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/raid1/www/Hosts/bankrupt/TCR_Public/011004.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, October 4, 2001, Vol. 5, No. 194 Headlines AMERICA WEST: Begins Axing Jobs As Part of Cost-Cutting Efforts AT HOME: Case Summary & 30 Largest Unsecured Creditors BAC SYNTHETIC: Fitch Junks $25 Million Class E Notes BETHLEHEM STEEL: Receives Commitments for New $750MM Facility BRIDGE INFO: Unexpired Lease Decision Period Extended to Feb. 12 BROCKER TECHNOLOGY: Violates Nasdaq Listing Requirements BUHRMANN N.V.: S&P Cuts Ratings to BB- on Lower EBITDA Coverage COMDISCO: Equity Panel Seeks Approval of Trading Wall Procedures EDISON: Says Settlement with CPUC Will Restore Financial Health EISBERG FINANCE: Fitch Downgrades $63.75MM Class C Notes to B EXODUS COMMUNICATIONS: Selling Louisiana Assets to TekInsight FEDERAL-MOGUL: Frank E. Macher Takes Helm As New Chairman & CEO FEDERAL-MOGUL: Fitch Drops Ratings to D After Chapter 11 Filing FOUNTAIN VIEW: Files for Chapter 11 Protection in Los Angeles GENESIS HEALTH: Emerges From Bankruptcy After Completion of Plan GRAND ADVENTURES: Begins Liquidation of UK Unit & Layoffs in US ICG COMMS: Rejects MCI Worldcom Pact & Inks New Deal with TTI IMPERIAL SUGAR: Commences Distribution of New Common Stock INTERNATIONAL TOTAL: Ex-CEO Calls For Meeting to Oust Board INTIRA CORPORATION: Creditors' Meeting Slated For October 9 JERRY'S FAMOUS DELI: Fails to Meet Nasdaq Public Float Minimum LBP INC: Initial Liquidating Distribution Will Start on Oct. 15 LAIDLAW INC: Seeks Court Approval of Key Employee Programs LOEWEN: Seeks Approval to Pay Exit Financing Due Diligence Fees LOOK COMMS: Secures CCAA Protection Until November 30 MJK CLEARING: Court Clears Sale of $10B Assets to SWS Securities MCLEODUSA: Scraps National Network to Focus on Core Businesses MEDIA GENERAL: S&P Rates Long-Term Credit & Unsecured Debt BB+ NATIONAL RECORD MART: Creditors' Meeting Set for October 4 NIAGARA MOHAWK: Reaches Agreement to Sell Energy Marketing Unit NOVO NETWORKS: Seeks to Extend Lease Decision Period to Dec. 31 OWENS CORNING: Gets Okay to Assume Amended SAP America Contract PACIFIC GAS: Files Appeal Statement of TURN Accounting Decision PILLOWTEX CORP: Court Approves Claims Settlement Protocol PLANET HOLLYWOOD: Closing Six U.S. Restaurants PRECISION AUTO CARE: Negotiates for Extensions of Senior Debt PSINET INC: Gets Approval of Settlement with TNS Re Escrow Fund RITE AID: Completes Refinancing, Reducing Debt By $2.9BB In Q2 SWISSAIR: Resumes Flight Operations Today TERRA INDUSTRIES: S&P Rates Proposed $200M Senior Notes at BB- THERMADYNE HOLDINGS: Bank Group Agrees to Forbear Until Oct. 31 TOWER RECORDS: Completes Amendment to Bank Credit Agreement UNIFORET: CCAA Protection Extended Until November 12 VLASIC FOODS: Confirmation Hearing Scheduled for Oct. 31 XEROX: Flextronics Buying Office Manufacturing Assets for $220MM * Cleary Gottlieb's One Liberty Plaza Offices Temporarily Moved ********* AMERICA WEST: Begins Axing Jobs As Part of Cost-Cutting Efforts --------------------------------------------------------------- America West Airlines (NYSE: AWA) began the process of reducing its workforce by approximately 2,000 positions as part of cost- cutting measures resulting from the terrorist attacks of September 11 and the ensuing sharp drop in demand for air travel. "These actions are particularly distressing after the employees of America West have worked tirelessly to rebuild our airline over the past year and, particularly, following recent tragic events," said W. Douglas Parker, chairman, president and chief executive officer. "As America West becomes a stronger airline, we hope to be in a position to bring many of these employees back." America West announced on September 17 that it would reduce its flight schedule by about 20 percent and eliminate about 2,000 positions through a combination of attrition, deferred hiring and reductions in force. Shortly afterward, the company offered employees the opportunity to volunteer for early retirement, unpaid leaves of absence and job sharing in an attempt to minimize the number of involuntary reductions. The company expects more than half of the eliminated positions to be handled through voluntary reductions. Furlough notifications have begun and will continue across all work groups over the next two weeks. "This is a painful process for all of us, and we commend those employees who stepped forward to volunteer for leaves of absence to assist America West in our cost reduction efforts," added Parker. In further cost reduction efforts, Parker has asked the company's board of directors to forego all his compensation through the end of this year. Additionally, America West's four executive vice presidents have volunteered to cut their pay by 25 percent and each member of the board of directors will forego compensation through the end of the year. AT HOME: Case Summary & 30 Largest Unsecured Creditors ------------------------------------------------------ Lead Debtor: At Home Corporation, a Delaware Corporation dba Excite@Home 450 Broadway Street Redwood City, CA 94063 Debtor Affiliates Filing Separate Chapter 11 Petition: Classified 2000, Inc. DataInsight, Inc. Excite@Home Work.com Full Force Systems, Inc. iMall, Inc. Join Systems, Inc. Kendara, Inc. MatchLogic, Inc. Narrative Communications Corporation Netbot, Inc. The McKinley Group, Inc. Webshots Corporation Worldprints.com International Inc. iMall Consulting, Inc. iMall Services, Inc. R&R Advertising, Inc. Cabot Richards & Reed Internet Yellow Pages Internet Merchandising, Inc. Pure Payments, Inc. Physicomp Corporation Chautauqua Publishing Group LLC Pogo Acquisition Corporation At Home Holdings Corporation MAC Corporation At Home L.P. AtHome.net At Home Network, Inc. Excite@Home Canada, Inc. Excite SARL Chapter 11 Petition Date: September 28, 2001 Court: Northern District of California At Home Corporation Case No.: 01-32495 through 01-32525 Judge: Thomas E. Calson Debtor's Counsel: Suzanna Uhland, Esq. Robert J. White, Esq. Victoria A. Graff, Esq. Austin K. Barron, Esq. O'Melvenny & Myers, LLP 990 Marsh Road Menlo Park, CA 94025-2600 Tel: 213-430-6000 Fax: 213-430-6407 Debtor's 30 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ State Bank & Trust Co. Bonds $505,937,500 Joey B. Edralin Of California 633 West 5th Street 12th Floor Los Angeles, CA 90071 Tel: 213-362-7330 Fax: 213-362-7301 State Bank & Trust Co. Bonds $437,573,126 Joey B. Edralin Of California 633 West 5th Street 12th Floor Los Angeles, CA 90071 Tel: 213-362-7330 Fax: 213-362-7301 Leonardo LP Lender $50,000,000 Angelo Gordon & Co, LP 245 Park Avenue, 26th Floor New York, NY 10167 Cisco Systems Capital Equipment Lessor/ $50,785,513 Kathy Murphy Financier 4 Venture Street Suite 100 Irvine, CA Tel: 949-788-5145 Fax: 949-789-5005 Sun Micro Systems Equipment Lessor/ $30,811,761 Finance Financier Jennifer Lewis 1400 Computer Drive Westborough, MA 01581 Tel: 508-836-2406 Fax: 508-836-2432 Tickets.com Customer Debt $9,737,920 W. Thomas Gimple, CEO 555 Anton Blvd., 12th Floor Costa Mesa, CA 92626 Tel: 714-327-5400 Fax: 714-327-5570 IBM Corporation Financial Equipment Lessor/ $9,514,575 Bruce Gordon Financier IBM (Fleet) Leasing 2929 N. Central Avenue Phoenix, AZ 85012 EMC Leasing Equipment Lessor/ $7,122,584 Randy Coste Financier 4140 Dublin Blvd. Suite 400 Dublin, CA 94568 Tel: 925-560-7917 Fax: 925-560-7810 Heller Financial, Equipment Lessor/ $5,818,035 Incorporated Financier David Ketchum 71 Stevenson Street Suite 200 San Francisco, CA 94105 Tel: 415-356-1326 Fax: 415-356-1335 Merrimak Leasing Equipment Lessor/ $5,685,180 Bill Marseilles Financier 60 Galli Drive, Suite T Novato, CA 94949 Tel: 415-884-4646 * 234 Fax: 415-884-5644 GATX Equipment Lessor/ $5,481,276 Chris Rhoes Financier Four Ambarcadero Center Suite 2200 San Francisco, CA 94110 Tel: 415-955-3300 Fax: 415-955-3416 ORIX USA Corporation Equipment Lessor/ $5,198,069 Steven L. Eny Financier 1177 Avenue of the Americas 10th Floor New York, NY 10036 Tel: 212-739-1600 Fax: 212-739-1701 Information Technology Lender $5,050,000 Business Department Aerospace Ryosuki Tsuji Hisato Kawakubo Kawakubo ITOCHI Corporation 5-1 Kita-Aoyama 2-chome Minato-ku Tokyo 107-8077 Japan Tel: +81-3-3497-3216 Fax: +81-3-3497-4181 De Lage Financial Services Equipment Lessor/ $3,927,933 Steve Grosso Financier 1111 Old Eagle School Road Wayne, PA 19087-1453 Tel: 610-386-5000 Fax: 610-385-5840 Transamerica Equipment Equipment Lessor/ $3,604,392 Financial Service Financier John Burke 4975 Preston Park Boulevard Suite 320 Plano, TX 75093 Tel: 972-458-5810 Fax: 972-458-5972 CitiCapital Equipment Lessor/ $2,785,184 Sanford Weill Financier PO Box 6229 Carol Stream, IL 60197-6229 Phone: 212-559-1000 Fax: 212-816-8913 Silicon Graphics Equipment Lessor/ $2,658,597 Financial Services Financier Jan Soules 1600 Ampitheathre Parkway MS 128, Mountain View, CA 94043 Tel: 650-933-8306 Fax: 650-933-0425 Fleet Business Credit Equipment Lease/ $2,379,301 Corporation Financier Michael F. Dougan Main Stop: MA DE 1030Z: One Federal Street, 7th Floor Boston, MA 02110 Tel: 617-346-0704 Fax: 917-346-4903 Pullman Bank and Equipment Lessor/ $1,848,079 Trust Company Financier Frank Altrui 1000 East 111th Street Chicago, IL 60628 Tel: 813-637-2505 Fax: 708-445-3165 Extreme Networks Credit Equipment Lessor/ $1,380,894 Corporation Financier Richard Salhany 3585 Monroe Street Santa Clara, CA 95051 Tel: 408-579-3178 Insight Communications Trade Debt $1,340,710 810 7th Avenue New York, NY 10019 Tel: 917-286-2300 Fax: 917-286-2301 Pacific Shores Center Real Estate Lessor $1,116,705 Mr. Jay Paul, Managing Partner 350 California Street Suite 1905 San Francisco, CA 94104 Tel: 415-263-7400 Fax: 650-556-3650 Oliver Allen Leasing Equipment Lessor/ $1,040,204 Ellen Udoff Financier 801 Larkspur Landing Larkspur, CA 94939 Tel: 415-925-4708 Fax: 415-461-4675 Leo Burnett Commercial Debt $972,133 Brad Brinegar, CEO 35 West Wacker Drive Chicago, IL 60601 Tel: 312-220-5959 Fax: 312-220-3299 Open Wave Commercial Debt, $811,942 Steven Peters, General Software License Counsel & Maintenance 1400 Seaport Boulevard Redwood City, CA 94063 Tel: 650-480-800 Fax: 650-480-4315 Sigma Software Provider $698,318 Peter McCormick, VP Ops. 55 York Street, Suite 1100 Toronto, Ontario M5J 1R7 Tel: 416-365-3959 Fax: 416-365-9227 Predictive Systems Consulting $694,945 Andrew Zimmerman, CEO 417 Fifth Avenue New York, NY 10019 Tel: 212-659-3400 Fax: 212-659-3499 Key Equipment Finance Equipment Lessor/ $640,407 David Bower Financier 1000 South McCaslin Road Superior, CO 80027 Tel: 720-304-1138 Fax: 720-304-148 Adelphia Trade Creditor/MSO $633,585 John J. Rigas, CEO One North Main Street Coudersport, PA 16915 Tel: 814-274-9830 Fax: 814-274-8631 MTV Commercial Vendor $600,000 Tom Freston, CEO 1515 Broadway New York, NY 10036 Tel: 212-258-8000 Fax: 212-258-7782 BAC SYNTHETIC: Fitch Junks $25 Million Class E Notes ---------------------------------------------------- Fitch has downgraded two classes of notes issued by BAC Synthetic CLO 2000-1 Limited, a synthetic cash flow CDO established by Bank of America to provide credit protection on a $10 billion portfolio of investment grade, corporate debt obligations. No rating action has been taken or is contemplated at this time for the class A, class B notes and class C notes, which are rated `AAA', `A+' and `BBB' respectively. Based on the current risk profile of the reference portfolio, the class A, class B and class C notes continue to maintain credit enhancement levels consistent with the assigned ratings. The securities have been downgraded and removed from Rating Watch Negative: * $100,000,000 class D notes from 'BB' to 'BB-'; * $25,000,000 class E notes from `B' to `CCC'. Fitch's rating action reflects higher than expected defaults in the underlying assets. This has resulted in higher than expected credit protection payments under the credit default swap agreement with Bank of America CLO Corporation II, and a diminished level of credit enhancement for the class D and E notes. BETHLEHEM STEEL: Receives Commitments for New $750MM Facility ------------------------------------------------------------- In response to inquiries about Bethlehem Steel's previously announced intentions to complete certain asset sales and a new credit facility in the third quarter 2001, Bethlehem said that it has made progress in both areas. With respect to the planned asset sales, Bethlehem announced that it has sold the South Buffalo Railway, a Bethlehem subsidiary railroad to Genesee & Wyoming, Inc. for $33.5 million in cash and $3.3 million in assumed liabilities. This sale, along with the completion of the sale of Bethlehem's 5% interest in Mineracoes Brasileiras Reunidas (MBR) announced last week, a transaction valued at about $25 million, is an important component of rebuilding Bethlehem's financial flexibility in the near-term. South Buffalo is a switching and terminal railroad located in Lackawanna, N.Y. It provides rail service to Bethlehem Steel's Galvanized Products Division, Ford Motor Company, Republic Technologies and others. South Buffalo interchanges with the Norfolk Southern, CSX, Canadian National, Canadian Pacific, and Buffalo & Pittsburgh railroads. Currently, it employs about 80 people. South Buffalo is one of nine shortline railroads owned by Bethlehem Steel. With respect to its planned financing, Bethlehem said it has obtained essentially all of the necessary commitments for a new $750 million credit facility. It has also obtained the necessary consents to amend its 10-3/8% Senior Notes in accordance with the consent solicitation dated September 10, 2001. The consent solicitation payment is conditioned upon closing the new credit facility and Bethlehem is extending this condition until October 31, 2001. Bethlehem also said that it is continuing to pursue certain other required consents. BRIDGE INFO: Unexpired Lease Decision Period Extended to Feb. 12 ---------------------------------------------------------------- Market Front Associates, LP is Bridge Information Systems, Inc.'s landlord with respect to a lease of non-residential real property for the premises in One Front Street, San Francisco, California. Peter D. Kerth, Esq., at Gallop, Johnson & Neuman, L.C., in St. Louis, Missouri, tells the Court that the Debtors owe Market Street $21,650.22 for post-petition rent and related charges, exclusive of interest, attorneys' fees and costs. Market Street does not object to the Debtors' proposed extension of their lease decision period, Mr. Kerth says, provided: (i) the post-petition defaults for the premises is immediately paid to Market Street, and (ii) all future rents and related charges are paid in accordance with the terms of the lease. Accordingly, Market Street asks the Court to enter an order: (i) compelling the Debtors to pay immediately to Market Street the post-petition defaults, and to pay interest, attorneys' fees and costs, in an amount to be determined, and (ii) compelling the Debtors to pay all future rents and related charges in accordance with the terms of the lease. * * * Persuaded that the relief requested is appropriate to assist the reorganization of the Debtors' businesses, Judge McDonald extends the period within which the Debtors must move to assume or reject the Unexpired Leases through and including February 12, 2002. (Bridge Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 609/392-0900) BROCKER TECHNOLOGY: Violates Nasdaq Listing Requirements -------------------------------------------------------- Brocker Technology Group Ltd. (Nasdaq: BTGL) (TSE: BKI) -- http://www.brockergroup.com -- announced that the Staff of the Nasdaq Stock Market has notified the Corporation that it does not currently comply with the net tangible assets/shareholders' equity/market capitalization/total assets and total revenue requirement for continued listing on the Nasdaq National Market as specified in Market Place Rules 4450(a)(3) and 4450(b)(1). This is in addition to the Staff's previous determination that the market value of the Corporation publicly held common shares had fallen below the Nasdaq National Market continued listing requirements, which gives rise to the Staff's determination to delist the Corporation's common shares from the Nasdaq National Market. The Staff's determination is to be reviewed by an Independent Panel in accordance with the procedures provided by the Nasdaq Stock Market rules. The delisting will be stayed until the Independent Panel makes its determination on these matters. The Corporation cannot predict the outcome of the review process and, accordingly, there is no assurance that the Corporation's listing on the Nasdaq Stock Market will be continued. The Corporation's listing on the Toronto Stock Exchange is not affected by the Nasdaq Stock Market action. Brocker Technology Group is a communications company focused on improving information flows by delivering innovation and market leadership in telecommunication services, e-commerce strategies and information management technologies. Brocker subsidiary, Datec also provides a broad range of IT and communications solutions to companies across the South Pacific. BUHRMANN N.V.: S&P Cuts Ratings to BB- on Lower EBITDA Coverage --------------------------------------------------------------- Following a profit warning by Netherlands-based office products supplier Buhrmann N.V., Standard & Poor's lowered its long-term corporate credit ratings and senior secured ratings on Buhrmann to double-'B'-minus from double-'B' and its subordinated debt ratings on the group to single-'B' from single-'B'-plus. Ratings remain on CreditWatch, where they were placed with negative implications on Aug. 3, 2001. The ratings downgrade and continued placement of ratings on CreditWatch reflect Buhrmann's further deterioration in its already weak debt protection measures following its third profit warning. EBITDA to net interest coverage was 2.6 times for the first half of 2001, compared with 3.0x for the corresponding period in 2000. In the six months ended June 30, 2001, the group's operating profits fell by 15% to EUR257 million ($237 million) from EUR301 million. The persistent downturn in the U.S. economy was exacerbated by the terrorist attacks on Sept. 11, 2001, and any hope of an early recovery of Buhrmann's U.S. business, which accounts for about half of the group's total operating profits, is therefore limited. Furthermore, a shift of Buhrmann's customers towards lower- margin products, and pricing pressure in paper merchanting