/raid1/www/Hosts/bankrupt/TCR_Public/011019.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, October 19, 2001, Vol. 5, No. 205
Headlines
360NETWORKS: Exclusive Period Extension Hearing On November 8
ABC-NACO: Files for Chapter 11 Protection in Illinois
ABC-NACO: Chapter 11 Case Summary
AMF BOWLING: Parent Wants Removal Period Extended to February 25
AMCAST INDUSTRIAL: Finalizing Talks on New Financial Covenants
AMERICREDIT: Offering $1.8 Billion Asset-Backed Securitization
AMES DEPT: Unsecured Panel Signs-Up Gersten as Special Counsel
AMKOR TECHNOLOGY: Market Volatility Spurs S&P Low-B Ratings
ARMSTRONG HOLDINGS: Property Damage Claimants Push a Hot Button
BETHLEHEM STEEL: S&P Drops Ratings to D After Chapter 11 Filing
BIRMINGHAM STEEL: Seeking Lenders' Support for Debt Workout
CHARIS HOSPITAL: Selling Louisiana Facility to Dynacq For $3.4MM
COMDISCO: Court Approves BofA Stipulation Covering L/C Account
COVAD COMMS: Has Until December 11 to Decide on Unexpired Leases
DIXON TICONDEROGA: Sub Debt Payment Date Extended to November 15
EXODUS COMMS: Court Allows Debtor to Continue Customer Programs
FANTOM TECHNOLOGIES: Ceases Manufacturing & Shipping Activities
FEDERAL-MOGUL: Hopes to File Schedules & Statements by Nov. 29
GENSYM CORP: Selling NetCure to Rocket Software for $2.5 Million
HOLLAND MARK: Closes Doors But Will Not File for Bankruptcy
HOMESEEKERS.COM: Jones and Harker Resign from Board of Directors
HUDSON RESPIRATORY: S&P Maintains Watch on B and CCC+ Ratings
INTEGRATED HEALTH: Woodruff Manor Takes Over Woodruff Facility
INTEGRATED HEALTH: Will Recapitalize Rotech With Over $1 Billion
K-TEL INT'L: Must Attain Profitability to Continue Operations
KELLSTROM INDUSTRIES: Misses Interest Payment on $54MM Notes
KNOLL INC: S&P Changes Outlook Noting Decline in Product Demand
LAIDLAW INC: Canadian Units Seek CCAA Stay Extension to Jan. 15
LERNOUT & HAUSPIE: Dictaphone to License Debtor's MREC Software
LERNOUT & HAUSPIE: Dictaphone Plans to Spin-Off After Bankruptcy
MCMS INC: Court Okays $49MM DIP Financing and Bidding Procedures
MIDWAY AIRLINES: S&P Drops Defaulted Class D Certificates to D
NETVOICE: Files Voluntary Chapter 11 Petition in Louisiana
NEXTWAVE: Mobile Carriers to Pay Debtor $16BB to End Dispute
OLYMPUS PACIFIC: Defers $3.75MM Financial Commitment to Ivanhoe
PACIFIC GAS: Urges Court to Disapprove DWR Servicing Agreement
PACIFIC GAS: Christopher P. Johns Named Senior VP & Controller
POLAROID CORP: Gets Approval to Maintain Existing Bank Accounts
POTLATCH: $6.6MM Net Loss in Q3 Due to Poor Market Conditions
PRECISION SPECIALTY: Taps TM Capital to Seek Strategic Options
PSINET INC: Gets Approval to Pay Pre-Petition Franchise Taxes
RAILWORKS CORP: Gets Interim Approval of $81MM in DIP Financing
RENT-WAY: Junk Ratings Remain on S&P's CreditWatch Negative
RUSSELL-STANLEY: Launches Exchange Offer & Solicits for Prepack
SABENA: Belgian Gov't Grants Bridge Financing After EU Approval
SCHWINN/GT: Breaks Ties with Mad Dogg Athletics & Johnny G
SUN HEALTHCARE: Asks Court to Nix Bank of New York's $5MM Claim
TRI-NATIONAL: Senior Care Lays-Out Reorg. Plan to Pay Creditors
USINTERNETWORKING: S&P Junks Ratings on Possible Restructuring
* BOOK REVIEW: Bankruptcy Crimes
*********
360NETWORKS: Exclusive Period Extension Hearing On November 8
-------------------------------------------------------------
360networks and its debtor-affiliates advise Judge Gropper that
a plan of reorganization will not be filed by October 26, 2001
-- the statutory deadline imposed under 11 U.S.C. Sec. 1121.
While much has been accomplished since the Petition Date, the
Debtors say, there is still much to be done. Accordingly, the
Debtors tell Judge Groper to expect a motion asking for an
extension of the Company's exclusive period during which to file
a plan of reorganization and solicit acceptances of that plan.
Judge Gropper will convene a hearing to consider an extension of
time at 10:00 a.m. on November 8, 2001 in Courtroom 617 at the
Alexander Hamilton United States Custom House, One Bowling
Green, New York, New York 10004. (360 Bankruptcy News, Issue No.
10; Bankruptcy Creditors' Service, Inc., 609/392-0900)
ABC-NACO: Files for Chapter 11 Protection in Illinois
-----------------------------------------------------
ABC-NACO Inc. (ABCR) and its U.S. subsidiaries have filed
voluntary petitions to reorganize their businesses under Chapter
11 of the U.S. Bankruptcy Code. The filings, due primarily to
the severe downturn in the rail supply industry and the
company's large debt burden, were made in the United States
Bankruptcy Court for the Northern District of Illinois, Chicago,
Illinois.
Operations around the world, including the United States, will
remain open, operating to fulfill existing and future customer
requirements. This filing does not include the company's
subsidiaries or joint ventures in Canada, Mexico, Scotland,
Sweden, Portugal, or China.
Filing for reorganization became necessary due to a severe
liquidity crisis caused primarily by the exceptionally weak
market for ABC-NACO's products. Additional factors included the
80-day strike at the Sahagun, Hidalgo, Mexico facility and the
roof collapse at the Cicero, Illinois facility, both of which
occurred this past summer.
To ensure continuation of operations, ABC-NACO received a
commitment for a $20 million debtor-in-possession (DIP)
financing facility from its existing senior secured bank group.
The financing will become available for future operating
obligations, once approved by the court. Together with the cash
generated from operations going forward, this financing will
provide the necessary liquidity for the company to fulfill
future obligations to customers, suppliers and employees.
"Despite our efforts to reduce costs and maximize cash flow, the
continuing deterioration of the rail supply market significantly
aggravated our liquidity situation. After careful review of the
company's financial condition and all available alternatives,
the Board of Directors and senior management concluded today's
court filing by our U.S. operations was a necessity," said
Vaughn Makary, President and Chief Executive Officer of ABC-
NACO.
The company has retained the management consulting firm of
Morris-Anderson and Associates, Ltd. and the investment banking
firm of Lincoln Partners L.L.C. to assist it in the evaluation
of reorganization alternatives in order to maximize its business
enterprise value.
Makary added, "In the best interest of our constituencies,
including our employees, the company's domestic and foreign
operating units will continue to serve their customers during
this process of maximizing business enterprise value."
The company said it is filing first day motions to support its
employees, customers and vendors, to obtain interim financing
authority, to maintain existing cash management programs, to
retain legal, financial, and other professionals relative to the
company's reorganization cases, and for other relief. The
company is retaining the law firm of D'Ancona & Pflaum L.L.C. to
assist in the court proceedings.
The company is one of the world's leading suppliers of
technologically advanced products to the rail industry. With
four technology centers around the world, the company holds pre-
eminent market positions in the design, engineering and
manufacture of high-performance freight car, locomotive and
passenger suspension and coupling systems, wheels and mounted
wheel sets.
The company also supplies railroad and transit infrastructure
products and services and technology-driven specialty track
products. It has offices and facilities in the United States,
Canada, Mexico, Scotland, Portugal and China.
ABC-NACO: Chapter 11 Case Summary
---------------------------------
Lead Debtor: ABC-NACO Inc.
335 Eisenhower Lane South
Lombard, IL 60148
Chapter 11 Petition Date: October 18, 2001
Court: Northern District of Illinois
Bankruptcy Case No.: 01-36484
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
NACO Inc., a Delaware Corporation 01-36491
National Castings, Inc. 01-36493
NACO Flow Products, Inc. 01-36499
National Engineered Products Co 01-36500
Buymetalcastings Inc. 01-36503
AIMS Group, Inc. 01-36509
ABC Rail Virgin Islands Corp. 01-36511
Judge: Eugene R. Wedoff
Debtors' Counsel: Steven B. Towbin
D'Ancona & Pflaum
111 E. Wacker Drive #2800
Chicago, IL 60601
312-602-2000
AMF BOWLING: Parent Wants Removal Period Extended to February 25
----------------------------------------------------------------
Peter J. Barrett, Esq., at Kutak Rock, LLP, in Richmond,
Virginia, tells the Court that AMF Bowling, Inc. has not yet had
a full opportunity to review its records and determine whether
it needs to or should remove any claims or causes of action
pending in other courts at the Petition Date to the Eastern
District of Virginia for final resolution.
Accordingly, the Parent Debtor believes that the most prudent
and efficient course of action is to request an extension of the
Removal Period, for an additional 120 calendar days, through and
including February 25, 2002.
Unless such extension is granted, Mr. Barrett tells the Court
that the consolidation of the Debtor's affairs into one court
may be frustrated and the Debtor may be forced to address these
claims and proceedings in piecemeal fashion to the detriment of
its creditors.
Mr. Barrett asserts that extensions of the Removal Period are
routine in large chapter 11 cases in this Court and others. (AMF
Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
AMCAST INDUSTRIAL: Finalizing Talks on New Financial Covenants
--------------------------------------------------------------
Amcast Industrial Corporation, (NYSE:AIZ) reported sales
declined nearly 13% in its fourth fiscal quarter ended August
31, 2001 versus the prior year. A net loss of $11.2 million,
including unusual items of $5.3 million after tax, was reported
for the quarter.
Fourth quarter sales were $132.3 million, compared to $151.4
million in the fourth quarter of fiscal 2000.
Weaker sales were attributed primarily to low vehicle build in
the company's major North American market. U.S. light vehicle
production dropped more than 9% year-over-year during the three
months ending in August, while vehicle sales were down 4% in the
same period. Sales at Speedline, the Company's European
operation, were down 5 % during the quarter as compared to the
prior year.
Flow Control segment sales declined 14% for the fourth quarter
versus last year, mostly due to some softness in housing starts
and competitive market pricing pressures.
The net loss for the quarter was $11.2 million versus a prior
year net profit of $0.3 million. Excluding unusual items, the
net loss for the quarter would have been $5.9 million.
For fiscal year 2001, sales were $529.4 million, down 13.3% from
the prior year's $610.7 million. The net loss for the year was
$37.1 million or ($4.38) per share. Excluding unusual items, the
net loss for the year would have been $16.3 million or ($1.92)
per share. Net income for fiscal year 2000 was $3.4 million or
$0.38 per share.
Byron O. Pond, President and Chief Executive Officer said, "The
Company has been primarily managed for cash since the new
management team was appointed in mid-February. The Company
experienced sales weaknesses early in the fiscal year, but
continued producing at planned levels causing inventories to
rise. By February inventories, including those at Casting
Technology Company, reached a high of $98.2 million, consuming
valuable cash resources. Management began taking actions to
reduce working capital, general spending and capital projects,
making cash generation the new management's highest priority. We
ended the year with inventories of $58.2 million, a $40 million
decrease. Obviously, a reduction of this magnitude had a
negative impact on operating income due to lost overhead
absorption. Most important, we have been able to operate the
Company without any additional borrowings since March 9 after we
had a non-monetary default on our credit facility."
Mr. Pond continued, "As we announced at the end of the third
quarter, the new management team immediately started a strategic
review of the Company because of its weak markets and relatively
poor operating performance. This resulted in management deciding
to dispose of certain under-utilized machinery, tooling and
equipment and certain slow moving inventories, and to increase
the Company's allowance for doubtful and disputed receivables.
We also established a valuation allowance for foreign net
operating loss carryforwards in compliance with Statement of
Financial Accounting Standards No.109. These unusual items
included recent costs associated with the Company's financial
covenant default and new financing arrangements."
Mr. Pond added, "We substantially concluded our strategic review
during Amcast's fiscal fourth quarter. This resulted in an after
tax write off of $5.3 million in the period. Unusual items for
the year totaled $20.9 million after tax. We do not anticipate
that there will be any significant additional charges of this
nature in the near future."
Leo W. Ladehoff, Chairman of the Board, in reviewing the status
of Amcast's loan agreements said, "Renegotiating our loan
agreements has been a slow process, but we have made
considerable progress with our lending group of banks and senior
note holders. The lending group has waived the financial
covenants until April 15, 2002. We entered into a LIFO lending
arrangement on June 5, 2001 that allows us to borrow an
additional $35 million, if required. As of [Wednes]day, we have
not borrowed against this line. In addition, the banks have
extended the maturity date of our loan agreement to September
15, 2002, pending finalization of new financial covenants, and
there is a provision to extend this to September 2003, under
certain conditions. Right now, we are in the process of
finalizing our new financial covenants and anticipate completing
this by the time we file our Form 10-K with the SEC."
Mr. Pond stated, "Amcast is showing signs of improvement. Our
August run rate was positive for Flow Control and U.S.
Automotive on the operating income line, although Speedline's
performance has been below expectations. We are taking actions
to continue to improve output, lower scrap and rework and
improve our support operations at Speedline. It may be late in
the fiscal year before Speedline will begin to experience
satisfactory operating income."
In conclusion, Mr. Pond said, "While we have made important
progress during the past seven months, it is clear that much
remains to be done. The September 11 terrorist attack and the
U.S. response will most likely further depress our markets.
However, we do believe that an economic recovery should benefit
our market sectors in six to nine months. Despite lower levels
of economic activity, we have won six new wheel programs with
General Motors in North America, won our first Chrysler wheel
order in North America, started up new business that will equal
10% of revenue in Europe and added several important pieces of
business in automotive aluminum suspension components. In
addition, we began production of front and rear steering
knuckles for Saab and Opel in Europe from our Franklin and
Richmond, Indiana plants. In the new fiscal year, we will be
focusing heavily on reducing SG&A spending overall and lowering
our total labor costs. This, coupled with our emphasis on
lowering our internal cost of quality, should help Amcast create
a stronger competitive edge."
Amcast Industrial Corporation is a leading manufacturer of
technology-intensive metal products. Its two business segments
are brand name Flow Control Products marketed through national
distribution channels, and Engineered Components for original
equipment manufacturers. The company serves the automotive,
construction, and industrial sectors of the economy.
AMERICREDIT: Offering $1.8 Billion Asset-Backed Securitization
--------------------------------------------------------------
AmeriCredit Corp. (NYSE: ACF) announced the pricing of a $1.8
billion offering of automobile receivables-backed securities
through Lead Managers J.P. Morgan Securities Inc. and Deutsche
Bank Alex. Brown and Co-Managers Banc of America Securities LLC,
Credit Suisse First Boston, and Merrill Lynch & Co.
The securities will be issued via an owner trust, AmeriCredit
Automobile Receivables Trust 2001-D, in four classes of Notes:
Note Class Amount Average Life Price Interest Rate
---------- ------ ------------ ----- -------------
A-1 $ 234,000,000 0.32 years 100.0000 2.39%
A-2 610,000,000 0.95 years 100.0000 1 mo. LIBOR + 0.23%
A-3 481,000,000 2.10 years 100.0000 1 mo. LIBOR + 0.30%
A-4 475,000,000 3.42 years 99.9863 4.41%
-----------
$1,800,000,000
The weighted average coupon paid by AmeriCredit is 3.9%.
The Class A-1 Notes will be rated A-1 by Standard & Poor's,
Prime -1 by Moody's Investors Service, Inc. and F-1 by Fitch,
Inc. Notes in classes A-2 through A-4 will be rated AAA by
Standard & Poor's, Aaa by Moody's and AAA by Fitch. Timely
principal and interest payments on the Notes are guaranteed by
an insurance policy provided by Financial Security Assurance
Inc.
The transaction represents AmeriCredit Corp.'s twenty-ninth
securitization of automobile receivables in which a total of
over $20.2 billion of automobile receivables-backed securities
have been issued.
AmeriCredit is the largest independent middle market automobile
finance company in North America specializing in purchasing and
servicing automobile loans. AmeriCredit maintains a Web site at
http://www.americredit.comthat contains further information on
the Company.
Early this week, Fitch affirmed the 'BB+' senior debt rating of
AmeriCredit Corp. (ACF), and revised the Rating Outlook to
Negative from Stable. The change reflects Fitch's concern of
declining capitalization in relation to the current economic
environment and the risk profile of ACF's balance sheet.
AMES DEPT: Unsecured Panel Signs-Up Gersten as Special Counsel
--------------------------------------------------------------
The Official Committee of Unsecured Creditors of Ames Department
Stores, Inc., presents an application to the Court to retain
Gersten Savage & Kaplowitz LLP as special counsel effective
September 20, 2001.
Art Tuttle, Executive Director of Retail Financial Services of
American Greetings Service Corp., Co-Chairperson of the
Committee, tells the Court that the Committee has selected
Gersten Savage as counsel because of the firm's extensive
experience in and knowledge of business reorganizations under
Chapter 11 of the Bankruptcy Code. Mr. Tuttle believes that
Gersten Savage is qualified to represent it in these Cases in a
cost-effective, efficient and timely manner.
