accounts all sums necessary to cure any default relating to assumption and assignment of the Provider Numbers; provided, however, that Buyer's consent shall be required to exceed a cumulative sum of $25,000.00. If Buyer does not so consent, Seller shall be entitled to instead reject the subject Provider Number or Numbers in its bankruptcy case. Notwithstanding anything to the contrary contained in the Agreement, if the Medicare Provider Agreement or any Medicaid Provider agreement is not assumed and assigned to Buyer, Seller shall be entitled to reject such Provider Agreement. (II) Closing The closing of this transaction shall take place at 10:00 A.M. on the eleventh day following the entry of an order of approval by the Court (not then subject to appeal or motion to stay the order or otherwise modification or amendment), subject to higher and better offers. Notwithstanding this, in the event that the Closing has not occurred by August 1, 2001, and this Agreement has not been terminated by Buyer or Seller, Buyer shall have the right on written notice to Seller delivered on or prior to August 9, 2001, to take possession of the Purchased Assets and the Business, and access to the Excluded Assets as provided in the Agreement, on August 10, 2001 (the "Operations Transfer Date") and Seller shall have the right to cease all operations of the Business as of the Operations Transfer Date and, in such event, Seller shall incur no further expenses related to the Business at the close of business on August 9, 2001. In the event Buyer exercises these rights, then all references to the Closing Date shall be replaced with references to the Operations Transfer Date. (III) Settlement As settlement of the Claims, Seller shall transfer to Buyer and Buyer shall take and accept from Seller: (a) on the Closing Date, the Purchased Assets; and (b) from and after the Closing Date, the Receivables Proceeds to which Buyer is entitled. The amount of the Receivables Proceeds being held by Seller on the Closing Date shall be delivered to Buyer by wire transfer to a bank account designated by Buyer at Closing in immediately available funds. Subsequently collected Receivables Proceeds shall be similarly delivered to Buyer weekly or within 3 business days of receipt by Seller or any affiliate of Seller of sums in the cumulative amount of in excess of $l0,000. Seller shall deliver at Closing to Buyer a copy of all bids received by Seller for purchase of any of the Purchased Assets. (Sun Healthcare Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900) TRANSFINANCIAL: Intends to Liquidate Assets for $14 Million ----------------------------------------------------------- TransFinancial Holdings, Inc. (AMEX:TFH), a holding company with continuing operations in financial services, reported that the Board of Directors of the company has adopted a plan to liquidate the company. In conjunction with the decision to liquidate, a definitive agreement was signed for the sale of the financial services businesses and certain related assets for $14 million. The Board of Directors of TFH has unanimously approved this transaction and related liquidation and will recommend such to the TFH shareholders. These proposals are subject to approval by a majority of outstanding TFH shares at a meeting to be held after preparation and mailing of proxy material. Bill Cox, Chairman and CEO, stated, "The costs related to the debt incurred in closing the transportation businesses, as well as the recurring costs associated with a public company were key factors in the board determination that liquidation was in the best interest of the shareholders." Under the plan of liquidation, the company will sell all of its assets, and after paying off its debts and setting aside required reserves, will distribute the remaining proceeds as one or more "liquidating dividends" within the next several months. The preliminary estimates of the total distribution under the plan range from $1.50 to $2.00 per share. TransFinancial Holdings concentrates on its financial services and industrial technology operations. The company's Universal Premium Acceptance unit finances premiums for buyers of commercial property and casualty insurance, allowing customers more time to pay for insurance. TransFinancial's Presis, a start-up, is developing ways to process dry powder particles for use in paint and ink production. In 2000 TransFinancial shut down its trucking businesses, Crouse Cartage and Specialized Transport, which had accounted for 95% of the company's sales. Both Crouse, which was losing money, and Specialized, which had its insurance canceled, are being liquidated. TRI-NATIONAL: Battles With Senior Care Over Involuntary Petition ---------------------------------------------------------------- Tri-National Development Corp. (OTCBB:TNAV) announced that on Sept. 12, 2001 it filed an answer to the involuntary bankruptcy petition filed by Senior Care Industries Inc. (OTCBB:SENC) on Aug. 23, 2001. Tri-National asserts in its answer that Senior Care filed the petition in bad faith, knowing that several of the alleged creditors were not creditors of Tri-National, and the company is also asking for a judgment against Senior Care for costs, attorney fees and punitive damages. Michael Sunstein, president and chief executive officer, said, "This latest filing by Senior Care continues a pattern of misrepresentations and underhanded actions taken to interfere with the business and activities of Tri-National, to the detriment of both our creditors and shareholders. We have retained Colin Wied, a top San Diego attorney and past president of the State Bar of California and San Diego County Bar Associations with 35 years of law experience and vast bankruptcy knowledge, to pursue this matter on our behalf. We intend to take aggressive action to defend ourselves and to maximize our opportunities to emerge successfully from this difficult time. This answer to their filing is the first salvo in that effort." "The company continues to work together with a number of highly respected and well funded industry partners to create a comprehensive strategic plan -- a plan that we believe will serve to take us from our present state to the realization of the value of our numerous significant real estate assets. Such a plan, if successful, will result in the payment of all creditors and significantly reward our longstanding and patient shareholders, whose continued support we greatly appreciate. We look forward to announcing our progress in this effort in the near future," Mr. Sunstein said. Tri-National Development Corp. is an international real estate development, sales and management company. TRI-NATIONAL: Senior Care Refutes Debtor's Rejoinder to Petition ---------------------------------------------------------------- Senior Care Industries Inc. (OTCBB:SENC) announced that answers filed in San Diego Superior Court by Tri-National Development Corp. (OTCBB:TNAV) in response to an involuntary bankruptcy petition were false and unfounded. Although Michael Sunstein, president of Tri-National, asserted that Senior Care filed the petition in bad faith, Richard Mata, counsel to Senior Care, was quick to correct Sunstein's allegations, stating that creditors of Tri-National acted together to file the petition and that many other creditors had contacted him to inquire about joining with the other co- petitioners. Attorney Mata explained that the petition had been filed to protect Tri-National's shareholders from levies by judgment creditors. He noted that Tri-National's most recent annual report showed more than $10 million in judgment creditors and another $11.5 million in bondholders whose claims are delinquent. One judgment creditor had gotten a state court receiver to take control of Tri-National's assets only in June and this could have resulted in the company's assets being lost to a few, unless Tri-National is forced into bankruptcy by either its creditors or its shareholders. Bob Coberly, Senior Care's vice president in charge of development, stated that during April, May and June of this year, "Senior Care loaned Tri-National more than $150,000. "These funds were used to pay certain Tri-National employee salaries, rent on the Tri-National office in San Diego, and to pay Tri-National utilities and telephone bills. To claim Senior Care is not a creditor is ludicrous," Coberly observed. "We have been working very hard with the management of one of Tri-National's largest judgment creditors, Capital Trust Inc. (NYSE:CT), to resolve a judgment that has grown from $8 million to in excess of $9 million in just the last year," Coberly explained. "Capital Trust could seize the assets because of its judgment and leave the shareholders and other creditors with nothing, unless Tri-National is forced into bankruptcy," Coberly went on to say. "This attempt to discredit Senior Care's efforts in the Bankruptcy Court as well as in the court of public opinion, may do nothing more than create uncertainty with the public and undo what is left of Tri-National," said Coberly. "Our job now is to bring in new management to Tri-National, develop properties that never have been developed, to pay off people that never have been paid off, and to finally give Tri-National shareholders a pattern for progress that will make us all proud." "Unlike Tri-National," Coberly noted, "Senior Care has no such massive debt burdens, is free of judgments, and is free to continue its work to complete the process of providing financing to develop the properties, which Senior Care's subsidiary purchased from Tri-National's subsidiaries in Baja California earlier this year." Senior Care is presently developing 223 single family senior "smart homes" near Palm Springs, Calif. and 55 town houses in Las Vegas. The land for both of these developments was purchased by Senior Care recently. Sales of Senior Care's Evergreen Manor II condominium project in Los Angeles have been brisk according to management. All Senior Care properties are developed for the senior market. Presently, the company has lined up land and has the plans to develop more than 2,000 homes in the Southwestern United States. Senior Care's "smart home" technology now being used in the project near Palm Springs will also be utilized in its Baja California development projects, within a one hour drive of San Diego. Baja California offers a year-round climate that averages 75 degrees Fahrenheit. Additionally, Baja California offers the amenities available from its oceanfront location including fishing, sailing, swimming, surfing, other water sports, oceanfront golf and a competitive advantage as an alternative to Senior Care's desert community development offering a choice for seniors. Although Michael Sunstein, president of Tri-National, asserted that Senior Care filed the petition in bad faith, Richard Mata, counsel to Senior Care, was quick to correct Sunstein's allegations, stating that creditors of Tri-National acted together to file the petition and that many other creditors had contacted him to inquire about joining with the other co- petitioners. Attorney Mata explained that the petition had been filed to protect Tri-National's shareholders from levies by judgment creditors. He noted that Tri-National's most recent annual report showed more than $10 million in judgment creditors and another $11.5 million in bondholders whose claims are delinquent. One judgment creditor had gotten a state court receiver to take control of Tri-National's assets only in June and this could have resulted in the company's assets being lost to a few, unless Tri-National is forced into bankruptcy by either its creditors or its shareholders. Bob Coberly, Senior Care's vice president in charge of development, stated that during April, May and June of this year, "Senior Care loaned Tri-National more than $150,000. "These funds were used to pay certain Tri-National employee salaries, rent on the Tri-National office in San Diego, and to pay Tri-National utilities and telephone bills. To claim Senior Care is not a creditor is ludicrous," Coberly observed. "We have been working very hard with the management of one of Tri-National's largest judgment creditors, Capital Trust Inc. (NYSE:CT), to resolve a judgment that has grown from $8 million to in excess of $9 million in just the last year," Coberly explained. "Capital Trust could seize the assets because of its judgment and leave the shareholders and other creditors with nothing, unless Tri-National is forced into bankruptcy," Coberly went on to say. "This attempt to discredit Senior Care's efforts in the Bankruptcy Court as well as in the court of public opinion, may do nothing more than create uncertainty with the public and undo what is left of Tri-National," said Coberly. "Our job now is to bring in new management to Tri-National, develop properties that never have been developed, to pay off people that never have been paid off, and to finally give Tri-National shareholders a pattern for progress that will make us all proud." "Unlike Tri-National," Coberly noted, "Senior Care has no such massive debt burdens, is free of judgments, and is free to continue its work to complete the process of providing financing to develop the properties, which Senior Care's subsidiary purchased from Tri-National's subsidiaries in Baja California earlier this year." Senior Care is presently developing 223 single family senior "smart homes" near Palm Springs, Calif. and 55 town houses in