/raid1/www/Hosts/bankrupt/TCR_Public/011026.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 26, 2001, Vol. 5, No. 210
Headlines
360NETWORKS: Four Subsidiaries File for Protection Under CCAA
ALGOMA STEEL: Files CCAA Plan of Arrangement & Reorganization
AMR CORPORATION: Records $525 Million Third Quarter Net Loss
AT HOME: Engages O'Melveny & Myers as Bankruptcy Counsel
AT HOME: AT&T Removes Directors From Board
ATLANTIC COAST: Boosts Regional Jet Services To 10 Cities
BETHLEHEM STEEL: Court Allows Use of Prepetition Bank Accounts
CHIQUITA BRANDS: Putting Pieces in Place for a Prepack Filing
COMDISCO INC.: HP Comes Back With a $750 Million Bid
COMDISCO INC.: Court Delays Sale Hearing To November 7
COOPER IND.: Danaher Withholds Offer Due To Asbestos Litigation
EXODUS COMM: Obtains Authority To Fund Foreign Units' Operations
EXODUS COMMS: Liquidating Four European Facilities
FANTOM TECHNOLOGIES: Directors Crockett and Kelman Resign
FEDERAL-MOGUL: Dissolving Receivables Securitization Facility
GLOBAL TECHNOVATIONS: Liquidates Onkyo America Subsidiary
HOLT GROUP: Agrees to Provide Panel with Documents by Month-End
HOMESEEKERS.COM: Director Says Company Has No Plans to Disappear
IBS INTERACTIVE: Pender Newkirk Replaces BDO Seidman as Auditors
ICG COMM.: Transwestern Presses For Decision on Colorado Lease
INFINIUM SOFTWARE: Shares Face Nasdaq Delisting
INSIGHT HEALTH: S&P Rates Proposed $200MM Senior Sub Notes at B-
INTERAXX TECHNOLOGIES: Plan Confirmation Hearing Set For Nov. 7
LODESTAR ENERGY: Walking Away from Indiantown Coal-Supply Deal
MAJESTIC INVESTOR: S&P Rates Proposed Senior Secured Notes at B
NCI BUILDING: S&P Affirms Low-B Ratings & Revises Outlook
NEXTWAVE: Amended Plan Confirmation Hearing Set For October 30
OWENS CORNING: Committees Don't Support Fibreboard Examiner Bid
OWENS CORNING: Hearing on Fibreboard Examiner Motion is Monday
PACIFIC GAS: Intends To Amend & Assume Big Valley Lumber PPA
PHAR-MOR: Receives Court Approval for $135MM in DIP Financing
POLAROID: Paying $3 Million of Prepetition Customer Obligations
RAILWORKS CORP.: Wins Final Court Nod For $165MM DIP Financing
SAFETY-KLEEN: Employs Howrey Simon As Investigative Counsel
SELAS CORP.: Board Votes to Suspend Current Quarterly Dividend
SUN HEALTHCARE: Enters Into 3rd DIP Financing Pact Amendment
TELEX COMM.: Will Not Make Interest Payment On Senior Sub Notes
TELIGENT INC.: Has Until December 17 To File Reorganization Plan
TRI-NATIONAL: Senior Care Extends Tender Offer to December 31
VAIL RESORTS: S&P Revises Ratings Outlook to Negative
VSOURCE: Schedules Shareholders Meeting on Nov. 20 in San Diego
W.R. GRACE: Settling Tax Disputes With Washington State
W.R. GRACE: Releases Third Quarter Operating Results
WARNACO GROUP: Exclusive Period to File Plan Extended to Feb. 6
XEROX CORPORATION: S&P Drops Credit Ratings To Lower-B's
BOOK REVIEW: THE ITT WARS: An Insider's View of Hostile
Takeovers
*********
360NETWORKS: Four Subsidiaries File for Protection Under CCAA
-------------------------------------------------------------
360networks announced that four additional operating
subsidiaries that are part of the 360atlantic group of companies
have voluntarily filed for protection under the Companies'
Creditors Arrangement Act (CCAA) in the Supreme Court of British
Columbia. Another operating entity, 360atlantic (UK) limited,
has instituted administration proceedings in England.
The companies that have filed for protection in Canada are
360atlantic (Canada) inc., 360atlantic (USA) inc., 360atlantic
sales (USA) inc. and Threesixty atlantic (Barbados) inc.
PricewaterhouseCoopers Inc. has been appointed as Monitor to
oversee these companies during the reorganization period.
360networks offers optical network services to
telecommunications and data communications companies in North
America. The company's fiber optic network includes terrestrial
segments and undersea cables in North America, the Atlantic and
South America.
On June 28, 2001, the company and several of its operating
subsidiaries voluntarily filed for protection under the
Companies' Creditors Arrangement Act (CCAA) in the Supreme Court
of British Columbia. Concurrently, the company's principal U.S.
subsidiary, 360networks (USA) inc., and 22 of its affiliates
voluntarily filed for protection under Chapter 11 of the U.S.
Bankruptcy Code in the U.S. Bankruptcy Court for the Southern
District of New York. Insolvency proceedings for several
subsidiaries of the company have been instituted in Europe and
Asia.
ALGOMA STEEL: Files CCAA Plan of Arrangement & Reorganization
-------------------------------------------------------------
Algoma Steel Inc. (TSE: ALG) filed a Plan of Arrangement and
Reorganization with the Court under the Companies' Creditors
Arrangement Act (CCAA).
The Plan provides for contributions from stakeholders that will
significantly reduce costs and improve cash flow in future
years. The contributions will enable Algoma to continue to
operate as a viable North American steel company.
Interest savings on Algoma's first mortgage notes, reductions in
employment costs, reductions in pension costs and other
contributions are expected to result in significant future cash
savings, particularly in 2002 and 2003 when estimated savings
will approximate $150 million per year.
Under the Plan, the holders of the existing $550 (U.S. $349)
million first mortgage notes will receive new notes for $150
million and 75% of the new common shares of the Company. The
existing common shares will be cancelled.
The Plan is conditional on the agreement of the employees to new
collective bargaining agreements. Changes will include wage and
benefit reductions, reduced vacation, pension benefit changes
and manning reductions. The employees will receive 20% of the
new common shares.
Algoma is finalizing arrangements with the Pensions Benefit
Guarantee Fund to restructure Algoma's pension plan liabilities
in a manner that continues to provide retirees with their
current level of pension benefits. Future indexing for retirees
will be eliminated under the Plan.
Under the Plan, the unsecured creditors will receive a total of
$2 million in cash and 5% of the new common shares in
satisfaction of their claims.
The Plan contemplates a new board of directors consisting of 10
directors, including three nominated by the United Steelworkers
of America. The new directors will be designated in the Court
order that sanctions the Plan.