Mr. Tuttle submits that the members and associates of Gersten
Savage do not have any connection with the Debtors, their
creditors or any other party in interest, or their respective
attorneys. Mr. Tuttle says the Committee is satisfied that
Gersten Savage represents no adverse interest to the Committee
which would preclude it from acting as counsel to the Committee
in matters upon which it is to be engaged, and that its
employment will be in the best interest of the estates.
Harold D. Jones, a member of Gersten Savage, informs the Court
that the professional services that Gersten Savage will render,
as necessary, to the Committee include:
A. to undertake any investigation, litigation, or any other
action on the Committee's behalf concerning matters that
will not be addressed by Otterbourg;
B. to appear, as appropriate, before this Court, the Appellate
Courts, and the United States Trustee, and to protect the
interests of the Committee before said Courts and the United
States Trustee; and
C. to perform all other necessary legal services in these Cases.
Mr. Jones states that Gersten Savage will charge for its legal
services on an hourly basis in 1/10th hour increments in
accordance with its hourly rates in effect on the date such
services are rendered and for its actual, reasonable and
necessary out-of-pocket disbursements incurred. The range of
hourly rates generally charged by Gersten Savage is:
Partner $300 - $425/hour
Associate $250 - $290/hour
Paralegal/Legal Assistant $145/hour
Mr. Jones relates that Gersten Savage intends to apply to the
Court for allowance of compensation and reimbursement of
expenses in accordance with applicable provisions of the
Bankruptcy Code, the applicable Federal Rules of Bankruptcy
Procedure, and the local rules and orders of this Court,
guidelines established by the Office of the United States
Trustee, and such other procedures as may be fixed by order of
the Court.
Mr. Jones sets forth a disclosure with respect to whether or not
Gersten Savage has or has had connections with the Debtors,
creditors or other parties-in-interest, their respective
attorneys and accountants, the United States Trustee or any
employee of that office:
A. may have appeared in the past, and may appear in the future,
in other cases unrelated to these cases where the Debtors,
creditors or other parties-in-interest may be involved;
B. may represent, and have represented, certain of the Debtors'
creditors in other matters unrelated to these cases; and
C. have had other dealings with creditors of the Debtors that
are wholly unrelated to these cases. (AMES Bankruptcy News,
Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
AMKOR TECHNOLOGY: Market Volatility Spurs S&P Low-B Ratings
------------------------------------------------------------
Standard & Poor's lowered its corporate credit and senior
unsecured debt ratings on Amkor Technology Inc. to single-'B'-
plus from double-'B'-minus.
At the same time, its rating on the company's convertible and
senior subordinated notes was lowered to single-'B'-minus from
single-'B', and Amkor's senior secured bank loan rating was
lowered to double-'B'-minus from double-'B'.
The outlook is negative.
The rating changes reflect volatile conditions in the
semiconductor market, rapidly falling revenues, and
deteriorating profitability and debt protection measures. While
Amkor retains market leadership in the independent packaging and
test segment, high operating and financial leverage is expected
to depress key debt protection measures over the intermediate
term.
West Chester, Pennsylvania based Amkor had expanded aggressively
in 2000, including the purchase of three packaging factories
from 42%-owned Anam Semiconductor Inc. of Korea (not rated).
Amkor also recently established a joint venture to provide
packaging services for Toshiba Corp. (BBB+/Negative/A-2). In the
current downturn, Amkor's customers are diverting higher
percentages of their packaging requirements to in-house
capacity.
However, the company believes it has retained its 30% share of
the highly competitive independent market. Persistent industry
overcapacity has led to very low utilization rates and
significantly depressed average selling prices. Revenues are not
expected to rebound from June quarter levels over the next
several quarters.
Amkor also markets digital signal processors (DSP) made by Anam
for Texas Instruments Inc.(A/Stable/A-1), reporting Anam on the
equity method. Anam has also been severely pressured by excess
cell-phone component capacity, and longer-term order visibility
remains unclear.
While EBITDA interest coverage was about 5 times in 2000,
coverage fell below 3x in June 2001 on a trailing 12-months
basis and less than 1x in the June quarter. Covenants in bank
loans were renegotiated the past two quarters. Debt, at about $2
billion, approximates sales over the past 12 months. With cash
plus bank lines of credit in excess of $400 million, the company
has sufficient liquidity for now. Capital expenditures are being
curtailed in light of uncertain market conditions and ample
manufacturing capacity.
Outlook: Negative
It is unclear when conditions in the semiconductor market will
stabilize. If Amkor's debt protection measures deteriorate
further, ratings could be lowered. The ratings assume that
potential covenant issues in the current quarter, resulting from
ongoing depressed market conditions, will also be favorably
resolved.
ARMSTRONG HOLDINGS: Property Damage Claimants Push a Hot Button
---------------------------------------------------------------
The Property Damage Claimants' Committee asks Judge Farnan to
enter an Order compelling Armstrong Holdings, Inc. to appear for
deposition and produce documents on an expedited basis.
While the Federal Rules of Civil Procedure ordinarily provide a
party receiving a discovery request a reasonable period, or 30
days, to appear or respond to a document request, the PD
Committee asks that Judge Farnan exercise his authority to
shorten that time period.
One of the issues that will be addressed at the hearing on the
Bar Date Extension Motion is the woefully inadequate notice
program that was implemented by the Debtors to distribute proof
of claim forms to asbestos-related property damage claimants.
Pursuant to that program, the Debtors provided actual notice of
the Bar Date to only six entities: the District of Columbia, the
Los Angeles Unified School District, the New York Telephone
Company, the State of Illinois, Rueben Gazara, and the State of
Mississippi.
Specifically, the Debtors only provided actual notice of the Bar
Date to entities listed in its Schedules; those schedules list
only six entitled as asbestos-related property damage claimants.
The PD Committee believes the Debtors can determine the identity
of many more asbestos-related property damage claimants. For
instance, the PD Committee believes that the Debtors may have
customer correspondence files, complaint files, or warranty
response files from individuals who purchased Armstrong flooring
products.
Similarly, the Debtors may have documents related to the
identity or location of buildings that contain asbestos-
containing Armstrong flooring products. The Debtors may also
have documents that identify individuals or entities who resold
(either at wholesale or retail) Armstrong flooring products.
Contemporaneously with the Motion, the PD Committee served
discovery on the Debtors designed to elicit information that
will help determine the identity of asbestos-related property
damage claimants. The PD Committee believes that a supplemental
notice program must be implemented to provide actual notice to
every asbestos-related property damage claimant that can be
identified as well as an expanded notice to unknown claimants.
In addition, to the notice and claimant identification issues,
the discovery requests relate to the scientific and expert
information relating to the health risks associated with the
floor tile products, product identification issues, and
insurance coverage, all of which have been raised as issues in
the Bar Date Extension Motion and the Debtors' opposition. Thus,
the discovery requested goes directly to the issues to be
decided by the Court at the hearing on the Bar Date Extension
Motion.
Given the vital importance of the discovery requested by the PD
Committee and the absence of any material undue burden upon the
Debtors, the Committee submits that the expedited discovery it
seeks should be ordered. Ample cause exists to compel the
Debtors to produce responsive documents within 10 days. Ample
cause also exists to compel the Debtors to produce a corporate
designee and the Debtors' notice expert, Katherine Kinsella, for
deposition within 15 days. Reduction of the applicable time
period is not prohibited under Fed, R. Bankr. P. 9006(c)(1).
For these reasons, Joanne B. Wills of the Wilmington firm of
Klehr Harrison Harvey Branzburg & Ellers LLP, asks Judge Farnan
to shorten the time within which the Debtors must produce
deponents for deposition and produce documents, and in
particular, requiring the Debtors to produce documents within 10
days, and deponents within 15 days.
The Debtors Object!
The PD Committee's Motion was scarcely lodged in the Clerk's
file before the Debtors objected to it.
The PD Committee's Delay
The Debtors complain to Judge Farnan that the PD Committee
indicated that it intended to conduct discovery, then waited
until September 26, 2001, 5 weeks later, before serving
discovery on the Debtors. The Debtors note that the PD Committee
served the discovery requests without first contacting the
Debtors. Pursuant to such discovery requests, the PD Committee
seeks (i) to depose Katherine Kinsella, a principal of the
Debtors' noticing consultant, and a corporate representative of
AWI, and (ii) to compel the Debtors to turn over an "expansive
laundry list of no less than thirty-three categories of
documents (covering a sixty-year period from January 1, 1930 to
January 1, 1990)", about a week after the Debtors received the
discovery requests.
No "Cause" for Shortening Time
The Debtors remind Judge Farnan that he may only reduce the
period of time for taking an action specified in the Bankruptcy
Rules "for cause." Notably, the PD Committee has not cited to
any "cause" that would require the expedited discovery requested
in the PD Committee's Expedited Discovery Motion.
Moreover, the PD Committee has not even attempted to explain its
delay in propounding the discovery requests on AWL.
The Debtors object to the relief requested in the PD Committee's
Expedited Discovery Motion as unreasonable, unnecessary, and
excessively burdensome. The PD Committee waited until the end of
September to serve the discovery requests on the Debtors,
notwithstanding the PD Committee's expression of its "need" to
conduct discovery as far back as August 22, 2001. After electing
to take no action, the PD Committee now contends that an
emergency exists that would warrant the Debtors producing sixty
years of documents in one week. In addition to being practically
impossible to comply with, any alleged need for expedited
discovery at this time is the direct result of the PD
Committee's delay in initiating the discovery process.
The Debtors submit that an emergency situation that is brought
about by the PD Committee's delay is not "cause" to shorten the
time for performance. Moreover, as stated, the PD Committee has
made no effort to establish cause" for expediting discovery,
notwithstanding that the PD Committee has the burden of
demonstrating why the discovery time periods established under
the Federal Rules of Civil Procedures should be shortened.
Nowhere in the PD Committee's Expedited Discovery Motion does
the PD Committee explain the "cause" or necessity for the
unreasonably short notice within which it is seeking to compel
the Debtors to comply with the expansive discovery requests.
Instead, the PD Committee states, as matter of fact, that "ample
cause exists to compel the Debtors to produce" the requested
documents. This statement alone is insufficient to carry the
burden of establishing the "for cause" standard. This is
particularly true where, as here, no hearing has been set on
either the Debtors' Motion to Disband or the PD Committee's
Motion to Extend. Given the absence of any scheduled hearing to
consider the matters to which the PD Committee's discovery
requests purportedly relate, the PD Committee's attempt to
shorten discovery can only be seen, at least by the Debtors, as
an effort to harass the Debtors and cause them to incur
substantial costs in responding to the extensive discovery
requests in an unreasonable amount of time. In fact, the Debtors
seriously question whether the discovery being sought is an
attempt by the PD Committee to create an historically
nonexistent constituency to justify the PD Committee's
existence.
Furthermore, despite the PD Committee's facile assertion to the
contrary, the burden on the Debtors far outweighs the necessity
of the expedited discovery. First, in view of the extraordinary
scope of the requested discovery, it would be physically
impossible to even come close to complying in accordance with
the severely expedited schedule requested. Secondly, even if
the discovery request could be considered remotely reasonable,
the cost to the Debtors' estates to attempt to complete such an
insurmountable task within the time frame described in the
Motion far exceeds the necessity of completing the discovery
process within the time frame unilaterally proposed by the PD
Committee.
Finally, the Debtors note that the PD Committee's requested
discovery fails to comply with the procedural requirements of
the Bankruptcy Rules, which provide that except when authorized
by order or agreement a party may not seek discovery from any
source before the parties have met and conferred. No local rule
modifies this requirement, and the parties have had no such
meeting. Accordingly, the PD Committee is barred from seeking
any discovery at this time.
Accordingly, the Debtors argue, the PD Committee's Expedited
Discovery Motion should be denied. (Armstrong Bankruptcy News,
Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900)
BETHLEHEM STEEL: S&P Drops Ratings to D After Chapter 11 Filing
---------------------------------------------------------------
Standard & Poor's lowered its ratings on Bethlehem Steel Corp.
to `D' and removed them from CreditWatch. The action follows the
company's announcement that it has filed a voluntary petition to
reorganize under Chapter 11 of the U.S. Bankruptcy Code.
Bethlehem Steel, based in Bethlehem, Pa., is the second-largest
integrated steel manufacturer in the U.S. Prior to the filing,
the company's financial profile was very weak and liquidity was
extremely limited.
Bethlehem had recently announced that it had obtained
essentially all of the necessary commitments for a new $750
million credit facility. This larger facility, together with
recently completed and pending asset sales (with estimated
proceeds of approximately $158 million) was expected to increase
Bethlehem's liquidity by about $250 million.
However, steel industry conditions have been extremely difficult
due to intense pricing pressures from near-record import levels
and poor demand. These conditions were further impaired by
Bethlehem's high cost position and more significantly by the
terrorist attacks of Sept. 11, 2001, which has led to further
deterioration in consumer spending and demand for key end market
products including automobiles, appliances, and construction.
The industry environment is expected to remain difficult for the
intermediate term. As a result, the company realized a need to
further increase its liquidity and opted for an additional
debtor-in-possession loan of $450 million, rather than seek an
increase of $100 million of its bank facility.
Bethlehem has filed for protection under Chapter 11 to provide
the necessary time to stabilize the company's finances and to
develop and implement a strategic plan to return Bethlehem to
sustained profitability. Key objectives of the plan will include
improving the company's capital structure, working with the
United Steelworkers of America (USWA) to improve productivity
and further reduce costs--particularly employment and healthcare
costs--and finding a solution to its approximate $3 billion
retiree healthcare obligation.
Ratings Lowered and Removed from CreditWatch
Ratings
Bethlehem Steel Corp. To From
Corporate credit rating D B
Senior secured bank loan rating D BB-
Senior unsecured debt D B
Preferred stock D C
Lukens Inc.
Corporate credit rating D B
Senior unsecured debt D B
BIRMINGHAM STEEL: Seeking Lenders' Support for Debt Workout
-----------------------------------------------------------
Birmingham Steel Corporation (NYSE:BIR) issued this statement:
John Correnti, Chairman and Chief Executive Officer, commented,
"On October 15, 2001, Birmingham Steel filed its Annual Report
on Form 10-K with the Securities and Exchange Commission. The
report of independent auditors that accompanied the financial
statements in the Form 10-K contained an explanatory paragraph
highlighting that the Company has significant debt principal
payments due on April 1, 2002."
Correnti continued, "In the financial statements for the fiscal
year ended June 30, 2001, $291 million of debt has been
appropriately classified as a current liability, which means the
debt matures within one year of the balance sheet date. Because
the Company is not currently generating cash flow from its
operations sufficient to pay the $291 million debt in full on
April 1, 2002, and because we do not have a financing commitment
in place to refinance the scheduled maturities in fiscal 2002,
auditing standards required Ernst & Young to include the
standard explanatory paragraph in their opinion. The explanatory
paragraph essentially states that the Company's ability to
continue as a going concern is dependent upon resolution of the
debt issue."
Correnti stated, "For some time now, the Company's public
statements have discussed the fact that our revolving credit
facility and a portion of our senior secured notes are scheduled
to mature on April 1, 2002. We have also indicated that we have
been engaged in ongoing discussions with our lenders regarding a
refinancing, restructuring or extension of our debt. Recent
discussions with the lenders were disrupted by the tragedy of
September 11, 2001. Because of the uncertainties in the economy
and steel industry as a result of the tragic events, the Company
believes it is appropriate to postpone taking action to address
the debt until the sale of its Cleveland facility is completed
and more is known about the near-term outlook for the economy
and the steel industry."
Correnti continued, "The Company recently released financial
results for the fourth quarter ended June 30, 2001, which
reflected the best performance of the fiscal year by the
continuing operations. Within a few days, we plan to release
results for the first quarter ended September 30, 2001, which we
expect will reflect continued improvement in financial
performance of our continuing operations. Also, we are
progressing with Corporacion Sidenor regarding its purchase of
our Cleveland facility, and we expect to complete a definitive
agreement for the transaction in early November.
Correnti said, "The Company remains in compliance with the
covenants under our financing agreements, and we expect to
maintain sufficient liquidity and availability under our
revolver to conduct operations as normal until the maturity of
the revolver on April 1, 2002. Obviously, we will continue
discussions with our lenders regarding restructuring,
refinancing or extension of the debt due April 1, 2002. We
appreciate the past support of our lenders during very difficult
times in the industry, and we will continue to seek their
support in the days ahead."
Correnti continued, "During the past year, we have also
maintained regular and open dialogue with our suppliers, vendors
and customers. Our management has been candid and forthcoming
with these groups, and we have kept them apprised of the status
of the Company's debt. We appreciate the confidence and support
of these constituents during difficult times in the industry. We
will continue to solicit their support as we continue our quest
of returning Birmingham Steel to profitability."
Correnti concluded, "These are uncertain times for the U.S. and
throughout the world. We believe shipments, pricing and margins
will be under pressure for the remainder of 2001 and for at
least the first half of 2002. Although the prevalent sentiment
is that the overall economic environment will be challenging in
the near-term, we believe the long-term outlook is promising for
construction and steel products such as rebar and merchant
products."
Birmingham Steel operates in the mini-mill sector of the steel
industry and conducts operations at facilities located across
the United States. The common stock of Birmingham Steel is
traded on the New York Stock Exchange under the symbol "BIR."