owing to lower advertising spend also contributed to the group's decline in profits. Standard & Poor's estimates that any further meaningful deterioration of the group's profitability could trigger a bank covenant violation over the next six months. The ratings will be increasingly driven by the group's weak financial position, but continue to be supported by its extensive distribution structure and diversified geographical mix. Standard & Poor's will be holding discussions with Buhrmann's management in the near term to review the group's strategies for halting the significant decline in profitability, and continues to closely monitor whether Buhrmann is in compliance with its bank covenants. COMDISCO: Equity Panel Seeks Approval of Trading Wall Procedures ---------------------------------------------------------------- David F. Heroy, Esq., at Bell, Boyd & Lloyd, in Chicago, Illinois, explains that a Securities Trading Committee Member has a fiduciary duty to maximize returns for its clients through the buying and selling of securities. But as a result of membership on the Equity Committee, Mr. Heroy says, such members and their affiliates also owe a fiduciary duty to other equity holders not to divulge any confidential or "inside" information regarding Comdisco, Inc. Thus, Mr. Heroy notes, if a Securities Trading Committee Member is barred from trading the Securities during the pendency of these cases because of its duties to other equity holders, it may risk the loss of a beneficial investment opportunity for its clients. On the other hand, Mr. Heroy relates, if a Securities Trading Committee Member resigns from the Equity Committee, its company's interests may be compromised by virtue of taking a less active role in the reorganization process. To solve this dilemma, the Equity Committee proposes that the Trading Wall procedures to be employed by a Securities Trading Committee Member, if it wishes to trade in Securities, should include the following information blocking procedures: (i) the Securities Trading Committee Member shall cause all its Committee Personnel to execute a letter acknowledging that they may receive nonpublic information and that they are aware of the Order and the Trading Wall procedures which are in effect with respect to the Securities; (ii) Committee Personnel will not share non-public Committee information with any other employees of such Securities Trading Committee Member, except employees of such Securities Trading Committee Member that have a need to know such information; (iii) Committee Personnel will keep non-public information generated from Committee activities in files inaccessible to other employees; (iv) Committee Personnel will receive no information regarding Securities Trading Committee Member's trades in Securities in advance of such trades, except that Committee Personnel may receive the usual and customary internal and public reports showing the Securities Trading Committee Member's purchases and sales and the amount and class of claims and securities owned by such Securities Trading Committee Member, including the Securities; and (v) to the extent applicable, the Securities Trading Committee Member's compliance department personnel shall review from time to time the Trading Wall procedures employed by the Securities Trading Committee Member as necessary to insure compliance with the Order and shall keep and maintain records of their review. Mr. Heroy notes that one of the Equity Committee Members is the Pontikes' Family Trusts. The Committee's requested relief includes treatment of the Pontikes' Family Trusts as a Securities Trading Committee Member for all purposes of the relief requested. The Committee further proposes that any Securities Trading Committee Member's Committee Personnel or other personnel may sell any securities to comply with a client's redemption directions. Accordingly, the Committee requests the Court to rule that any such sale will not violate such Securities Trading Committee Member's fiduciary duties as a Committee member. Thus the Committee member will not subject its interests or claims to possible disallowance, subordination, or other adverse treatment for reason of its trading in the Securities during the pendency of the Bankruptcy Cases. Mr. Heroy tells Judge Barliant that the Trading Wall procedures outlined is identical to that proposed by the Official Committee of Unsecured Creditors and approved by this Court. So there is no reason why the Court should not also approve the relief requested, Mr. Heroy implies. By this motion, the Equity Committee requests that the Court enter an order: (i) approving the Trading Wall procedures set forth; (ii) determining that any Committee member, acting in any capacity, that engages in securities trading as a regular part of its business will not violate its fiduciary duties as a Committee member, and, accordingly, will not subject its interests or claims to possible disallowance, subordination, or other adverse treatment by trading in the Securities during the pendency of the Bankruptcy Cases, provided that, such Committee member follows the procedures set forth herein to insulate its trading activities from its Committee related activities. (Comdisco Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) EDISON: Says Settlement with CPUC Will Restore Financial Health --------------------------------------------------------------- Southern California Edison today announced the settlement of its Filed Rate Doctrine lawsuit with the California Public Utilities Commission that will enable SCE to develop a plan to pay off its creditors and prevent another utility bankruptcy in California. The settlement, filed Tuesday in U.S. District Court, was crafted in response to the lawsuit Edison filed nearly a year ago based on the fact that state regulators were preventing Edison from collecting sufficient retail rates to pay for the actual cost of power it was purchasing last year on behalf of its customers. The following statement was issued by Edison International Chairman, President and CEO John E. Bryson. "Throughout the entire energy crisis, Edison has had just one goal: to become creditworthy again so that the State of California could get out of the electricity-buying business and Edison employees could get back to what they do best -- provide safe, secure power to Edison customers. "[Tues]day's federal court settlement agreement between Edison and the California Public Utilities Commission is a workable way for Edison to become creditworthy, to remove the state from the power business, and to allow Edison to return to its core mission of delivering reliable electricity service. "Particularly at this time of national crisis and a fragile California economy, it is vital to avoid the great uncertainty of potential bankruptcy and lawsuits. By guaranteeing rate stability and making Edison creditworthy, this federal court settlement is in the best interest of California consumers." An Edison International (NYSE: EIX) company, Southern California Edison is one of the nation's largest electric utilities, serving a population of more than 11 million via 4.3 million customer accounts in a 50,000-square-mile service area within central, coastal and Southern California. For more information on the California electricity crisis, see http://www.sce.com EISBERG FINANCE: Fitch Downgrades $63.75MM Class C Notes to B ------------------------------------------------------------- Fitch has downgraded one class of notes issued by Eisberg Finance Ltd., a synthetic cash flow CDO established by UBS AG, London Branch to provide credit protection on a $2.5 billion portfolio of investment grade, corporate debt obligations. No rating action has been taken or is contemplated at this time for the class A and class B notes which are rated `AAA' and `A' respectively, and no further action has been taken on the class D notes which were downgraded on March 21, 2001 to `CCC' from `B'. Based on the current risk profile of the reference portfolio, the class A, class B and class D notes continue to maintain credit enhancement levels consistent with the assigned ratings. The following securities have been downgraded and removes from Rating Watch Negative: * $63,750,000 class C notes from 'BB' to 'B'. Fitch's rating action reflects the deterioration in credit quality of several of the underlying assets. This has resulted in higher than expected credit protection payments under the credit default swap agreement with UBS, and a diminished level of credit enhancement for the class C notes. EXODUS COMMUNICATIONS: Selling Louisiana Assets to TekInsight ------------------------------------------------------------- TekInsight.com Inc. (Nasdaq:TEKS)(Nasdaq:TEKSP)(Nasdaq:TEKSW), a leading provider of government transformation services, announced they have signed a letter of intent with Exodus Communications(R) to acquire its professional services business in the state of Louisiana. Exodus(R) provides network support and other technology services to several state agencies within Louisiana. Under the terms of the agreement and subject to bankruptcy court approval, TekInsight will acquire Exodus' current contracts and employees for an undisclosed amount. "We are committed to providing superior service and a seamless transition for both customers and employees within Louisiana. We are excited about the dynamic business that is created by this agreement and feel that this is a very positive development for Exodus' employees, customers and the state," said Steve Ross, TekInsight's chief executive officer. "This acquisition will also help TekInsight further expand our National Technology Support Center, located in Baton Rouge, and support Governor Foster's efforts to make Louisiana an attractive place for the technology industry." TekInsight helps governments transform by using innovative technology and management techniques to increase efficiency in government operations and improve access to government functions. The company's comprehensive Government Transformation Methodology includes consulting, infrastructure planning and deployment, application development, legacy integration and support. TekInsight's ePluribus(TM) Software Suite is comprised of custom and modular e-government applications that enable governments to process tax and violation payments, licenses, parks & recreation management, deeds and more online and in real-time. TekInsight's ProductivIT(TM) suite of Internet-based applications is a completely customizable IT support enhancement tool designed to aid in the diagnosis and resolution of hardware and software application issues in any size environment. TekInsight competes in the government technology space shared with companies such as National Information Consortium Inc. (Nasdaq:EGOV) and Maximus (NYSE:MMS). For additional information on TekInsight, visit http://www.tekinsight.com FEDERAL-MOGUL: Frank E. Macher Takes Helm As New Chairman & CEO --------------------------------------------------------------- The Board of Directors of Federal-Mogul Corporation (NYSE: FMO) has elected Frank E. Macher as chairman and chief executive officer, adding the responsibilities of chairman to his previous role as chief executive officer, effective October 1, 2001. Macher, 60, replaces Robert S. (Steve) Miller Jr., who had been serving as non-executive chairman and who will remain on Federal-Mogul's board of directors. The board's action accelerates a leadership succession plan at Federal-Mogul that was announced at the time of Macher's appointment on January 11, 2001. The acceleration resulted from the recent appointment of Miller as chairman and chief executive officer of Bethlehem Steel Corporation, effective September 24, 2001. Chip McClure remains as Federal-Mogul's president and chief operating officer, a position he has held since January 11, 2001. Macher has more than 35 years of automotive industry experience. He served as president and chief executive officer of the former ITT Automotive, a $6 billion global automotive supplier, from July 1997 to January 1999. Before joining ITT, Macher served 30 years at Ford Motor Co. in a variety of progressively responsible positions in management, manufacturing, engineering and quality. His last position at Ford was vice president and general manager of the Automotive Components Division, the predecessor to the current Visteon Corporation. While at Ford, Macher served as general manager of the Plastic and Trim Products Division, the Electronics Division and the Electrical and Electronics Division. His other roles included vice president of northern Pacific Operations, based in Tokyo, Japan, and general manufacturing manager and plant manager at several Michigan facilities. He began his Ford career in 1966 as a manufacturing development engineer. Headquartered in Southfield, Michigan, Federal-Mogul is an automotive parts manufacturer providing innovative solutions and systems to global customers in the automotive, small engine, heavy-duty and industrial markets. The company was founded in 1899. Visit http://www.federal-mogul.comfor more information. FEDERAL-MOGUL: Fitch Drops Ratings to D After Chapter 11 Filing --------------------------------------------------------------- Fitch downgrades both the senior unsecured debt and the secured bank debt of Federal Mogul Corporation to D from CCC and B-, respectively. Federal Mogul Corporation voluntarily filed for financial restructuring under Chapter 11 of the U.S. Bankruptcy Code Monday. In addition, its subsidiaries in the U.K. have filed jointly for similar proceedings. Most recently, Federal Mogul Corporation had $1.9 billion in secured bank debt outstanding in addition to $2.1 billion of unsecured debt. The 'D' ratings reflects the great uncertainty as to the timely proceedings of yesterday's filings and also the potential liabilities related to asbestos claims as the proceedings move forward and its effect on ultimate recovery value for all classes of debtholders. The company has stated that it has obtained up to $675 million in a new loan through debtor-in-possession financing. Federal-Mogul Corp., headquartered in Southfield, MI, is a global producer and distributor of a broad range of components for automobiles and light trucks, heavy-duty trucks, farm and construction vehicles and industrial products. The company's major products and systems focus on engines, sealing and braking, which it sells to OE producers as well as to replacement markets. FOUNTAIN VIEW: Files for Chapter 11 Protection in Los Angeles ------------------------------------------------------------- Citing its inability to get a plaintiffs' lawyer to remove a lien on its bank accounts, Fountain View, Inc., a leading operator of 49 long-term care facilities with approximately 5,000 patients and about 6,000 employees in California and Texas, filed for protection under Chapter 11 of the U.S. Bankruptcy Code to ensure continuation of patient care. Robert Snukal, chief executive officer of the Burbank, CA-based company, said Fountain View officials have been attempting to negotiate a settlement with attorneys for plaintiffs who, in April of this year, were awarded a $6.1 million judgment against the Company. He said when company officials learned that the plaintiffs' attorneys had attached the company's bank accounts, Fountain View's lawyers contacted them in an attempt to get the attachment removed. "When they refused, we had no choice but to take action to protect the assets of the company to ensure we had the necessary resources to continue to provide care to our patients and honor our obligations to our employees," he said. "The company disputes the judgment in its entirety and intends to appeal." Mr. Snukal said that the company has sufficient cash to fund ongoing operations. He stressed that under Chapter 11 daily operations will continue as usual. "Patients will receive the same quality care as before the filing. Employees will continue to be paid. Vendors will be paid currently for goods and services provided after the date of the filing," he said. "Under Chapter 11, Fountain View will have the necessary time to develop and implement a plan to restructure its debt," Mr. Snukal said. "We are extremely optimistic about the future of this company. While we would have preferred to have been able to avoid the filing, we are confident that it is now in the best interest of all of the company's constituents to work out a plan which will ensure that Fountain View emerges from this process as a strong and viable company," he stated. Mr. Snukal continued, "We provide quality care for a lot of people in need. We are very proud of the service we are providing and look forward to continuing to do so for many years to come." The Company filed its voluntary petition for Chapter 11 reorganization in the U.S. Bankruptcy Court in the Central District of California, Los Angeles Division. Klee, Tuchin, Bogdanoff & Stern, LLP of Los Angeles, is Fountain View's bankruptcy counsel. Fountain View is a leading operator of long-term care facilities and a leading provider of a full continuum of post-acute care services, with a strategic emphasis on sub-acute specialty medical care. The Company operates a network of facilities in California and Texas, including 43 skilled nursing and six assisted living facilities. In addition to long-term care, the Company provides a variety of high-quality ancillary services such as physical, occupational and speech therapy and pharmacy services. GENESIS HEALTH: Emerges From Bankruptcy After Completion of Plan ---------------------------------------------------------------- Genesis Health Ventures, Inc. has emerged from chapter 11 protection following the completion of its plan of reorganization and merger with the Multicare Companies, Inc. In conjunction with emergence, Genesis also announced that it has secured a $515 million senior secured credit facility led by First Union, Goldman Sachs and GE Capital that will fund obligations under the plan of reorganization as well as ongoing corporate financing needs. "We are emerging as a stronger and re-energized Company, ready to take on the big challenges of meeting this nation's healthcare needs for an aging population," said Michael R. Walker, founder, chairman and CEO of Genesis. With the exception of certain secured debt, the plan of reorganization cancels both companies' pre-petition debt plus preferred and common stock. The plan provides for Genesis and Multicare bank lenders to receive a combination of cash, new debt, new convertible