The Plan must be approved by each of the classes of creditors of
Algoma. Materials for the meetings, including proof of claim
forms, will be sent by mail and posted on Algoma's web site
following receipt of directions from the Court. The mailing date
is expected to be in early November. The meetings are expected
to be held in early December.
Hap Stephen, Algoma's Chief Restructuring Officer said, "I am
very pleased that Algoma has reached the stage of filing a plan.
We have been engaged in intensive negotiations with the
stakeholder groups and there is full appreciation of the
contributions that are needed to restore Algoma to financial
health."
Algoma Steel Inc., based in Sault Ste. Marie, Ontario, is
Canada's third largest integrated steel producer. Revenues are
derived primarily from the manufacture and sale of rolled steel
products including hot and cold rolled sheet and plate.
AMR CORPORATION: Records $525 Million Third Quarter Net Loss
------------------------------------------------------------
Citing the disastrous financial effects of the September 11
terrorist attacks and the continuing weakness of the U.S.
economy, AMR Corp. (NYSE: AMR), the parent company of both
American Airlines, Inc. and TWA Airlines LLC, reported a third
quarter net loss of $525 million before special items. This
compares with net earnings of $322 million in the third quarter
of 2000.
"With the economy weak and fuel prices still relatively high, we
and the rest of the industry were experiencing a very difficult
financial quarter even before the September 11 attacks," said
Don Carty, AMR's chairman and chief executive officer. "But the
attacks and their aftermath further weakened traffic and had a
staggering effect on our overall financial performance,
producing the largest quarterly loss in our long and proud
history."
In addition to the operating losses caused by the attacks and
reflected in the $525 million loss before special items, the
company recorded several special charges and a special gain, all
as a direct result of September 11. First, AMR recorded special
charges of $397 million, as outlined in the chart below. Second,
the company recorded a credit of $508 million for government
financial-aid payments associated with the special charges and
lost revenue. Including these items, AMR recorded a loss of $414
million for the third quarter.
Carty said AMR took a number of steps to respond swiftly to the
crisis. First, American cut its daily flight schedule by about
20 percent to better align its capacity with reduced demand.
Second, the company advanced the retirement of older aircraft
and deferred delivery of new aircraft, sharply reducing capital
spending. Costs were further cut by closing facilities, trimming
food service, and aggressively reducing overhead.
Additionally, in a move Carty described as "sad and
exceptionally painful," AMR eliminated the equivalent of about
20,000 jobs around its system. The company took steps to limit
the number of people affected by the reductions, and used a
portion of the federal aid payments to put together a package of
payments and other benefits for those who were affected.
Also as part of the cost-cutting effort, Carty announced that he
and the entire Board of Directors would take no compensation for
the rest of 2001, and that every senior officer and officer of
the company had taken voluntary paycuts. AMR also created an
"American Heroes" program that allows employees to take
voluntary pay reductions to help the company.
"We are in the midst of the worst financial crisis in the
history of the industry," Carty said, "and yet we have many
formidable strengths as we manage our way through the crisis and
look to the future. Our brand is strong, our global route
network is intact, we have an excellent fleet, we are the only
carrier with more legroom throughout coach, AAdvantage remains
the industry's premier frequent flyer program, and we have the
most dedicated corps of employees in the business.
"All this gives us a solid base for winning back our customers,
which in the end will be the key to resolving our financial
challenges," Carty said.
AT HOME: Engages O'Melveny & Myers as Bankruptcy Counsel
--------------------------------------------------------
A team of O'Melveny & Myers lawyers, including Robert White,
Suzzanne Uhland and Michael P. Whalen recently counseled At Home
Corporation d/b/a Excite@Home and its subsidiary companies in a
chapter 11 bankruptcy filing in the Northern District of
California, San Francisco, after a slump in media advertising
put the Internet company in danger.
Excite@Home offers broadband Internet access to more than 3.6
million residential customers and more than 12,000 businesses
using high-speed cable modem and DSL (digital subscriber lines).
The O'Melveny team stepped in to provide support and direction
in restructuring and bankruptcy counseling after the company
experienced heavy losses in its media business and faced
possible delisting from the Nasdaq exchange.
"The filing will protect the company's broadband business and
financial stakeholders throughout the restructuring period,"
said Suzzanne Uhland, a bankruptcy and restructuring partner in
the firm's Newport Beach office. Michael P. Whalen, a corporate
partner in the firm's Menlo Park office who has represented
Excite@Home for several years, stated that "Chapter 11 should
allow the company to go through an orderly sale of its assets
and help ensure that its customers will transition to a new
Internet provider without a disruption in service."
O'Melveny & Myers maintains 13 offices around the world. The
firm's expertise spans virtually every area of legal practice,
including Mergers and Acquisitions; Capital Markets; Banking and
Finance, Entertainment and Media; Copyright, Trademark and
Internet; Patent and Technology; Trade and International Law;
Labor and Employment; Litigation; White Collar; Real Estate and
Project Development and Finance; Tax and Bankruptcy.
AT HOME: AT&T Removes Directors From Board
------------------------------------------
At Home Corporation d/b.a Excite@Home has been notified by AT&T
that AT&T has removed C. Michael Armstrong, Frank Ianna, Charles
H. Noski and Daniel E. Somers from the board of directors of
Excite@Home, and that AT&T has irrevocably relinquished its
rights to replace these directors and to otherwise appoint or
designate additional directors that would constitute a majority
of Excite@Home's board of directors, effective October 1, 2001.
The two remaining directors elected by AT&T, Mufit Cinali and
John C. Petrillo, will continue to serve on the board.
This announcement is not expected to have an impact on the
pending Asset Purchase Agreement between Excite@Home and AT&T.
About Excite@Home
Excite@Home is the leading provider of broadband, offering
consumers residential broadband services and businesses high-
speed commercial services. Excite@Home has interests in one
joint venture outside of North America delivering high-speed
Internet services and three joint ventures outside of North
America operating localized versions of the Excite portal.
ATLANTIC COAST: Boosts Regional Jet Services To 10 Cities
---------------------------------------------------------
Atlantic Coast Airlines (ACA)(NASDAQ/NM: ACAI), the Dulles, VA-
based regional carrier that operates as United Express in the
Eastern and Midwestern United States, and as Delta Connection in
the Eastern U.S. and Canada, has announced anticipated capacity
levels for November and December, while recapping previously-
announced schedule additions effective October 31, 2001.
Beginning October 31st, ACA will offer United Express regional
jet service to the following ten cities from Chicago O'Hare
International Airport (ORD):
- Allentown, PA (ABE)
- Greensboro, NC (GSO)
- Indianapolis, IN (IND)
- Knoxville, TN (TYS)
- Norfolk, VA (ORF)
- Oklahoma City, OK (OKC)
- Portland, ME (PWM)
- Raleigh/Durham, NC (RDU)
- Rochester, NY (ROC)
- White Plains, NY (HPN)
Effective that same date, ACA will also begin new United Express
regional jet service from Washington Dulles International
Airport (IAD) to Birmingham, AL (BHM).