CHARIS HOSPITAL: Selling Louisiana Facility to Dynacq For $3.4MM
----------------------------------------------------------------
Dynacq International, Inc. (Nasdaq: DYII) announced that it will
acquire Charis Hospital in Baton Rouge, Louisiana, and following
renovations, operate it as a surgical hospital.
Late last month, a reorganization plan was approved in federal
bankruptcy court whereby Dynacq was authorized to buy the Charis
complex, which consists of a 50,000 square-foot hospital and
several ancillary buildings situated on 14 acres.
The purchase price was $3.4 million. Dynacq will close the
business transaction in early November using cash on hand, thus
incurring no debt for the original transaction.
Located at 9032 Perkins Road in Baton Rouge, the Charis facility
is licensed as a general hospital and has been operating as a
psychiatric hospital. Dynacq will renovate the facility as a
surgical hospital housing 50 private patient rooms and a newly
constructed 20,000 square-foot surgical suite. Dynacq will
reopen the hospital in the summer of 2002 under a new name --
Vista Hospital of Baton Rouge.
"We are pleased to announce this hospital acquisition, which is
an important step forward in our strategic growth plan of
prudently identifying expansion opportunities for our surgical
operating models, while continuing to focus on same store-growth
at current operations in Houston," said Chiu M. Chan, Chairman
and CEO of Dynacq. "Our management team has worked diligently
to identify a second surgical hospital project with significant
physician support that can be quickly renovated into a state-of-
the-art surgical hospital and fast-tracked into operation."
Dynacq was recently ranked number two in Forbes' annual list of
America's top small-cap companies and number three in Fortune
Small Business Magazine's fastest growing small public companies
in major stock exchanges.
COMDISCO: Court Approves BofA Stipulation Covering L/C Account
--------------------------------------------------------------
Pursuant to the Master Facility Agreement dated April 28, 2000,
Comdisco, Inc. delivered to Bank of America the sum of
$31,885,641 to be held as cash collateral for letters of credit
issued pursuant to, and outstanding after the termination date
of the Facility Agreement.
According to the parties, the funds were deposited into an
account maintained with the name of "Bank of America, N.A. for
the benefit of Comdisco, Inc., Cash Collateral Account". The
deposit and the application of the Cash Collateral are governed
by terms set forth in a letter agreement dated April 27, 2001
between the Debtors and Bank of America.
Prior to Petition Date, the parties explain, Bank of America
would debit the Account for the amount of the Letter of Credit
draw and the Letter of Credit drawing fees as Letters of Credit
were presented to the Bank. But since Petition Date, the
parties note, Bank of America refused to draw funds from the
Account to pay Letters of Credit drawn on the Bank until the
Court orders them to do so.
In the meantime, the Facility Agreement mandates that upon the
funding of any letter of credit that is not reimbursed, such
funding is deemed a loan to Comdisco and bears interest in the
amount of prime plus 3%. On the other hand, the parties compare
that the interest rate paid on the Cash Collateral Account is
only less than prime plus 3%.
Since Petition Date, these letters of credit have been
presented:
Letter of Credit Original Amount Draw Date Draw Amount
---------------- --------------- --------- -----------
LC#7403167 - issued on $ 1,846,677 08/17/01 $ 611,256
4/7/00 in the name of
Stag Investor 2000 Ltd.
LC#7404456 - issued on 1,202,394 08/07/01 1,202,394
12/27/00 in the name of
Speiker Properties, LP
LC#7404266 - issued on 577,342 08/24/01 577,342
10/26/00 in the name of
The Irvine Company
LC#7404150 - issued on 5,000,000 08/28/01 5,000,000
9/21/00 in the name of
Renco Investment Company
As of Petition Date, the parties inform the Court that the
Letter of Credit #7403708 issued to Civic Center Development in
the face amount of $444,887 has expired.
At that same time, the parties observe that the amounts then
credited to the Cash Collateral Account exceeded the undrawn
face amount of Letters of Credit then outstanding by an amount
in excess of $500,000. By that time, the Bank of America was an
oversecured creditor as to the letter of credit obligations and
the Account.
Nonetheless, both parties relate that Letters of Credit will
continue to be presented to Bank of America on a regular basis.
Thus, the parties concur that it is in the best interest of the
Debtors, the Debtors' estates, and their respective creditors
that the Cash Collateral shall be used to pay the Letters of
Credit as drawn, instead of incurring the interest cost
resulting from a failure to promptly reimburse Bank of America
for such amount.
By this Stipulation, the parties agree that:
(1) Bank of America shall be entitled to withdraw from the
Account sufficient funds to pay the amount of any drawings
under any Letter of Credit presented to it, plus (to the
extent of any unapplied Over-Collateralization) its
ordinary charges relates to honoring Letters of Credit;
(2) Bank of America shall be entitled, as to any Letter of
Credit presented prior to the date of the entry of this
Order, to deduct from the Account amounts drawn under such
Letters of Credit for which it has not been reimbursed,
such interest to which it is entitled pursuant to the
Facility Agreement, and any of its ordinary fees related
to Letter of Credit;
(3) Bank of America shall:
(i) within 2 business days of the entry of this Order,
return to Comdisco, amounts held in the Account in
an amount equal to the undrawn face amount of the
Expired Letter of Credit;
(ii) promptly, upon the termination without drawings or
reduction in the amount available for drawing under
any other Letter of Credit issued pursuant to the
Facility Agreement, return amounts held in the
Account with respect to such Letter of Credit on the
terms provided in the Letter Agreement; and
(iii) promptly, upon the request of Comdisco, return to
Comdisco the amount held in the Account in excess of
105% of the undrawn face amount of Letters of Credit
then outstanding; provided however that in no case
under (i), (ii) or (iii) or otherwise shall the
amounts in the account be reduced below 105% of the
undrawn face amount of the then-outstanding Letters
of Credit.
This Stipulation is not meant to prejudice or expand the rights
of Bank of America, the Official Committee of Unsecured
Creditors, or the Debtors.
* * *
Having determined that the agreements are in the best interests
of the estate, Judge Barliant approves the Stipulation and
authorizes the Debtors and Bank of America to carry out and
comply with its terms and provisions.
Accordingly, the Court also modifies the automatic stay to all
of the parties to effectuate the terms of the Stipulation.
Judge Barliant recognizes that the agreement will minimize the
continuing interest burden and requirement to provide adequate
protection of Bank of America. (Comdisco Bankruptcy News, Issue
No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900)
COVAD COMMS: Has Until December 11 to Decide on Unexpired Leases
----------------------------------------------------------------
Covad Communications Group, Inc. sought and obtained an order
from the Court extending the deadline by which it must assume or
reject certain unexpired leases to December 11, 2001.
Christopher J. Lhulier, Esq., at Pachulski Stang Ziehl Young &
Jones, in Wilmington, Delaware relates that while the Debtor has
rejected certain of its Leases, there remains 32 unexpired
leases which has neither been assumed nor rejected by the
Debtor.
Mr. Lhulier says that the deadline originally set for the Debtor
to assume or reject these Leases is October 12, 2001. He says
that unless the deadline is extended, these remaining leases
will be automatically rejected.
According to Mr. Lhulier, the outcome of a confirmation hearing
on the Reorganization Plan that the Debtors recently filed will
greatly affect the Debtor's decision of whether to assume or
reject the Leases. He tells the Court that the verdict of the
hearing, which is expected before the end of November 2001, will
be a factor for consideration in the Lease decisions.
Furthermore, Mr. Lhulier submits that the time and energy of the
Debtor's employees and management has been focused on the
accomplishment and negotiation of the Plan. He argues that there
has not been enough opportunity to assess and determine which of
the Leases should be assumed.
Mr. Lhulier tells the Court that if the requested extension is
not granted, the Debtor will be forced to assume potentially
long-term liabilities or forfeit profitable Leases prematurely.
Mr. Lhulier asserts that these potential errors would create
substantial administrative claims at a relatively early state in
the case or severely impair the Debtors ability to operate and
preserve their estates.
Extension of the Deadline, Mr. Lhulier says, will not prejudice
the lessors under the Leases because the Debtor has paid and
will continue to pay its post-petition obligations. Moreover,
any lessor may file a motion with the Court to move that the
extension be shortened as to its particular lease. (Covad
Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
DIXON TICONDEROGA: Sub Debt Payment Date Extended to November 15
----------------------------------------------------------------
Dixon Ticonderoga Company (Amex: DXT) announced that it is
pleased with its continuing negotiations with its senior debt
and subordinated debt lenders.
The company has received from its subordinated lenders an
extension until November 15, 2001, to make a subordinated debt
principal payment of $5.5 million, originally due September 26,
2001.
All interest due on the subordinated debt has been paid.
In addition, the company received from its senior lenders a
waiver of compliance with one required financial ratio through
November 14, 2001.
During the coming weeks, the company expects to continue
negotiations to amend its various debt agreements to the
satisfaction of all parties.
The subordinated lenders have indicated a willingness to
negotiate a restructuring of their scheduled principal payments.
In addition, the company believes it has sufficient liquidity
and lines of credit available to make all current payments to
its lenders and to fulfill all current and anticipated
requirements of its business.
Moreover, the senior lenders have consistently supported the
company by continuing all normal funding under their agreements
during the ongoing negotiations.
Dixon Ticonderoga Company, with operations dating back to 1795,
is one of the oldest publicly held companies in the U.S. Its
consumer group manufactures and markets a wide range of writing
instruments, art materials and office products, including the
well-known Ticonderogar, Prangr and Dixonr brands.
The Company's industrial group manufactures and markets
refractory products. Headquartered in Heathrow, Florida, Dixon
Ticonderoga employs approximately 1,400 people at 11 facilities
in the U.S., Canada, Mexico, the U.K. and China. The company
has been listed on the American Stock Exchange since 1988 under
the symbol DXT.
EXODUS COMMS: Court Allows Debtor to Continue Customer Programs
---------------------------------------------------------------
Exodus Communications, Inc. sought and obtained an order
authorizing them to continue their customer discount, customer
credit, promotional and other practices aimed at improving and
maintaining existing customer satisfaction and attracting new
customers.
In the Debtors' business judgment, the uninterrupted maintenance
of their Customer Practices is essential to attracting new
customers and maintaining customer satisfaction. Mark S. Chehi,
Esq., at Skadden Arps Slate Meagher & Flom, LLP, in Wilmington,
Delaware, tessl the Court that the discontinuation of Customer
Practices would disrupt business operations, generate adverse
publicity and undermine the Debtors' customer base.
Mr. Chehi relates that the Debtors credit customer accounts to
correct prior billing errors, to address service issues and for
general customer satisfaction. Under certain circumstances, Mr.
Chehi adds that the Debtors have also waived the first month or
two of user fees to attract new customers entering into service
agreements. The Debtors estimate that credits arising prior to
the Petition Date that will be issued to customers post-petition
on account of the above programs will aggregate approximately
$25 million.
The Debtors believe that honoring the terms of the Customer
Practices, practices that are typically found in the industry in
which the Debtors operate, is critical to their continued
operations. In the competitive internet web-hosting and services
industry in which the Debtors operate, Mr. Chehi states that
failure to offer discounts that are the same or similar to their
competitors and the inability to credit customer accounts for
billing errors is likely to have a material adverse impact on
the Debtors' ability to attract new customers and maintain
existing ones.
Moreover, the Debtors believe that if they are not authorized to
continue the Customer Practices during the pendency of these
Chapter 11 cases, their valuable business relationships with
their customers will be severely jeopardized. Mr. Chehi contends
that even a short delay by the Debtors in continuing their
Customer Practices could cause serious and irreparable harm to
the value to the Debtors' estates.
The Debtors submit that the total amount to be paid or credited
to customers if the Court grants the requested relief is de
minimis compared with the losses that the Debtors could suffer
if the patronage of their customers erodes at the outset of
these cases. In sum, Mr. Chehi asserts that the maintenance of
the Customer Practices is essential to the continued vitality of
the Debtors' businesses and, ultimately, to their prospects for
a successful reorganization.
The Debtors thus submit that permitting them to continue the
Customer Practices would be in the best interests of their
estates, their creditors, and all other parties in interest. Mr.
Chehi explains that maintenance of the Customer Practices is
appropriate in that most of the "credits" issued to customers
under such practices could be viewed merely as valid contractual
adjustments to the price paid for future prospective services
and do not constitute pre-petition "claims" that the Debtors
would otherwise be prohibited from paying absent relief from the
Court.
However, to the extent the "credits" are viewed as pre-petition
claims, the Debtors seek relief to pay such claims in order to
preserve the going concern value of the estates for their
stakeholders.
Mr. Chehi claims that a Court's use of its equitable powers to
authorize the payment of pre-petition debt when such payment is
needed to facilitate the rehabilitation of the debtor is not a
novel concept. Mr. Chehi contends that Courts have recognized
that in certain instances pre-petition amounts must be paid to
critical parties in order to maintain and enhance the overall
value of the debtor's operations and businesses.
The "necessity of payment" doctrine further supports the relief
requested herein, Mr. Chehi says, which recognizes the existence
of the judicial power to authorize a debtor in a reorganization
case to pay pre-petition claims where such payment is essential
to the continued operation of the debtor.
The Debtors submit that there are substantial benefits that will
credit to their estates, creditors and interest holders as a
result of their maintaining and continuing their Customer
Practices and honoring pre-petition obligations on account of
the Customer Practices, and that entry of an order authorizing
them to honor the Customer Obligations is necessary and
appropriate to maintain the Debtors' going concern value.
(Exodus Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
FANTOM TECHNOLOGIES: Ceases Manufacturing & Shipping Activities
---------------------------------------------------------------
Fantom Technologies Inc. (NASDAQ: FTMTF; TSE: FTM) confirms
that, in significantly reducing its work force and operations,
it is not manufacturing or shipping its products. The Company
continues to pursue restructuring options with its principal
lender.
FEDERAL-MOGUL: Hopes to File Schedules & Statements by Nov. 29
--------------------------------------------------------------
Federal-Mogul Corporation estimate that they have approximately
35,000 commercial creditors and that over 300,000 alleged
asbestos claims have been asserted against them.
David M. Sherbin, the Debtors' Vice President and Deputy General
Counsel, contends that given the number of creditors, the size
and complexity of the Debtors' businesses, the diversity of
their operations and assets, and the limited staffing available
to gather, process and complete the Schedules and Statements, it
will be impossible to produce comprehensive Schedules of Assets
and Liabilities and Statements of Financial Affairs within the
15-day deadline imposed under Rule 1007 of the Federal Rules of
Bankruptcy Procedure.
The Debtors require additional time to bring their books and
records up to date and to collect the information necessary for
the preparation and filing of the Schedules and Statements.
At this juncture, the Debtors estimate that an extension through
November 29, 2001. will provide the Company with sufficient time
to prepare and file the Schedules and Statements. Accordingly,
by this Motion, the Debtors ask for that extension, without
prejudice to their right to seek any further extension, and, if
necessary, to seek a waiver of the requirement for filing
certain Schedules and Statements.
Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young & Jones,
suggests to the Court that the accuracy of the Schedules and
Statements that will be filed will be greatly enhanced if the
requested extension is granted.
Noting that extensions like the one sought are routinely granted
in large chapter 11 cases, Judge Robinson approves the Debtors'
request to extend the deadline for filing Schedules and
Statements to November 29, 2001. (Federal-Mogul Bankruptcy News,
Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900)
GENSYM CORP: Selling NetCure to Rocket Software for $2.5 Million
----------------------------------------------------------------
Gensym Corporation (OTC Bulletin Board: GNSM), a leading
provider of software and services for expert operations
management, announced that it has signed a binding letter of
intent to sell its NetCure product line to Rocket Software, Inc.
of Natick, Massachusetts for $2.5 million.
The sale is subject to the execution of a definitive purchase
agreement, which is expected to be completed in the near future.
NetCure is Gensym's out-of-the-box software product for IP
network event and fault management that provides automated root-
cause analysis of critical network infrastructure problems as
well as action recovery from such problems. NetCure allows
customers to effectively manage large, complex networks by
automatically detecting, isolating, diagnosing and correcting
faults in frame relay, ATM and routing / switching elements -
all in real time.
Commenting on the proposed sale, Lowell Hawkinson, Gensym's
president and CEO, said, "The sale of the NetCure product line
is an important part of Gensym's restructuring plan that was
announced in early August when I returned to the company as
president and CEO. The sale will allow us to concentrate our
energies and resources on our existing customer base and our
well established G2 and G2-based products."
Mr. Hawkinson added, "We also expect that the NetCure sale will
increase our available working capital and improve our liquidity
position."
Gensym Corporation -- http://www.gensym.com -- is a provider
of software products and services that enable organizations to
automate aspects of their operations that have historically
required the direct attention of human experts. Gensym's product
and service offerings are all based on or relate to Gensym's
flagship product G2, which can emulate the reasoning of human
experts as they assess, diagnose, and respond to unusual
operating situations or as they seek to optimize operations.
With G2, organizations in manufacturing, communications,
transportation, aerospace, and government maximize the
performance and availability of their operations. For example,
Fortune 1000 manufacturers such as ExxonMobil, DuPont, LaFarge,
Eli Lilly, and Seagate use G2 to help operators detect problems
early and to provide advice that avoids off-specification
production and unexpected shutdowns. Manufacturers and
government agencies use G2 to optimize their supply chain and
logistics operations. And communications companies such as AT&T,
Ericsson Wireless, and Nokia use G2 to troubleshoot network
faults so that network availability and service levels are
maximized.