Las Vegas. The land for both of these developments was purchased by Senior Care recently. Sales of Senior Care's Evergreen Manor II condominium project in Los Angeles have been brisk according to management. All Senior Care properties are developed for the senior market. Presently, the company has lined up land and has the plans to develop more than 2,000 homes in the Southwestern United States. Senior Care's "smart home" technology now being used in the project near Palm Springs will also be utilized in its Baja California development projects, within a one hour drive of San Diego. Baja California offers a year-round climate that averages 75 degrees Fahrenheit. Additionally, Baja California offers the amenities available from its oceanfront location including fishing, sailing, swimming, surfing, other water sports, oceanfront golf and a competitive advantage as an alternative to Senior Care's desert community development offering a choice for seniors. UNITED AIRLINES: Will Furlough Around 20,000 Employees ------------------------------------------------------ In response to reduced flight schedules in the wake of the September 11 terrorist attacks, United Airlines, a unit of UAL Corporation (NYSE: UAL), announced that it will furlough approximately 20,000 employees. The furloughs will affect all work groups of the company and will begin as soon as practicable. "These actions are extremely painful ones, but they are absolutely critical to maintaining our ability to continue operating and meeting the needs of our customers over the near term," said James E. Goodwin, United's chairman and chief executive officer. "The entire industry is being severely affected by the consequences of September 11 -- consequences that have added to the tragic events of that day and put the financial health of our industry in jeopardy." Goodwin added: "While we continue to focus our attention on assisting the families of our passengers and employees who were victims of last Tuesday's attack, we must also focus on saving our company. We simply have no choice but to step up to the realities of this extraordinarily critical time and take drastic measures to preserve our viability and operations." As previously announced, United's flight schedule has been reduced by 20 percent to approximately 1,900 daily flights. Separately, United is also working alongside other North American carriers and officials from the Administration as well as members of the U.S. Congress on a relief package to address the unprecedented loss to the industry that directly resulted from last week's terrorist attack, as well as resulting liability issues that could force the industry into bankruptcy. "Without this relief, the viability of the nation's air transportation system is in doubt. It is as serious and straightforward as that," said Goodwin. "As this nation continues to recover from this horrific act of war and as it continues to focus on minimizing the impact on the national economy, the airline industry's contributions to the U.S. gross domestic product and its ability to connect business and communities across the globe will be critical." UNITED PETROLEUM: Hires Advisor as Bank Accelerates $23MM Loan -------------------------------------------------------------- On September 7, 2001, United Petroleum Corporation received notice from Hamilton Bank, the holder of the Company's $23 million institutional loan, that the bank had accelerated the maturity of that loan. The Company is discussing means of repaying the loan with the bank, and has engaged Gulf Atlantic Capital Corporation to advise the Company regarding its strategic alternatives. Convenience store chain United Petroleum once was an operator of oil wells. The company once planned to move into the entertainment industry, but abandoned that move and filed for Chapter 11. F.S. Convenience Stores bought the company in 1999 and adopted its name. The new United Petroleum operates some 90 convenience stores under the Farm Store name in Florida and holds a 10% stake in Farm Stores Grocery, which has about 110 drive-through grocery stores. The company plans to buy more convenience stores in New York, Mississippi, Alabama, and Arkansas. Former Farm Stores CEO Joe Bared and his wife own 48% of United Petroleum; Infinity Investors owns about 35%. UNIQUE BROADBAND: Downsizes Transmission & Waveguide Divisions -------------------------------------------------------------- Unique Broadband Systems, Inc. (CDNX: UBS) announced that it has completed the initial stage of its restructuring plan. Under such plan, which is designed to focus the Company on its core competencies and to significantly reduce operating costs, the Company reduced the size of its transmission and waveguide divisions, refocused the R&D department on a narrower, more clearly defined assortment of products, reduced its operations in Denmark and sold its Russian office. The restructuring has resulted in the elimination of 68 positions in Canada, Denmark and Russia, representing a 40% decrease in total employment. The Company will realize a reduction in operating costs for fiscal 2002 of approximately $14.4 million, representing a 50% savings over operating costs incurred in fiscal 2001. "In my view, the Company has achieved its initial goals of refocusing its operations and significantly reducing overhead," said Patrick Lavelle, interim President and CEO of UBS. "We will continue to look at other ways to preserve cash, while we examine all opportunities to improve shareholder value." Unique Broadband Systems, Inc. (UBS) designs, develops and manufactures high-speed fixed and mobile wireless solutions based on OFDM technology. UBS has offices in Canada, Denmark, the UK and Italy. VANGUARD AIRLINES: Weighing Options to Raise Additional Capital --------------------------------------------------------------- Vanguard Airlines Inc. operates a value-priced, medium-to-long haul passenger airline with a hub in Kansas City, Missouri. Since October 2000, the Company has reconfigured its route system to operate longer haul routes, commencing service with low frequencies in new markets. The Company's costs have increased as a result of transition expense and the perceived need to commence new longer-haul markets with low frequency service. The Company expects such impact to lessen as it increases frequencies in its new markets. Also, revenues derived from new routes generally build over a period of time. Revenues and expenses were further impacted in the second quarter as a result of the Company's transition to Sabre as its host reservations system. This transition disrupted the Company's normal reservation activity resulting in a reduction in sales, required training of all reservations and customer