preferred stock, and approximately 93% of the new common stock of Genesis. Unsecured creditors such as vendors and subordinated bondholders will get approximately 7% of the new common stock and warrants to purchase additional shares of new common stock. Pre-petition preferred and common shareholders will not receive a distribution under the plan. The company has applied to have the new common stock listed on the Nasdaq National Market. Genesis and Multicare voluntarily filed for chapter 11 protection on June 22, 2000 after drastic cuts in Medicare reimbursement and continued underpayment by most State funded Medicaid systems resulted in an inability to continue to meet debt obligations under the companies' existing capital structures. Genesis Health Ventures provides eldercare in the eastern US through a network of Genesis ElderCare skilled nursing and assisted living facilities plus long term care support services nationwide including pharmacy, medical equipment and supplies, rehabilitation, group purchasing, consulting and facility management. GRAND ADVENTURES: Begins Liquidation of UK Unit & Layoffs in US --------------------------------------------------------------- Grand Adventures Tour & Travel Publishing Corporation (OTC Bulletin Board: GATT) announced the closing and liquidation of its UK subsidiary Lawson Interline Travel Ltd. (Lawson). This closure was brought about after the company was unable to renew required operating licenses that fell due at end of September. The closing of the Lawson operation was directly impacted by the terrorist events that occurred September 11. Prior to the attacks on the World Trade Center, the company was about to close a private placement offering that would have provided the necessary capital to permit the UK operation to obtain the renewal of its license. The subsequent uncertainty in the capital markets as well as the significant disruption to the air traffic system foreclosed any opportunity the company may have had to raise the required capital. The company's US operations have also been substantially damaged by the attacks on September 11. Since that date, new bookings have dropped by over 70%, and the company has experienced significant cancellations of future bookings. Furthermore, its chances for a quick recovery have been limited by the fact that approximately 20% of the market for the company's services, airline employees, have been or soon will be laid off. The timing of this business disruption was also extremely damaging to GATT because the September and October period is a peak travel time for airline employees. Revenues generated during this period are generally used to fund operations over the November and December period when the company has historically experienced slow sales. In response to this situation the company has drastically cut back on staff and expenses. In the US, 45 employees have been laid off while the closing of the UK operation cost over 46 employees their jobs. The remaining 30 employees in Austin are focused on servicing the travel needs of passengers with existing reservations while also handling any new booking requests. Finally, the company has suspended payments to all debt holders and subsequently is in default on many of obligations. Additionally, no payments to trade creditors for past services are being made until further notice. Payments for future services are being made where appropriate. Additionally, the company has also suspended the publication of the print edition of Interline Adventures magazine. ICG COMMS: Rejects MCI Worldcom Pact & Inks New Deal with TTI ------------------------------------------------------------- As part of ICG Communications, Inc.'s normal business operations, the ICG Communications, Inc., has provided long distance and local telecommunications services to customers for the past several years. Specifically, the Debtors purchase long distance and local service connections from MCI WorldCom Network Services, Inc., f/k/a WorldCom Network Services, Inc., and, in turn, sell such services to certain third parties. The long distance business has yielded approximately $500,000 in monthly revenue for the Debtors in the past. However, due to losses resulting from long-distance fraud (including over $5 million this year) and problems with various billing systems, the Debtors have determined that the long distance business is no longer a profitable enterprise. Accordingly, as part of the Debtors' restructuring efforts, to maximize the value of these estates and streamline operations, the Debtors have decided to exit such business. Toward that end, the Debtors have negotiated an agreement with TTI National, Inc., an affiliate of MCI WorldCom Network Services, Inc., f/k/a WorldCom Network Services, Inc., subject to Judge Walsh's approval, whereby the Debtors will (i) reject the agreement for long distance service with MCI WorldCom, (ii) assume and assign the long distance portion of customer contracts to MCI WorldCom, and (iii) assume, as amended, the agreement with MCI WorldCom for local service. In consideration for the assignment of the customer contracts, as discussed more fully below, MCI WorldCom has agreed to waive substantial claims it alleges are owed in connection with the rejection of the long distance service agreement and the assumption of the local service contract, and pay the Debtors a royalty on fees collected on account of the customer contracts. Moreover, MCI WorldCom has agreed to amend the local service contract to provide more beneficial terms for the Debtors. The Debtors assure Judge Walsh that they anticipate that regulatory approval for the Asset Purchase Agreement, although a condition to the closing of the Asset Purchase Agreement, is expected to be obtained easily and in due course. Long Distance Agreement On or about August 16, 1999, Debtor ICG Telecom Group, Inc., entered into a contract with MCI WorldCom, under which MCI WorldCom provides Telecom with long distance telecommunications services . In accordance with the Long Distance Agreement, Telecom pays MCI WorldCom for monthly charges based on specified rates for actual customer usage. In addition, under the Long Distance Agreement, when Telecom fails to maintain certain customer usage levels, it is required to pay MCI WorldCom the difference between mandatory minimum and actual customer usage levels. The Debtors estimate that Telecom could owe up to $11 million on account of such underutilization charges to date. The Debtors have determined in their business judgment that the long distance business is no longer profitable, and, therefore, request this Court's authority to reject the Long Distance Agreement. As part of the proposed Asset Purchase Agreement, MCI WorldCom has agreed to waive any and all claims owed by Telecom in connection with the rejection of the Long Distance Agreement, totaling up to $24 million. Customer Service Agreements The Debtors currently provide approximately 5400 customers long distance and local telecommunications services pursuant to a Master Telecommunications Services Agreement, the Debtors have determined that the long distance business is no longer profitable, and desire to exit such business. Accordingly, the Debtors, with the assistance of their financial advisors, analyzed various potential strategic transactions with respect to the Debtors' long distance customer base. The Debtors' financial advisors determined that the estimated market value of the long distance portion of the Debtors' customer base is approximately $2.5 million. As part of the proposed Asset Purchase Agreement, in consideration for the purchase of the long distance portion of the Customer Contracts, MCI WorldCom shall waive: (i) approximately $4.5 million in prepetition and post petition claims it filed against Telecom; (ii) any damage claim in connection with the rejection of the Long Distance Agreement, and (iii) any underutilization charges owed in connection with the assumption of the Local Service Agreement, and to pay Telecom a ten percent royalty on any fees collected on account of the Customer Contracts, which the Debtors estimate equals a net present value of approximately $2.2 million. The Debtors estimate that the consideration offered by MCI WorldCom with respect to the Customer Contracts is certainly in excess of the market value for such agreements. In its business judgment, the Debtors have determined that MCI WorldCom's offer with respect to the Customer Contracts provides a substantial benefit to the Debtors and estates. Accordingly, the Debtors respectfully request Judge Walsh's authority to assume the Customer Contracts, and, in accordance with the terms of the proposed Asset Purchase Agreement, assign the long distance portion of the Customer Contracts to MCI WorldCom. Local Service Agreement On or about September 1, 1998, Telecom entered into a contract with MCI WorldCom, under which MCI WorldCom provides Telecom with dedicated digital, interexchange, local access and ancillary services. In accordance with the Local Service Agreement, Telecom pays MCI WorldCom monthly charges based on certain specified rates for actual customer usage. In addition, like the Long Distance Agreement, when Telecom fails to maintain certain customer usage levels, it is required to pay the difference between the mandatory minimum and actual customer usage levels on a monthly basis. The Debtors estimate that Telecom owes over $1.7 million on account of such underutilization charges. The Debtors have determined in their business judgment that the services provided by MCI WorldCom under the Local Service Agreement are critical to the Debtors' continued ability to service highly profitable customers. In addition, to transition such customers to a different local service provider or carrier would involve significant expenditures. Accordingly, the Debtors request Judge Walsh to authorize them to assume the Local Service Agreement, as amended. Specifically, MCI WorldCom has agreed, pursuant to the Asset Purchase Agreement, to amend the Local Service Agreement to provide for the removal of any future underutilization charges. Moreover, as part of the Asset Purchase Agreement, MCI WorldCom has agreed to waive any claim based on prepetition or postpetition underutilization charges owed in connection with the Local Service Agreement, which the Debtors estimate total approximately $1.7 million. If a debtor's business judgment is shown to have been reasonably exercised, a court should approve the assumption or rejection of an unexpired lease or executory contract. In applying the "business judgment" standard, courts show great deference to the debtor's decision to reject. The Debtors clearly satisfy the business judgment standard with respect to the proposed Asset Purchase Agreement. By rejecting the Long Distance Agreement, pursuant to the proposed Asset Purchase Agreement, the Debtors will be able to exit an unprofitable business without incurring any rejection damage claims. Moreover, under the Asset Purchase Agreement, the Debtors will receive consideration well in excess of the market value of their long distance customer base. Finally, under the Asset Purchase Agreement, the Debtors will be able to assume, as amended, the Local Service Agreement, which is integral to the Debtors continued ability to service highly profitable customers, without incurring any underutilization charges. Claim Settlement Settlements and compromises are "a normal part of the process of reorganization" and are strongly favored over litigation. Federal courts have repeatedly stated that: "[P]ublic policy strongly favors pre-trial settlements in all types of litigation because such cases, depending on their complexity, "can occupy a court's docket for years on end, depleting the resources of parties and taxpayers while rendering meaningful relief increasingly elusive" . . . . Second, litigation costs are particularly burdensome on a bankrupt estate given the financial instability of the estate. A settlement should be approved unless it "falls below the lowest point in the range of reasonableness." For all of the reasons described above, the Debtors submit that the settlement of the claims described above is highly favorable to the Debtors and their estates. MCI WorldCom has agreed to waive substantial damage claims, and, in addition, pay Telecom royalties on future revenues from the Customer Contracts. Indeed, the Debtors negotiated the best terms and conditions they could with respect to the Asset Purchase Agreement. Sale Pursuant to Section 363(b)(1) In addition, because the proposed Asset Purchase Agreement is in the best interests of the Debtors, their estates, creditors and other parties in interest, entering into the Asset Purchase Agreement represents a reasonable business judgment on the part of the Debtors and thus is appropriate under section 363(b)(1). Section 363(f) is drafted in the disjunctive. Thus, satisfaction of any of the requirements enumerated therein will suffice to warrant the Debtors' sale of the free and clear of all liens, claims, encumbrances. Each lien, claim or encumbrance attached to the long distance portion of the Customer Contracts satisfies at least one of the five conditions of section 363(f), and the Debtors submit that any such lien, claim or encumbrance will be adequately protected by attachment to the net proceeds of the proposed sale, subject to any claims and defenses the Debtors may possess with respect thereto. Accordingly, the Debtors request that the long distance portion of the Customer Contracts be transferred to MCI WorldCom, free and clear of all liens, claims and encumbrances, with such liens, claims and encumbrances to attach to the proceeds of the sale of such property. The Sale Should Be Free of Any Transfer Tax Section 1146(c) of the Bankruptcy Code provides: "The issuance, transfer, or exchange of a security, or the making or delivery of an instrument of transfer under a plan confirmed under section 1129 of this title, may not be taxed under any law imposing a stamp tax or similar tax." 11 U.S.C. 1146(c). Where, as with this proposed sale of surplus real estate, an asset sale outside of a plan is "necessary to the consummation of a plan," such sale is within the exemption from taxation provided under section 1146(c). Proceeds of the sale of the long distance portion of the Customer Contracts will be utilized to position the Debtors for emergence from chapter 11. Thus the section 1146(c) exemption is appropriate and should be granted here, the Debtors tell Judge Walsh. (ICG Communications Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) IMPERIAL SUGAR: Commences Distribution of New Common Stock ---------------------------------------------------------- Imperial Sugar Company (OTC:IPSU) announced the distribution of shares of its new common stock to shareholders of record on August 29, 2001. The Company's Second Amended and Restated Joint Plan of Reorganization, confirmed by the U.S. Bankruptcy Court, became effective on August 29, 2001. Under the Plan, the Company's former common stock (OTC BB:IPRLQ) was canceled. On September 26, 2001, the Company distributed to its shareholders of record on August 29, 2001 approximately 0.0062 shares of common stock in the reorganized company for each share previously held. These new shares of common stock began trading on the OTC under the symbol "IPSU", September 27, 2001. Under the Plan, the Company's shareholders of record on August 29, 2001 also will receive warrants to purchase shares of new common stock. The Company will issue these warrants on the basis of 0.0343 warrants for each share of common stock held of record on August 29, 2001. The Company expects to issue the warrants and set their exercise price within the next five months when a determination is made of the maximum number of shares of new common stock to be issued to creditors in settlement of their claims made during the bankruptcy proceedings. The rights to receive warrants held by shareholders of record on August 29, 2001 began trading on the OTC under the symbol "IPRLZ", September 27, 2001. Transactions in the Company's common stock on the OTC under the symbol "IPRLQ" after August 29, 2001 and before September 27, 2001 represent the right to receive shares of the Company's new common stock and warrants to acquire shares of the Company's new common stock. Beginning on September 27, 2001, transactions in shares of its new common stock occur on the OTC under the symbol "IPSU" and transactions in the rights to receive warrants occur on the OTC under the symbol "IPRLZ". Imperial Sugar Company is the largest processor and marketer of refined sugar in the United States and a major distributor to the foodservice market. The Company markets its products nationally under the Imperial(TM), Dixie Crystals(TM), Spreckels(TM), Pioneer(TM), Holly(TM), Diamond Crystal(TM) and Wholesome Sweeteners(TM) brands. Additional information about Imperial Sugar may be found on its web site at http://www.imperialsugar.com INTERNATIONAL TOTAL: Ex-CEO Calls For Meeting to Oust Board ----------------------------------------------------------- In a showdown over the control of International Total Services, a global provider of airline service and security personnel, former CEO Robert A. Weitzel notified the company that he was calling for a shareholder's meeting to replace the board of directors. The new board will include the former head of the Federal Bureau of Investigation in Cleveland. Weitzel, whose family controls approximately 52 percent of the company, cited the inability of the company's management to operate the business profitably during an international crisis that affects the security of travelers throughout the world. He said it was one of the factors causing his action. ITS management filed for bankruptcy in New York City two days after the terrorist attack on the World Trade Center. ITS had served Continental Airlines in preboarding passenger screening at Cleveland Hopkins International Airport until May 31, when it lost the contract. Weitzel said ITS lost the contract because the airlines said the company did not understand its security needs. "The bankruptcy filing was a move to prevent me from regaining control of ITS," Weitzel said. "But to do it at a time when the security at the nation's airports is under such focus is an insult to loyal airline clients who need all the support they can get." The notification asking for a shareholder meeting came as a two- year voting trust giving the board control of the company expired on September 30. In the letter to the company, Weitzel stated his intention to replace the three existing members with William D. Branon, formerly FBI agent-in-change in Cleveland, Edward R. Towns, the former mayor of Chagrin Falls and himself. Weitzel, who is a founder of ITS, which was established here in 1978, retired from the company in September of 1999 after appointing John O'Brien, Jeffery Schwartz and Jeffery Eakin to the board and giving them the authority to run the company through the voting trust terms. The board named Mark Thompson, a real estate lawyer, to replace Weitzel as CEO of ITS which, at the time, had revenues of $240 million annually and served more than 300 locations worldwide with 15,000 employees. "Annual revenues have dropped to less than $160 million and the stock is at 10 cents a share," said Weitzel. "The board rushed the company into bankruptcy before the voting trust expired despite the fact that there was financing available and potential investors out there." Motions are pending to transfer the bankruptcy case to Cleveland. It is Weitzel's intent to regain control of the company and rescue it from bankruptcy. Weitzel filed a $25- million lawsuit in Cuyahoga County Common Pleas Court on September 24 against the trustees charging a breach of fiduciary duty. The company then countered with a suit alleging Weitzel's actions forced the company into bankruptcy. Weitzel denies all allegations. INTIRA CORPORATION: Creditors' Meeting Slated For October 9 ----------------------------------------------------------- Creditors of Intira Corporation will meet on September 9, 2001 at 1:00 P.M., in Room 2112, U.S. Court House, Wilmington, Delaware, pursuant to Section 341 of the Bankruptcy Code. A representative of the company will be there at the meeting for the purpose of being examined under oath. Attendance by creditors at the meeting is welcomed, but not required. Intira Corporation, a pioneer and industry leader in netsourcing, the outsourcing of information technology and network infrastructure used to support Internet or private network-based applications, filed for chapter 11 protection on July 30, 2001 in Delaware. Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young & Jones P.C. represents the Debtors in their restructuring effort. When the company filed for protection from its creditors, it listed $112,970,000 in assets and $152,700,000 in debt. JERRY'S FAMOUS DELI: Fails to Meet Nasdaq Public Float Minimum -------------------------------------------------------------- Jerry's Famous Deli Inc. (Nasdaq:DELI) announced that it had received a letter from the Nasdaq Stock Market Inc. on October 1, 2001, advising the company that its stock would be delisted from the Nasdaq SmallCap Market at the opening of business on October 10, 2001, for failure to meet public float requirements and failure to have a sufficient number of independent directors to serve on the audit committee. As was anticipated and disclosed in Offer to Purchase related to the recent tender offer, as a result of the tender offer the company no longer meets the public float requirement for continued listing pursuant to the Nasdaq Marketplace Rules. In addition, in anticipation of delisting for delisting pursuant to the float requirement, the company had not solicited a new board member to add to the audit committee as required by the rules. Following the delisting of the company's common stock from the Nasdaq SmallCap Market, the company may remain eligible for trading on the Nasdaq OTC Bulletin Board (OTCBB). However, no assurance can be given that the company will remain eligible to trade on the OTCBB or that market makers will quote the company's stock on the OTCBB. In order to remain eligible for trading on the OTCBB, the company will be required to maintain the registration of its common stock under the Securities Exchange Act of 1934, and to file the quarterly, annual and other reports required under that act on a timely basis. The company's board of directors has not determined if or when the company will stop reporting and deregister the company's common stock under the act, thereby making the common stock ineligible for trading on the OTCBB. The company cannot assure that, even if it remains eligible for trading on the OTCBB, there will be an active market for its common stock. Because of the substantial reduction in the number of shares in the hands of public holders of the common stock as a result of the tender offer, the company anticipates that future trading in the common stock will be substantially reduced. As described in the Offer to Purchase related to the tender offer, the company may at some time in the future complete a merger in which all shareholders except the control shareholders would receive cash for their common stock. Since the control shareholders now own more than 90 percent of the outstanding common stock, such a merger could be completed at any time without a vote of the public shareholders. To the company's knowledge, no decision has been definitively made at this time by the control shareholders about whether or when to complete such a merger transaction. LBP INC: Initial Liquidating Distribution Will Start on Oct. 15 --------------------------------------------------------------- LBP, Inc. (OTC Bulletin Board: LBPI) announced that, consistent with an order of the Delaware Chancery Court, the Company will make its initial liquidating distribution in the amount of $5.10 per share to holders of record of the Company's Common Stock on October 15, 2001. The payment will be made on or about October 25, 2001. The Company will close its stock transfer books as of the record date, and trading of the Company's Common Stock will cease as of the close of business on the record date. Future liquidating distributions, currently estimated at $.70 to $.85 per share in the aggregate, will be made to holders of the Company's Common Stock as of the October 15, 2001 record date in accordance with Delaware law. The right to receive future distributions will be non-transferable. At this time, the Company is unable to predict with certainty the amount and timing of such distributions. Notices published in compliance with the Delaware liquidation procedures resulted in one contingent claim for a reserve relating to an existing indemnification obligation undertaken by the Company in connection with the sale of its business in June 1998. Because the claimant did not assert any loss and because the Company believes that the contingency is extremely remote, the Company will, unless an agreement is reached with the claimant, request the Chancery Court to determine the appropriate amount and duration of the reserve. As of September 30, 2001, the Company had cash and liquid short term investments, (primarily US Government money market funds) aggregating approximately $29.75 million. The initial liquidating distribution will be approximately $25.5 million. * * * On January 11, 2001 the Board of Directors adopted the Company's Plan of Complete Liquidation, Dissolution and Termination of Existence, which was approved by the stockholders of the Company at the Company's annual stockholder' meeting on May 16, 2001. On June 29, 2001, the Company filed a Certificate of Dissolution in the Office of the Secretary of State of the State of Delaware. The Company has liquidated all its non-cash assets. Pursuant to the Plan, after payment of all claims, obligations and expenses owing to the Company's creditors, cash distributions of cash on hand will be made to holders of the Company's Common Stock on a pro rata basis. LAIDLAW INC: Seeks Court Approval of Key Employee Programs ---------------------------------------------------------- Laidlaw Inc. asks the Court for an order: (a) approving a key employee retention plan; (b) authorizing them to assume: (i) a supplemental executive retirement plan, and (ii) a severance plan; and (c) authorizing them to make certain interim payments under certain consulting and non-competition agreements. According to Joseph M. Witalec, Esq., at Jones, Day, Reavis & Pogue, in Columbus, Ohio, one of the keys to the Debtors' successful restructuring is the retention of their current employees. Mr. Witalec tells Judge Kaplan that the Debtors have 3 specific programs in place that are designed to retain and motivate their key employees. The Retention Program Before the Debtors filed for bankruptcy, Mr. Witalec relates, they implemented Phase I of the Retention Program, which provided for the payment of retention bonuses while the Debtors sought to restructure their operations and financial obligations. Phase I expired in Spring 2001. Now, Mr. Witalec says, the Debtors wish to execute Phase II of the Retention Program, which aims to retain key employees of the Debtors through both the conclusion of the Laidlaw companies' restructuring efforts and the potential movement of the Laidlaw companies' headquarters. Under Phase II, 38 designated employees are classified into 1 of 2 "tiers" based on an employee's job responsibilities and importance to the Debtors' operations. An employee's Retention Incentive Bonus is based upon: (a) a percentage of the employee's monthly salary as determined by the employee's tier classification (the "Participation Rate") and (b) the length of service of the employee with the Debtors after the start of Phase II (the "Service Time"). Tier I employees have a Participation Rate of 50%, while Tier 2 employees have a 25% Participation Rate. Upon the commencement of Phase II, all employees are credited with an initial Service Time of 3 months, and an additional month is added for each month of employment with the Debtors after the commencement of Phase II. Service Time is capped for all employees at 12 months, including the initial 3-month award. The Retention Incentive Bonus is calculated by multiplying the Participation Rate and the Service Time by the employee's monthly salary. Each eligible employee still working for the Debtors will receive the Retention Incentive Bonus on the later of: (a) confirmation of a plan of reorganization in these cases or (b) the relocation of the Debtors' corporate headquarters. If the Debtors do not have a confirmed plan of reorganization in place by June 1, 2002, eligible employees will receive 25% of the Retention Incentive Bonus at that time, with the balance being paid on the later of the plan confirmation or the relocation of corporate headquarters. The Debtors estimate that Phase II of the Retention Program will cover 38 employees at a total cost of $1,100,000, Mr. Witalec discloses. The Supplemental Executive Retirement Plan According to Mr. Witalec, the Supplemental Executive Retirement Plan consists of 2 separate programs -- one for United States employees and another for employees in Canada. Mr. Witalec reports that as of April 1, 2001, the Canadian Retirement Plan covered 13 active employees, 9 former employees and 1 pensioner, while the U.S. Retirement Plan covered 46 active and 17 former employees. Under the Retirement Plan, Mr. Witalec tells Judge Kaplan, a covered employee receives an annual benefit amount equal to 1% of Final Average Earnings below %150,000 in the applicable country's currency and 1.5% of Final Average Earnings in excess of $150,000 in the applicable country's currency times the years of service with the Laidlaw companies. The Severance Plan The Severance Plan provides severance benefits to all covered employees who are terminated due to a release or a reduction in workforce, Mr. Witalec relates. The Severance Benefits consist of: (a) severance that is paid for a period at the Debtors' discretion either as a lump sum or in installments on the normal payroll cycle, based on the years of service, age and base salary of the terminated employee; (b) certain health, dental or life insurance benefits for the lesser of: (i) the Severance Period or (ii) until the procurement of alternative employment; and (c) outplacement assistance. The aggregate amount of Severance Benefits available to employees on the Petition Date totaled approximately $2.5 million, Mr. Witalec reports. Because many employees who are covered by the Severance Plan will continue to work for the Debtors, the Debtors believe that total payments under the Severance Plan will be far less than $2.5 million. The Scott's Agreements The Scott's Agreements consist of 3 consulting and non- competition agreements dated November 1987 between Scott's Hospitality Inc. and: (a) Benson Orenstein, (b) Richard A. Hunter, and (c) Charles King. Under the Scott's Agreements, Mr. Orenstein, Mr. Hunter and Mr. King agreed to provide consulting services to Scott's Hospitality Inc. upon their retirement and to refrain from competing with Scott's Hospitality Inc. for the remainder of their lives. They are compensated for their services on a monthly basis: Professional Monthly Fee ------------ ----------- Benson Orenstein CD$18,196.92 ($11,885.68) Richard Hunter CD$ 5,282.32 ($ 3,786.02) Charles King CD$ 1,435.61 ($ 932.57) Mr. Witalec tells Judge Kaplan that Laidlaw, Inc., one of the Debtors, assumed the obligations under the Scott's Agreements as part of its pre-petition purchase of Scott's Hospitality, Inc. The Debtors believe that their employees' confidence in the willingness of the Debtors to honor their obligations is essential to maintaining the morale of the Debtors' current employees and retaining their services, Mr. Witalec says. The Debtors only seek authority to make certain interim payments under the Scott's Agreements through the Effective Date, Mr. Witalec adds, and do not seek to assume the Scott's Agreements at this time, or authority to make any payments after the Effective Date. The approval of the Retention Program and the assumption of the Supplemental Executive Retirement Plan and the Severance Plan will accomplish a sound business purpose and aid the Debtors' reorganization, Mr. Witalec contends. Without an adequate retention program in place, Mr. Witalec cautions, the Debtors' competitors and prospective employers in other industries would quickly target the Debtors' most qualified employees and offer them new career opportunities. The Debtors simply cannot afford to lose their key employees at this time, Mr. Witalec tells Judge Kaplan. It would be difficult, costly and time-consuming for the Debtors to attract qualified replacements, Mr. Witalec says, and the employee search process would divert the Debtors' attention and resources from the reorganization process. The loss of key employees could also lead to further employee attrition, Mr. Witalec advises. The loss of key employees, Mr. Witalec asserts, will make it extremely difficult for the Debtors to complete their reorganization on their current accelerated timetable. Any resulting delay in completing the reorganization process, Mr. Witalec warns, would: (a) undermine the Debtors' substantial work to date to expedite the completion of these cases, (b) frustrate the goals and expectations of the Debtors' key stakeholders, and (c) threaten the implementation of the comprehensive settlement agreement among the Debtors, the Bank Group and the Noteholders' Committee regarding the Debtors' financial restructuring. (Laidlaw Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) LOEWEN: Seeks Approval to Pay Exit Financing Due Diligence Fees --------------------------------------------------------------- Confirmation of The Loewen Group, Inc.'s Fourth Amended Plan of Reorganization is conditioned upon the receipt of a commitment for the Proposed Exit Financing Facility in a form satisfactory to the Debtors, and the effectiveness of the Plan is conditioned upon the execution and delivery of the documents effectuating the facility. The Proposed Exit Financing Facility is currently anticipated to consist of a secured revolving credit facility in the amount of up to $75 million that would include a $25 million letter of credit sub-facility. Working towards the goal of confirmation and effectiveness of the Plan, the Debtors contemplate filing a term sheet regarding the Proposed Exit Financing Facility no later than October 26, 2001. Correspondingly, the Debtors envisage the need for prompt negotiations, significant due diligence and other tasks. In this regard, the Debtors have discussed the potential provision of exit financing with number of banks and other financial institutions. Based on these discussions, the Debtors have identified CIT as the most promising candidate to provide the Proposed Exit Financing Facility. Accordingly, the Debtors seek the Court's authority, pursuant to section 363 of the Bankruptcy Code, 11 U.S.C. section 101-1330, and Rule 6004 of the Bankruptcy Rules for (1) entry into a letter of intent and addendum and (2) payment of a deposit and certain expenses in connection with the Proposed Exit Financing Facility with The CIT Group/Business Credit, Inc. By a letter of intent dated August 6, 2001 CIT confirmed its interest in providing the Proposed Exit Financing Facility on the general terms described therein, subject to further negotiations. The parties also have negotiated an addendum to the Letter of Intent that further details the parties' agreement with respect to the Debtors' reimbursement of CIT's costs and expenses. Under the Letter of Intent and Addendum, the Debtors will agree to pay CIT upon demand all out-of-pocket costs and expenses that CIT incurs in connection with the Proposed Exit Financing Facility and CIT's due diligence with respect thereto, including, but no limited to, all reasonable legal, environmental and other consultant and appraisal costs, fees and disbursements incurred by CIT in connection with the preparation, negotiation, execution and closing of the Proposed Exit Financing Facility. As security for this payment obligation, the Letter of Intent required that the Debtors immediately pay to CIT a "good faith deposit" of $200,000, which the Debtors already have done. Under the terms of the Letter of Intent and Addendum, the Deposit, less any out-of-pocket costs and expenses incurred by CIT in evaluating the Proposed Exit Financing Facility, will be returned to the Debtors if CIT is unable to offer the Debtors an exit financing facility. If the Proposed Exit Financing Facility is consummated, CIT will credit the unused portion of the Deposit against a loan facility fee, which the parties currently anticipate will be $1,125,000, which will be due at the closing of the Proposed Exit Financing Facility. In all other instances, the Deposit will be retained