Gensym has numerous partners who can help meet the specific
needs of customers. Gensym and its partners deliver a range of
services, including training, software support, application
consulting and complete solutions. Through partners and through
its direct sales force, Gensym serves customers worldwide.
Gensym and G2 are registered trademarks of Gensym Corporation.
* * *
On March 28, 2001, Gensym entered into a credit facility with
Silicon Valley Bank. The credit facility provides the Company
the ability to borrow up to 80% of the Company's qualified and
eligible gross domestic accounts receivable up to a maximum of
$2.5 million. Borrowings under this agreement will
be at an interest rate of 2% per month of the average gross
daily purchase account balance, plus an administration fee of 1%
of gross purchased account receivables.
This agreement is subject to certain restrictive covenants,
including a monthly adjusted quick ratio covenant. At June 30,
2001 the Company did not have any borrowings outstanding under
this facility.
Also at June 30, 2001, the Company was not in compliance with
the adjusted quick ratio covenant. Amounts under this credit
facility are secured by substantially all of the corporate
assets of Gensym Corporation.
HOLLAND MARK: Closes Doors But Will Not File for Bankruptcy
-----------------------------------------------------------
Troubled Holland Mark, which in recent years has ranked as New
England's largest privately owned advertising agency, closed it
doors Monday and shut down, according to the PR Wire.
The Boston agency does not plan to file for bankruptcy, said
Chairman and CEO Bill Davis. "The plan of attack is for some
kind of assignment for the creditors," he said. The shop, which
finished last year with about $200 million in billings, had
fallen on hard times of late and closed with about 50 employees.
Clients Citizens Bank Radisson Hotels and TJX Cos. left within
the past year. Davis attributed the closure to the fact that "a
lot of clients recently can't pay their bills." (ABI World,
October 16, 2001)
HOMESEEKERS.COM: Jones and Harker Resign from Board of Directors
----------------------------------------------------------------
HomeSeekers.com (OTC Bulletin Board: HMSK), a leader in online
real estate technology and services, announced that it accepted
the resignation of Ted Jones from the HomeSeekers board of
directors.
In addition, Joseph Harker, Chairman of the Board of Directors
announced his resignation effective October 17, 2001, citing
personal reasons.
HomeSeekers also announced that it has received notice from
HomeMark placing HomeSeekers in default under the Securities
Purchase Agreement dated June 6, 2001 between the Company and
HomeMark.
Separately, HomeSeekers revealed that it also received notice
that HomeMark has sold contract rights and promissory notes and
liens secured by HomeSeekers assets to privately held
HomeSeekers Management, Inc. ("HMI"), indicating HomeMark's
total severance of any perceived remaining relationship with
HomeSeekers.
HomeMark has never been a shareholder of HomeSeekers. HomeMark
advised HomeSeekers that it would issue its own press release on
the matter.
HomeSeekers.com, Incorporated is a leading provider of
technology to the North American and International real estate
industries. The Company provides technology solutions and
services targeted to brokers, agents, Multiple Listing Services
(MLS), builders, consumers and others involved in the real
estate industry. Product and service offerings can be viewed at
the Company's primary website, http://www.homeseekers.com
HUDSON RESPIRATORY: S&P Maintains Watch on B and CCC+ Ratings
-------------------------------------------------------------
Standard & Poor's ratings on Hudson Respiratory Care Inc. remain
on CreditWatch with negative implications, where they were
placed September 20, 2000.
The ratings were listed on CreditWatch because of Standard &
Poor's concern with Hudson's constrained financial flexibility
following its acquisition of the Sheridan line of endotracheal
tubes from Tyco International Ltd.
Moreover, Hudson was experiencing weak operating performance due
to difficulties implementing and integrating an Enterprise
Resource Planning computer system.
While Hudson has since filed its 10-K for the year ended
December 31, 2000, 10Qs for the quarters ending March 31, 2001
and June 30, 2001, and made its October 2001 subordinated bond
interest payment, Hudson's financial position remains
constrained.
Standard & Poor's will continue to monitor developments and will
review the company's plans for bolstering its credit profile
before taking further rating action.
Temecula, California-based Hudson is a leading manufacturer of
niche disposable respiratory-care and anesthesia products.
Ratings Remaining on CreditWatch with Negative Implications
Ratings
Hudson Respiratory Care Inc.
Corporate credit rating B
Subordinated debt CCC+
Bank loan B
INTEGRATED HEALTH: Woodruff Manor Takes Over Woodruff Facility
--------------------------------------------------------------
Integrated Health Services, Inc. previously sought to reject the
non-residential real property lease between Cathcart &
Associates (landlord/lessor) and Debtor Woodruff Healthcare,
Inc. (lessee/Transferor) pertaining to skilled nursing facility
known as Woodruff Healthcare in its motion for rejection of 11
leases.
The Facility is located at 500 Jeff Davis Drive, Spartanburg,
South Carolina 29305. In light of consistent operating losses,
the Debtors have determined that the Facility is of no value to
the IHS bankruptcy estates. Woodruff Facility's annualized year
2000 earnings before interest, taxes, depreciation, and
amortization (EBITDA), minus Capital Expenditures (CapEx), was a
negative $142,482.00.
The landlord served its Response to the Debtors' Lease Rejection
Motion. The Debtors in turn noticed the Landlord for a
deposition and served the Landlord with a request for the
production of documents.
The Landlord, (who is also the owner of the Woodruff Facility),
made a proposal to take over the operation of the Woodruff
Facility, through the New Operator (Woodruff Manor, LLC),
and the Rejection Motion was adjourned pending the outcome of
the negotiations surrounding the Transfer Agreement.
The Debtors believe that it would be extremely costly, difficult
and time consuming, to attempt to transfer Woodruff's patients
to another healthcare facility or close the Facility through
attrition because the Woodruff Facility specializes in the care
of a special population of patients, and is the only facility of
its kind in the State of South Carolina.
Accordingly, the Debtors sought and obtained an order from the
Court, pursuant to sections 105(a), 363(b), and 365(a) and (b)
of the Bankruptcy Code, and Rules 6004 and 6006 of the
Bankruptcy Rules, approving and authorizing the Lease
Termination and Operations Transfer Agreement, dated as of
August 2001 (the Transfer Agreement), providing for the transfer
of Woodruff Healthcare to Woodruff Manor, LLC (the New
Operator).
The Transfer Agreement provides for the termination of the
Woodruff Lease and governs the transition of the Facility to the
New Operator in accordance with applicable state and federal
law.
According to the Transfer Agreement, if the Court has not ruled
on the Rejection Motion prior to the Closing of the Transfer
Agreement, then the Woodruff Lease will terminate as of the
Effective Time; if Closing occurs as contemplated under the
Transfer Agreement, the Debtor will withdraw the Rejection
Motion.
The Transfer Agreement acknowledges that all rent which was due
and payable by the Transferor from the Petition Date through
July 31, 2001, has been paid, and provides that the rent for the
period from August 1, 2001, through the date immediately
preceding the Effective Time will accrue at the rate of $922.19
per day and will be paid in full by the Transferor at the
Closing.
If the Effective Time does not occur by September 30, 2001, the
Transferor may proceed with its Rejection Motion, and seek an
order fixing the rent at the fair use and occupancy of the
Facility retroactive to the date on which the Rejection Motion
was filed.
The Transfer Agreement provides that the New Operator has the
option of assuming the Transferee's Medicare provider number and
provider reimbursement agreement.
In the event that the New Operator makes such an election, and
the Transferee assumes and assigns the Medicare Provider
Agreement to the New Operator, the New Operator must also assume
and satisfy all obligations and liabilities under the Medicare
Provider Agreement regardless of whether they arose before or
after the Effective Time. If any payments are required in order
to cure any defaults as a condition to the New Operator's
assumption of the Medicare Provider Agreement, then the New
Operator is required to pay those sums prior to the Closing.
In addition, the New Operator is required to enter into an
agreement with the United States Department of Health and Human
Services, and the Transferor, regarding the assignment of the
Medicare Provider Agreement which includes a release of the
Transferor from all liabilities under the Medicare Provider
Agreement which arose prior to the Effective Date.
The New Operator is also required to obtain a new Medicaid
provider number and provider reimbursement agreement. In the
event that the New Operator has not obtained a new Medicaid
provider number by the Effective Time, the New Operator will
submit payment requests to Medicaid under the Transferor's
current Medicaid provider number. The New Operator has agreed to
indemnify the Transferor for any losses resulting from the New
Operator's the use of the Transferor's Medicaid provider number.
Alternatively, the New Operator may elect not to pay the Cure
Payment, and not to assume the Medicare Provider Agreement prior
to Closing. In such event, the New Operator (i) assumes all risk
arising out of the New Operator's failure to obtain a new
Medicare provider number or agreement with respect to the
Woodruff Facility.
The New Operator further agrees to indemnify Transferor and IHS
from and against all damages, claims, losses, penalties,
liabilities, actions, fines, costs and expenses incurred by
Transferor which arise out of the New Operator's failure to
accept assignment of the Medicare provider number or agreement,
or obtain a new Medicare or Medicaid provider agreement.
Except as expressly provided in the Transfer Agreement, the New
Operator will not assume any claims, lawsuits, liabilities,
obligations or debts of the Transferor, including without
limitation, any debts or other liabilities related to
Transferor's Medicaid Provider Agreement; and any debts or
liabilities related to Transferor's Medicare Provider Agreement
(provided the New Operator does not assume Transferor's Medicare
Provider Agreement).
Transferor has also agreed to indemnify New Operator with
respect to any and all damage, loss, liability, deficiency, cost
and expense resulting from the Transferor's use of the
Transferor's Medicaid provider number during the period from
February 2, 2000, and ending as of the Effective Time.
Finally, the Transfer Agreement governs (i) the transfer of
Transferor's property located at the Woodruff Facility to the
New Operator, including, but not limited to inventory, furniture
and equipment; (ii) the transfer of Resident Trust Funds; (iii)
the employment of Transferor's employees; (iv) the disposition
of unpaid accounts receivable; (v) access to records; and (vi)
the transfer of vendor, service and other agreements to the New
Operator.
The Debtors believe it is sound business decision to transfer
the Woodruff Facility to the New Operator pursuant to the
transfer Agreement, considering the result which the Debtors'
estates will realize: the divestiture of an unprofitable
facility that the Debtors have been unable to turn around, and
the elimination of significant ongoing administrative
liabilities.
To effect the transfer, the following parties entered into a
Stipulation, so ordered by the Court:
(a) IHS, Inc. for itself and on behalf of each of the debtors in
the IHS chapter 11 cases;
(b) the United States of America, on behalf of the Unites States
Department of Health and Human Services (HHS), and its
designated component, the Centers for Medicare and Medicaid
Services (CMS); and
(c) Woodruff Manor, LLC.
The Stipulation and Order provides, among other things, that:
(1) Debtors have agreed to transfer to Woodruff the operations
of a skilled nursing facility, woodruff Healthcare, Inc.
located in Woodruff, South Carolina in accordance with this
Stipulation;
(2) Debtors have a provider agreement with HHS for the Facility
identified by Medicare provider number 42-5l79 enabling
Debtors to participate in the Medicare program;
(3) Debtors assume and assign the Medicare Provider Agreement
to Woodruff, effective on the date that operation of the
Facility is transferred to Woodruff (the Effective Date);
(4) Upon the Effective Date, all of CMS's claims against both
Debtors and Woodruff or monetary liabilities arising under
the Medicare Provider Agreement before the Effective Date,
shall be satisfied, discharged and released; provided,
however, that Woodruff succeeds to the quality history of
the Facility and shall be treated, for purposes of survey
and certification issues as if it is the Debtor and no
change of ownership occurred;
(5) Upon the Effective Date, nothing in this stipulation as so
ordered by the Court shall relieve or be construed to
relieve Woodruff from complying with all procedures, rules
and regulations of the Medicare program, provided that
Debtors, Woodruff and CMS each will consider all cost
reporting periods under the Medicare Provider Agreement
prior to the Effective Date to be fully and finally closed
in accordance with all applicable laws; and Debtors and
Woodruff will withdraw any appeals with respect to the
Medicare Provider Agreement (including, but not limited to,
appeals of civil monetary penalties), that are pending on
the Effective Date either administratively or before any
Provider Reimbursement Review Board or any federal court
and agree not to bring any further appeals thereafter
relating to events and cost reporting periods prior to the
Effective Date and provided further, that the rights
accorded CMS and Woodruff under this Stipulation and the
Order shall constitute "cure" under 11 U.S.C. section 365
of all outstanding financial defaults under the Medicare
Provider Agreement arising before the Effective Date;
(6) Debtors shall file a terminating cost report for the
Facility through the Effective Date, and woodruff shall
file a partial cost report to cover the period from the
Effective Date through the end of the fiscal period in
which the Effective Date falls;
(7) Debtors shall not alter, modify or amend in any way any of
the terms of this Stipulation through a plan of
reorganization or otherwise;
(8) Any disputes regarding the rights arising under the
Stipulation and Order shall be governed by federal law;
(9) This Stipulation is binding on the parties' successors and
assigns;
(10) This Stipulation does not affect the rights and claims of
any other federal agency other than CMS;
(11) This Stipulation is not intended to, and does not,
constitute a release, waiver or compromise of any claims
against either Debtors or woodruff under the False Claims
Act within the authority of the Civil Fraud Section of the
Commercial Litigation Branch of the United States
Department of Justice and the United States Attorneys
Offices. (Integrated Health Bankruptcy News, Issue No. 20;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
INTEGRATED HEALTH: Will Recapitalize Rotech With Over $1 Billion
----------------------------------------------------------------
Rotech Medical Corp., a unit of bankrupt Integrated Health
Services Inc., is preparing a recapitalization that will be
valued at more than $1 billion, according to TheDeal.com.
If the deal takes place, Integrated's creditors will then become
Rotech's owners and receive a dividend. UBS Warburg LLC will
raise debt to support the recap. The Sparks, Maryland based
Integrated, which owns hospitals, hospices and nursing homes,
had been trying to sell Rotech since mid-summer and expected to
select a winner by last month.
After several tries, Integrated creditors decided they did not
want to sell a majority stake in the Orlando, Florida based
Rotech. The creditors that control Rotech likely changed their
minds for several reasons, but the primary cause was the losses
they are facing, a source said. Integrated Health, also of
Orlando, filed for bankruptcy in February 2000 with $4.1 billion
in debt. (ABI World, October 16, 2001)
K-TEL INT'L: Must Attain Profitability to Continue Operations
-------------------------------------------------------------
During the years ended June 30, 2001, 2000 and 1999, K-Tel
International incurred net losses from continuing operations of
$10,597,000, $10,190,000 and $9,222,000, respectively, and used
$2,443,000, $7,507,000 and $7,631,000 of cash in operating
activities.
Additionally, the Company had a working capital deficit of
$11,916,000 at June 30, 2001.
The Company's ability to continue its present operations and
successfully implement future expansion plans is contingent upon
its ability to maintain it's line of credit arrangements with K-
5, increase its revenues, and ultimately attain and sustain
profitable operations.
Without increased revenues and sustained profitability, the cash
generated from the Company's current operations may not be
adequate to fund operations and service its indebtedness during
fiscal 2002.
Management is concentrating its efforts on returning the Company
to profitability by focusing on its music licensing business and
limited music distribution. However, there can be no assurance
that the Company's business plan will be successful in this
effort. In the event the Company is unable to fund its
operations and its business plan, it may be unable to continue
as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Subsidiary Bankruptcy
In March 2001, the Company's music distribution subsidiary in
the United States, K-tel International (USA), Inc., (K-tel
(USA)) ceased operations and filed for protection under Chapter
7 of the U. S. bankruptcy code.
In connection with this filing, the assets and liabilities of
this subsidiary have been removed from the books of the Company
as control of the subsidiary was transferred to the bankruptcy
trustee. Management believes the Company will have no ongoing
liability related to this subsidiary as a result of the filing
and the outcome of the bankruptcy proceeding.
Therefore, the elimination of the net liability of this
subsidiary has been shown as a gain on Chapter 7 liquidation.
During the three fiscal years ended June 30, 2001, 2000, and
1999, this subsidiary had net sales of $11,948,000, $23,426,000
and $29,336,000 and operating losses of $5,299,000, $9,857,000
and $3,229,000, respectively.
K-tel International, Inc. was incorporated in 1968 with
corporate offices located in Minneapolis, Minnesota. Through its
operating subsidiaries, K-tel licenses its music catalog
internationally and markets entertainment products mainly
derived from its catalog in the United States and Europe through
retail and direct response marketing channels as well as through
an Internet e-commerce site http://www.ktel.com
KELLSTROM INDUSTRIES: Misses Interest Payment on $54MM Notes
------------------------------------------------------------
Kellstrom Industries, Inc. (NASDAQ: KELL) announced that the
forbearance agreements with its senior lenders and their agent,
Bank of America N.A., and its mezzanine lender, Key Principal
Partners, have expired. Kellstrom's Senior Lenders are currently
funding Kellstrom's operations on an interim basis and Kellstrom
is working with the Senior Lenders on more permanent financing
arrangements.
Kellstrom did not make the October 15, 2001 interest payment due
on its outstanding 5-3/4% Convertible Subordinated Notes due
October 15, 2002.
As previously announced, certain of the holders of the Company's
$54 million of its 5-3/4% convertible subordinated notes due
October 15, 2002 and $86.25 million of its 5-1/2% convertible
subordinated notes due June 15, 2003 have formed a Steering
Committee, and Kellstrom continues to update the Committee's
advisors.