service personnel on the Sabre system, resulting in an increase in training and payroll costs, and caused temporary reservations and passenger handling inefficiencies, resulting in passenger inconvenience, lost revenues and higher costs. As of the end of June 2001, the Company's reservations operations had returned to normal levels and substantially all the Company's reservations and customer service personnel had been trained on Sabre. Costs in the second quarter of 2001 were further impacted by the Company's introduction of MD-80 aircraft into its fleet. Transition cost items included training expense and acquisition of equipment. During 1999 and 2000, the Company focused its growth on Chicago's Midway Airport, creating a small hub at Midway. Before revenues on the routes could build to profitable levels, the Company's traffic levels on certain routes were adversely impacted by the introduction of service and aggressive fare actions by several competitors. The Company determined it was unlikely to achieve profitable operations at Midway due to these actions and, in 2000, undertook a comprehensive review of its strategic alternatives. As a result of this review, the Company determined to refocus its route strategy on operating medium-to-long haul routes that connect through a hub in Kansas City. Although no assurance can be provided that profitability will be achieved or sustained, management believes the Company can profitably operate a hub at Kansas City for several reasons, the most significant of which are (i) the Company's cost structure is less than the cost structure of most airlines providing medium-to-long-haul service and (ii) Kansas City is a strong business market that is not dominated by a single airline. Among other route changes, during 2000, the Company discontinued service from Chicago Midway to Minneapolis, Pittsburgh and Cincinnati, while adding service from Kansas City to New Orleans in July, Los Angeles in October, New York-LaGuardia in October, and Austin, Texas in December. In March 2001, the Company discontinued service from Kansas City to Minneapolis. In April 2001, the Company added service from Kansas City to San Francisco and Las Vegas. The Company requires additional debt or equity financing to fund ongoing operations in 2001. The Company is seeking to raise additional capital; however, there can be no assurance that such capital can be obtained. The inability to secure additional funding could have a material adverse effect on the Company, including the possibility that the Company could have to cease operations. The Company has begun several initiatives designed to increase its average fare levels, including modest fare increases, tighter control over inventory levels at discounted fares, and improved marketing to business travelers, including to travel agencies. The Company contracted with Sabre Holdings Corporation to provide the Company's computerized reservation and check-in system for a period of five years, and transitioned its reservation system to Sabre in April 2001. In addition to one-time transition costs, the transition to the Sabre system and the accompanying changes in other systems have resulted in a material increase in ongoing reservations and booking expense. Management believes this ongoing increase has been more than offset by an increase in sales due, in part, to the Sabre system providing the Company's flights improved display on travel agency reservation systems. Tickets sold through travel agencies as a percentage of sales increased roughly 40% from May to July 2001. In August 2001, the Company instituted a fare sale for fall travel. As of July 25, 2001, the Company operates eight leased Boeing 737-200 jet aircraft and three leased Boeing MD-80 jet aircraft. The Company is returning certain of its 737-200 aircraft to the respective lessors and has committed to lease a total of eight used MD-80 series jet aircraft with remaining deliveries scheduled in 2001 and 2002. The Company intends to lease additional MD-80 series jet aircraft. The lease costs on the MD-80 series aircraft are approximately one-third higher than the lease costs on the Company's 737-200 aircraft. However, in the Company's configuration, most of the MD-80 series aircraft will seat 10% more passengers and include a business class cabin. Moreover, the MD-80 series aircraft are generally newer aircraft and are expected to have greater reliability and lower annual maintenance expense. Three/six months ended June 30, 2001 compared to the three/six months ended June 30, 2000: For the six months ended June 30, 2001, the Company realized a net loss of $22.4 million as compared with a net loss of $10.3 million for the six months ended June 30, 2000. Operating revenue decreased 14%, or $9.4 million, for 6MO 2001 compared with 6MO 2000, while operating expenses decreased 4%, or $3.1 million. Other expense increased $5.8 million because of the $4.1 million expense incurred as a part of the accounting treatment of the VAC transaction. For the quarter ended June 30, 2001 Vanguard realized a net loss of $10.9 million compared with a net loss of $2.7 million for the quarter ended June 30, 2000. Operating revenue decreased 20%, or $7.5 million, for 2Q 2001 compared with 2Q 2000, while operating expenses decreased 11%, or $4.3 million. Other expense increased $5.0 million during the same period. The Company's results for 6MO 2001 reflect a significant increase (56%) in the Company's average length of haul (the average length of a passenger's flight) resulting from the reconfiguration of its route system to longer-haul flying from a Kansas City hub. The Company's scope of operations (as measured by ASMs) increased less than 1% between the periods despite a 35% decrease in flight departures, attributable to the transition to longer-haul flying. The Company's revenue passenger miles (RPMs) increased 10%, resulting in an increase in load factor of 10%, or an average of 66.5% for 6MO 2001 compared to a 60.7% load factor for 6MO 2000. Operating expense per ASM declined 5%. This unit cost improvement was more than offset by a 22% decline in yield mainly attributable to the longer haul flying and to an increase in discount fares resulting, in part, from the Company's entering new markets, and general decreases in passenger demand for air travel in 6MO 2001 resulting, management believes, from general passenger concerns over a soft economy. For 2Q 2001 the Company's revenue passenger miles (RPMs) increased 6%, while its average fleet size dropped 13% to 12.8 aircraft and available seat miles (ASMs) decreased by 11% for 2Q 2001. This resulted in a 19% increase in the Company's load factor to an average of 73% for 2Q 2001 from 62% for 2Q 2000. Operating Revenues