As part of its Delta Connection program, ACA will redeploy four
of its Fairchild-Dornier 328JET aircraft from the Northeast to
expand its service into Delta's Cincinnati hub, effective
November 1st. The company is continuing to operate its full
Delta Connection schedule, as it has since October 3rd.
Based on the above schedule changes, ACA anticipates that its
November systemwide schedule will generate approximately 324
million available seat miles (ASMs), which is less than
1% below capacity projected by the company for that month prior
to September 11, 2001.
As a result of increased aircraft utilization planned for
December, ACA estimates that it will produce 345 to 355 million
ASMs for that month, which would be slightly higher than the
capacity projected by the company for December prior to
September 11th.
The company expects its number of systemwide departures to be
about 14% lower in November and approximately 4% lower in
December than had been projected prior to September 11th.
BETHLEHEM STEEL: Court Allows Use of Prepetition Bank Accounts
--------------------------------------------------------------
Prior to Petition Date, Bethlehem Steel Corporation and its
debtor-affiliates maintained 53 Bank Accounts.
The Debtors believe that their transition to chapter 11 will be
smoother and more orderly, with a minimum of harm to operations,
if all their existing bank accounts are continued post-petition,
according to Jeffrey L. Tanenbaum, Esq., at Weil, Gotshal &
Manges LLP, in New York, New York.
"It is provided, however, that checks issued or dated prior to
the Petition Date will not be honored, absent a prior order of
the Court," Mr. Tanenbaum adds.
Mr. Tanenbaum explains that all parties-in-interest will be best
served if the Debtors are allowed to preserve business
continuity as well as avoid the disruption and delay to the
Debtors' payroll activities and the Debtors' business that would
inevitably result from closing the Bank Accounts and opening new
accounts.
Considering the numerous bank accounts maintained by the
Debtors, Mr. Tanenbaum warns of the confusion that would result
if the Court will not allow the Debtors to maintain its existing
bank accounts. The disruption will not be good for the Debtors'
rehabilitative efforts, Mr. Tanenbaum notes.
Thus, the Debtors ask Judge Lifland to waive the requirements of
the United States Trustee "Operating Guidelines and Financial
Reporting Requirements Required in All Cases Under Chapter 11,"
which mandate, among other things, the closure of the Debtors'
pre-petition bank accounts, the opening of new bank accounts and
the immediate printing of new checks with a "Debtor-in-
Possession" designation on them.
* * *
In response, Judge Lifland authorizes the Debtors to:
(i) designate, maintain, and continue to use any or all of
their existing Bank Accounts in the names and with the
account numbers existing immediately prior to the
commencement of their chapter 11 cases,
(ii) deposit funds in and withdraw funds from such accounts
by all usual means including, without limitation,
checks, wire transfers, Automated Clearing House
transfers and other debits, and
(iii) treat their pre-petition Bank Accounts for all purposes
as Debtor-in-possession accounts;
The Court also directs all banks, with which the Debtors
maintain Bank Accounts as of Petition Date, to continue to
maintain, service and administer such bank accounts. However,
Judge Lifland makes it clear that he is not authorizing any bank
to honor any check issued or dated prior to the filing of the
Debtors' chapter 11 cases, except as otherwise provided by
further order of the Court. (Bethlehem Bankruptcy News, Issue
No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900)
CHIQUITA BRANDS: Putting Pieces in Place for a Prepack Filing
-------------------------------------------------------------
Chiquita Brands International, Inc. (NYSE: CQB) continues to
make progress in negotiation with bondholder committees
regarding an initiative announced in January to restructure the
public debt of Chiquita Brands International, Inc., which is a
parent holding company without business operations of its own.
The Company's operations will continue as normal throughout the
restructuring process, which will neither involve nor affect the
Company's operating subsidiaries. The restructuring will
include the conversion of a significant portion of CBII's debt
into common equity, which will result in a substantial dilution
of the interests of Chiquita's common and preferred
stockholders. If an agreement on such a restructuring plan is
reached, the Company would present the plan for judicial
approval under Chapter 11 of the U.S. Bankruptcy Code, which
provides for companies to reorganize and continue to operate as
going concerns. The Company is not currently in a position to
predict the outcome or timing of these negotiations.
reported third quarter results.
Chiquita reports that net sales for the third quarter of 2001
increased $43 million to $509 million. The improvement in third
quarter results occurred in the Company's Fresh Produce business
primarily as a result of higher volume and higher pricing in
European and North American markets. The benefit of higher
pricing more than offset the negative effect of weak European
currencies in relation to the U.S. dollar. The Company's
Processed Foods operating results declined primarily due to
lower market pricing for canned vegetables in the third quarter
of 2001, when the industry was reducing inventory levels.
The third quarter unusual charges include $9 million for the
closure of non-competitive farms that represented about 20% of
the Company's Armuelles, Panama, banana production division.
The Company has since reached agreement with the local labor
union regarding work practices in its remaining farms in
Armuelles. The new agreement should improve the quality,
productivity and cost performance of the remaining farms.
However, additional improvements will be needed in order for the
remaining farms to become cost-competitive in world markets.
Chiquita is a leading international marketer, producer and
distributor of quality fresh fruits and vegetables and processed
foods.
COMDISCO INC.: HP Comes Back With a $750 Million Bid
----------------------------------------------------
Hewlett-Packard Company (NYSE:HWP) announced it has submitted a
bid of $750 million to purchase substantially all of the assets
of Comdisco, Inc.'s Availability Solutions (AS) operations.
The HP bid is fully supported by the Official Committee of
Unsecured Creditors and has been approved by the Comdisco board
of directors. Both the creditors committee and Comdisco have
withdrawn their support of a prior bid by SunGard Data Systems
Inc. The Department of Justice has also filed a civil antitrust
lawsuit to block SunGard's acquisition.
HP's bid is still subject to final approval at a sale hearing of
the U.S. Bankruptcy Court for the Northern District of Illinois.
About HP
Hewlett-Packard Company -- a leading global provider of
computing and imaging solutions and services -- is focused on
making technology and its benefits accessible to all. HP had
total revenue from continuing operations of $48.8 billion in its
2000 fiscal year. Information about HP and its products can be
found on the World Wide Web at http://www.hp.com
COMDISCO INC.: Court Delays Sale Hearing To November 7
------------------------------------------------------
SunGard (NYSE:SDS), a global leader in integrated IT solutions
and eProcessing for financial services, announced that the
United States Bankruptcy Court for the Northern District of
Illinois postponed the hearing to approve the sale of Comdisco's
Availability Solutions business.