On a different subject, as previously announced, KAV Inventory
LLC, Kellstrom's partnership with Aviation Sales Company, has
reported certain covenant defaults under its Senior Credit
Facility. KAV's lender has accelerated the amounts due from KAV.
KAV is working with its lender to restructure the loan and
consignment arrangement pursuant to which Kellstrom is selling
KAV's parts inventory.
The default by KAV under its Senior Credit Facility will not
result in any financial impact on Kellstrom beyond the initial
investment by Kellstrom in the partnership.
Kellstrom is a leading aviation inventory management company.
Its principal business is the purchasing, overhauling (through
subcontractors), reselling and leasing of aircraft parts,
aircraft engines and engine parts.
Headquartered in Miramar, Florida, Kellstrom specializes in
providing: engines and engine parts for large turbo fan engines
manufactured by CFM International, General Electric, Pratt &
Whitney and Rolls Royce; aircraft parts and turbojet engines and
engine parts for large transport aircraft and helicopters; and
aircraft components including flight data recorders, electrical
and mechanical equipment and radar and navigation equipment.
KNOLL INC: S&P Changes Outlook Noting Decline in Product Demand
---------------------------------------------------------------
Standard & Poor's revised its outlook on Knoll Inc. to stable
from positive.
At the same time, Standard & Poor's affirmed its double-'B'
corporate credit and bank loan ratings, as well as its single-
'B'-plus subordinated debt rating for Knoll.
Total debt as of June 30, 2001 was about $605 million.
The outlook revision reflects challenging conditions in the
office furniture market, which could limit the potential for an
upgrade over the intermediate term.
Ratings are supported by Knoll's favorable position in the
cyclical office furniture market, offset somewhat by the
company's moderately leveraged capital structure.
The office furniture market is experiencing declining demand
from lower capital spending by businesses and falling white-
collar employment. The Business and Institutional Furniture
Manufacturers Association expects demand for office furniture to
fall by about 25% for the second half of 2001 compared to 2000.
In 2000, spending for office furniture was artificially buoyed
by purchases from dot-com companies and from pent-up demand
following Y2K remediation.
Standard & Poor's anticipates that capital spending by
businesses will begin to slightly improve early in 2002. Still,
office furniture sales will lag capital spending generally,
since large companies are accelerating layoffs.
Knoll manufactures workstations, seating, desks, tables, and
other office furniture in a broad range of styles and prices. In
market share, the company ranks among the top five office
furniture manufacturers in the U.S.
Consistent with the office furniture industry softening, sales
at Knoll fell 12% for the first half of fiscal 2001 ended June
30. With lower volume and unabsorbed factory overhead, somewhat
mitigated by cost reductions, EBITDA declined to $122.8 million
for the first half of fiscal 2001, from $141.8 the prior year.
Cost reductions helped maintain profitability, reflected by
an EBITDA margin of 24% for the period, flat with the prior
year.
Given the cyclical nature of the office furniture industry,
credit ratios are appropriate for the rating. The latest 12
months EBITDA coverage of interest expense, adjusted for
operating leases, was 5.7 times at June 30, 2001, compared to
6.7x in 2000. Total debt to EBITDA was 2.4x, versus 2.0x in
2000. With $124 million available on Knoll's revolving credit
facility, liquidity is adequate.
Outlook: Stable
Standard & Poor's expects that Knoll will continue to maintain
credit ratios appropriate for the rating.
LAIDLAW INC: Canadian Units Seek CCAA Stay Extension to Jan. 15
---------------------------------------------------------------
The Canadian Applicants, Laidlaw Inc. and Laidlaw Investments
Ltd., sought and obtained an order from Mr. Justice Farley
extending the CCAA stay to and including January 15, 2002.
Thus, until that date, no suit, action, enforcement process,
extra-judicial proceeding or other proceeding against the
Applicants or their property shall be commenced, and all such
proceedings already commenced are stayed and suspended.
Mr. Justice Farley adds that the stay may be further extended by
the Court upon motion by the Applicants. (Laidlaw Bankruptcy
News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
LERNOUT & HAUSPIE: Dictaphone to License Debtor's MREC Software
---------------------------------------------------------------
Dictaphone Corporation announced that it has concluded an
agreement with Lernout & Hauspie Speech Products N.V., L&H
Holdings USA, Inc. and certain of their related subsidiaries to
license key speech recognition technology, and to acquire L&H's
PowerScribe(R) for Radiology speech recognition product line,
which Dictaphone has been co-marketing for the past year.
The appropriate bankruptcy courts have approved this agreement,
and it represents a significant step for Dictaphone in advance
of its expected emergence by year-end from Chapter 11 and
independence from parent L&H.
The contract calls for Dictaphone to license one of L&H's core
speech recognition engines, called MREC, which is used in
PowerScribe(R) and will be used in Dictaphone's EXSpeech product
lines. Dictaphone will have access to key MREC software
development tools, giving Dictaphone the ability to provide on-
going technical support to existing platforms, and to develop
new applications and solutions upon this speech recognition
engine.
Additionally, Dictaphone will have a special team of L&H
software engineers assigned to provide on-going support and
development in connection with the contract. These L&H employees
will complement Dictaphone's own internal speech recognition
engineering staff. Under the agreement, Dictaphone has also
licensed important data needed to develop and expand language
models used in the speech recognition process.
PowerScribe(R) is a leading speech recognition system for the
radiology market and part of Dictaphone's current product
portfolio marketed by its national sales organization.
Dictaphone is acquiring the PowerScribe line of products,
including its software source code.
The agreement also calls for L&H to transfer to Dictaphone
certain L&H employees directly involved in the development and
support of the PowerScribe(R)-based speech technology as well as
the company's Clinical Language Understanding products, which
are under development, a move that will significantly increase
the size of Dictaphone's speech recognition engineering force.
"Speech recognition is core to Dictaphone's mission and
strategy," stated Rob Schwager, president and COO of Dictaphone.
"This technology will allow Dictaphone to deliver to the market
solutions that offer tremendous improvements in terms of cost
saving and productivity, where currently $6 billion is spent
annually in the transcription of medical documentation.
"Our agreement with L&H provides Dictaphone with long-term
access to this leading technology, which will assure our
customers on-going support of their present systems, and access
to software enhancements and developments made by Dictaphone in
the future."
Under the agreement, Dictaphone has also licensed and acquired
from L&H software intended to be used by Dictaphone in its
Clinical Language Understanding products as well as natural
language processing (NLP) technology components. Dictaphone has
made a significant investment in NLP with an internal advanced
linguistics staff, which is developing practical healthcare
applications such as automatic coding products.
Dictaphone currently deploys dictation, transcription and report
management system solutions in some of the world's premier
healthcare organizations. Its solutions automate and integrate
critical elements in the creation and management of health
information, helping healthcare organizations improve
productivity and the quality of patient care.
Dictaphone's flagship Enterprise Express(R) dictation,
transcription and report management system is an integral part
of the creation and flow of patient information in a substantial
number of U.S. hospitals. It currently supports several hundred
thousand physicians who use Dictaphone systems to generate an
estimated one million reports and 100,000 hours of dictation a
day.
Dictaphone is also actively deploying its EXSpeech and
PowerScribe(R) speech recognition solutions, designed to
dramatically reduce transcription costs and speed report
turnaround. Dictaphone has also introduced the ichart family of
Internet subscription-based solutions that integrate existing
systems with new coding, natural language and data mining
technologies, which can significantly reduce the costs of
managing patient information. For sales and product information
visit Dictaphone at http://www.dictaphone.comor call
1-888-350-4836.
LERNOUT & HAUSPIE: Dictaphone Plans to Spin-Off After Bankruptcy
----------------------------------------------------------------
Dictaphone Corporation, a leader in dictation, transcription and
patient information management solutions for the healthcare
industry, expressed optimism over significant progress in its
product portfolio, following an agreement among Lernout &
Hauspie Speech Products N.V., Dictaphone and their creditors
that will allow Dictaphone to once again become an independent
company.
The agreement, which is embodied in a plan of reorganization
filed by Dictaphone in connection with it's chapter 11 case,
calls for creditors to exchange debt for equity in the newly
formed Dictaphone Corporation. Although there can not be
assurances, Dictaphone expects to emerge from chapter 11 by
close of 2001. Dictaphone, along with its parent, Lernout &
Hauspie, has been operating under Chapter 11 protection since
late last year.
"Dictaphone's continued growth and strong product position,
particularly within our stable healthcare business, are very
positive indicators of our future growth potential," said Rob
Schwager, president and COO of Dictaphone. "We are experiencing
very positive growth in all areas of our healthcare business,
especially in new speech recognition solutions, where an
exciting opportunity exists for our customers to remove
substantial cost and time from the production of their patient
records. And, after the transition, Dictaphone will be operating
with very little debt, the lowest we've had, in fact, in more
than five years, and with a very strong, comfortable capital
structure."
Schwager's remarks were made at the AHIMA Convention, where
Dictaphone is showcasing its new speech recognition solutions
among other technology.
Under L&H ownership, Dictaphone's cash flow has remained
positive, while its R&D spending has doubled. In addition to
significant new customer acquisitions, Dictaphone continues to
derive a major portion of its revenue from stable, solid and
annually recurring sources, including on-going service and
support of its large and growing customer base.
Healthcare market group especially strong
Building upon its already strong hospital market share,
Dictaphone's Healthcare Solutions Group (HSG) has continued to
show positive sales of its flagship Enterprise Express(R)
dictation, transcription and report management platform. With
over 2,500 systems in place, the company continues to install
more than 17 new enterprise-wide systems a month.
Speech recognition solutions gaining rapid acceptance
Dictaphone also said it is particularly encouraged by growth
within its medical speech recognition solutions, which have
demonstrated that there is considerable cost saving possible
through reduced transcription keyboarding, and an opportunity to
positively impact physician satisfaction and patient care
through more rapid report completion.
Dictaphone has secured more than 45 new orders for its EXSpeech
recognition platform since introduction several months ago. This
recognition solution, which is integrated as part of the
Enterprise Express system, offers the ability to accommodate
physician practice patterns by allowing direct telephone input.
Dictaphone has already documented significant productivity gain
in user hospitals, and projects that customers will have the
potential to fully recoup their system acquisition costs in
under 24 months of use, through increased productivity gain, and
reduced reliance on outside transcription services.
Radiologists continue also to embrace the PowerScribe for
Radiology system, with more than 45 new systems implemented so
far in 2001. Recent additions to the Healthcare Solutions
Group's list of more than 165 PowerScribe user hospitals and
clinics, representing nearly 2,000 user "seats", include:
Wyandotte Central/Henry Ford (Wyandotte, Mich.), Mills Peninsula
(Burlingame, Calif.), V.A. Northport (Northport, N.Y.), Durham
Regional/Duke (Durham, N.C.), Lourdes-Catholic Health
(Bronxville, N.Y.), Pinnacle Health (Harrisburg, Pa.), Primary
Children's-LDS (Salt Lake City), Fort. Sam Houston and Fort
Gordon (Ft. Houston, Texas).
Rose Ann Webb, health information director at the Boca Raton
Medical Center in Boca Raton, Fla., where a 15-member radiology
staff prepares close to 300,000 reports each year, indicates
that since the installation of PowerScribe in October 2000, the
hospital has saved nearly $1 million dollars in transcription
costs. "We've saved a tremendous amount of money. But more than
that, it makes things go so much faster. You don't have to run
around looking for information, it's just all right there," said
Webb.
Healthcare Solutions Group also makes progress in
penetrating outpatient markets
The ichart solution, Dictaphone's recently launched ASP
(application service provider) suite of Internet-based
dictation, transcription and related services, targeted at
clinics and physician groups, is also gaining strong momentum,
as indicated by the more than 2 million lines of dictation
processed through Dictaphone's Internet Data Center per month.
New ichart customers of note include Mt Kisco Medical Center,
Pella Regional Health, Walter Reed Army Medical Center, and
Insight Health Services Corp.
Pella Regional Health Center, in Pella, Iowa, is routing more
than 70,000 lines of dictation a month through Dictaphone's
ichart system, and using Dictaphone's transcription services for
outsourced typing. Jeff Caracci, Pella's chief information
officer, said: "As an ASP solution, Dictaphone's ichart moves us
closer to our goal of creating an electronic patient record,
while reducing Pella's capital investment and eliminating our
exposure to technology obsolescence."
Looking Forward
"Today I can say the new Dictaphone will come through this
process a stronger, more seasoned company," said Rob Schwager.
"As one of the five oldest U.S. brands still in existence,
Dictaphone is now entering what I believe will be one of our
100-plus-year-old company's most exciting periods of growth and
innovation."
Dictaphone Healthcare Solutions Group (HSG) currently deploys
dictation, transcription and report management system solutions
in some of the world's premier healthcare organizations.
Its solutions automate and integrate critical elements in the
creation and management of health information, helping
healthcare organizations improve productivity and the quality of
patient care. Its flagship Enterprise Express dictation,
transcription and report management system is an integral part
of the creation and flow of patient information in a substantial
number of U.S. hospitals.
It currently supports several hundred thousand physicians who
use Dictaphone systems to generate an estimated one million
reports and 100,000 hours of dictation a day. The company is
also actively deploying its EXSpeech and PowerScribe speech
recognition solutions, designed to dramatically reduce
transcription costs and speed report turnaround. Dictaphone HSG
has also introduced the ichart family of Internet subscription-
based solutions that integrate existing systems with new coding,
natural language and data mining technologies, significantly
reducing the costs of managing patient information. For sales
and product information visit Dictaphone at
http://www.dictaphone.com or call 888-350-4836.
MCMS INC: Court Okays $49MM DIP Financing and Bidding Procedures
----------------------------------------------------------------
MCMS, Inc., announced that the U.S. Bankruptcy Court for the
District of Delaware granted final approval of a $49 million
Debtor-in-Possession (DIP) financing facility provided to it by
a consortium of banks led by PNC Bank. The DIP facility will be
used to fund the ongoing business operations of MCMS.
The Court also approved bidding procedures regarding the sale of
substantially all of the assets of MCMS to Manufacturers'
Services Limited (MSL). The sale to MSL is subject to higher and
better offers through the Court supervised competitive sale
process. The order approving the bidding procedures provides
that competing bids must be submitted by November 19, 2001.
An auction involving MSL and those parties that have timely
submitted bids will be held on November 27, 2001. A hearing on
the sale is scheduled for November 29, 2001, in Wilmington,
Delaware.
Rick Rowe, Chief Executive Officer of MCMS, said, "MCMS is very
pleased with the approval by the Court of the final DIP
facility, which we believe will provide customers and vendors
assurance that we will meet normal business obligations and
operate without interruption. We are grateful for the continued
support of the banks, customers and vendors and the dedication
of our employees. MCMS is also pleased that the Court set the
bid deadline for November 19th. This timeframe provides
assurance to customers, vendors and employees as to the
conclusion of the auction process and will provide potential
bidders ample time to conduct due diligence and formulate bids."
As previously announced, on September 18, 2001, MCMS and its two
U.S. subsidiaries filed voluntary petitions for relief under
Chapter 11 of the U.S. Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware in Wilmington to
implement a sale of substantially all of its assets to MSL.
MCMS, Inc. is a global leading provider of advanced electronics
manufacturing services to original equipment manufacturers who
primarily serve the data communications, telecommunications, and
computer/memory module industries. MCMS targets customers that
are technology leaders in rapidly growing markets, such as
Internet infrastructure, wireless communications and optical
networking, that have complex manufacturing service requirements
and that seek to form long-term relationships with their
electronics manufacturing service providers.
The Company offers a broad range of electronics manufacturing
services, including pre-production engineering and product
design support, prototyping, supply chain management,
manufacturing and testing of printed circuit board assemblies,
full system assembly, end-order fulfillment and after-sales
product support. The Company delivers this broad range of
services through operations in Nampa, Idaho; Durham, North
Carolina; Penang, Malaysia; Monterrey, Mexico; and San Jose,
California. More information is available by visiting the
company's Web site at http://www.mcms.com
MIDWAY AIRLINES: S&P Drops Defaulted Class D Certificates to D
--------------------------------------------------------------
Standard & Poor's lowered its ratings on Midway Airlines Corp.'s
1998-1 Class D pass-through certificates to 'D' from triple-'C'-
minus and removed the issue from CreditWatch.
Ratings of other classes of debt in the 1998-1 and ratings of
the 2000-1 series of pass-through certificates were not changed
and remain on CreditWatch with developing implications.
The downgrades reflect the October 5, 2001, rejection by
bankrupt Midway Airlines of the leases that were securitized in
the 1998-1 pass-through certificates. The 1998-1 Class D
certificates are the most junior class of securities in that
series and do not have the benefit of the dedicated liquidity
facility, in contrast to the Class A-C pass-through certificates
(which are enhanced equipment trust certificates).
Accordingly, when Midway rejected the leases on eight Bombardier
CRJ-200 regional jets, the 1998-1 Class D certificates
defaulted.
Ratings could be raised or lowered, depending on changes in
prospects for full repayment of the Class A-C pass-through
certificates in the 1998-1 and 2000-1 series. That, in turn,
will depend on aircraft values and, possibly, on actions by the
holders of equity in the leveraged leases whose aircraft notes
were securitized in these two transactions. For example, the
equity in the seven B737-700's that indirectly collateralize the
2000-1 certificates is held by GE Capital Aviation Services
(GECAS), which may choose to acquire full control of the planes
by prepaying all classes of certificates. Both the B737-700 and
CRJ-200 aircraft are desirable, new technology planes whose
market values have been affected less by the current airline
industry downturn than have values of most other planes.