Total operating revenues decreased 14% to $56.7 million for 6MO 2001 from $66.1 million for 6MO 2000 and decreased 20% to $30.2 million for 2Q 2001 from $37.6 million for 2Q 2000. A 10% increase in the Company's load factor for 6MO 2001 was more than offset by a 22% decline in yield for 6MO 2001. During 6MO 2001, the Company's average length of haul increased 56%, which more than offset a 21% increase in average fares and resulted in lower yields. Much of the Company's load factor improvement occurred in the second quarter, which posted a 19% increase in load factor in 2Q 2001 as compared to 2Q 2000. Fare levels (and yields) were impacted during 6MO 2001 and 2Q 2001 as a result of the Company's efforts to stimulate traffic. The Company's traffic levels had declined significantly in January in part as a result, management believes, of general uncertainty over the domestic economy, as well as passengers booking away from the Company due to a decline in the Company's operational performance in December 2000. Although the Company implemented significant yield improvement initiatives in 2Q 2001, the effect of such initiatives was dampened in 2Q 2001 by the continued carrying of passengers who booked seats in 1Q 2001 and the conversion to Sabre, which disrupted the Company's reservations activity, resulting in lost sales, for approximately 60 days following the transition. Although the industry has recently experienced widespread fare discounting, the Company has been able to continue many of its yield improvement initiatives. The Company follows a strict refund policy whereby a majority of its fares are non-refundable. When forfeited, these fares are recognized in passenger revenue. In conjunction with its conversion to Sabre reservations system in April 2001, the Company revised its fare rules applicable to certain passengers who do not complete their scheduled itinerary. As a result of this change, the Company no longer allows unused non-refundable fares to be applied as a credit against future travel if the change is not requested before the reserved flight date. As of the effective date of these fare rules, the Company recognizes revenue for unused non-refundable tickets in the month in which the "no show" occurs. Revenues from expiration of nonrefundable tickets totaled $4.7 million in 6MO 2001 compared with $5.2 million for 6MO 2000. In 2Q 2001, these revenues totaled $2.5 million compared with $2.2 million for 2Q 2000. Other revenues consist of service fees from passengers who change flight reservations on nonrefundable fares, charter revenue, liquor sales, and mail and cargo revenues. Service fees declined to $1.6 million in 6MO 2001 from $2.6 million for 1Q 2000, of which $0.8 million occurred during 2Q 2001, largely due to the Company's change in fare rules to restrict rebooking of nonrefundable fares. As a result of the Company's operating losses and limited financial resources, the Company's independent auditors have expressed a "going concern" qualification on the Company's financial statements for the year ended December 31, 2000. The Company had a working capital deficiency and stockholders' deficit at June 30, 2001 of approximately $41 million and $25 million, respectively. The Company requires additional debt or equity financing to fund ongoing operations in 2001. The Company is seeking to raise additional capital; however, there can be no assurance that such capital can be obtained. The inability to secure additional funding could have a material adverse effect on the Company, including the possibility that the Company could have to cease operations. Since inception, the Company has financed its operations and met its capital expenditure requirements primarily with proceeds from public and private sales of equity and debt securities. Prior to 2001, such financings have been made possible by two principal stockholders, The Hambrecht 1980 Revocable Trust and the J. F. Shea Company (together, the "H/S Investors"). During the twelve months ended December 31, 2000, the H/S Investors invested $11.5 million in the Company. In the first six months of 2001, Vanguard Acquisition Company ("VAC") became a principal stockholder through its investment in $3.75 million of equity securities and $3.5 million of demand notes. On July 12, 2001, these demand notes were exchanged for 17,500,000 shares of common stock. VAC currently holds approximately 37% of the Company's issued and outstanding voting securities. The Company continues actions designed to achieve long-term profitability and improve its capital resources. Management's strategy to achieve long-term profitability includes building connecting traffic at its Kansas City hub through strategic routes, increasing yields through improved revenue management processes and automation, improving customer service, adding new cities to increase connecting opportunities, increasing efforts to attract and retain price-sensitive business travelers and continuing cost savings programs. There can be no assurance that such efforts will be successful. Nearly all of the Company's advance ticket sales are charged to credit cards. The Company provides collateral to secure a bank, which processes the Company's VISA and MasterCard transactions and pays the related receivable. The amount of required collateral varies in direct relation to the Company's air traffic liability: as ticket sales and air traffic liability increase, the Company must either provide additional collateral satisfactory to the bank or allow cash to be held by the bank as collateral. Currently, the Company has provided letters of credit from the H/S Investors in the aggregate amount of $4.0 million and a surety bond in the amount of $6.0 million to secure the bank. The bank's exposure (as computed under the credit card processing agreement) has exceeded the available security from time to time, which has resulted in the bank holding cash as additional collateral. In March 2001, the Company's $8.0 million surety bond provided as additional collateral to secure the Company's credit card processor expired and was renewed for an unspecified term subject to a 90-day cancellation clause. The bond was terminated in July 2001 per order of the State of Nebraska, which had instituted liquidation proceedings against the issuer. On July 6, 2001, the Company replaced this bond with a $6.0 million surety bond from a different issuer with a one-year term and a 90-day cancellation clause. This $6.0 million bond is subject to reduction after certain targets for capital infusions to the Company have been reached. In the first and second quarters of 2001, the Company negotiated lease deferral agreements with certain of its aircraft lessors. As of June 30, 2001, the Company