The Bankruptcy Court hearing has been rescheduled for November
7, 2001. SunGard's $825 million cash bid for the Availability
Solutions business had been announced previously by Comdisco as
the highest or otherwise best received in the court-authorized
auction held on October 11, 2001 and was fully supported by both
the Official Committee of Unsecured Creditors and the Official
Equity Committee.
Before the hearing, the Creditors' Committee withdrew their
support of SunGard's bid after receiving a new $750 million bid
by Hewlett Packard Company, which was characterized as
unsolicited. The Equity Committee still supports SunGard's bid.
James L. Mann, SunGard's chairman and chief executive officer,
stated, "We are disappointed with the delay in bankruptcy court
approval since our bid is the superior bid and will benefit
Comdisco's customers, creditors and equity holders. We will
explore all avenues of completing this acquisition, including
increasing our bid."
Company officials also announced that SunGard, Comdisco and the
U.S. Department of Justice have agreed to an accelerated
schedule to resolve the Justice Department's case against
SunGard's acquisition of Comdisco's Availability Solutions
business. The deadline for resolving the case is November 15,
2001.
Mr. Mann said, "We believe that the government's case is without
merit, and we look forward to proving that in court. This
transaction is procompetitive, since it will assure that there
is a strong, independent business continuity vendor to compete
with enhanced services and reduced costs against the hardware
giants. The government's assertion that the acquisition will
raise prices and lower service quality is absurd."
About SunGard
SunGard (NYSE:SDS) is a global leader in integrated IT solutions
and eProcessing for financial services. SunGard is also the
pioneer and a leading provider of high-availability
infrastructure for business continuity. With annual revenues in
excess of $1 billion, SunGard serves more than 20,000 clients in
over 50 countries, including 47 of the world's 50 largest
financial services institutions. Visit SunGard at
http://www.sungard.com
COOPER IND.: Danaher Withholds Offer Due To Asbestos Litigation
---------------------------------------------------------------
Danaher Corp. wouldn't submit a formal bid for Cooper Industries
because of concerns over Cooper's exposure to asbestos
litigation, Dow Jones reported. In August, Cooper was forced to
put itself up for sale due to an unsolicited bid by Danaher. The
report, which cites people familiar with the matter, said this
doesn't signal the end of the deal, but simply Danaher's need to
obtain more information. Part of Danaher's asbestos worry
relates to Federal-Mogul Corp., which bought Cooper's automotive
business in 1998. Cooper never made asbestos, but sold products
containing it. Federal-Mogul, which recently filed for
bankruptcy protection, had said it would underwrite Cooper for
liabilities associated with the business. However, since filing
for chapter 11, Federal-Mogul has said it may not honor
indemnity claims relating to the Abex brand of automotive brake
products.
Cooper reported a drop in third-quarter earnings and lowered its
fourth-quarter outlook, citing what it called one of the most
severe U.S. manufacturing slowdowns in the last 20 years. The
Houston-based electrical products maker said it expects to earn
65 cents a share in the year's final quarter as its markets
weaken further. It also will be ramping up production in Mexico
and reducing its inventories. Cooper had been expected to earn
66 cents to 74 cents in the fourth quarter according to a survey
of four analysts by Thomson Financial/First Call. The company
declined to comment on its review of strategic options,
including a possible sale, although it said the process should
be completed "in a matter of weeks, not months." (ABI World,
October 24, 2001)
EXODUS COMM: Obtains Authority To Fund Foreign Units' Operations
----------------------------------------------------------------
Through their foreign subsidiaries, the Exodus Communications,
Inc. Debtors conduct extensive international operations through
nine Internet Data Centers located in Europe, Japan, Canada, and
Australia. The Debtors' foreign operations are a critical part
of the Debtors' overall business strategy and offer excellent
growth and revenue potential as more customers develop web sites
to compete more effectively in a rapidly integrating world
economy.
However, due to the recent acquisition and capital investment in
the foreign operations, the Debtors are required to fund the
foreign operations until such operations are able to generate
positive cash flow. The Debtors expect that the foreign
subsidiaries they will continue to operate will be financially
self-sufficient within the next 6 to 8 months. Accordingly, the
Debtors estimate that they will be required to fund
approximately $20,000,000 of operating expenses of their non-
Debtor foreign subsidiaries over the next 6 to 8 months.
By motion, the Debtors ask for authority to fund operations
and wind-down costs of foreign subsidiaries in an aggregate
amount not to exceed $12,000,000, and after issuance of a final
order, authority to fund an additional $13,000,000 in the
aggregate of Foreign Fundings, thereby increasing the Foreign
Funding Aggregate Limit to $25,000,000.
The Debtors also propose that within 3 business days following
the formation date of the Official Committee of Unsecured
Creditors, the Debtors shall report all Foreign Funding to the
Committee, provided that in no event shall such Foreign Funding
actually funded prior to formation of the Committee exceed $3
million in the aggregate.
The Debtors propose further that immediately following the
formation of the Committee, the Debtors shall provide written
notice by facsimile to counsel for the Committee of any
additional Foreign Funding proposed to be funded by the Debtors.
If no written objection by the Committee to the proposed Foreign
Funding is served by facsimile upon counsel for the Debtors
within 3 business days after service of the Funding Notice with
respect to such proposed Foreign Funding, the Debtors shall be
authorized without further order of Court to fund such Foreign
Funding subject to the applicable Foreign Funding Aggregate
Limit. If a written objection by the Committee to a proposed
Foreign Funding is timely served upon counsel for the Debtors,
the Debtors shall not be authorized to fund such proposed
Foreign Funding without further order of the Court.
In addition, until such operations become financially self-
sufficient, the Debtors request authority to:
A. defer enforcement of intercompany obligations owed by foreign
subsidiaries,
B. remit collections received by the Debtors on account of the
foreign subsidiaries to such entities, and
C. subordinate any intercompany claim to claims of foreign
creditors.
Mark S. Chehi, Esq., at Skadden Arps Slate Meagher & Flom in
Wilmington, Delaware, tells the Court that without funding, the
Debtors will be forced to shut down the foreign subsidiaries as
they will be unable to procure goods and services from vendors
servicing the foreign subsidiaries. Moreover, Mr. Chehi submits
that foreign vendors will likely commence insolvency proceedings
against the foreign subsidiaries upon default of payment
obligations.
Such a cessation of foreign operations would be disastrous for
the Debtors for these three principal reasons:
A. Cessation of business will severely disrupt the ability
of many of the Debtors' customers to operate web sites housed
overseas, and thereby severely damage the Debtors' goodwill with
their customers. With respect to the Debtors' customers who
receive services from the Debtors both in the United States and
overseas, the Debtors' inability to provide services overseas
may lead such customers to migrate to other service providers.