Ratings Lowered, Removed from CreditWatch
To From
Midway Airlines Corp.
Equipment Trust Certificates
Pass-through certificates Series 1998-1
Class D D CCC-
Ratings Remain on Creditwatch with Developing Implications
Midway Airlines Corp.
Equipment Trust Certificates
Pass-through certificates Series 1998-1
Class A BBB
Class B BB
Class C B
Pass-through certificates Series 2000-1
Class A BBB
Class B BB
Class C BB-
NETVOICE: Files Voluntary Chapter 11 Petition in Louisiana
----------------------------------------------------------
NetVoice Technologies Corporation (OTCBB:NTVT), a provider of IP
(Internet Protocol) telephony, and communication solutions
announced the Company and its subsidiaries voluntarily filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in
the U.S. Bankruptcy Court for the Eastern District of Louisiana.
The filing will enable NetVoice to continue to conduct business
as usual to provide service to its customers while pursuing an
orderly financial reorganization with the protection of the
court.
"During the past 18 months the Telecommunications sector has
faced difficult financial times and NetVoice has been caught in
the down draft," said Jeff Rothell, CEO of NetVoice Technologies
Corp. "NetVoice is voluntarily taking this action because we
believe it will best protect the Company's assets for the
benefit of our creditors, customers, employees and other
stakeholders while we continue to evaluate our strategic
alternatives. Although we have taken dramatic steps to counter
the severe downturn in the market for our services, we now find
it necessary to seek the assistance of the court in order to
reorganize our balance sheet."
NEXTWAVE: Mobile Carriers to Pay Debtor $16BB to End Dispute
------------------------------------------------------------
The nation's major mobile telephone companies reached an
agreement with NextWave Telecom Inc. yesterday in which they
would pay almost $16 billion to end a five-year dispute over a
slice of airwaves, The Washington Post reported.
Under the terms of the deal, the wireless companies would divide
up the spectrum that NextWave won in a 1996 auction by the
Federal Communications Commission (FCC) but never paid for.
NextWave will retain none of the spectrum, but investors in the
firm, which have been in bankruptcy since 1998, would end up
with $5 billion after paying off debts and taxes. The federal
government would be paid $11 billion.
If approved, the deal upholds the results of an auction the FCC
held earlier this year in which Verizon Wireless and companies
controlled by Cingular Wireless, AT&T Wireless Services Inc.,
and VoiceStream Wireless Corp., a unit of Deutsche Telecom, bid
a total of $15.8 billion for NextWave's spectrum. (ABI World,
October 16, 2001)
OLYMPUS PACIFIC: Defers $3.75MM Financial Commitment to Ivanhoe
---------------------------------------------------------------
Olympus Pacific Minerals Inc. announces that Olympus and Ivanhoe
Mines Ltd. have agreed to defer the settlement date of the
rescheduled US$3.75 million payment that was due to Ivanhoe on
October 19, 2001, in order to coincide with closing of Olympus'
private placement.
Under the general terms of the restructuring settlement, the
following will be deliverable to Ivanhoe, or effective, on or
before the revised closing date of November 30, 2001:
1. payment of US$1.32 million;
2. US$1.00 million share component of 3.03 million shares at a
deemed price of $0.50/share;
3. US$1.43 million re-allocated as Prepaid Contribution to
ongoing exploration, less contributions outstanding from
Ivanhoe at the closing date; and
4. 750,000 fully-paid and non-assessable common shares of
Olympus.
The private placement announced on August 14, 2001 is
rescheduled to close on or before November 30, 2001. The private
placement is for 9,000,000 Units at $0.32 per Unit, each unit
comprising one common share and one two-year non-transferable
warrant entitling the purchase of an additional common share at
$0.32 per share.
These transactions are subject to all regulatory approvals.
Olympus and Ivanhoe are joint venture partners in the Phuoc Son
project, which is located in Central Vietnam. The joint venture
is held by: Olympus (57.18%), Ivanhoe (32.64%) and Zedex Limited
(10.18%). Olympus is the operator of the project.
PACIFIC GAS: Urges Court to Disapprove DWR Servicing Agreement
--------------------------------------------------------------
While Pacific Gas and Electric Company and the California
Department of Water Resources (DWR), were in discord over the
terms in a draft servicing agreement, DWR filed a contested
draft servicing agreement with the CPUC on June 27, 2001 and
asked the CPUC to order PG&E to implement the Agreement pursuant
to AB 1X-1. On September 10, 2001, the CPUC issued its Servicing
Agreement Decision (D.) 01-09-015 ordering PG&E to enter into
the Servicing Agreement.
PG&E turns to the Bankruptcy Court for help. Specifically, PG&E
moves the Court for entry of an order declining to authorize
PG&E to enter into and implement the Servicing Agreement, on the
grounds that the proposed Servicing Agreement, which pertains to
a use of PG&E's property outside of the ordinary course of its
business, within the meaning of Section 363(b) of the United
States Bankruptcy Code,
(1) contains terms that would be detrimental to PG&E's
bankruptcy estate and its creditors, including terms
expressly different from those that had been negotiated by
the DWR and PG&E;
(2) is, at best, premature, and should not be considered until
several other disputed matters, which pertain directly to
the obligations which the Servicing Agreement would require
PG&E undertake, are resolved.
The CPUC acknowledges that the Servicing Agreement it ordered
PG&E to implement could be subject to review and approval by the
Bankruptcy Court.
Judge Montali will convene a hearing on PG&E's motion on October
29, 2001 at 9:30 a.m. or as soon thereafter as the matter may be
heard.
The Assembly Bill
AB 1X-1 authorizes DWR to enter into long-term contracts to
purchase electricity and sell it to consumers. Under AB 1X-1,
DWR sells power directly to consumers, with the utilities, as
appropriate, acting solely as distribution, transmission,
billing, and collection agents with respect to the energy
provided by DWR to each of the utility's customers.
AB 1X-1 allows DWR to seek reimbursement for its energy
purchases through a "revenue requirement" determined by DWR. DWR
"shall be entitled to recover, as a revenue requirement, amounts
and at the times necessary to enable it to comply with Section
80134, and shall advise the commission as the department
determines to be appropriate." (DWR shall "at least annually,
and more frequently as required, establish and revise revenue
requirements sufficient, together with any moneys on deposit in
the fund, to provide" the costs of acquiring power, repaying
bonds, and a number of other listed items).
AB 1X-1 explicitly contemplates that in order to recover the
costs of power purchases by DWR, the CPUC may be required to
raise retail electricity rates for certain customers and levels
of usage.
The CPUC's statutory role under AB 1X-1 is to cooperate with DWR
in the implementation of DWR's cost recovery plans, and the CPUC
may not independently review the reasonableness of the revenue
requirement formulated by DWR to recover its costs.
AB 1X-1 also contemplates that DWR may issue bonds to finance
its purchases of wholesale electricity, and authorizes DWR to
submit to the CPUC, as part of its revenue requirement, the
costs of such bond financing. As amended, the California Water
Code authorizes DWR to issue up to $13.4 billion in bonds. Of
this amount, DWR has announced it intends to issue $12.5 billion
in DWR bonds.
The date for issuance of the DWR bonds depends on approval of
DWR's ratemaking and rate agreement with the CPUC. However, DWR
received $4.3 billion in "bridge loans" on June 26, 2001 to help
finance power purchases until the DWR bonds are issued.
Furthermore, the State of California has represented, in
connection with a recent general obligation bond and revenue
anticipation note offerings, that DWR has sufficient bonds
available to purchase power for the rest of the 2001-2002 fiscal
year, even if power bonds are not issued this year, and that the
State has sufficient funds and cash reserves to fulfill its
overall governmental and budgetary responsibilities as well.
Negotiations and the Servicing Agreement
Beginning in February 2001, and extending over a period of
several months, PG&E and DWR engaged in lengthy discussions as
to how best to facilitate the goals of AB 1X-l, the emergency
legislation the California Legislature adopted on February 1,
2001. Under certain circumstances, AB lX-1 requires PG&E and
other utilities to collect and remit funds to DWR for electric
power purchased by DWR and sold to their customers, and also to
provide revenues to DWR to pay interest and principal on bonds
which DWR is authorized to issue to finance its power supply
program. In particular, AB 1X-1 provides that DWR may contract
with the utilities "to transmit or provide for the transmission
of, and distribute the power and provide billing, collection,
and other related services, as agent of the department . . ."
Section 80106(b) permits DWR to request that the CPUC order a
utility to enter into such an agreement.
While reserving the issue as to whether an obligation to
transmit and deliver power and to bill and collect charges and
revenues for DWR could lawfully be imposed upon PG&E by AB 1X-1,
PG&E negotiated with DWR the terms and conditions under which
the parties would implement AB 1X- 1. The parties worked to
negotiate an agreement that would provide for recovery of DWR's
legitimate power purchase costs while at the same time
protecting PG&E's legitimate property interests in its assets.
However, in May and June 2001, PG&E became increasingly
concerned during its negotiations with DWR that PG&E's servicing
agreement would require PG&E to provide transmission,
distribution, billing and collection services in a manner
obliging PG&E to divert its existing generation related rates to
DWR's use. PG&E also became concerned that DWR would use the
servicing agreement to require that PG&E deliver DWR power on a
priority basis, even if utility retained generation could be
provided more cheaply and efficiently and irrespective of
whether such prioritization would result in losses.
PG&E also noted that its execution of a servicing agreement in
any form was premature without a determination of both DWR's and
PG&E's respective revenue requirements. Determining the manner
in which DWR and PG&E revenue requirements are set and allocated
in PG&E'S overall electric rates is an essential prerequisite to
determining whether the Servicing Agreement would impermissibly
require PG&E to pay DWR at the expense of recovering PG&E's own
costs. This is because the terms of the Servicing Agreement
require PG&E to bill and collect DWR Charges from its customers.
Moreover, the definition of DWR Charges, and the Servicing
Agreement generally, do not put any cap on the amounts
constituting DWR Charges. Therefore, the Servicing Agreement
does not prevent diversion of PG&E assets and revenue to DWR to
the extent DWR sets a revenue requirement that effectively
requisitions such assets and revenues as DWR Charges, PG&E
noted.
DWR's filed the contested draft servicing agreement with the
CPUC.
The CPUC issued a Draft Decision ordering that PG&E provide
access to PG&E's utility facilities to DWR and remit funds to
DWR under the terms set forth in the Servicing Agreement, with a
number of modifications none of which attempted to provide any
protection for PG&E's own assets, revenues, and ability to
recover its costs. As well, the Draft Decision modified the
Servicing Agreement to require that DWR and PG&E charges be
shown as a single line item on each retail customer's bill,
instead of being presented as separate line items as proposed by
DWR. PG&E filed comments on September 4, 2001 reiterating its
prior objections to entering into the Servicing Agreement, and
objecting to the commingled presentation of DWR and PG&E charges
as a single line item on PG&E customer bills. Nevertheless, the
CPUC approved and issued the Draft Decision without material
change on September 10, 2001.
PG&E tells Judge Montali that, under AB lX-1, the CPUC views its
role as acting more as DWR's agent for the purpose of
implementing DWR's financial and commercial relationship with
PG&E and other utilities, than as an independent arbiter.
* * *
PG&E submits that the CPUC's attempt to dictate the manner and
scope of PG&E contractual relationship with DWR, thereby
limiting Bankruptcy Court review and approval is impermissible.
"The CPUC cannot compel a debtor-in-possession to use property
of the estate outside of the ordinary course of business," PG&E
asserts, "Such authority belongs solely to the trustee or
debtor-in-possession upon notice and a hearing."
PG&E also points out that, approval of the Servicing Agreement
at this time would be premature and could facilitate potential
violations of the automatic stay of Section 362 of the
Bankruptcy Code because the Servicing Agreement establishes the
mechanism for payment of "[c]harges assessed to Customers for
DWR Power and any other amounts authorized to be collected
pursuant to Sections 80110 and 80134 of the California Water
Code in order to meet DWR's revenue requirements under the Act,
as calculated pursuant to Applicable Law".
DWR's initial revenue requirement request and the mechanism for
adjusting that revenue requirement in the future (Rate
Agreement), PG&E notes, are still in bona fide dispute by many
parties before the CPUC, including PG&E. The CPUC has not yet
issued a final decision on these subjects.
PG&E also argues that the Servicing Agreement lacks the
requisite business justification because: (1) the Servicing
Agreement fails to adequately protect the estate from DWR's
possible misuse of PG&E's transmission and distribution
facilities; and (2) the Servicing Agreement exposes the estate
to losses by restraining PG&E from separating out DWR charges on
customer bills in a separate line item or its equivalent,
thereby violating California law by prohibiting customers from
directing partial payments of their balances.
Specifically, the Servicing Agreement exposes PG&E's estate to
losses by restraining PG&E from separating out DWR charges on
customer bills in a separate line item or its equivalent, and by
violating California law by prohibiting customers from directing
partial payments of their balances to the party of their choice,
PG&E tells the Court.
Existing California law allows customers the right to withhold
payments to DWR without fear of losing electric service from
PG&E. Also, under California law, where a billing agent provides
a bill to a customer for more than one source of charges, that
customer has the right to direct her or his payments to some
sources but not others. The billing agent must, moreover,
respect that customer's desires. Furthermore, California law
prohibits PG&E from terminating a residential customer's service
for nonpayment of third-party charges if that customer has paid
the PG&E portion of the bill.
PG&E alleges that, apparently sensing DWR's vulnerability to
customer protests against payment of DWR charges, the Servicing
Agreement Decision (i) attempts to hide DWR charges from
customers and (ii) denies customers their legal rights to
withhold payments to DWR.
PG&E tells the Court that a separate line item or its equivalent
denoting DWR charges is critical to ensuring that PG&E is not
shortchanged if customers decide to partially pay their energy
bill. It is necessary, PG&E avers, to permit consumers the
opportunity to view the DWR charges for which they are held
responsible.
Without a separate line item or its equivalent to segregate DWR
charges from PG&E charges, PG&E says, customers will find it
difficult, if not impossible, to exercise their rights under
California law to direct their payments to the party of their
choice. PG&E further charges that the Servicing Agreement
attempts, even more openly, to contravene California law by
requiring that PG&E prohibit customers from directing their
payments: "Utility shall not permit Customers to direct how
partial payments of balances due on Consolidated Utility bills
will be applied."
The Servicing Agreement, PG&E alleges, functions as a State-
approved vehicle designed to facilitate a diversion of PG&E's
assets and revenue to the detriment of PG&E's estate and for the
pecuniary benefit of DWR, a sister agency to the CPUC. PG&E
tells Judge Montali that, the Servicing Agreement is an integral
part of an overall package of proposed actions regarding the
financial and commercial relationship between DWR and PG&E that
are pending before the CPUC for decision, and, based on the
proposed DWR and CPUC actions, PG&E has a reasonable basis to
believe that the DWR's and CPUC's determinations of DWR's and
PG&E's revenue requirements may have the effect of diverting
PG&E's assets and revenue to DWR.
PG&E believes it has a legal right to retain such assets and
revenue for the benefit of its estate and its creditors.
PG&E anticipates, based on customers' adverse reaction to recent
rate increases and proposed rate increases, that many customers
are likely to protest payment and withhold at least a portion of
their energy bills. The utility is concerned that, under the
Servicing Agreement, PG&E's estate could be meaningfully damaged
by such withholdings because customers' ability to target their
protest against DWR would be diminished by the commingled
presentation of charges on a single line item and PG&E will
likely bear the brunt of any customer protests even if they are
motivated by the high cost of DWR power.
PG&E anticipates that DWR may argue that the Court must approve
the Servicing Agreement on an expedited basis, in order to avoid
interfering with the State's efforts to market bonds that will
provide funds necessary to purchase the DWR power.
"The Court should not be influenced by this argument," PG&E
opines, "DWR will not be prejudiced if the Court declines to
approve the Servicing Agreement and orders the parties to take
the time necessary to negotiate and resolve the issues raised in
this Motion, including the very serious potential stay
violations, particularly as the CPUC will not be issuing final
decisions with respect to DWR's and PG&E's revenue requirements
until October 2001 at the earliest. The timing of California's
bond offer does not rest on the approval of the Servicing
Agreement.
"According to the State Treasurer's Office, the State has
sufficient funds and cash reserves to meet its overall budget
needs, including DWR's power supply program, through the end of
the 2001-2002 fiscal year -- even if the DWR bonds are not
issued."
Similarly, DWR has taken a contradictory stand on whether or not
it will reimburse PG&E for DWR's share of local government
franchise fees under the Servicing Agreement. DWR raised this
concern in comments on the proposed Rate Agreement, still
pending before the CPUC for decision. Because this franchise fee
liability could run into the tens of millions of dollars
annually, PG&E asserts that it cannot and should not be required
to implement the Servicing Agreement until this issue is
resolved.
In addition, DWR has obtained over $4.3 billion in "bridge
loans" with lenders based on Governor Gray Davis' Executive
Order D-42-01 issued on June 18, 2001, California Secures $4.3B
in Loans.
PG&E submits that it cannot and should not be ordered to disable
itself and to damage its efforts to reorganize its business by
implementing the Servicing Agreement as ordered by the Servicing
Agreement Decision, and the Bankruptcy Court may not approve any
use of the property of the estate if such use abridges PG&E's
fiduciary duty to its creditors to preserve the bankruptcy
estate for their benefit pursuant to 11 U.S.C. section 363(b).