by CIT as a fee for its consideration of the Proposed Exit Financing Facility. Under the terms of the Letter of Intent and Addendum, CIT will be permitted to charge the Deposit against all costs and expenses that the Debtors agree to pay pursuant to the Letter of Intent and Addendum. Moreover, if the unused balance of the Deposit is reduced to $50,000 or less, the Debtors will be required, within three business days of receipt of a notice from CIT in this regard, to make a payment to CIT that will replenish the Deposit to an amount of not less than $200,000. Upon demand, CIT is required to provide the Debtors an accounting of the costs and expenses incurred by CIT and charged to the Deposit. The Letter of Intent and Addendum contemplate that the Debtors will seek, at the hearing to be held in these cases on September 28, 2001, an order of the Court that, among other things, (a) authorizes the Debtors to execute and perform under the Letter of Intent and Addendum and (b) provides that the Debtors' payment obligations thereunder constitute administrative expenses under section 503(b) of the Bankruptcy Code. Prior to entering into a firm commitment to provide the Proposed Exit Financing Facility, CIT will incur costs and expenses in connection with, among other things, undertaking due diligence with respect to the Proposed Exit Financing Facility. After the commitment is entered into, CIT will incur costs and expenses in connection with, among other things, documenting and negotiating the final terms of the Proposed Exit Financing Facility. The Debtors have filed this Motion at the request of CIT to obtain express authority to, among other things, enter into the Letter of Intent and reimburse CIT for its costs and expenses incurred in connection with the Proposed Exit Financing Facility. The Debtors represent that the relief requested is necessary to permit a continuation and timely completion of the process of conducting due diligence and negotiating the terms of a commitment for the Proposed Exit Financing Facility as required by the Plan. The terms of the Letter of Intent and Addendum, including the provisions for the payment of the Deposit and reimbursement of CIT's costs and expenses, the Debtors submit, are reasonable in relation to other commercial lending transactions under similar circumstances. The Debtors tell Judge Walsh that prospective lenders frequently require nonrefundable up-front fees and charges to reimburse them for due diligence, document preparation and related activities but that is not the case here. Moreover, CIT's exit financing proposal is the most favorable proposal received by the Debtors. Accordingly, the Debtors request the entry of an order, pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 6004 authorizing the Debtors to (a) execute and perform under the Letter of Intent and Addendum and (b) pay the Deposit and other costs and expenses incurred by CIT thereunder. (Loewen Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-0900) LOOK COMMS: Secures CCAA Protection Until November 30 ----------------------------------------------------- Look Communications Inc. sought and obtained an order from the Ontario Superior Court of Justice extending its period of operating under the Companies' Creditors Arrangement Act (CCAA) until November 30, 2001. The Company is continuing to discuss long-term financing with potential investors and its objective is to present a draft plan of arrangement as well as the proposed claims process for Court approval within the extension period. Such a plan would include details of how the Company will deal with its current debt and will outline its financing plans for the future. Look also announces that it has entered into term sheets for a mortgage and a short-term loan from private investors for an aggregate amount of $2.5 million. The short-term loan is from existing equity investors in Look and, as such, was approved by the Court as a related party transaction. The Court exempted Look, subject to the right of any interested party to apply to the Court on a timely basis for further review of the transaction, from those portions of Ontario Securities Commission Rule 61-501 that would otherwise have required the Company to obtain approval of this transaction from all unrelated shareholders and to obtain a formal valuation. The proceeds of both transactions will be used to finance ongoing operations while the Company continues to operate under the CCAA. Both transactions are expected to close within 15 days. Such closing dates are appropriate in the circumstances given Look's financial situation and the use of proceeds. Look is deeply grateful to its customers for their exceptional loyalty and encouragement, and its dedicated employees are making every effort to maintain high service levels. The Company also acknowledges the support of its suppliers and shareholders during this period. There can be no assurance that Look will successfully conclude current negotiations with new investors or reach agreement with creditors and trade suppliers under a plan of arrangement. Look Communications (CDNX: LKC) is a leading wireless broadband carrier, delivering a full spectrum of communications services including digital television distribution, high-speed and dial- up Internet access and Web-related services. Through its advanced MDS technology (Multipoint Distribution System) Look provides superior digital entertainment services to homes across Quebec and Ontario. Look's Internet service has established itself as one of Canada's largest independent service providers offering both high speed and dial-up Internet access, in addition to other Web-based applications, to consumers and businesses throughout Canada. For more information on Look, visit the company's Web site at http://www.look.ca MJK CLEARING: Court Clears Sale of $10B Assets to SWS Securities ---------------------------------------------------------------- The Securities Investor Protection Corporation (SIPC), which maintains a special reserve fund authorized by Congress to help investors at bankrupt brokerages, announced that the U.S. Bankruptcy Court in Minneapolis has approved a deal under which 175,000 investors at the financially troubled firm MJK Clearing, a subsidiary of Minneapolis-based Stockwalk Group, Inc. (Nasdaq: STOK), will be transferred to SWS Securities, Inc., a Dallas- based financial services company with assets of nearly $4 billion. The transfer arrangement was worked out by SIPC and court- appointed trustee James P. Stephenson of the Minneapolis law firm Faegre & Benson. "We expect most customers to be able to access their accounts this week, many as early as Wednesday," Stephenson said. "Generally, individual customers with accounts up to $2 million dollars would have access to 100 percent of their accounts. A small number of large account holders will be able to access only a percentage of their account balances pending disposition of other assets of MJK Clearing." Stephenson said customers should call their regular broker for more information. Information about the MJK Clearing Case will be available at SIPC's Web site at http://www.sipc.org Customers should not contact the U.S. Bankruptcy Court, which has no further information about MJK Clearing. The liquidation case is the largest ever handled by SIPC in its more than 30 year history. The largest previous brokerage shutdown handled by SIPC involved the firm Adler, Coleman Clearing Corp., headquartered in New York City, which had 65,000 customers and failed in February 1995. "MJK was found to be out of compliance with federal rules requiring the maintenance of minimum capital levels," said SIPC General Counsel Stephen Harbeck. "SIPC is working closely with regulatory authorities to ensure that customers of MJK Clearing can obtain access to their accounts as soon as possible." Based in Minneapolis, Minn., Stockwalk Group, Inc. is the parent company of MJK Clearing, Inc., which provides comprehensive clearing and brokerage services to correspondents across the country, and Stockwalk.com, Inc., an online trading company (AOL keyword: Stockwalk); and Stockwalk Group, Inc. common stock trades on the Nasdaq Stock Market under the symbol STOK. MJK Clearing, Inc., is the parent company of Miller Johnson Steichen Kinnard, Inc., a full-service brokerage firm of approximately 400 investment executives in eight states. Miller Johnson Steichen Kinnard is a member of the Chicago Stock Exchange. Stephenson also noted that Miller Johnson Steichen Kinnard, Inc., is being sold by the trustee to the Stockwalk Group, Inc., under a separate agreement approved Tuesday by the Bankruptcy Court. About SIPC >From its creation by Congress in 1970 through December 2000, SIPC advanced $391 million in order to make possible the recovery of $3.8 billion in assets for an estimated 443,000 investors. SIPC estimates that more than 99 percent of eligible investors have been made whole in the failed brokerage firm cases that it has handled to date. SIPC either acts as trustee or works with an independent court- appointed trustee in a missing asset case to recover funds. The statute that created SIPC rules provides that customers of a failed brokerage firm receive all non- negotiable securities that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims of each customer up to a maximum of $500,000. This figure includes a maximum of $100,000 on claims for cash. Recovered funds are used to pay investors whose claims exceed SIPC's protection limit of $500,000. SIPC often draws down its reserve to aid investors. Recovered funds also are used to replenish SIPC's reserve in the event that the reserve is tapped in the early stages of a liquidation proceeding. SIPC is an important part of the overall system of investor protection in the United States. While a number of federal, self-regulatory and state securities agencies deal with cases of investment fraud, SIPC's focus is both different and narrow: Restoring funds to investors with assets in the hands of bankrupt and otherwise financially troubled brokerage firms. The Securities Investor Protection Corporation was not chartered by Congress to combat fraud. MCLEODUSA: Scraps National Network to Focus on Core Businesses -------------------------------------------------------------- McLeodUSA Incorporated (Nasdaq: MCLD), the nation's largest independent competitive local exchange carrier, announced that it has taken a number of actions to position the company for future success. The company has revised its corporate strategy to focus on its 25-state footprint, where it sells voice and data services to small and medium size business and residential customers. As a result, the company has abandoned its plans for a national network and will de-emphasize certain wholesale services. This new strategy is designed to focus the company's resources and provide a strong foundation for profitable growth in its core CLEC and directory publishing businesses. "Given the current economic environment, McLeodUSA has redefined its strategy to focus on our core strengths," said Steve Gray, President and Chief Executive Officer. "Our strategy will emphasize continued expansion in our 25-state footprint where we expect to capitalize on our proven ability to increase our market share." In support of the company's new strategy, McLeodUSA plans to take the following actions: 1. Abandon the development of the national network and place the associated assets for sale. Sell other non-core assets and excess inventory. These actions are expected to generate $400 to $450 million in cash in 2002, up from prior estimates of $150 to $200 million. 2. Reduce employment by approximately 15% and execute plans to consolidate 11 facilities into 3 over the next twelve months, resulting in annual savings of approximately $105 million. 3. Scale back capital expenditures from prior plan of $400 million to $350 million in 2002, focused on market growth within the 25-state footprint, primarily augments and new customer requirements. 4. Take a one-time, non-cash charge in the third quarter of approximately $2.9 billion, including write-downs of goodwill and other long-lived assets ($2.5 billion), write- off of inventory and construction work-in-process from discontinued operations ($200 million), restructuring reserves for the reduction in force ($13 million), and facilities consolidations ($150 million). The company will also take a charge to operating income of approximately $35 million in the third quarter associated with balance sheet adjustments to various accounts such as prepaid expenses, receivables and bad debt reserves. Chris Davis, Chief Operating and Financial Officer, added, "We have spent the past seven weeks evaluating the key operational and financial aspects of the business. The company's rapid growth over the past several years resulted in an overly broad market focus, operating inefficiencies, and inadequate business processes to allow the company to continue to effectively scale. We are taking decisive actions to address these issues." These actions include: 1. Evaluated the company's strengths and available capital in order to focus its strategic direction; 2. Reviewed the company's business units for profitability and synergy with the newly focused strategic plan; 3. Completed an organizational assessment to identify redundancies and operational inefficiencies; 4. Assessed all positions in the company in order to properly staff to support the revised corporate strategy; 5. Established five cross-functional teams to strengthen processes and drive improvements. Ms. Davis added, "We have established detailed plans and a new organization structure for the future. The five process teams have been tasked to drive significant improvements in sales efficiencies, provisioning and customer installation, billing and revenue assurance, cash management and business forecasting and planning. The company clearly faces challenges in this environment, but we are convinced we now have the right strategy to capitalize on the McLeodUSA sound operating model." Agreement with Forstmann Little & Co. On September 30, 2001, McLeodUSA and Forstmann Little completed the previously announced preferred stock exchange, which eliminated cash dividend payments, saving the company $175 million over the next five years. In consideration for elimination of the dividend, the conversion price was reduced from $12.17 to $6.10. Forstmann Little, a very strong supporter of McLeodUSA, was prepared to proceed with the previously announced $100 million common stock purchase, at a price in line with the current market environment. Given the significant recent change in the equity markets and the company's decision to place non-core assets for sale, McLeodUSA and Forstmann Little mutually agreed not to proceed with the common stock transaction at this time. Forstmann Little will continue to make the $100 million available to the company, if needed, with pricing and terms to be negotiated based on market conditions at that time. Revised Financial Forecast While the accounting closing for third quarter 2001 is not yet complete, the company expects that as a result of the actions described above, third quarter EBITDA will be well below current consensus estimates. For full year 2001, the company now expects revenues of approximately $1.8 billion and EBITDA (excluding the one-time non-cash charge for balance sheet adjustments) of approximately $130 million. For 2002, the company expects revenues, (adjusted for the company's focused strategy and the sale of non-core assets) to be approximately $1.8 billion with EBITDA of approximately $250-275 million. Fully Funded Status Based on the significant cost reductions, expected asset and inventory sales and the elimination of cash dividends on the preferred stock, along with the $550 million that remains available to the company under its bank credit facility, the company believes its revised business plan is fully funded. It now expects to have cash and liquidity of approximately $400 million at year-end 2002. McLeodUSA provides integrated communications services, including local services, in 25 Midwest, Southwest, Northwest and Rocky Mountain states. The company also provides data and voice services in all 50 states. McLeodUSA is a facilities-based telecommunications provider with, as of June 30, 2001, 383 ATM switches, 49 voice switches, 372 collocations, 512 DSLAMs, nearly 31,000 route miles of fiber optic network and 10,600 employees. The company's fiber optic network is capable of transmitting integrated next-generation data, Internet, video and voice services, reaching 800 cities and approximately 90% of the U.S. population. In the next 12 months, McLeodUSA plans to distribute 35 million telephone directories in 26 states, serving a population of 59 million. McLeodUSA is a Nasdaq-100 company traded under the symbol MCLD. Visit the company's web site at http://www.mcleodusa.com MEDIA GENERAL: S&P Rates Long-Term Credit & Unsecured Debt BB+ -------------------------------------------------------------- Standard & Poor's revised its outlook on Media General Inc. to stable from positive. At the same time, Standard & Poor's affirmed its double-'B'-plus long-term corporate credit and senior unsecured debt ratings on Media General. The outlook change is based on the reduced likelihood of Media General's financial profile strengthening in the intermediate term to a level supportive of a higher rating. This reflects the continued economic weakness and its impact on an already soft advertising revenue climate. The ratings reflect Media General's significant debt levels and prospects for continued growth through acquisition. In addition, the company is subject to the impact of general economic conditions on advertising revenues and the variability of newsprint prices. These factors are mitigated by Media General's strong market positions, diversified mix of newspaper and television operations, and historically healthy cash flow generation. Richmond, Virginia-headquartered Media General is a communications company with newspaper publishing, television broadcasting, and interactive media operations located primarily in the Southeast. Newspaper publishing, which accounts for about 70% of revenues and segment operating cash flow, includes 25 daily newspapers in Virginia, North Carolina, Florida, Alabama, and South Carolina, as well as a 20% interest in the Denver Post. Television broadcasting consists of 26 network-affiliated stations that reach more than 30% of the