had issued approximately $9.0 million of long-term debt to satisfy amounts payable to these lessors, net of $1.0 million of accounts receivable for reimbursement of certain maintenance expenses. Additionally, the Company issued a note for approximately $1.0 million to a lessor to satisfy its obligations for the condition of an aircraft at return. Repayment of these loans, including interest at 10%, generally was scheduled to commence in July 2001 with maturities varying to December 2002. To date, the Company has not made the payments required under these loans, scheduled for July and August 2001. The Company has received notices of default from certain of its lessors with whom lease deferral agreements had been reached. The Company is negotiating revised repayment terms with these lessors, and continues to negotiate a lease deferral agreement with another aircraft lessor with whom an agreement was not reached in the first half of 2001, payments to whom are in arrears. On April 12, 2001, the Company entered into an Aircraft Spare Parts Support Agreement with an aircraft components supply company under which the Supplier would allow the Company to have access to up to $2.0 million of spare parts inventory for the Company's Boeing MD-80 aircraft. The Company pays a monthly fee for this access and is responsible for replacement of any parts used. As of June 30, 2001, the Company has received approximately $1.6 million of parts under this agreement. On February 14, 2001, the H/S Investors agreed to renew for a two-year period the letters of credit securing a portion of the funds held by the Company's credit card processor. In consideration for the establishment of the letters of credit, the Company issued to the H/S Investors warrants to purchase up to an aggregate of 4,000,000 shares of common stock at an exercise price of $1.17. Upon execution of the letter of credit, the Company 800,000 of the warrants immediately vested. In May 2001 another 2,624,238 warrants vested. The remaining warrants will vest over the remaining term of the letters of credit depending on the amount of exposure. On March 9, 2001, the Company issued 162,500 shares of a new issue of Series C Convertible Preferred Stock to VAC, a subsidiary of Pegasus Aviation, in exchange for a capital investment of $3.25 million. The Series C Convertible Preferred Stock has a liquidation preference of $20 per share, subject to annual accretion over three years, and is convertible into common stock at a price of $1.25 per share of common stock. On April 9, 2001, the Company issued an additional 25,000 shares of Series C Preferred Stock to VAC in exchange for a further capital investment of $0.5 million. On April 30, 2001, the Company executed a term sheet providing for certain investors to purchase up to 37.5 million shares of the Company's common stock for an aggregate purchase price of $7.5 million or $0.20 per share of common stock and to loan up to the purchase price of the common stock to the Company in advance of the closing of the equity transaction. One condition to the investors' obligation to close the transaction was the modification of the repricing provisions contained in certain warrants and the Company's Series A Preferred Stock and Series B Preferred Stock, which warrants and preferred stock were held by investors committing to take a minority share of the new investment. In May, 2001, VAC (who committed to provide the majority of the new investment) provided bridge loans totaling $3.5 million to the Company in the form of a demand note bearing interest at an annual rate of 9%. Other investors provided an additional $1.0 million in demand notes on June 21, 2001 with interest at an annual rate of 9%. On July 12, 2001, these demand notes were applied to the purchase of common stock (the "VAC Transaction") at which time the $4.5 million of demand notes, plus $5,249 of accrued interest, were exchanged for 22,526,249 shares of common stock. At closing, the holders of the Company's outstanding shares of Series B Preferred Stock and Series C Preferred Stock waived certain anti-dilution rights and modified the antidilution provisions of the Repriced Warrants with the result that the exercise price of warrants to purchase approximately 13.6 million shares of common stock, held by two of the Company's principal investors, was adjusted to $0.50 per share. Absent the agreement of these holders to such modification, the exercise price of the Repriced Warrants would have adjusted to $.20 pursuant to the terms of the antidilution provisions contained in such warrants. An additional 2,500,000 shares of common stock, reserved for issuance to certain financial advisors to the Company in exchange for the cancellation of $0.5 million of fees owed to them, have not been issued pending possible restructuring of this portion of the investment. The Company will record an extraordinary loss on the extinguishment of the related payable to the extent the fair value of the equity instruments issued exceeds the $0.5 million payable on the date of issuance. The net proceeds from the foregoing capital transactions were added to the Company's working capital and used to fund the Company's operating cash requirements and to fund security deposits on aircraft leased to the Company. As stated above, the Company is seeking additional capital; however, there can be no assurance that such capital can be obtained. The inability to secure additional funding could have a material adverse effect on the Company, including the possibility that the Company could have to cease operations. In July 2001, the Company was notified by Airlines Reporting Corporation (ARC) that its Letter of Credit securing cash transactions was under-funded according to ARC's cash reserve requirements. The Company has been requested to increase the Letter of Credit by approximately $0.9 million. In addition, the Company was notified in July 2001 by one of its credit card processors not secured by the $10.0 million facility that its collateral balance was under-funded. The Company has been requested to provide additional cash collateral of approximately $0.2 million. The Company is negotiating the timing and final amounts of these reserve requirements. The Company expects to expend approximately $5.0 million on various capital expenditures in 2001, which are primarily related to improvements to aircraft, increased aircraft parts inventory levels, additional heavy ground equipment and improvements to its computer systems, including the Company's switch to Sabre as its host reservations system. As of June 30 2001, approximately $1.8 million of such capital expenditures had been incurred. Vanguard Airlines continues to review its financing alternatives in