PG&E asks the Court to decline to approve the Servicing
Agreement until all disputed matters relating to DWR's Revenue
Requirement, the proposed Rate Agreement, and the relationship
of the DWR and the California Independent System Operator (ISO)
have been fully and finally resolved, and the ultimate effect of
the operation and payment of the amounts provided for under the
Servicing Agreement on PG&E's estate may be determined, and
evaluated by this Court.
PG&E is confident that, if afforded the time by the Court, it
will be able to resolve the outstanding issues and is fully
prepared to finalize a Servicing Agreement with DWR that does
not violate the purpose of Section 363(b) of the Bankruptcy
Code, which requires the debtor-in-possession to enter into only
those transactions that will benefit the estate. (Pacific Gas
Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
PACIFIC GAS: Christopher P. Johns Named Senior VP & Controller
--------------------------------------------------------------
Pacific Gas & Electric Corporation (NYSE: PCG) today announced
that its board of directors has elected Christopher P. Johns,
41, Senior Vice President and Controller. In his new role, Mr.
Johns will assume responsibility for Investor Relations and
continue with his current controller responsibilities.
"This promotion reflects Chris' leadership and contributions to
PG&E Corporation at a critical time in our history as we work
through our Chapter 11 Plan of Reorganization," said Robert D.
Glynn, Jr., PG&E Corporation Chairman, CEO and President. "We
are pleased to recognize his continuing accomplishments and wish
him continued future success."
Since joining PG&E Corporation in 1996, Mr. Johns has been
responsible for accounting, tax and financial planning and
analysis. Prior to PG&E Corporation, he was a partner at KPMG
Peat Marwick LLP in the firm's National Public Utilities
practice. Active in the business community and a frequent
speaker at industry conferences, he is a member and former
chairman of the American Gas Association's Accounting Advisory
Council.
Mr. Johns serves his local community as president of the Moraga
Baseball Association.
An alumnus of University of Notre Dame, Mr. Johns earned a B.A.
in Accounting in 1982. He is a member of the American Institute
of Certified Public Accountants and is a Certified Public
Accountant in the states of California and Florida.
POLAROID CORP: Gets Approval to Maintain Existing Bank Accounts
---------------------------------------------------------------
Polaroid Corporation Executive Vice President Neal D. Goldman
informs the Court that the Debtors have more than 21 domestic
bank accounts located in various states. Through these domestic
bank accounts, Mr. Goldman says, the Debtors managed cash
receipts and disbursements for its entire corporate enterprise.
According to Mr. Goldman, the Debtors also have several bank
accounts located at two banks outside the United States. "The
Foreign Bank Accounts are utilized by the Debtors to collect
amounts due and owing from Polaroid Corporation's foreign
subsidiaries and to complete the Debtors' hedging activities,"
Mr. Goldman explains.
In the ordinary course of their business, the Debtors routinely
deposit, withdraw, and otherwise transfer funds to, from and
between such accounts by various methods including check, wire
transfer, automated clearing house transfer and electronic funds
transfer. Likewise, Mr. Goldman notes, the Debtors generate
thousands of checks per month from the Bank Accounts.
"I believe that under the circumstances of the cases, it would
be appropriate for this Court to grant a waiver of the United
States Trustee's requirement that the Bank Accounts be closed
and that new post-petition bank accounts be opened. If enforced
in these cases, I believe that such requirements would cause
significant and unnecessary disruption in the Debtors'
businesses," Mr. Goldman tells Judge Walsh.
Timothy P. Olson, Esq., at Skadden, Arps, Slate, Meagher & Flom,
in Chicago, Illinois, also argues that closing the existing Bank
Accounts and opening new accounts would inevitably result in
delays. "These delays could impede the Debtors' ability to
ensure as smooth a transition into chapter 11 as possible," Mr.
Olson warns. If that happens, Mr. Olson fears, it will
jeopardize the Debtors' efforts to successfully reorganize in a
timely and efficient manner.
Determining that it is in the Debtors' best interests to keep
existing bank accounts in place, Judge Walsh permits the Debtors
to:
(a) designate, maintain and continue to use, with the same
numbers, all of the Bank Accounts in existence on the
Petition Date; and
(b) treat the Bank Accounts for all purposes as accounts of
the Debtors as debtors-in-possession.
Accordingly, the Court directs the banks, where the Bank
Accounts are maintained, to continue to service and administer
the Bank Accounts as accounts of the respective Debtor as a
debtor-in-possession without interruption and in the usual and
ordinary course.
Judge Walsh also instructs the banks to receive, process
and honor, and pay any and all checks, drafts, wires, or
automated clearing house transfers drawn on the Bank Accounts
after the Petition Date by the holders or makers, as the case
may be.
In addition, Judge Walsh orders the Debtors to reimburse the
Banks for any claim arising prior to or after the Petition Date
in connection with customer checks deposited with the Banks,
which have been dishonored or returned for insufficient funds in
the applicable customer account.
"But it is provided, however, that in addition to these
requirements, any checks, drafts, wires or automated clearing
house transfers drawn or issued by the Debtors before the
Petition Date shall be timely honored by any such Bank to the
extent necessary to comply with any order(s) of this Court
authorizing payment of certain pre-petition claims, unless such
Bank is instructed by the Debtors to stop payment on or
otherwise dishonor such check, draft, wire or automated clearing
house transfer," Judge Walsh states.
Furthermore, the Court directs Banks to accept and honor all
representations from the Debtors as to which checks, drafts,
wires, or automated clearing house transfers should be honored
or dishonored, regardless of the dates and whether or not the
Bank believes the payment is or is not authorized by any
order(s) of the Court.
Except for those that must be honored and paid pursuant to the
Court's order, Judge Walsh emphasizes that no checks, drafts,
wires, or automated clearing house transfers issued on the Bank
Accounts prior to Petition Date but presented for payment after
Petition Date shall be honored or paid.
The Banks are also prohibited from offsetting, freezing or
otherwise impeding the use or transfer of, or access to, any
funds deposited by the Debtors in the Bank Accounts before or
after the Petition Date on account of any claim of the Bank
against the Debtors that arose prior to Petition Date. Also,
the Court declares that any checks drawn or issued by the
Debtors shall be timely honored by any such Banks
notwithstanding any such claim they may hold against the
Debtors. But Judge Walsh makes it clear that this order shall
not prejudice the Banks' rights or ability to seek relief from
the automatic stay.
Moreover, the Court states that Debtors are not prevented from
opening any additional bank accounts, or closing any existing
bank accounts ad they may deem necessary and appropriate. Judge
Walsh authorizes the Banks to honor the Debtors' requests to
open or close such Bank Accounts or additional bank accounts.
But the Court emphasizes that any new account shall be with a
bank that is insured with the Federal Deposit Insurance
Corporation or the Federal Savings and Loan Insurance
Corporation and that is organized under the laws of the United
States. (Polaroid Bankruptcy News, Issue No. 2; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
POTLATCH: $6.6MM Net Loss in Q3 Due to Poor Market Conditions
-------------------------------------------------------------
Potlatch Corporation (NYSE:PCH) reported that poor market
conditions for most of its products and substantially higher
interest expense resulted in a loss for the third quarter of
2001.
For the third quarter of 2001, the company incurred a net loss
of $6.6 million, compared to a loss of $10.5 million for the
same period in 2000. The 2000 results include an after-tax
charge totaling $11.3 million for costs related to the closure
of a plywood mill in Idaho. Net sales for the third quarter of
2001 were $456.6 million, slightly higher than the $452.0
million recorded in the third quarter of 2000.
For the first nine months of 2001 the company incurred a net
loss totaling $47.7 million, or $1.69 per diluted common share.
Comparatively, the net loss for the first nine months of 2000
was $17.5 million, which included charges for a salaried
workforce reduction and the plywood mill closure. Before these
charges, net earnings for the first nine months of 2000 were
$9.6 million. Net sales for the first nine months of 2001 were
$1.36 billion, compared with $1.39 billion for 2000's first nine
months.
The resource segment reported operating income of $17.9 million
for the third quarter of 2001, down from the $23.5 million
earned in the third quarter of 2000. The results reflect lower
net sales realizations for log sales to external customers in
Idaho and internal customers in Arkansas combined with higher
production costs in Idaho and Arkansas.
Operating income for the wood products segment was slightly
above breakeven for the third quarter of 2001, compared to a
loss of $29.0 million in the third quarter of 2000. Results for
2000 include an $18.5 million charge related to the closure of a
plywood mill in Idaho.
"A 15 percent increase in shipments and modestly higher net
sales realizations for lumber were primarily responsible for the
favorable comparison," said L. Pendleton Siegel, Potlatch
chairman and chief executive officer.
"Results for the company's panel products improved slightly,"
Siegel said. "Oriented strand board and plywood shipments
increased 8 percent and 21 percent, respectively, offsetting
declines in net sales realizations of 1 percent and 6 percent,
respectively, compared to 2000's third quarter."
Markets for the company's wood products weakened noticeably in
mid-to-late September.
The printing papers segment recorded a third quarter operating
loss of $7.0 million, versus income of $2.3 million reported a
year ago.
"Lower net sales realizations for printing papers and pulp
adversely affected results for the segment," Siegel said.
"Unfavorable economic conditions and foreign imports have had a
negative effect on both price and product mix for printing
papers," Siegel added. Net sales realizations for printing
papers and pulp were down 12 percent and 44 percent,
respectively, compared to the third quarter of 2000. Shipments
for printing papers and pulp increased 2 percent and 17 percent,
respectively, partially offsetting the negative effects of lower
net sales realizations.
The pulp and paper segment reported operating income for the
third quarter of $10.0 million, compared to $6.9 million for
2000's third quarter.
"An 11 percent increase in shipments for consumer tissue
products together with slightly higher net sales realizations
were responsible for the improvement during the period," Siegel
said. Lower net sales realizations for paperboard and pulp of 6
percent and 51 percent, respectively, and a 25 percent decrease
in pulp shipments partially offset the positive consumer tissue
results.
"Energy costs were not a factor in the quarter-to-quarter
comparison. The company's efforts to increase energy production
and reduce consumption, combined with a more stable energy
marketplace, kept those costs comparable to the prior year's
third quarter, although the company's year-to-date results were
significantly affected by higher energy costs," Siegel added.
Higher interest expense during the current quarter was due
largely to the greater amount of debt the company currently has
outstanding compared to last year and to a reduction in the
amount of interest capitalized for major construction projects.
Potlatch is a diversified forest products company with
timberlands in Arkansas, Idaho and Minnesota.
PRECISION SPECIALTY: Taps TM Capital to Seek Strategic Options
--------------------------------------------------------------
Precision Specialty Metals, Inc., the nation's leading stainless
steel conversion mill, announced that it has retained TM Capital
Corp., a private New York-based investment banking firm, to
pursue strategic alternatives to maximize value, including the
potential sale of the business and assets of the company.
Precision Specialty Metals' Chief Executive Officer Lawrence F.
Hall stated, "Given the substantial consolidation which is
taking place in the specialty steel industry and Precision
Specialty Metals' unique market position, we believe it is
timely for the company to explore alternatives to maximize
value."
Precision Specialty Metals is a specialty steel conversion mill
engaged in re-rolling, slitting, cutting and polishing stainless
steel and high- performance alloy hot band into standard or
customized finished thin-gauge strip and sheet product.
Headquartered in Los Angeles, PSM is the sole stainless steel
conversion mill in the Western United States, and the largest
independent conversion mill in the U.S. Its products are
consumed by the automotive, aerospace, construction, computer
and appliance industries.
The Company filed a voluntary petition under Chapter 11 in the
U.S. Bankruptcy Court for the District of Delaware in Wilmington
on July 16, 2001, and received final approval for a $29 million
debtor-in-possession financing agreement on September 4, 2001.
PSINET INC: Gets Approval to Pay Pre-Petition Franchise Taxes
-------------------------------------------------------------
PSINet, Inc. sought and obtained the Court's authority, pursuant
to Section 105(a) of the Bankruptcy Code, to pay in the ordinary
course of business any prepetition franchise, business and
similar tax obligations that may be due and owing to various
state and/or local taxing authorities.
In connection with the normal operation of their businesses,
some or all of the Debtors are required to pay "franchise" or
"business" taxes, including corporate or business license, gross
receipts, income, BPOL and net worth taxes, annual report fees
and similar tax obligations (collectively, Franchise Taxes) to
various state and/or local taxing authorities, as a condition of
the continued privilege of doing business within the Taxing
Authorities' jurisdictions in the preceding or succeeding year,
as the case may be.
On a periodic basis, typically once every year, the Debtors pay
Franchise Taxes to each Taxing Authority. These taxes are
typically based on either the assets, net worth, or gross
receipts (for the previous reporting period) of the Debtor(s)
subject to the jurisdiction of the Taxing Authority. The payment
due date can vary considerably from Taxing Authority to Taxing
Authority.
The Debtors estimate they will be required to pay approximately
$25,000 in Franchise Taxes that will come due in the ordinary
course during the remainder of 2001. A certain portion of these
taxes may be attributable to the Debtors' prepetition
activities.
The Debtors believe that to the extent the Franchise Taxes
coming due may be Prepetition Franchise Taxes, payment of such
taxes in the ordinary course of their businesses is in the best
interest of the Debtors, their bankruptcy estates, and all
parties in interest, for the reasons set forth below.
First, the Debtors believe that the administrative expense and
delay they would likely incur in attempting to distinguish
Prepetition Franchise Taxes from the remainder of the Franchise
Taxes that will come due during 2001 (the Postpetition Franchise
Taxes), including the burden and expense of litigating whatever
disputes may arise between the Debtors and the Taxing
Authorities regarding the accuracy of the distinction drawn by
the Debtors, would reduce, and may outweigh, any potential gain
to be realized by their estates from nonpayment of any such
Prepetition Franchise Taxes.
Second, failure to pay any Prepetition Franchise Taxes may lead
to precipitous action on the part of the Taxing Authorities,
including a marked increase in state tax deficiency notices and
audits, a flurry of lien filings or lift stay motions, and quite
possibly, attempts to revoke the Debtors' corporate charters or
other applicable business privileges and authorizations.
Furthermore, to the extent the Prepetition Franchise Taxes may
be entitled to priority under Section 507(a)(8)(A) of the
Bankruptcy Code as a "tax on or measured by income or gross
receipts," payment of Prepetition Franchise Taxes should not
prejudice general unsecured creditors or materially affect the
Debtors' estates because such priority claims would be required
to be paid in full under a plan of reorganization prior to
payment to general unsecured creditors.
Judge Gerber makes it clear that the Debtors are authorized and
empowered, but not required, to pay all prepetition Franchise
Taxes due to the Taxing Authorities, by whatever means the
Debtors may deem appropriate, including, without limitation, the
issuance of postpetition checks or fund transfer requests.
(PSINet Bankruptcy News, Issue No. 8; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
RAILWORKS CORP: Gets Interim Approval of $81MM in DIP Financing
---------------------------------------------------------------
RailWorks Corporation (Nasdaq: RWKSQ) announced that on October
5, 2001 the U.S. Bankruptcy Court for the District of Maryland
approved, on an interim basis, up to $81 million of the
Company's $165 million Debtor-in-Possession (DIP) financing
arrangement from a number of entities, including Bank of
America, N.A., CSFB Global Opportunities Advisers, LLC,
Stonehill Capital Management LLC, and Travelers Casualty and
Surety Company of America.
The interim approval immediately makes available to the Company
up to approximately $81 million to fund daily operations, pay
suppliers and vendors and compete for new business. A hearing to
consider final approval of the financing is set for October 23,
2001.
The facilities to be finally approved by the Court includes a
revolver and LC facility of up to $35 million, an additional
revolver facility of up to $30 million, and a surety bonding
facility of up to $100 million supported by an LC facility of up
to $40 million.
"The Court's ruling puts funding in place, on a going-forward
basis, that allows RailWorks to fund its ongoing obligations and
assures our ability to continue to be a leading supplier of
rail-related services and products," said John Kennedy, Chief
Executive Officer of RailWorks Corporation.
RailWorks and its operating subsidiaries in the U.S. voluntarily
filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code on September 20, 2001. RailWorks operations in Canada are
not involved in the filings and continue to operate outside of
bankruptcy.
Founded in March of 1998, RailWorks Corporation (RWKSQ) is a
leading supplier of rail system products, track construction,
rehabilitation, repair and maintenance and installation of
electrification, communication and signaling equipment for rail
applications, and related products and services throughout North
America. RailWorks is headquartered in Baltimore, Maryland.
RENT-WAY: Junk Ratings Remain on S&P's CreditWatch Negative
-----------------------------------------------------------
Standard & Poor's triple-'C'-plus corporate credit and senior
secured bank loan ratings on Rent-Way Inc. remain on CreditWatch
with negative implications, where they were placed October 31,
2000.
Rent-Way has obtained an amendment to its bank agreement and is
no longer operating under a forbearance agreement with its
lenders. The amended agreement provides a credit line of
approximately $360 million. The company had $306 million of debt
outstanding on September 30.
Standard & Poor's remains concerned about the uncertain outcome
of any class action lawsuits against the company pertaining to
its accounting irregularities. The actions seek damages in
unspecified amounts.
In August 2001, the company filed its 10-Qs for the quarters
ended December 31, 2000, March 31, 2001, and June 30, 2001,
disclosing its most recent financial results.
Standard & Poor's will meet with management to review its most
recent financial results and outlook, financial controls, and
financial flexibility.