television households in the Southeast and nearly 8% nationwide. Media General's recent results have been hurt by the impact of the weaker economy on advertising revenues and by higher average newsprint prices. While the advertising revenue climate is expected to remain soft in coming periods, this will be tempered by Media General's cost control initiatives and by recent declines in newsprint prices. Aided by healthy operating cash flow margins in the mid 20s percentage area and manageable capital expenditure and dividend requirements, the company has historically generated meaningful levels of discretionary cash flow. With the sale of its cable operations in 1999, Media General had no net debt at December 1999. Debt levels at June 2001 totaled about $800 million and reflect two major acquisitions completed in 2000. Debt to operating cash flow is in the high 3 times area, and operating cash flow to interest is also in the high 3x area. Standard & Poor's expects that Media General will continue to actively seek acquisitions in the Southeast region. However, the timing and magnitude of such transactions are uncertain. In the interim, Media General is expected to use its discretionary cash flow for debt reduction, rather than for additional share repurchases, in order to build financial flexibility for possible acquisitions. Further potential flexibility is provided by investments and a diversified portfolio of discrete assets. Outlook: Stable Ratings stability reflects the expectation that Media General's overall financial profile will not change significantly in the intermediate term. NATIONAL RECORD MART: Creditors' Meeting Set for October 4 ---------------------------------------------------------- The United States Trustee will convene a meeting of National Record Mart Inc.'s Creditors to be held on October 4, 2001 at 10:00 a.m. in Suite 960 at 1001 Liberty Ave., in Pittsburgh, Pennsylvania 15222. US Trustee Joseph M. Fornari, Jr., invites all creditors to attend. This Official Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of National Record Mart Inc. under oath. The last day for filing proofs of claim is set January 2, 2002. National Record Mart, the oldest music retailer in the US, consented to the entry of an Order For Relief under Chapter 11 of the Bankruptcy Code last August 15, 2001. Earlier, the company's largest suppliers filed an involuntary Chapter 7 petition last June 19, 2001 at the Western District of Pennsylvania. The law firms, Campbell & Levine, LLC, and Morgan, Lewis & Bockius LLP, represent the Debtors. As of June 30, 2001, National Record Mart posted $60,113,834 in assets and $74,792,064 in debt. NIAGARA MOHAWK: Reaches Agreement to Sell Energy Marketing Unit --------------------------------------------------------------- Niagara Mohawk Holdings Inc. (NYSE: NMK) announced it has reached an agreement to sell Niagara Mohawk Energy Marketing Inc., the largest division of its unregulated subsidiary Niagara Mohawk Energy, to Select Energy Inc., the competitive energy marketing and services subsidiary of Northeast Utilities (NYSE: NU). Financial terms of the sale were not disclosed. Based in Syracuse, Niagara Mohawk Energy Marketing is engaged in the wholesale and retail sales of natural gas and electricity in the Northeastern U.S. and Canada. Select Energy provides electricity, natural gas, and energy services to business and institutional customers throughout the 11 northeastern states from Maine to Maryland. Headquartered in Berlin, Ct., the company currently has revenues exceeding $2.5 billion annually. Niagara Mohawk Energy Marketing had revenues of $635 million in 2000. "Through this transaction, Niagara Mohawk Energy Marketing will be part of an organization with a similar strategic mission and the resources and commitment necessary to continue to grow and succeed," said Albert J. Budney, president of Niagara Mohawk Holdings. "In addition, Niagara Mohawk Energy Marketing's customers will benefit from the combined resources and expertise of the two companies." Budney noted that the divestiture of Niagara Mohawk Energy Marketing is in keeping with Niagara Mohawk Holdings' plan to merge with National Grid USA and remain focused on the regulated energy transmission and distribution business. He said Niagara Mohawk Holdings is continuing to pursue the sale of Niagara Mohawk Energy's other operating divisions: Niagara Mohawk Energy Services and Niagara Mohawk Distributed Power. The sale of Niagara Mohawk Energy Marketing is subject to approval of the Federal Energy Regulatory Commission and is expected to close in late November. Select Energy intends to maintain the Syracuse office upon consummation of the transaction. Niagara Mohawk Holdings also is the parent company of Niagara Mohawk Power Corp., a regulated electricity and natural gas delivery company with the largest service territory in New York state. Niagara Mohawk Power Corp. serves more than 1.5 million electricity customers and more than 540,000 natural gas customers across 24,000 square miles. Select Energy, founded in 1997 at the start of electric utility restructuring, provides retail and wholesale energy supply, energy-related services, and facilities management and operation. Parent company Northeast Utilities operates New England's largest energy delivery system, serving more than 1.7 million electricity customers in Connecticut, Massachusetts and New Hampshire and 187,000 natural gas customers in Connecticut. NU is one of the largest competitive energy suppliers in New England and is a major energy trader in the Northeast. Navigant Consulting, Inc.'s (NYSE: NCI) Energy & Water business unit managed the sale of Niagara Mohawk Energy Marketing and is also managing the sales of Niagara Mohawk Energy Services and Niagara Mohawk Distributed Power. NOVO NETWORKS: Seeks to Extend Lease Decision Period to Dec. 31 --------------------------------------------------------------- Novo Networks International Services, Inc. wants the U.S. Bankruptcy Court for the District of Delaware to extend its time to decide whether to assume or reject unexpired leases of nonresidential real property to December 31, 2001. The company and its affiliate debtors have been evaluating their core enterprise and formulating potential business plans under a "stand alone" chapter 11 plan. Novo Networks says that when this process is concluded, the Debtors will have a much better understanding of which leases are necessary to their continued operations. The company assures the Court that the lessors will not suffer any harm as a result of the requested extension since the Debtors will continue to comply with their post-petition obligations under the leases. Novo Networks, a developer of facilities-based broadband network offering voice and data transport targeted to communications carriers, ISPs, and large corporate and government clients, filed for chapter 11 protection on July 30, 2001 in the District of Delaware. Jeffrey M. Schlerf, Esq., at The Bayard Firm represents the Debtors in their restructuring effort. OWENS CORNING: Gets Okay to Assume Amended SAP America Contract --------------------------------------------------------------- Owens Corning sought and obtained the Court's approval to assume a modified version of a Software End-User License Agreement with SAP America Incorporated. According to Norman L. Pernick, Esq., at Saul Ewing LLP, in Wilmington, Delaware, the Debtors entered into this Agreement in September 1994. Mr. Pernick discloses that this Agreement licenses to the Debtor a certain software responsible for the integrated management of almost all aspects of their businesses, ranging from sales, inventory, payroll, and even plant maintenance. Mr. Pernick therefore concludes that, given the fundamental importance of this software, assumption of the Agreement will accrue the most benefits to the Debtors' estates. However, Mr. Pernick says, modifications are necessary to aid the Debtors' current restructuring efforts. He presents the modification agreed by both parties, which states: 12.1 Should Licensee, from time to time, sell or otherwise transfer the assets or equity ownership of any Licensee division, affiliate, or business unit, and as part of such transfer Licensee desires to provide transitional use to the purchaser of the Business Unit, including the use of software by the purchaser of such Business Unit, SAP shall evaluate on a case by case basis whether Licensee shall have the right to grant such transitional use rights to the purchaser of such Business Unit for a period of 6 months after the completion of such transfer. If SAP consents, and such consent shall not be unreasonably withheld to grant the purchaser of such Business Unit transitional use rights for a period of 6 months, SAP shall require the purchaser to execute an acknowledgement agreement, to be agreed upon by the parties, whereby the purchaser will consent to the terms of SAP's Agreement with the Licensee. In no event shall Licensee grant a purchaser the transitional use rights without written consent of SAP. If SAP consents to grant transitional use rights to the purchaser upon the termination of the 6-month period, SAP agrees that they will offer to license the software on current prices and terms and conditions in effect. Upon termination of the 6- month period, if the purchaser does not enter into a new License Agreement, then Licensee shall ensure that the purchaser of such Business Unit complies with the termination provisions of the License Agreement. Aside from approving the modified Agreement, Judge Fitzgerald ordered that: (a) The Debtors shall pay the total cure amount of $6,332,835.30 within fourteen days of the date of approval of the motion. (b) SAP shall be entitled to a general unsecured claim against the Debtor amounting to $287,604.34 for unpaid pre-petition consulting services. (Owens Corning Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC GAS: Files Appeal Statement of TURN Accounting Decision --------------------------------------------------------------- Pacific Gas and Electric Company has filed its opening brief in the United States District Court for the Northern District of California in its appeal of the Bankruptcy Court's decision on the TURN accounting order. On March 27, 2001 the California Public Utilities Commission (CPUC) issued a decision that required the company to restate all its regulatory books and accounts retroactively back to January 1, 1998. On April 9, Pacific Gas and Electric Company filed an action in Bankruptcy Court challenging the CPUC's implementation of the order, under various provision of the Bankruptcy Code. On June 1, the Bankruptcy Court issued a decision denying PG&E's request for preliminary injunction and dismissing the action. In a June 25 filing, the company initiated its appeal to the District Court. PILLOWTEX CORP: Court Approves Claims Settlement Protocol --------------------------------------------------------- Judge Robinson granted Pillowtex Corporation's motion to settle and pay claims and controversies, and thus: (a) approving the procedures under which the Debtors may, in their sole discretion, compromise and settle actions, whether arising before or after the filing of these cases, without further court approval; and (b) authorizing, in the Debtors' sole discretion, to make payments in satisfaction of any settlements of actions. Under the Settlement Procedures, the Debtors (in their sole discretion) is authorized in connection with the settlement of any action to agree to: (1) in the instance of an action against one or more of the Debtors, (a) if the action is covered by the Debtors' insurance policies, permit the party or parties to recover the settlement amount from available insurance proceeds, (b) the allowance of a general unsecured claim against the applicable Debtor or Debtors, (c) make and authorized payment upon the parties' entry into the settlement or (d) a combination of the above; (2) in the instance of an action by one or more of the Debtors against a third party, accept one or more payments after the parties' entry into the settlement. (Pillowtex Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) PLANET HOLLYWOOD: Closing Six U.S. Restaurants ---------------------------------------------- Planet Hollywood International announced that it closed six of its U.S. restaurants in the past few weeks, the most dramatic cuts in the restaurant chain's lineup since it shuttered nine eateries in October 1999 when it filed for chapter 11 bankruptcy protection, according to The Orlando Sentinel. Robert Earl, Planet Hollywood founder and chairman, said on Friday that he could not say if more of the remaining 12 U.S. outlets will be shut down, but he predicted that the company is close to the end of its current downsizing binge. The most recent Planet Hollywood outlet to close was located on Pennsylvania Avenue near the White House. A sharp drop in visitors to the nation's capital in the wake of the Sept. 11 hijackings led to severe losses in restaurant business, a Planet Hollywood representative said. Outlets in San Diego, Atlanta and Baltimore also were shuttered within days of the hijackings, and outlets in Seattle and Nashville, Tenn., closed earlier in September. (ABI World, October 2, 2001) PRECISION AUTO CARE: Negotiates for Extensions of Senior Debt ------------------------------------------------------------- Precision Auto Care, Inc. (Nasdaq: PACI) announced for the fiscal year ending June 30, 2001, a loss of $18.9 million, compared with a loss of $18.4 million, for the prior year. For the quarter ending June 30, 2001, the Company incurred a loss of $13.3 million, or $(1.67) per share, compared to a loss of $14.2 million, or $(2.26) per share for comparable quarter in 2000. Included in the fourth quarter loss are special charges of $10.9 million for impairment of goodwill. The Company's CEO, Louis M. Brown, Jr. stated, "During the prior fiscal year, the bottom line results were significantly impacted by charges associated with the impairment of goodwill on certain assets. However, the Company's restructuring efforts have enabled the company to improve operating results during the year. In FY02, the Company will continue to focus on strategies that will improve the bottom line." Robert Falconi, the Company CFO stated, "The Company has taken a number of steps the past year to improve operating results including the sale of non- performing assets, cost reductions and the consolidation of certain business units. In FY02, we will continue to look at ways we can improve operating results. This might include selling other non-performing assets or divisions. In addition, we are hopeful that the Company's car wash division, Hydro-Spray, will continue to grow and grow profitably along with the Company's core franchising business." Although the Company has negotiated extensions of Senior Debt, in the event that the Company is unable to accomplish its strategic objectives or is otherwise unable to generate revenues sufficient to cover operating expenses and pay other debt, the Company would not be able to sustain operations at the current level. This would require the Company to further reduce expenses and liquidate certain assets. Precision Auto Care, Inc. is the world's largest franchisor of auto care centers, with over 500 operating centers as of June 30, 2001. The Company franchises and operates Precision Tune Auto Care centers around the world. PSINET INC: Gets Approval of Settlement with TNS Re Escrow Fund --------------------------------------------------------------- PSINet, Inc. received the Court's approval of its Settlement Agreement with TNS Holdings, Inc. releasing $4.5 million to the TNS from a $10 million escrow amount and releasing the other $5.5 million to the Debtors and resolving all claims arising from a reduction in the purchase price and indemnification amounts paid in relation to the transaction. This was in connection to PSINet, Inc. prepetition sale of PSINet Transaction Solutions, Inc. to TNS Holdings, Inc. for approximately $285 million. PSINet and the Purchaser reached agreement on a final adjustment to the Purchase Price of approximately $3.8 million. Pursuant to the cost-sharing provision, PSINet would indemnify the Purchaser for the first $100,000 and 70% of any additional amounts paid in settlement of such claim, subject to a cap of $0.6 million. Following a review of the basis underlying this claim, including additional documentation submitted by the Purchaser evidencing the Purchaser's payment in excess of $1.0 million in settlement of such claim, the parties agreed to resolve the Peters claim in the amount of $0.6 million. (PSINet Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) RITE AID: Completes Refinancing, Reducing Debt By $2.9BB In Q2 -------------------------------------------------------------- Rite Aid Corporation (NYSE, PCX: RAD) announced results for its second quarter, ended September 1, 2001. Sales for the 13-week quarter were $3.691 billion, up 7.3 percent from $3.439 billion reported in the prior year's second quarter. Second quarter same store sales increased 8.9 percent versus the prior year, reflecting prescription sales growth of 11.7 percent and a 4.8 percent increase in front-end same store sales. Prescription revenue accounted for 61.0 percent of total drugstore sales and third party prescription sales represented 92.0 percent of total pharmacy sales. Second quarter earnings before interest, taxes, depreciation and amortization, LIFO charges, gains and losses from asset disposals, and non-cash expenses (EBITDA) amounted to $120.8 million, up 33.2 percent from the prior year's second quarter EBITDA of $90.7 million. A change in accounting for leases, which was effective on June 27, 2001 in conjunction with the company's refinancing, lowered second quarter EBITDA by $9.6 million; on a comparable basis EBITDA increased this year versus last by $39.8 million or 49.1 percent. Excluding net non- operating income related to legal settlements of $17.0 million received in the second quarter of this year and $12.3 million received in the second quarter of last year, EBITDA was $103.8 million or 2.8 percent of sales this year versus $78.4 million or 2.3 percent of sales for the second quarter of the prior year. "We are pleased with the continued improvement in sales and EBITDA, especially in a very tough retail environment," said Mary Sammons, Rite Aid president and chief operating officer. "While our decisions to accelerate the roll out of reduced cash