order to purchase or lease additional aircraft under suitable terms. The Company has agreed o lease eight MD-80 aircraft, the first three of which were delivered to the Company in March, April, and June 2001. The Company is required to provide lease deposits aggregating $2.3 million with respect to these aircraft, of which $0.6 million was deposited in the first quarter of 2001. VLASIC FOODS: Court Extends Rule 9027 Removal Period to Nov. 30 --------------------------------------------------------------- Judge Walrath extended the time period within which Vlasic Foods International, Inc. and its debtor-affiliates may remove actions through the longer of: (a) November 2, 2001, or (b) 30 days after entry of an order terminating the automatic stay with respect to any particular action sought to be removed. (Vlasic Foods Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) WHEELING-PITTSBURGH: Intends to Sell 2 West Virginia Properties --------------------------------------------------------------- Wheeling-Pittsburgh Steel Corp. owns two pieces of property in Brooke County, West Virginia: * a hilltop property along Green's Run Road near Beech Bottom, West Virginia, and * some riverfront property in Beech Bottom, West Virginia. WPC listed these properties for sale in 1999 and has actively sought to sell them. The Green's Run property consists of three parcels of undeveloped land along Green's Run Road in Brooke County. These parcels contain approximately 159 acres, 200 acres and 94 acres, for a combined total of 453 acres. Harry Bruner, a land developer from Caldwell, Ohio, recently inspected the property and offered $420,000 for all three parcels. This price is higher than the average value unit of similar properties sold in a 10-mile radius, and higher than the estimated value determined by a licensed appraiser. The Riverfront property sits at the northern limit of the Village of Beech Bottom. The property was purchased in the 1920s and 1930s. The parcel consists of a 2.014 acre parcel fronting along WV State Route 2 and a 22.349 acre parcel fronting the Ohio River, for a combined total of 24.363 acres of land. The property is covered by twelve feet of coal mine tailings, which restricts development to very light structures and diminishes its utility and desirability. Further, the water supply to the property is limited and it cannot support heavy development. Delaware North Companies has offered $475,000 for the Riverfront property, and intends to use the property as a staging area for a dog kennel facility for its Wheeling Downs Dog Racing Track. The proposed price is higher than the unit value of comparable river frontage and higher than the estimated value determined by a licensed appraiser. WPC says it no longer has any business purpose for this land, had marketed the properties for sale since 1999, and had not received any adequate offers until recently. The sales will be made in good faith, after reasonable marketing efforts, and at prices above the appraised values and higher than unit prices paid in sales of comparable lands. WPC therefore urges Judge Bodoh to approve these sales promptly, saying they are in the best interest of WPC's estate. The Unsecured Noteholders Committee Doesn't Consent The Official Committee of Unsecured Noteholders, appearing through Lee D. Powar of the Cleveland firm of Hahn Loeser & Parks LLP, tells Judge Bodoh that, under the terms of the Settlement and Release Agreement with the Noteholders, WPC cannot, without the prior consent of the Committee, lend or otherwise make available to WPSC the proceeds from the disposition of any of its assets. The Committee says it doesn't consent to the proposed sales if the proceeds are to be used for steel company operations. Accordingly, the Committee asks Judge Bodoh to approve the sales conditioned upon application of the proceeds of the sales as: (a) one-seventh of the net proceeds shall be utilized to permanently pay down the obligations under the Term Loans held by Citicorp USA, Inc., and (b) six-sevenths of the net proceeds must be retained by WPC, or used solely for WPC purposes. This would mean no money for WPSC. The Noteholders also ask that the Debtors be required to demonstrate to the Noteholders Committee and other parties in interest, prior to any use of the sale proceeds by WPC, that such use is reasonable and appropriate. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) WINSTAR COMMS: Expects eAuction of Excess Assets to Fetch $20MM --------------------------------------------------------------- Prior to the filing of Chapter 11 cases, Winstar Communications, Inc. engaged Accenture to conduct an assessment of the Debtors' supply management processes. The initiative resulted in a number of negotiations, including the sale of surplus equipment no longer necessary for the ongoing operations of the Debtors' business. By this motion, the Debtors seek authority from the Court to retain Accenture and seek Court approval of excess equipment sales of inventory through Accenture's eAuction process. Edwin J. Harron, Esq., at Young Conaway Stargatt & Taylor, LLP in Wilmington, Delaware states that Accenture's proposed eAuction holds a number of advantages over a traditional auction as it can maximize the number of buyer participants by reducing the cost and complexity of participation and as a result, increasing market liquidity. Mr. Harron adds that the proposed eAuction also creates a competitive selling environment by allowing prices to move freely to adjust to current supply & demand conditions. The Debtors believe that the use of the eAuction process, which is expected to net over $20,000,000 for the Debtors, will result in higher selling prices at lower costs. An Arrangement Letter sets forth the terms & conditions on which Accenture will provide assistance for the sale of inventory: a) The scope of the project will be cataloging the consumable and asset inventory available for immediate liquidation through various methods, identifying potential buyers and preparing for and executing a single forward auction event; b) Accenture will receive an 8% fee of total payment received from the first eAuction & other inventory liquidation efforts but in no event more than $1 million. c) After the conduct of the eAuction, Accenture will invoice the buyers. Upon receipt of the payment from the buyers, Accenture will advise the Debtors, who will be responsible for picking, packing & shipping the purchased items, and for executing any quality or delivery guarantees offered to buyers. Upon confirmation of delivery, Accenture will remit the payments to the Debtors, net of Accenture's fees. d) Accenture will work jointly with the Debtors in reducing existing inventory levels by selling