Rent-Way is the second largest operator of rental-purchase
stores in the U.S. Rent-Way rents name brand merchandise such as
home entertainment equipment, computers, furniture, and
appliances from 1,087 stores in 42 states.
RUSSELL-STANLEY: Launches Exchange Offer & Solicits for Prepack
---------------------------------------------------------------
Russell-Stanley Holdings, Inc. announced results for the third
quarter and nine-month periods ended September 30, 2001.
"The continuing sluggish North American economy and the tragic
events of September 11 have resulted in lower demand for
industrial container products, which impacted our results during
the third quarter, " said Dan Miller, President & CEO of
Russell-Stanley.
He further added, "While our performance comparisons trail last
year, we remain sharply focused on cost reductions and
efficiency gains. Combined with our continued emphasis on
excellent customer service and enhanced quality, we have been
able to partially temper the economic factors impacting our
business."
Consolidated sales for the third quarter were $60.4 million, a
12% decline versus the third quarter of 2000. This decrease was
due primarily to a planned account rationalization in the
plastic services business as we transitioned this business from
a drum leasing to a reconditioning business model to improve
Adjusted EBITDA.
In addition, we experienced unit volume softness in the
containers segment, due principally to the economic effects
impacting our market. Consolidated Adjusted EBITDA of $3.9
million was down $2.1 million versus last year's third quarter
due primarily to the unit volume softness in the containers
segment, partially offset by improved toll.
Consolidated year to date sales of $190.0 million compared to
$211.1 million for the first nine months of last year. The
decline was due principally to the current economic slowdown,
impacting all sectors of the market, which adversely effected
both containers and services unit volumes; coupled with the
planned rationalization in plastic services.
Year to date consolidated Adjusted EBITDA of $14.4 million (7.6%
of revenues) compares to last year's $17.2 million (8.2% of
revenues). The decrease is due primarily to across the board
unit volume softness, which was partially offset by lower steel
costs and a company-wide reduction in delivery, selling, and
general & administrative expenses (D,S,G&A).
The current year to date D,S,G&A reduction of $.9 million versus
2000 is a continuation of cost reduction initiatives begun in
1999. These activities have contributed savings in excess of
$3.0 million annually.
Mr. Miller noted, "We recently announced our participation in
the Containers America, LLC steel drum consortium. Our
participation along with the five original steel drum
manufacturers permits the consortium to provide exceptional
customer service and the highest quality products through an
expanded geographic presence. In addition we can leverage our
steel business through group purchasing, improved logistics and
enhanced product development. We also announced the decision to
close our Allentown facility by year-end and re-deploy machine
capacity in South Brunswick, NJ and the Midwest. Savings from
the Allentown shutdown should approximate $1.5 to $2.0 million
annually."
Mr. Miller concluded, "These initiatives along with the daily
execution of our strategic plan have us well positioned to take
advantage of an upturn in the economy and its impact upon the
industrial container market."
Russell-Stanley Holdings, Inc. is a leading manufacturer and
marketer of plastic and steel containers and a leading provider
of related container services in the United States and Canada.
* * *
The Company has reached an agreement in principle on a term
sheet for a restructuring that will significantly de-leverage
the Company's balance sheet by eliminating a significant amount
of debt and related interest cost.
In early October, the Company commenced an offer to exchange $20
million aggregate principal amount of 9% Senior Subordinated
Notes due 2008 and 3,000,000 shares of common stock for all of
its outstanding 10 7/8% Senior Subordinated Notes due 2009, and
a solicitation of releases and acceptances of a prepackaged plan
of reorganization.
At June 30, 2001, the Company's consolidated financial
statements showed (i) liabilities exceeding assets by $39
million, rendering the Company insolvent and (ii) $59 million of
current assets available to satisfy $278 million of debt coming
due within the next year, straining liquidity to unmanageable
levels.
SABENA: Belgian Gov't Grants Bridge Financing After EU Approval
---------------------------------------------------------------
On Wednesday, October 17, 2001, the EU Commission approved a
bridge credit of the Belgian government for Sabena. The 125
million EUR bridge credit is accepted as an emergency measure,
limited in time, to be paid back according to market rates, and
linked to a fundamental restructuring plan.
The bridge credit aims to temporarily provide the necessary
liquidities to ensure for the continuation of Sabena's
activities.
For the restructuring plan, which is being developed at this
moment and which includes selling of subsidiaries and
establishing a new company, Sabena is looking for private
investors.
In the US, Sabena obtained a further court order protecting
Sabena's assets in the United States from creditor action. The
order effectively continues the injunction which was previously
in place and is effective immediately.
The order will continue until a hearing on December 4, 2001 when
Sabena will seek a continuance of the preliminary injunction
should the Belgian temporary moratorium be extended beyond
November 30.
SCHWINN/GT: Breaks Ties with Mad Dogg Athletics & Johnny G
----------------------------------------------------------
Mad Dogg Athletics (MDA) and Johnny G, owners of the Spinning
indoor cycling program, the Johnny G Spinner bike and the
associated trademarks, announced that their six-year
relationship with Schwinn has ended.
"Schwinn's financial and management difficulties -- and
subsequent bankruptcy -- have strained our business agreement
and limited facilities' ability to procure bikes and parts for
months now, which is unacceptable," says John Baudhuin,
president and CEO of MDA. "Terminating our contract enables us
to get back to the business of providing training and bikes to
facilities, both here and overseas."
Schwinn had been an MDA licensee for the patented Johnny G
Spinner bike since 1995. During that time, the Spinner models
have achieved dominance in the indoor cycling market. "We know
we have the best stationary bike on the market and we don't want
facilities to lose faith in the Spinning program or opt to
purchase a different bike because they have no choice."
MDA will continue producing the Spinner bike and expects to be
able to start delivering new bikes within the next eight to ten
weeks.
In addition to securing a ready supply of bikes and parts, MDA
expects to make numerous design changes in the coming months to
enhance the bike's already excellent quality. Facilities that
are looking for bikes or that have had problems obtaining bikes
or parts should contact MDA immediately. "We will be honoring
all existing orders and licensing agreements," says Baudhuin.
MDA is an international education and training company that was
formed in 1993 by Johnny G and Baudhuin. It is the worldwide
leader and innovator in indoor cycling training and education:
MDA trains Spinning instructors in more than 60 countries around
the globe.
The company has also developed an extensive line of cycling
apparel and accessories, in addition to organizing the World
Spinning & Sports Conferences, which are held in various cities
around the globe each year. Spin, Spinning and Spinner are
registered trademarks of Mad Dogg Athletics.
SUN HEALTHCARE: Asks Court to Nix Bank of New York's $5MM Claim
---------------------------------------------------------------
Sun Healthcare Group, Inc. objects to proof of claim no. 10197
in the amount of $5,081,589 filed by The Bank of New York as
successor indenture trustee under an Indenture dated as of March
1, 1995 against Debtor Retirement Care Associates, Inc., in
connection with a Guaranty Agreement dated as of March 1, 1995
pursuant to which BONY claimed RCA had agreed to the payment and
performance of all obligations arising under the Bonds, the
Indenture and a loan agreement dated as of March 1, 1995 between
the Issuer of the Bonds and Chamber Health Care Society,
Incorporated.
The Debtors object to the claim on the basis of a ruling by the
United States District Court for the Western District of
Tennessee Reaffirming Appointment of Receiver and Granting
Motion for Preliminary Injunction, entered October 1, 1999
(collectively the "Receivership Orders") in which the District
Court orders that the Trustee cease all further efforts to
collect on the Guaranty or to pursue the prosecution of its
claim in the RCA bankruptcy case."
Prepetition, BONY asserted that Chamber failed to make payments
due under the Bonds and Loan Agreement, and filed suit in the
United States District Court for the Western District of
Tennessee at Memphis, Case No. 99-2841 MN, against Chamber and
RCA for the claimed amount due, together with other relief. RCA
subsequently filed for protection under chapter 11 of the
Bankruptcy Code, automatically instituting a stay of those
proceedings as to RCA. While maintaining the Chamber Suit, BONY
also filed the Proof of Claim no. 10197.
Subsequently, BONY, as indenture trustee, in the Chamber Suit,
agreed to a proposal for repayment by Chamber of the monies
claimed in the Proof of Claim, the Debtors relate. In connection
with that proposal, after being directed by a majority of
bondholders not to oppose such a proposal, the proposal was
approved by the Court in the Chamber Suit and BONY was ordered
not to pursue collection from RCA under the Guaranty, the
Debtors tell Judge Walrath.
Accordingly, the Debtors request that the Court enter an Order
disallowing and expunging the BONY Claim pursuant to section 502
of title 11 of the United States Code and Rule 3007 of the
Federal Rules of Bankruptcy Procedure. (Sun Healthcare
Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
TRI-NATIONAL: Senior Care Lays-Out Reorg. Plan to Pay Creditors
---------------------------------------------------------------
In a series of sweeping moves, designed to salvage a bankrupt
Tri-National Development Corp. (OTCBB:TNAV), as well as to
protect creditors, shareholders and note holders of that
company, management of Senior Care Industries Inc. (OTCBB:SENC),
announced a far reaching plan of reorganization of Tri-National.
Richard Mata, general counsel to Senior Care, said that the goal
of Senior Care management is to protect the interests of
everyone with a stake in Tri-National. He said that Wednesday's
action was a reaffirmation of Senior Care's intentions to honor
the commitments it made when it first launched its tender offer
earlier this year to gain a majority interest of Tri-National.
Mata said it was critical that the Tri-National reorganization
plan, fashioned by Senior Care and other creditors, be approved.
"Without this plan, or something close to it, our greatest fear
is that the bankruptcy court may quickly act to convert the Tri-
National Chapter 11 filing into a Chapter 7 full scale
liquidation." This could happen, he said, if the bankruptcy
court finds that Tri-National has no real assets on which to
base a recovery plan.
In a Chapter 7 filing, Mata noted, all of a company's assets are
liquidated, with funds typically disbursed to secured creditors
leaving nothing for anyone else. "That would leave nothing for
the shareholders, smaller creditors, or the more than 300 note
holders who bought promissory notes with nine month due dates
over two years ago. Today, those note holders, who saw their
$11.3 million investment disappear, now are owed $13.6 million
after adding on unpaid and long overdue interest."
Bob Coberly, a Senior Care vice president, expanded on Mata's
comment, stating that he has discovered that most of the note
holders are elderly senior citizens who were defrauded when they
bought promissory notes believing that they would be paid in
nine months.
Tri-National didn't even bother to register these notes, either
with the SEC or under state Blue Sky laws. That precipitated
regulatory action from a number of states, Coberly explained.
Senior Care intends to protect not only the note holders but
other creditors, Coberly said, stating that the company
anticipates extending its tender offer to Tri-National
shareholders, perhaps through the end of the year.
"Our goal is still to obtain 51% of the outstanding common
shares of the company. In so doing," said Coberly, "we would
have a mandate for change, permitting the establishment of a
subsidiary of Senior Care, with a management structure that
would be better able to complete building projects, achieve
profitability, and maximize shareholder value. We also believe
this would send a clear signal to the bankruptcy court that our
plan of reorganization for Tri-National is best for the
creditors and its shareholders.
"Senior Care has been pledged millions of dollars, including a
multi-million dollar line of credit from a major investment
banking firm, to undertake this rescue effort," Coberly said.
"It has the support of major creditors of Tri-National. Senior
Care management continues to meet with Tri-National's principal
judgment holders while the bankruptcy case proceeds with the
intent of carving out agreements fair to all creditors."
Precise details of the reorganization plan will be released to
the public only after they are presented to the bankruptcy
court, and could not be immediately discussed, Mata said.
Coberly added that Senior Care's continuing goal would be to
focus on affordable housing construction for seniors. He noted
that under current FHA guidelines, home buyers can borrow up to
90% of the purchase price on affordable homes that sell under
$207,000 and even finance the 10% down payment at 6.5% interest.
These guidelines are expected to become even more friendly after
Jan. 1, 2002, when buyers will be able to purchase affordable
homes up to $150,000 with only 3% down and with an initial
interest rate of 2.95% for the first three years of the loan.
"It's a very attractive market, and we believe the proven track
record of Senior Care management could be a very potent factor
in guiding the new company to realize its full potential to tap
into that marketplace," Coberly concluded.
Senior Care Industries is a specialty real estate development
firm constructing a focused portfolio of real estate uniquely
designed and located to meet the needs of a growing senior
citizen population. The company develops and constructs age-
restricted projects that are on the cutting edge of design and
efficiency.
In the future, Senior Care may acquire assisted living centers
for seniors. Senior Care also continues to actively seek land
for development or existing large apartment complexes that can
be converted to senior housing. For additional information, see
http://www.seniorcareind.com
USINTERNETWORKING: S&P Junks Ratings on Possible Restructuring
--------------------------------------------------------------
Standard & Poor's lowered its corporate credit rating on
Usinternetworking Inc. (Usi) to triple-'C' from single-'B'-
minus. The rating on the company's $125 million convertible
subordinated notes is lowered to double-'C' from triple-'C'. The
outlook is negative.
The ratings revision is based on management's announcement that
a financial restructuring of USi's existing debt obligations is
likely, as a condition for a $100 million equity investment by
Bain Capital. In addition, concerns associated with USi's
operating performance, due to deteriorating information
technology spending in a weakening economy, is a contributing
factor.
Ratings on Usi reflect a highly leveraged profile and financial
losses. The Annapolis, Maryland based company is a facilities-
based application service provider that implements, delivers,
and continuously supports packaged software applications over
the Internet.
Sales for the 12 months ended June 2001 totaled $135 million,
and total debt was more than $200 million. Quarterly sales
declined throughout 2001 and are likely to remain pressured over
the near term. USi is not profitable. For the first half of
2001, operating losses exceeded $30 million, and capital
expenditures were nearly $20 million. Therefore, a cash balance
of about $80 million as of June 2001 is likely to diminish over
the near term.
Outlook: Negative
Ratings on USinternetworking are likely to be lowered if a
financial restructuring impairs bondholders.
* BOOK REVIEW: Bankruptcy Crimes
--------------------------------
Author: Stephanie Wickouski
Publisher: Beard Books
Softcover: 395 Pages
List Price: $124.95
Review by Gail Owens Hoelscher
Order your personal copy today at:
http://amazon.com/exec/obidos/ASIN/1893122832/internetbankrupt
Did you know that you could be executed for non-payment of debt
in England in the 1700s? Or that the nailing of an ear was the
sentence for perjury in bankruptcy cases in 1604? While ruling
out such archaic penalties, Stephanie Wickouski does believe "in
the need for criminal sanctions against bankruptcy fraud and for
consistent, effective enforcement of those sanctions." She
decries the harm done to individuals through fraud schemes and
laments the resulting erosion in public confidence in the
judicial system.
This leading authoritative treatise on the subject of bankruptcy
fraud, first published in August 2000 and updated annually with
new material, will prove invaluable for bankruptcy law
practitioners, white collar criminal practitioners, and
prosecutors faced with criminal activity in bankruptcy cases.
Indeed, E. Lawrence Barcella, Jr. of Paul, Hastings, Janofsky,
and Walker, in Washington, DC, says, "If I were a lawyer
involved in a bankruptcy matter, whether civil or criminal, and
had only one reference work that I could rely upon, it would be
this book." And, Thomas J. Moloney with Cleary, Gottlieb, Steen
& Hamilton describes the book as "an essential reference tool."
An estimated ten percent of bankruptcy cases involve some kind
of abuse or fraud. Since launching Operation Total Disclosure in
1992, the U.S. Department of Justice has endeavored to send the
message that bankruptcy fraud will not be tolerated. Bankruptcy
judges and trustees are required to report suspected bankruptcy
crimes to a U.S. attorney.
The decision to prosecute is based on the level of loss or
injury, the existence of sufficient evidence, and the clarity of
the law. In some cases, civil penalties for fraud are deemed
sufficient to punish and deter.
Ms. Wickouski suggests that some lawyers might not recognize
criminal activity that the DOJ now targets for investigation.
She gives several examples, including filing for bankruptcy
using an incorrect Social Security number, and receiving
payments from a bankruptcy debtor that were not approved by the
bankruptcy court. In both of these real life examples, DOJ
investigations led to convictions and jail time.
Ms. Wickouski says that although new schemes in bankruptcy fraud
have come along, others have been around for centuries. She
takes the reader through the most common traditional schemes,
including skimming, the bustout, the bleedout, and looting, as
well as some new ones, including the bankruptcy mill.
The main substance of Bankruptcy Crimes is Ms. Wickouski's
detailed analysis of the U.S. Bankruptcy Criminal Code, chapter
9 of title 18, the Federal Criminal Code. She painstakingly
analyzes each provision, carefully defining terms and providing
clear and useful examples of actual cases. She ends with a good
chapter on ethics and professional responsibility, and provides
a comprehensive set of annexes.
Bankruptcy Crimes is never dry, and some of the cases will make
you nostalgic for the days of ear-nailing. This comprehensive,
well researched treatise is a particularly invaluable guide for
debtors' counsel in dealing with conflicts, attorney-client
relationships, asset planning, and an array of legal and ethical
issues that lawyers and bankruptcy fiduciaries often face in
advising clients in financially distressed situations.
* * *
Stephanie Wickouski is a partner in the Washington, D.C. firm of
Arent Fox Kintner Plotkin & Kahn, PLLC. Her practice is
concentrated in business bankruptcy, insolvency, and commercial
litigation.
*********
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.
This material is copyrighted and any commercial use, resale or
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*** End of Transmission ***