prices to all of our pharmacies and to lease new photo processing equipment in many of our stores reduced second quarter gross margins, we expect these decisions to result in higher sales in the coming quarters." Interest expense for the second quarter was $102.4 million versus $182.1 million in the prior year's second quarter. Interest expense was comprised of $93.2 million cash interest on indebtedness and capital lease obligations and non-cash interest of $9.2 million. Other non-cash expenses of $86.9 million this quarter consisted of $21.9 million in losses on debt modifications related to the refinancing completed on June 27; a $31.0 million loss to mark to market $1.0 billion of interest rate swap contracts on floating rate bank debt that was retired in the refinancing; $26.7 million related to store closings and impairment charges; $4.5 million for losses related to the company's investment in drugstore.com and $2.8 million of other non-cash expenses. Net loss from continuing operations for the second quarter was $179.3 million or a loss per share of $0.40 compared to a net loss from continuing operations of $425.0 million or a loss per share of $1.87 in the year ago period. The net loss from continuing operations would have been $105.3 million or a loss per share of $0.22 without non-cash expenses of $86.9 million, net proceeds from legal settlements of $17.0 million, $5.6 million of non-recurring legal and accounting expenses and a $1.6 million gain from asset sales. During the quarter, the company relocated four stores and closed 37 stores. Stores in operation at the end of the quarter totaled 3,594. Guidance for the Second Half of Fiscal 2002 The company expects sales of $7.7 billion to $8.0 billion for the remainder of fiscal 2002 which ends March 2, 2002. Same store sales are expected to improve 8.0 percent to 10.0 percent versus the prior year. EBITDA for the second half is expected to be $265.0 million to $315.0 million, bringing full year EBITDA to $550.0 million to $600.0 million. Excluding the effect of the change in accounting for leases of approximately $40.0 million, full year EBITDA would be expected to be $590.0 million to $640.0 million. Interest expense for the second half is expected to total approximately $180.0 million with cash interest expense expected to be approximately $157.0 million and non-cash interest expected to be approximately $23.0 million. Depreciation and amortization, including goodwill amortization, is expected to total approximately $171.0 million with approximately $89.0 million expected in the third fiscal quarter and $82.0 million expected in the fourth fiscal quarter. The company does not expect to record federal income tax expense or benefit for the remainder of fiscal 2002; state taxes of approximately $2.5 million are expected to be recorded during the balance of fiscal 2002. Capital expenditures for the remainder of fiscal 2002 are expected to total approximately $70.0 million bringing full year capital expenditures to approximately $120.0 million. Working capital is expected to be lower on a full year basis by approximately $100.0 million. The company expects to generate $125.0 million to $175.0 million of free cash flow for fiscal 2002. Free cash flow represents the excess of reported EBITDA and working capital reductions over cash interest expenses, capital expenditures and amounts paid with respect to closed stores. "Our biggest accomplishment in the second quarter was completing our refinancing efforts, which reduced debt by $2.9 billion, greatly improved our balance sheet and allowed us to provide financial guidance for the first time," said Bob Miller, Rite Aid chairman and chief executive officer. "With the sales and operating initiatives we have in place, we expect to generate a significant amount of free cash flow at the end of the fiscal year. This will be another positive step in Rite Aid's turnaround." Preliminary September Sales Results Final September sales results will be reported on October 9, 2001. On a preliminary basis, same store sales for the four-week period ended September 29, 2001 were up approximately 6.0 percent over the prior year period. Pharmacy same store sales were up approximately 9.7 percent, while front-end same store sales were slightly positive. While the September 11 tragedy had a negative impact on sales on September 11 and the days following, same store sales started to recover during the second half of the month with the last two weeks up approximately 7.7 percent, including an increase in pharmacy of approximately 11.2 percent and a front-end gain of approximately 2.2 percent, compared to the same two-week period last year. SWISSAIR: Resumes Flight Operations Today ----------------------------------------- Swissair will resume its flight operations on Thursday, October 4, 2001. It is estimated that approximately half of the flights scheduled to depart on Thursday will be operated. The decision to immediately resume flight operations was taken after the Swiss government made a credit available to Swissair in the amount of maximum CHF450 million. It is to be expected that only 50 percent of the scheduled flights can be operated on the first day. Subsequently, the number of flights operated shall be increased. It is Swissair's goal to offer their passengers as complete a flight schedule as possible. TERRA INDUSTRIES: S&P Rates Proposed $200M Senior Notes at BB- -------------------------------------------------------------- Standard & Poor's assigned its double-'B'-minus rating to Terra Industries Inc.'s proposed $200 million senior secured notes due 2008, which will be sold under Rule 144A with registration rights. Standard & Poor's also assigned its double-'B' bank loan rating to Terra's $175 million senior secured revolving credit facility. At the same time, Standard & Poor's affirmed its double-'B'- minus corporate credit rating and its single-'B' senior unsecured debt rating on the company. The outlook is negative. Proceeds from the note issuance and borrowings under the revolver will be used to repay debt under the company's existing secured credit facility and to repay the senior notes due 2003. The revolving credit facility, available to certain subsidiaries of Terra, is rated one notch higher than the corporate credit rating. Drawings under the revolving credit facility will be subject to a borrowing base of eligible accounts receivable and inventory. The facility is secured by substantially all of the company's current assets. The bank loan rating anticipates that the collateral package will retain value in the event of default and would be sufficient to fully cover the bank facility in a liquidation. In a simulated default scenario, Standard & Poor's assumes that the revolving credit facility would be drawn up to the available amount under the borrowing base calculation, and assumes a depressed level of asset valuation. In addition, Standard & Poor's stress scenario factored in costs associated with delays in disposing of properties, and corporate bankruptcy in general. The senior secured notes will be issued by Terra Capital Inc., a wholly owned subsidiary of Terra, and will be guaranteed by Terra and its other wholly owned domestic subsidiaries. Borrowings are secured by substantially all fixed assets either directly or through secured intercompany notes. The senior secured notes are rated the same as the corporate credit rating given the uncertainty of asset values under Standard & Poor's postdefault simulation analysis. However, Standard & Poor's notes that there is a possibility of nearly full recovery under these conditions. Credit quality reflects Terra's fair business position as a commodity fertilizer producer, offset by high financial risk. Terra is a leading North American producer of nitrogen fertilizer and methanol. The company also has nitrogen facilities in Europe. Good market shares are offset by cyclicality in Terra's highly competitive commodity businesses and a relatively narrow scope of operations. In addition, these businesses are sensitive to volatility in raw material costs (primarily natural gas). In particular, the nitrogen fertilizer sector has below-average business characteristics, including low barriers to competitive entry, profitability that is highly dependent on fluctuating natural gas costs, and inconsistent product demand due to changing planting patterns. Still, a growing population, higher incomes, and improved diets support long-term prospects. The long-term prospects for methanol are uncertain due to the possible phase-out in key markets of methyl tertiary butyl ether (MTBE), a gasoline additive that is an important methanol end use. Profitability and cash flows have been negatively impacted by overcapacity in global nitrogen markets, exacerbated by the lingering effects of reduced demand attributable to low Chinese nitrogen imports, and higher natural gas and feedstock costs. In the recent planting season, North American demand declined due to poor weather conditions and low grain prices. In response to natural gas cost spikes, the company has periodically idled significant portions of its nitrogen capacity. Debt levels are high due to acquisitions and an aggressive capital spending program. Proceeds from the sale of the retail distribution business in 1999 relieved some pressure from the company's balance sheet. Operating margins are about 15% over the last 12 months, though financial results benefited significantly from favorable natural gas forward pricing contracts. Funds from operations to total debt (FFO/TD) is more than 20%, exceeding the 15%-20% range considered appropriate for the ratings. However, cash flow has been negatively impacted by a buildup in inventory stemming from weaker-than-expected demand. The high debt levels continue to strain financial flexibility, and the significant upswing in pricing and profitability needed to provide meaningful and sustainable improvements in cash flows is not expected to occur in the near term. Still, lower gas costs could support a measure of improvement. The ratings incorporate expectations that a gradual recovery in business conditions should result in cash flow generation that is in excess of internal needs, leading to debt reduction and a strengthening of credit protection measures. Profitability is expected to improve as the company approaches the next seasonal peak, and operating margins should average at least 15% during the cycle. EBITDA interest coverage should average 2.0 times - 2.5x. Capital spending is expected to be curtailed. Ample availability under the revolving credit facility and good cash balances should be sufficient to fund seasonal borrowings and minimal shortfall in free operating cash flow. Standard & Poor's does not expect Terra to implement a meaningful stock repurchase program, and ratings assume that any significant change in Anglo American's equity holdings would be accomplished in a manner that preserves credit quality. Outlook: Negative A further weakening in business conditions and deterioration in the company's financial profile could lead to a ratings downgrade. THERMADYNE HOLDINGS: Bank Group Agrees to Forbear Until Oct. 31 --------------------------------------------------------------- Thermadyne Holdings Corporation (OTC BB: TDHC.OB) announced the extension through October 31, 2001 of the forbearance agreement with its bank lending group. The prior agreement expired September 28, 2001. The agreement calls for lenders to refrain from exercising any rights or remedies relating to existing financial covenant and other defaults, including Thermadyne's election to defer a principal payment on the bank debt that was due September 30, 2001. The Company said discussions are continuing with its bank group and representatives of the bondholders. "We remain fully committed to restructuring our balance sheet and reducing our heavy debt load, so our Company can capitalize on its substantial brand and operating strengths," explained Karl Wyss, Chairman and Chief Executive Officer of Thermadyne. Thermadyne, headquartered in St. Louis, is a multinational manufacturer of cutting and welding products and accessories. For more information, contact James Tate, senior vice president and chief financial officer, Thermadyne Holdings Corporation at 314/746-2107. TOWER RECORDS: Completes Amendment to Bank Credit Agreement ----------------------------------------------------------- MTS, Incorporated, dba Tower Records, the world's largest independent entertainment software retailer, announced that it has substantially completed an amendment to its revolving credit facility. The amendment provides significantly greater credit availability for the company through April 2002. The company expects completed execution of the amendment by the end of this week. Prior to the amendment, credit available under the facility was $195 million from October 1 through December 31, and $100 million thereafter. The amendment provides Tower with a credit facility of $205 million through December 31 and $195 million thereafter. These changes afford the retailer immediate and strong buying leverage with its vendors throughout the holiday season. Tower Records' Chief Financial Officer, DeVaughn Searson said, "We believe this to be a vote of confidence from our banks, which firmly demonstrates their support of Tower's business plan and acknowledges the improvements we have made to date. Once the amendment has been executed, we can move forward with the anticipation that we have sufficient liquidity to meet all of our financial obligations." Having worked in conjunction with its bank group and the music industry over the past nine months, the entertainment software retailer has put into effect a comprehensive program, designed to streamline operational efficiencies, address all under- performing aspects of the company, improve profitability and strengthen its financial position. Michael Solomon, President and CEO for Tower Records said, "The strategies we implemented have positioned us to meet the challenges of a changing environment. However, nothing could have prepared us for the catastrophic events of September 11 and our thoughts and prayers are with all those who have been affected. Despite everything we confront currently as a nation, we continue to see consumer confidence in our segment of the market, as well as customer and community loyalty to the Tower brand. As always, we intend to serve our customers during this time with a focus on customer service and selection." Since 1960 Tower Records has been recognized and respected throughout the world for its unique brand of retailing. Founded in Sacramento CA, by current Chairman Russ Solomon, the company's growth over four decades has made Tower Records a household name. Tower Records owns and operates 173 stores worldwide with 57 franchise operations in five countries. The company opened one of the first Internet music stores on America Online in June 1995 and followed a year later with the launch of TowerRecords.com. The site was named "Best Music Commerce site" by Forrester Research in Fall 2000. The recent founding of Tower Records own exclusive and independent record label "33rd Street Records" has enabled the retailer to release popular and niche hit driven music, while placing great emphasis on both marketing and artist development. Tower Records' commitment to introducing its customers to the latest trends in new product lines is paramount to the organization's retail philosophy. Tower forges ahead with the development of exciting shopping environments, espousing diverse product ranges, artist performance stages, personal electronics departments, and digital centers. Tower Records maintains its commitment to providing the deepest selection of packaged entertainment in the world, merchandised in stores that celebrate the unique interests and needs of the local community. UNIFORET: CCAA Protection Extended Until November 12 ---------------------------------------------------- Uniforet Inc. and its subsidiaries, Uniforet Scierie-Pate Inc. and Foresterie Port-Cartier Inc. (the Company) announced that they have obtained from the Superior Court of Montreal an order extending for an additional period of 45 days expiring on November 12, 2001 the Court protection afforded to the Company under the "Companies' Creditors Arrangement Act". As already announced, the meeting of the class of US Noteholders-creditors to vote on the amended plan of arrangement is still temporarily suspended, following the institution of proceedings, until settlement of the composition of that class of creditors. On October 9, 2001, the Court will fix the hearing dates for these proceedings. The Company intends to keep on its current operations and its customers are not affected by the Court order. Suppliers who will provide goods and services necessary for the operations of the Company will continue to be paid in the normal course of business. Uniforet Inc. is an integrated forest products company which manufactures softwood lumber and bleached chemi-thermomechanical pulp. It carries on its business through its subsidiaries located in Port-Cartier (pulp mill and sawmill) and in the Peribonka area in Quebec (sawmill). Uniforet Inc.'s securities are listed on The Toronto Stock Exchange under the trading symbol UNF.A, for the Class A Subordinate Voting Shares, and under the trading symbol UNF.DB, for the Convertible Debentures. VLASIC FOODS: Confirmation Hearing Scheduled for Oct. 31 -------------------------------------------------------- Vlasic Foods International, Inc. and its debtor-affiliates present the Court with their Second Amended Joint Plan and a Second Amended Disclosure Statement to resolve various objections raised by parties in interest and to clarify various issues: (1) Creditors are directed to the Pinnacle Annex for information concerning Pinnacle and the Warrants to be issued under the Plan. Among other things, the Pinnacle Annex describes Pinnacle's business, certain risks associated with Pinnacle's business activities, Pinnacle's dividend policy, Pinnacle's stockholders' equity, Pinnacle management's discussion and analysis of Pinnacle's financial condition and results of operations, Pinnacle's management, certain relationships and related transactions, the security ownership of Pinnacle's principal stockholders and management, Pinnacle's capital stock, the Warrants, certain federal tax consideration and Pinnacle's financial condition. (2) The hearing to consider the confirmation of the Plan will