B. Many of the network services provided by the Debtors in
the United States rely upon international networks operated by
the foreign subsidiaries. If foreign networks and services are
disrupted, the Debtors' domestic network will not function
properly and many of the Debtors' customers may seek to migrate
to alternative service providers.
C. The Debtors will lose their promising foreign operations
which are a valuable asset of the Debtors' estates for little or
no value.
As part of their overall restructuring efforts, the Debtors have
identified several foreign operations that may be closed. If
such operations are closed, Mr. Chehi informs the Court that the
Debtors intend to wind down these operations and promptly
liquidate their assets in accordance with the laws of the
countries in which subsidiaries operate. The Debtors estimate
that the costs associated with wind down of these entities will
be approximately $5,000,000.
Without such funding, the Debtors believe the managers,
directors, and officers of the foreign subsidiaries, many of
whom are officers of the Debtors or other operating foreign
subsidiaries, may be exposed to personal and criminal liability.
In addition, without an orderly liquidation, Mr. Chehi contends
that the Debtors' recoveries from these assets will be reduced
and will not be able to transition customers from the closed
IDCs to other operating IDCs. Mr. Chehi argues that this will
negatively impact the Debtors' goodwill with their customers.
Accordingly, the Debtors believe that payment of the wind-down
costs is in the best interests of the Debtors, their estates and
stakeholders.
Mr. Chehi states that funding of the foreign subsidiaries is
justified under the necessity of payment rule, in which a
bankruptcy court will permit a reorganizing debtor to make post-
bankruptcy payments on pre-bankruptcy claims when payment is
necessary to effectuate a successful reorganization. Mr. Chehi
asserts that other courts also have permitted a debtor-in-
possession to fund operations of foreign subsidiaries and
shutdown costs where such payment was critical to the Debtors'
reorganization.
Finding the relief requested necessary and in the best interest
of the Debtors and their estates, their creditors and other
parties-in-interest, Judge Robinson grants an interim order
authorizing the Debtors to fund operations and wind-down costs
of non-debtor foreign subsidiaries subject. (Exodus Bankruptcy
News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
EXODUS COMMS: Liquidating Four European Facilities
--------------------------------------------------
Exodus Communications, Inc. (OTC Bulletin Board: EXDSQ)
announced actions that affect a limited number of its European
operations as part of the company's overall plan of
reorganization to provide a suitable capital structure for long-
term growth and profitability.
On September 26, Exodus filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in
the United States. The filing included the company's domestic
operations headquartered in Santa Clara, Calif. and certain
other domestic subsidiaries. In conjunction, the company
received a commitment for up to $200 million in debtor-in-
possession (DIP) financing from GE Capital that will be used to
fund post-petition operating expenses and supplier and employee
obligations.
Thursday, Exodus announced it is liquidating four non-
operational facilities, one each in Munich and Amsterdam, and
two in Dublin. None of the facilities is functioning currently,
and no customers or employees are affected by the liquidations.
Exodus also has filed for reorganization of its entity in
Amsterdam, which will provide protection from creditors and
allow for uninterrupted operations as the company provides
service to customers and meets its obligations to customers and
employees.
"Exodus remains committed to serving the global marketplace,"
said L. William Krause, Exodus Chairman and Chief Executive
Officer. "Our restructuring actions, both in the U.S. and
internationally, are designed to ensure that we have the
wherewithal to do that. In assessing our international
operations, cost structure and potential for profitable growth,
it became clear that we were over-invested in non-operational or
under-utilized facilities in certain markets. To continue these
entities, or to fail to provide adequate protection to help
ensure uninterrupted service to our customers, would be
inconsistent with our restructuring plans, and with managing
Exodus to profitability."
Exodus has international operations in Frankfurt, London, Paris,
Melbourne, Sydney, Hong Kong, Tokyo and Toronto. These
operations are unaffected by the plans announced Thursday and
continue business as usual.
Focus on Long-Term Profitable Growth
Exodus, as a market leader in complex Web hosting and Internet
operations outsourcing services, enjoyed first-mover status in
its category, building one of the world's largest privately-
managed data networks and locating dozens of state-of-the-art
Internet Data Centers (IDCs) in more high-demand locations than
any other hosting service provider.
"In the past, we sacrificed profitability in exchange for growth
and market share, over-expanding in some areas in advance of
demand, and not anticipating the decline as the dot.com bubble
burst and the economy weakened," Krause said. "Our top priority
now is to serve our existing customers, better than ever, so
they entrust us with more of their business. Our goal is to run
a profitable business without sacrificing any of the unique
value we bring to customers and the marketplace."
Exodus Communications is the leading provider of managed hosting
services for enterprises with mission-critical Internet
operations. The company offers sophisticated system and network
management solutions along with professional services to provide
optimal performance for customers' Internet infrastructures.
Exodus manages its network infrastructure via a worldwide
network of Internet Data Centers (IDCs) located in North
America, Europe, Asia and Australia. More information about
Exodus can be found at http://www.exodus.net
FANTOM TECHNOLOGIES: Directors Crockett and Kelman Resign
---------------------------------------------------------
Fantom Technologies Inc. (TSE: FTM; NASDAQ: FTMTF) announced
that two directors of the Company, Arthur Crockett and Kenneth
Kelman, have resigned.
FEDERAL-MOGUL: Dissolving Receivables Securitization Facility
-------------------------------------------------------------
Pursuant to a Receivables Purchase Agreement (RPA) dated June
13, 2001, Federal-Mogul Canada Ltd.; Federal-Mogul Piston Rings,
Inc., Federal-Mogul Powertrain, Inc., Federal-Mogul Ignition
Co., Federal-Mogul Products Inc., sold all newly arising trade
accounts receivable on a daily basis to the Federal-Mogul
Corporation Debtors. In turn, the Debtors sold all receivables
it had acquired as a result of the RPA to F-M Funding, a limited
purpose subsidiary that has been structured as bankruptcy-remote
from the Debtors, pursuant to the Receivables Sale and
Contribution Agreement (RSCA). Finally F-M Funding sold
interests in the trade receivables it had acquire to Blue Ridge
Asset Funding Corporation and Falcon Asset Securitization
Corporation pursuant to a Receivables Interest Purchase
Agreement (RIPA).
Pursuant to these agreements, F-M Funding provided working
capital to the Debtors by purchasing a significant portion of
the accounts receivable generated by the Debtors in the ordinary
course of business. F-M Funding, in turn funded its purchase of
receivables by borrowing money in the capital markets. As of
petition date, F-M Funding owned receivables with an aggregate
face amount of $550,000,000 and was in turn, obligated to its
lenders for approximately $265,000,000.
By motion, the Debtors requests the Court's approval in:
A. loaning of approximately $265,000,000 by the Debtors to F-M
Funding so that it may retire certain of its debt
obligations;
B. following retirement of such debts, the merger of F-M Funding
to the Debtors.