total excess inventory through Accenture's eAuction channel. The Debtors believe that the sale of inventory by Accenture will benefit their estates by realizing substantial amounts of cash from dormant assets and has determined that such sale would be in the best interest of their estates. They also believe that Accenture is well qualified to assist the Debtors in realizing the greatest return from the sale of inventory. The Debtors seek to employ Accenture to liquidate the their excess inventory as follows: a) Auction Assessment - identifying specific items to be sold as excess inventory, assess the feasibility of the eAuction to the Debtors' inventory reduction requirements and to estimate size of the total opportunity b) Auction Execution - establishing auction strategy, preparing bidders & host for the event & conducting the event. Accenture will provide forward auction services to the Debtors, host the forward auctions, provide training to authorized representative of buyers, provided software, hardware & technical assistance needed to host the forward auction. (Winstar Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLD AIRWAYS: Requests Nasdaq Hearing to Review Delisting ---------------------------------------------------------- World Airways, Inc. plans to request a hearing before a Nasdaq Listing Qualifications Panel to ask for continued listing of the Company's stock on the Nasdaq SmallCap Market. World Airways announced on June 22, 2001, that it had been notified by Nasdaq that its common stock had not maintained a closing bid price of $1.00 for 30 consecutive trading days as required by a Nasdaq SmallCap Market rule. According to Nasdaq, World Airways needed to meet the $1.00 price requirements within 90 days (by September 18, 2001) or it would be subject to delisting from the Nasdaq SmallCap Market. The delisting of the Company's stock will be delayed pending the outcome of the hearing. Hollis Harris, World Airways Chairman and CEO said, "We believe we can make a strong case that our business is on solid footing and our financial results will show improvement. We continue to focus on placing our aircraft in profitable operations, and have taken a number of actions to reduce costs and make our operations more efficient." "We look forward to continued support of the Air Mobility Command contract, an important military airlift program, which should generate the same or higher revenues in the coming year as it did this past year," he added. "In addition, we have received several new contracts recently, including the placement of two additional cargo aircraft with a current customer from Sept 17 through year-end, as well as a six month cargo contract with the military, which will begin October 1, 2001. For the longer term, we're well-positioned to pursue the Air Force/Boeing BC-17X Program, a new Department of Defense contract involving the operation of a commercial version of the military's C-17 aircraft." He added, "World Airways was successful in retaining its market listing a year ago, after we had requested a hearing, and we are hopeful that our stock will remain listed on the Nasdaq SmallCap Market." Utilizing a well-maintained fleet of international range, wide- body aircraft, World Airways has an enviable record of safety, reliability and customer service spanning 53 years. The Company is a U.S. certificated air carrier providing customized transportation services for major international passenger and cargo carriers, the United States military and international leisure tour operators. Recognized for its modern aircraft, flexibility and ability to provide superior service, World Airways meets the needs of businesses and governments around the globe. * Thacher Proffitt Relocates to 11 West 42nd Street --------------------------------------------------- Thacher Proffitt & Wood is relocating its New York City office, formerly at Two World Trade Center, to 11 West 42nd Street. The law firm said that the first of its approximately 300 New York City employees will be moving in tomorrow, with the remainder moving in over the next few days. All of the Firm's employees survived the attack on the World Trade Center last week. Omer S.J. "Jack" Williams, Managing Partner, said, "On behalf of the Firm, I want to thank all the brave men and women who risked or lost their lives in the rescue efforts following last week's terrorist attacks. Our gratitude is immeasurable for their many acts of assistance to members of our staff. "Now that all of our employees are accounted for and safe, our first priority is continuing to serve our clients. We have been working quickly to have all systems in New York City up and running in as short an amount of time as possible to serve our clients without interruption." Mr. Williams said that the firm's White Plains, N.Y., Jersey City, N.J., Washington, D.C., and Mexico City offices provided seamless backup services to clients during the past week. "Despite the logistical challenges of relocation and the emotional challenges of survival and loss, our client work continues in full force," Mr. Williams continued. "We have received tremendous support from other law firms, clients and friends, allowing us to continue our practice during this difficult time. We have ten structured finance transactions on schedule to close by the end of the month, several complex real estate transactions moving forward, and a variety of litigation matters underway. Last week, we also provided our publicly traded clients with guidance on SEC regulations with regard to share repurchase programs as a hedge against market volatility. It is certainly true that work is a great healer, and we embrace these ongoing projects." Mr. Williams concluded, "While our new office space is the foundation of our rebuilding effort and very reassuring news, we are very much aware that others have suffered grievous loss. All of us at Thacher Proffitt & Wood want to express our heartfelt condolences to friends, colleagues, and individuals everywhere who have lost a loved one." Thacher Proffitt & Wood advises domestic and global clients in the areas of corporate and financial institutions law, structured finance, cross-border transactions, global finance, real estate, insurance, admiralty and ship finance, litigation and dispute resolution, e-Business, technology and intellectual property, taxation, trusts and estates, bankruptcy, reorganizations and restructurings. Founded in 1848, the Firm has approximately 200 lawyers located in New York (including White Plains), New Jersey, Washington, D.C., and in its Mexican affiliate office, Thacher Proffitt & Wood, S.C. ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. 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