be on October 31, 2001 at 10:30 a.m. (Eastern time). (3) Convenience claims will receive a recovery of 28%; (4) Contractual subordination provisions that may be applicable to certain holders of Class 2 and Class 5 claims are not altered or impaired under the Plan; (5) The Debtors' payment of $324,000,000 to satisfy the Senior Credit Facility debt and an additional secured debt of $600,000 owned to certain members of the Dorrance Family is subject to repayment if the liens securing the debt are ultimately determined to be invalid. (6) The Bank Group continues to assert claims against the Debtors for: (i) unpaid interest on principal; (ii) unpaid interest on interest; and (iii) unpaid expenses, indemnification costs, and legal fees, including contingent costs and expenses. The Bank Group further asserts that as of a recent date, the unpaid interest on principal and interest together total $2,343,000, while unpaid expenses reach $125,000. The Bank Group contends that such amounts will continue to increase due to, among other things, certain threatened litigation actions, and that all of its claims are secured by liens upon the Debtors' assets. The DF Participants also assert similar additional claims arising under the DF Participation Compensation Letter dated July 24, 2000. Based on its preliminary investigation, the Creditors' Committee advised the Debtors that it believes there are bases to dispute the claims asserted by the Bank Group and the DF Participants. The Creditors' Committee anticipates that the LLC Manager will continue the investigation into the Bank Group's claims and the claims of the DF Participants. (7) Substantive consolidation is included as one of the means for implementation of the Plan. The Plan is predicated upon entry of an order substantively consolidating the Estates and the Chapter 11 Cases for purposes of all actions associated with confirmation and consummation of the Plan. Substantive consolidation is appropriate because, among other things: (a) the security interests asserted by the Bank Group pursuant to the Senior Credit Facility apply equally to each of the Debtors, (b) claims against VFI comprise approximately 99% of all the claims asserted against the Debtors, (c) assets of VFI comprise substantially all of the Debtors' assets available for distribution, (d) the recovery of creditors of VFI will not be materially diminished by the inclusion of claims asserted only against other Debtors, and (e) the administrative costs associated with the allocation of sales proceeds and certain liabilities between and among VFI and the other Debtors would likely exceed the benefits of non-consolidation. PricewaterhouseCoopers has conducted an analysis and has advised the Debtors have the substantive consolidation of the Chapter 11 Cases will not have a significant negative effect on distributions to creditors under the Plan. The Creditors' Committee has not concluded an independent analysis of the effects of substantive consolidation. On the Confirmation Date, or such other date as may be set by another order of the Bankruptcy Court, but subject to the occurrence of the Effective Date, (i) all Intercompany Claims will be eliminated, (ii) all assets and liabilities of the direct and indirect Debtor affiliates of VF Brands will be treated as if they were merged with the assets and liabilities of VF Brands, (iii) any obligation of a Debtor and all guarantees thereof by one or more of the other Debtors will be deemed to be one obligation of VF Brands, and (iv) each Claim filed or to be filed against any Debtor will be deemed filed only against VF Brands and will be deemed a single Claim against and a single obligation of VF Brands. On the Confirmation Date, and in accordance with the terms of the Plan and the consolidation of the assets and liabilities of the Debtors, all Claims based upon guarantees of collection, payment or performance made by the Debtors as to the obligations of another Debtor will be released and of no further force and effect. Notwithstanding any provision of the Plan or this Disclosure Statement to the contrary, the rights of parties-in-interest to contest claims of non-Debtor affiliates of the Debtors are preserved. Unless the Bankruptcy Court has approved the substantive consolidation of the Chapter 11 Cases by a prior order, the Plan will serve as, and will be deemed to be a motion for entry of an order substantively consolidating the Estates and the Chapter 11 Cases. If no objection to substantive consolidation is timely filed and served by any holder of a Claim in a Class impaired by the Plan on or before the Voting Deadline or such other date as may be established by the Bankruptcy Court, an order approving substantive consolidation may be entered by the Bankruptcy Court. If any such objections are timely filed and served, a hearing with respect to substantive consolidation and the objections thereto will be scheduled by the Bankruptcy Court, which hearing may, but is not required to, coincide the Confirmation Hearing. (8) The Administrative Agent of the Bank Group has advised the Debtors that: (i) the Bank Group has security interests in Intercompany claims and on subsidiary stock as well as guarantees from Debtors that are subsidiaries of VFI, (ii) the Agent has not been advised of the basis for substantive consolidation, and (iii) the Agent will oppose substantive consolidation if the effect is to eliminate the value of any Collateral or such subsidiary guarantee. (9) Instead of just 90 days, the LLC Manager has 120 days after the Effective Date, wherein he/she may offer all holders of Class 5 Claims, whose Allowed Claims do not exceed an amount to be determined by the LLC Manager, a Cash payment equal to between 20% and 25% of each such holder's Allowed Claim. (10) VFI LLC, the LLC Manager, and the Managing Board shall be fiduciaries with respect to the holders of Class 5 Claims. (11) On the Effective Date, the Estates and the Debtors shall be deemed to have, and shall have, irrevocably assigned and transferred to VFI LLC all of their rights, title and interest in and to any and all property and assets of the Debtors, free and clear of all Liens, claims, encumbrances, and other interests other than Collateral that remains subject to any Class 2 Liens. (12) No transfer of such interest shall be permitted to the extent the transfer would violate or require registration under any federal or state securities law. (13) It is contemplated that the LLC Manager Reserve and the Managing Board Reserve shall be funded in the aggregate amount of not less than $5,000,000, and shall not be subject to any liens securing any Secured Claim. (14) The VFI LLC Members' Agreements shall provide that the VFI LLC shall distribute the Distribution Proceeds to holders of LLC Membership Interests at such times as the Managing Board deems appropriate, but only after paying all outstanding administrative expenses of VFI, LLC, and reserving for: (i) the reasonably anticipated amount of any such administrative expenses that may be incurred thereafter, and (ii) any unpaid Allowed Secured Claims. (15) The LLC Manager will also be empowered: in the event that the LLC Manager shall determine that compliance with any applicable securities law requirements is or will be unduly costly or impossible, the LLC Manager may, with the approval of the Managing Board, take any action necessary in order to comply with the requirements of the Securities Act, the Exchange Act, and/or the Investment Company Act of 1940, as amended, or to qualify for any applicable exemptions from such requirements. (16) Following confirmation of the Plan, VFI LLC and the LLC Manager shall perform all acts necessary to accomplish termination of the Non-Union Pension Plan and the 401(k) Plans. (17) The VFI LLC Members' Agreement shall set forth the duties and responsibilities of the Managing Board and shall in all respects govern the operation and management of VFI LLC, and shall be filed and served by the Creditors' Committee by not later than October 15, 2001. (18) The LLC Manager shall make all distributions otherwise payable to each holder of a Debt Securities Claim to the Indenture Trustee, who shall make distributions in accordance with the provisions of the Plan and the respective governing indenture, including the turnover provisions thereof. (19) The LLC Manager shall deposit or invest the funds in the Distribution Reserve in accordance with the provisions set forth in section 345 of the Bankruptcy Code. The holders of Allowed Claims for which Distribution Reserve has been established shall receive a pro rata distribution of the interest actually earned on account of such holder's Allowed Claim. (20) The Confirmation Order shall provide that the issuance and distribution of the LLC Membership Interests shall be exempt from registration requirements of the Securities Act and any similar state or local laws, pursuant to section 1145 of the Bankruptcy Code. (21) The conditions set forth in the Plan can be waived in whole or in part by the Debtors, the Creditors' Committee, acting jointly, at any time without an order of the Bankruptcy Court, other than the condition set forth in Article IX.A.1 the Plan, which may only be waived by Pinnacle. (22) The Debtors, with the consent of the Creditors' Committee, reserve the right to modify the Plan either before or after Confirmation to the fullest extent permitted under section 1127 of the Bankruptcy Code and Bankruptcy Rule 3019, including but not limited to, modifications necessary to obtain any no-action letters. (23) Neither confirmation of the Plan nor the entry of the Confirmation Order shall expand or limit the original jurisdiction of the Bankruptcy Court as such jurisdiction exists as the Confirmation Date with respect to the Causes of Action, and neither event shall be deemed to constitute a consent to jurisdiction by any party-in-interest. (24) As an inducement to and in recognition of the past and future efforts of the parties identified in this section K, in connection with the prosecution of the Debtors' Chapter 11 Cases, the Plan provides certain protections related to the performance of services by such parties during the Chapter 11 Cases. The Debtors believe that such limited protections have substantially aided the Debtors by inducing such parties to render services during the Chapter 11 Cases and thereby maximize the value of property to be distributed under the Plan to holders of Allowed Claims, and are consistent with settled law in the Third Circuit. (25) All injunction or stays in effect of the Chapter 11 cases by virtue of Section 362 of the Bankruptcy Code shall terminate in accordance with Section 362(c) of the Bankruptcy Code. * * * Judge Walrath ruled that any and all objections to approval of the Disclosure Statements, to the extent not previously withdrawn, are overruled. The Court approved the Debtors' Disclosure Statement. Judge Walrath also authorized the Debtors to make non-material changes to the Disclosure Statements prior to distributing them to impaired creditors, including modifications to reflect updated financial information concerning Pinnacle and provided by Pinnacle. The Debtors will transmit copies of the Second Amended Plan and Second Amended Disclosure Statement to creditors together with customized ballots. The Voting Deadline is October 24, 2001. (Vlasic Foods Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) XEROX: Flextronics Buying Office Manufacturing Assets for $220MM ---------------------------------------------------------------- Taking another major step forward in its turnaround plan to reduce costs, improve productivity and increase competitiveness, Xerox Corporation (NYSE: XRX) announced a manufacturing agreement with Flextronics (NASDAQ: FLEX), a $12 billion global electronics manufacturing services (EMS) company. The agreement includes payment to Xerox of approximately $220 million and assumption of certain liabilities for the sale of inventory, property and equipment and a five-year contract for Flextronics to manufacture certain Xerox office equipment and components, at a modest premium over book value. Xerox will sell to Flextronics office manufacturing operations including manufacturing assets and inventory in Toronto; Resende, Brazil; Aguascalientes, Mexico; and Penang, Malaysia. The approximately 3,650 current Xerox employees in these operations are expected to transfer to Flextronics. "Our agreement with Flextronics will redefine our office manufacturing strategy through significantly improved asset utilization, greater supply chain flexibility and cost savings as well as generating cash from the asset sales," said Anne M. Mulcahy, Xerox president and chief executive officer. The company also said that it will stop production by the end of the second quarter 2002 at its printed circuit board factory in El Segundo, Calif., and its customer replaceable unit plant in Utica, N.Y. The operation in El Segundo currently employs 425; Utica's employment is 265. When these plants close, Flextronics will build the work into its global network of manufacturing plants. In addition, Xerox will begin consultations with European works councils regarding the sale of its office manufacturing operations in Venray, The Netherlands, and the transfer to Flextronics of some production work currently performed at Xerox's site in Mitcheldean, England. As a result of these actions, Xerox expects to incur cash restructuring charges that will approximately equal the premium over book value from the asset sales. Xerox and Flextronics expect that the first in a series of closings on the asset sales will occur in the fourth quarter, beginning a one-year transition period for Flextronics to assume manufacturing of Xerox-designed office products and related components. Flextronics will also begin the manufacturing of Xerox's electronic parts and subsystems during the first half of 2002. Xerox will continue to strengthen its manufacturing competencies in high-end production printing and publishing equipment, toner and imaging supplies through its remaining global manufacturing plants. In total, the agreement with Flextronics represents in excess of $1 billion in annual manufacturing costs, approximately 50 percent of Xerox's overall manufacturing operations. "This agreement exemplifies the type of business that we have built Flextronics to handle and is further evidence that the trend towards virtual manufacturing continues," said Michael E. Marks, chairman and chief executive officer of Flextronics. "This is also an opportunity to expand our customer base and product portfolio through the acquisition of these sites in addition to gaining valuable knowledge through the Xerox people." "Our partnership with Flextronics ensures that all Xerox office products and components will continue to be produced under the high quality standards that customers rely on from Xerox," said Ursula Burns, president, Xerox Worldwide Business Services. "At the same time, Xerox will benefit from Flextronics' commitment to significant annual productivity improvements, maximizing its large-scale purchasing and technological efficiencies." Today's announcement with Flextronics is the latest in a series of Xerox turnaround-related actions that are restoring Xerox's financial strength and positioning the company for a return of profitability. For example, Xerox announced last month a framework agreement with GE Capital's Vendor Financial Services to become the primary equipment-financing provider for Xerox's U.S. customers. The two companies also agreed to the principal terms of a financing agreement under which Xerox will receive from GE Capital approximately $1 billion secured by Xerox's lease receivables in the United States. Xerox's agreement with Flextronics is expected to close in stages subject to the completion of global regulatory requirements. Xerox will receive cash proceeds from the agreement in phases as the companies close on the individual worldwide asset sales. Deutsche Banc Alex. Brown served as Xerox's advisor on this agreement. Headquartered in Stamford, Conn., Xerox Corporation is a US$18.7 billion global enterprise with 85,000 employees serving customers in 130 countries. Xerox makes the digital world work better with an array of innovative document solutions, services and systems -- including color and black-and-white digital printers, multifunction devices and copiers -- designed for offices and production-printing environments. Xerox Worldwide Business Services, based in Webster, N.Y., is responsible for all manufacturing operations, which currently employs 14,400 people. For further information, http://www.xerox.com Headquartered in Singapore, Flextronics is a world-class Electronics Manufacturing Services (EMS) provider focused on delivering operational services to branded technology companies. With fiscal year 2001 revenues of USD$12 billion and approximately 70,000 employees, Flextronics is a major global operating company with design, engineering, manufacturing and logistics operations in 27 countries and four continents. This global presence allows for manufacturing excellence through a network of facilities situated in key markets and geographies that in turn provide its customers with the resources, technology and capacity to optimize their operations. Flextronics' ability to provide end-to-end operational services that includes innovative product design, manufacturing, IT expertise and logistics has established the company as a top- tier EMS provider. For further information, visit http://www.flextronics.com * Cleary Gottlieb's One Liberty Plaza Offices Temporarily Moved --------------------------------------------------------------- Because of the close proximity of One Liberty Plaza to the World Trade Center complex, Cleary, Gottlieb, Steen & Hamilton's offices are temporarily unavailable. For this interim period, Lindsee P. Granfield, Esq., and her fellow lawyers ask that all service of papers, mail, courier and hand deliveries be sent to bankruptcy practitioners to the Firm's mid-town Manhattan offices at: Cleary, Gottlieb, Steen & Hamilton Citicorp Center 153 East 53rd St., 38th Floor New York, NY 10022-4611 Telephone (212) 572-5353 Fax (212) 572-5399 Voice mail may be left for Cleary Gottlieb lawyers at (212) 572- 5202. For further information, see http://www.cgsh.comor http://www.clearygottlieb.com ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2001. All rights reserved. ISSN: 1520-9474. 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