James O'Neill, Esq., at Pachulski Stang Ziehl Young & Jones,
P.C., in Wilmington, Delaware, contends that the relief
requested is necessary in order to permit the Debtors to
reacquire approximately $550,000,000 of outstanding accounts
receivable sold by the Debtors to F-M Funding so that the
Debtors can pledge these accounts receivable to Chase Manhattan
Bank, the Debtors' proposed debtor-in-possession lenders.
Mr. O'Neill explains that the Debtors' borrowing capacity under
the DIP facility is governed by reference to a borrowing base
consisting of accounts receivable owned by the Debtors. With
respect to their interim borrowing needs, Mr. O'Neill says that
the Debtors are unable to comply with the negotiated borrowing
base formula unless the Debtors are permitted to pledge to Chase
the $550,000,000 in sold receivables. However, Mr. O'Neill
submits that F-M Funding cannot pledge any of the sold
receivables so long as obligations remain outstanding to the
securitization lenders.
Mr. O'Neill relates that Chase is prepared to advance to the
Debtors under the DIP facility the incremental sums required to
satisfy the obligations due to the securitization lenders. Once
the securitization lenders have been paid, Mr. O'Neill informs
the Court that the Debtors will merge F-M Funding into the
Debtors and the $550,000,000 of sold receivables will
immediately become available as collateral to secure payment of
the DIP facility. Importantly, the Debtors' interim borrowing
requirements can then be met with in formula borrowings.
Moreover, since the Debtors have been permitted to use the
proceeds realized from collections on the sold receivables, Mr.
O'Neill asserts that the Debtors' incremental interim borrowing
needs will only increase by approximately $50,000,000. (Federal-
Mogul Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
GLOBAL TECHNOVATIONS: Liquidates Onkyo America Subsidiary
---------------------------------------------------------
Global Technovations, Inc. (AMEX:GTN) (GTI) announced that Onkyo
America, Inc. (OAI), its wholly-owned subsidiary, had entered
into an agreement with OAI's bankers and OAI's principal
customer, to initiate and fund the orderly liquidation or sale
of the OAI, located in Columbus, Indiana.
This decision was made as the result of certain events that made
it clear that OAI could no longer meet the needs of its
customers in the competitive United States automotive industry.
The liquidity issues facing OAI were not adequately addressed by
cost savings initiatives implemented by OAI management and the
additional $4 million invested by GTI during the last twelve
months. OAI is currently in negotiations with all of its major
customers to enter into comparable type agreements. As a result
of entering into this agreement, GTI expects to write-off its
investment in OAI and record a one-time charge against earnings
that could exceed $20,000,000 for the period ended September 30,
2001.
Will Willis, GTI's Chairman and CEO, stated, "We acquired 100%
of OAI from Onkyo Japan and affiliates on August 31, 2000. Since
the acquisition, we have done everything possible to attempt to
overcome operating issues. Additionally, we implemented numerous
other business enhancement efforts. This included GTI investing
an additional $4,000,000 in cash and spending considerable
management time and resources to support OAI operations.
Unfortunately, we were not successful. Considering the
circumstances, we feel that the course of action we are now
pursuing provides OAI's operations and customers with the least
disruption and maximizes OAI's potential enterprise value during
an orderly liquidation process or a sale."
Mr. Willis continued, "Although we are very disappointed about
this failed venture, the OAI actions that we have taken should
not significantly impact current OSA business building
initiatives. The events at Onkyo have been a tremendous
diversion of senior GTI management time and resources away from
its OSA business. We can now return to our principal mission,
which is commercializing the OSA and providing stockholder
value."
Global Technovations, Inc., develops, assembles, and markets the
patented MotorCheck and TruckCheck On-Site Analyzer, "an oil
analysis mini-lab in a box", solid state spectroscopic analyzers
for liquid petroleum marker detection systems, the
PetroAnalytics line of diesel fuel and gasoline properties
analyzers for the automotive, truck and heavy-duty equipment
service markets.
As of June 30, 2001, the company's balance sheet reflects it's
insolvent with total liabilities of $59.8 million exceeding
total assets of $59.3 million. Current debt amounts to $35.9
million against current assets of $14.9 million.
For more information, visit http://www.Globaltechnovations.com
HOLT GROUP: Agrees to Provide Panel with Documents by Month-End
---------------------------------------------------------------
Holt Group Inc. assured its committee of unsecured creditors it
will provide any document the committee deems necessary to
helping it formulate and file its own plan of reorganization, by
month's end. The committee believes many of the Gloucester City,
N.J.-based privately held cargo services company's assets have
been and continue to be transferred between the company and its
affiliates. (ABI World, October 24, 2001)
HOMESEEKERS.COM: Director Says Company Has No Plans to Disappear
----------------------------------------------------------------
Thomas Chaffee, the sole board director of HomeSeekers.com Inc.
(OTC Bulletin Board: HMSK), a leader in online real estate
technology and services, issued a statement assuring
shareholders, customers and employees that the company plans to
remain a going concern.
In an open letter to "Friends of HomeSeekers," Chaffee stated:
"This has been an extremely difficult time fraught with emotion
and replete with seemingly insurmountable challenges. The
confluence of events, resignations and the acrimony of a breakup
played out in a public forum has led to wild, unfounded
speculation.
"As the sole remaining director of HomeSeekers, I feel it is
time to reassure our friends and customers that there is
absolutely no gap in leadership. We stand here with the finest
in real estate technology, the most capable and committed
employees and a substantial market share. We intend to not only
survive, but also to thrive.
"As the sole point of fiduciary responsibility at the director
level, it bears notice that I take my commitment to our
shareholders and our business very seriously. I am giving my all
to protecting shareholder interests to whatever extent possible.
"I recognize that there has been a credibility gap with
HomeSeekers management in the past. You can and should expect
the team running your company to operate with absolute
integrity. In that context, I want to assure you that I have my
hands firmly on the wheel as we execute our plan to successfully
grow our business.
"I hope for the end of hyperbole at all levels, in lieu of this
simple message: It is our sole intention to transform
HomeSeekers into a successful and profitable growth company. Let
me repeat: We are serving our customers, paying our employees
and developing new solutions that will revolutionize our
industry.
"Lord Byron said that 'adversity is the first path to truth,'
and so it shall be for HomeSeekers.
"Despite the news and rumors you may have heard, this company
has no plans to disappear. We will fight."
HomeSeekers.com, Incorporated is a leading provider of
technology to North American 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 Web site,
http://www.homeseekers.com
IBS INTERACTIVE: Pender Newkirk Replaces BDO Seidman as Auditors
----------------------------------------------------------------
IBS Interactive, Inc., notified BDO Seidman LLP they would no
longer be engaged as the Company's auditors and appointed Pender
Newkirk Company, a local Tampa firm, as its independent
accountant for the remainder of 2001.
ICG COMM.: Transwestern Presses For Decision on Colorado Lease
--------------------------------------------------------------
Acting on behalf of Transwestern Arapahoe, LLC, Kurt F. Gwynne
of the Wilmington firm of Reed Smith LLP as local counsel, and
Donald A. workman and Patrick J. Kearney of the Washington DC
firm of Foley & Lardner, tell Judge Walsh that Transwestern owns
real property and an office building located at 6555 South
Kenton Street, Englewood, Colorado, and asks Judge Walsh to
compel ICG Communications, Inc. to make a decision about the
assumption or rejection of the commercial lease of that property
and building.
Transwestern reminds Judge Walsh that, while he has extended the
deadline for the Debtors' assumption or rejection decision
several times, he has done so without prejudice to the rights of
lessors to ask for a shorter period. The time limitation in the
Bankruptcy Code is intended to protect the owners of commercial
property from a lengthy delay or uncertainty in the decision-
making process. Congress intended the requirement of a timely
assumption or rejection decision to prevent parties in lease
relationships from being left in doubt concerning their status
vis-a-vis the estate. Accordingly, a party which cannot afford
the uncertainty of the assumption/rejection decision during the
pendency of a Chapter 11 case may request that the Court order
the Debtors to make a decision by a date certain. The Court must
require that the decision be made within a time period which is
reasonable given all of the parties' circumstances. In reaching
this decision, the Court should consider the nature of the
interests at stake, the balance of the hurt to the litigants,
the safeguards afforded those litigants and whether the action
taken is so derogatory of Congress' scheme that it might be said
to be arbitrary.
A Year's Delay versus Now!
Transwestern says that the passage of time favors granting its
motion. More than 200 days have elapsed since the Petition Date.
While the Debtor is part of a large and complex business, the
passage of time is far in excess of the Congressionally mandated
60-day period. Further, the current extension delays the
decision for a year after the Petition Date.
It Isn't That Difficult
The nature of the interests at stake in this case involves the
Debtor's delay in making a what Mr. Gwynne describes as a "less
than complex business decision" to assume or reject a single
lease which is weighed against Transwestern's ability to market
the Property. Thus, the balance of harm to the parties weighs
heavily in favor of Transwestern.
(1) The extended period of time in which the Debtors may
assume or reject its lease creates uncertainty about when and if
Transwestern will have to obtain a new tenant and, consequently,
incur expenses for marketing and building out the space for a
new tenant.
(2) Transwestern may market or may be in the process of
marketing the Property.
(3) Transwestern's ability to sell the property is tied
directly to its stabilized rent as weighed against leasing and
build-out expenses. This is because an investor who purchases
income producing property is essentially giving up a sum of
present dollars for the right to receive future dollars.
Assumption's Okay
Transwestern does not have an objection to the Debtor assuming
the lease in accordance with the Bankruptcy Code. However,
Transwestern cannot adequately market the property for sale when
uncertainty exists as to whether or not a large tenant will
remain in the leased premises.
Accordingly, this is a case where the Debtors will incur minimal
harm in undertaking to assume or reject the Lease. Transwestern,
on the other hand, may not be able to sell the property for an
extended period of time without the certainty of knowing whether
the lease will be assumed or rejected or may suffer economically
because the uncertainty negatively impairs the value of the
property.
For each of these reasons, Transwestern asks Judge Walsh to
order the Debtors to make a prompt decision and either assume or
reject this lease. (ICG Communications Bankruptcy News, Issue
No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900)
INFINIUM SOFTWARE: Shares Face Nasdaq Delisting
-----------------------------------------------
Infinium Software, Inc. (Nasdaq: INFM), a provider of Web-
integrated enterprise business solutions, requests a hearing
with The Nasdaq Stock Market to appeal a notice it received
regarding its continued listing compliance.
In its notice to the Company, Nasdaq informed Infinium that it
was no longer in compliance with Marketplace Rule 4310(c)(2)(B).
Pending a decision from the Nasdaq Listing Qualifications Panel,
Infinium's common stock will continue to trade on The Nasdaq
SmallCap Market.
Infinium is a provider of Web-integrated enterprise business
solutions that include: human resources, payroll, financial
management, customer relationship management, materials
management, process manufacturing, and business intelligence
analytics offerings optimized for the IBM eServer iSeries.
Infinium has over 1,800 customers worldwide representing a
variety of industries including: manufacturing, hospitality and
gaming, healthcare, transportation and distribution, retail, and
financial services. Founded in 1981, Infinium has offices
worldwide and is headquartered in Hyannis, Massachusetts. For
more information visit http://www.infinium.com
INSIGHT HEALTH: S&P Rates Proposed $200MM Senior Sub Notes at B-
----------------------------------------------------------------
Standard & Poor's assigned its single-'B' minus subordinated
debt rating to Insight Health Services Corp.'s proposed offering
of $200 million senior subordinated notes due 2011 under rule
144A with registration rights. At the same time, Standard &
Poor's assigned its single-'B' plus secured bank loan rating to
the company's $275 million senior credit facilities due in 2008.
In addition, Standard & Poor's withdrew its ratings on the
company's previously outstanding $100 million 9 5/8% senior
subordinated notes due in 2008 and its $150 million bank
facilities due in 2004, both of which have been repaid. Standard
& Poor's affirmed its corporate credit rating on Insight Health
Services at single-'B' plus. The outlook is stable.
The secured bank loan is rated single-'B'-plus, the same as the
corporate credit rating. Although the company's $275 million
bank loan is secured by the company's stock and the stock of its
subsidiaries, as well as all the assets of the company, in
Standard & Poor's simulated default scenario there is
insufficient collateral to recover the entire bank loan in the
event of a default. Nevertheless, given the nature of the
collateral, there is reasonable confidence of meaningful
recovery of principal, despite potential loss exposure on the
entire loan if fully drawn.
The speculative-grade ratings on Insight Health Services Corp.
reflect its leading position in the mobile- and fixed-site
imaging services field, offset by concerns regarding its niche
position in a narrow field and heavy debt burden.
Newport Beach, Calif.-based Insight Health Services is one of
the nation's leading independent diagnostic-imaging services
companies, providing diagnostic-imaging and management services
in 28 states, through a network primarily consisting of 90
mobile facilities with 82 MRI systems and 65 fixed-site centers
with 69 MRI systems. It has a meaningful presence in 11 regions,
with core markets that include California, Texas, New England,
the Midwest, and the Southeast.
Over the past several years, MRI has become a definitive
diagnostic tool and an acceptable first line diagnostic
procedure that ultimately reduces overall health care spending.
This recognition has led to double-digit industry volume growth
in the number of scans. Operators like Insight benefit from
increasing volume, particularly considering their high fixed-
cost structure. Operating margins at 40% appear high, but
Standard & Poor's remains concerned with the pressures to
contain health care spending as this business is highly
dependent on third-party reimbursement from the government and
managed care firms.
Insight had been highly leveraged because of prior ownership
changes. The Carlyle Group and GE Medical Systems sold their
approximate two-thirds ownership in the company for $468 million
to a group led by J.W. Childs, The Halifax Group, and
management. The buyout of the company is funded primarily
with debt, although the equity partners infused approximately
$100 million in new equity. Still, under this capitalization,
funds flow to total debt is expected to average about 15% and
interest coverage is expected to be about 2.7x, both consistent
with the current rating.
Outlook: Stable
Standard & Poor's does not expect the rating to change over the
intermediate term, as the company must continue to successfully
operate under a heavy debt burden in a challenging health care
environment.
INTERAXX TECHNOLOGIES: Plan Confirmation Hearing Set For Nov. 7
---------------------------------------------------------------
Interaxx Technologies, Inc. (OTC Bulletin Board: INAX) and its
wholly owned subsidiary Interaxx Television Network, Inc. have
filed their Second Joint Plan of Reorganization and Disclosure
Statement and are set for Chapter 11 Confirmation Hearing on
November 7, 2001. These filings may be reviewed at
http://www.newinteraxx.com
On August 1, 2001, Technologies entered into a merger agreement
with SunSpots International, Inc. of Seattle, Washington -
http://www.sunspotstickers.com-- and on August 10th, Television
agreed to merge with Xaos Tools, Inc. of Berkeley, California --
www.xaostools.com --. When approved by the Court, Sunspots and
Xaos Tools emerge as stand-alone, revenue- producing companies.
The creditors and shareholders of Interaxx are to receive shares
in each of the companies according to a distribution schedule
disclosed in the Plan. Ballots were mailed to all creditors and
shareholders and are also available by accessing
http://www.newinteraxx.com. Ballots must be received by the
Court no later than October 31, 2001.
The post confirmation operations of Technologies (SunSpots) are
concentrated in expanding the sales of SunSpots products.
SunSpots is the sole owner of a photo-chromic platform
technology that is protected by patent filings both domestically
and abroad. The first product using this technology is SunSpots,
a self-diagnostic, one inch round sticker that acts as an early
warning device to protect against sunburn, a primary cause of
malignant melanoma. Its second product is a sunscreen that is
self-applied from a hand held applicator. Recently, in addition
to Internet sales and those to smaller retailers, Sunspots was
awarded placement of its products into the 840 store Shoppers
Drug Mart, Canada's largest retail pharmacy chain --
http://www.shoppersdrugmart.ca.
Post confirmation, Television's (Xaos Tools') operations include
the roll- up of other compatible entities to increase revenue
and assets. Xaos Tools is a leading developer and marketer of
multi-platform graphic software products for graphics
professionals, business presenters and consumers. Xaos Tools has
scheduled the release of upgrades for its existing professional
workstation software and the introduction of new desktop modules
harvested from its prior technologies, development tools and
methodologies utilizing low cost, Rapid Application Development
(RAD).
These recent accomplishments are a continuation of efforts made
to generate business solutions for Interaxx that began in July
1997. The goal at that time was to assemble revenue-producing
operations that would lead to liquidity for the Interaxx
shareholders. Cybercast Technologies, Inc. was originally
engaged in 1997 as an outsource services provider in pursuit of
this goal. Cybercast continued this work in the background until
March 2001 when it joined with Back-in-the-Black Consulting
Services and formed a small group of creditors and shareholders
to finish what was started three years ago. The result is the
design of a structure and recovery model that led to the
composition of the Plan filed on September 5th 2001.
Confirmation of the Plan is dependent upon funding and there are
investment opportunities for qualified shareholders.
LODESTAR ENERGY: Walking Away from Indiantown Coal-Supply Deal
--------------------------------------------------------------
Lodestar Energy Inc. is asking a bankruptcy court for the
authority to reject a coal purchase agreement with Indiantown
Cogeneration LP, according to Dow Jones. Under the coal purchase
pact, Lodestar supplies all the coal for Indiantown
Cogeneration's 330-megawatt pulverized coal-fired cogeneration
plant in Indiantown, Fla., and disposes of ash produced at the
site. Power produced at the facility is sold to Florida Power
and Light under a power purchase agreement. A hearing on the
proposed contract rejection had been scheduled for Oct. 16,
before the U.S. Bankruptcy Court in Lexington, Ky. However,
Lodestar requested and was granted a deferral until Nov. 2 to
allow the company and the Indiantown partnership to negotiate
potential modifications to the agreement.
The Bethesda, Md.-based Indiantown Cogeneration said in the
filing that it's exploring alternative sources of coal supply in
case negotiations with Lodestar are unsuccessful and the
bankrupt company is permitted to terminate the contract. Five
creditors of Lodestar Energy and its Lodestar Holdings Inc.
parent filed an involuntary bankruptcy petition against the
companies, claiming that they weren't paying their bills as they
became due. The Lexington court converted Lodestar's case to a
voluntary chapter 11 filing on April 27. New York-based Lodestar
Holdings listed total assets of about $173.8 million and total
liabilities of about $307 million as of Jan. 31 in its most
recent quarterly report. The company hasn't filed a quarterly
report since March. (ABI World, October 24, 2001)
MAJESTIC INVESTOR: S&P Rates Proposed Senior Secured Notes at B
---------------------------------------------------------------
Standard & Poor's assigned its single-'B' rating to the proposed
$140 million senior secured notes due 2008 to be issued by
Majestic Investor Holdings LLC and its Majestic Investor Capital
Corp. subsidiary. These securities are expected to be privately
placed under Rule 144A. The notes will be secured by
substantially all current and future assets of the company and
will be structurally subordinate to the proposed bank facility.
A single-'B' corporate credit rating also was assigned to
Majestic Investor Holdings.
The outlook is stable.
Proceeds of the notes will be used to help fund the company's
acquisition of three casino properties from Fitzgerald's Gaming
Corp. (unrated entity). The transaction is expected to close by
the end of 2001, subject to financing.
Ratings reflect Majestic Investor's small cash flow base, high
debt levels, and competitive market conditions. These factors
are mitigated by the company's solid pro forma credit profile
for the rating and adequate financial flexibility.
Gary, Ind.-headquartered Majestic Investor, an unrestricted
subsidiary of Majestic Star Casino LLC (single-'B'/Stable/--),
upon consummation of the offering and closing of the
acquisition, will own and operate casino facilities in Tunica,
Miss.; Black Hawk, Colo.; and Las Vegas, Nev. Operating
performance in Tunica, the company's largest cash flow
contributor, has steadily improved over the past few years
despite an increasingly competitive market environment. The
property has benefited from its niche market position, more-
targeted marketing programs, and the addition of a 411-space
parking garage in mid-2000. While significant upside is not
expected, near-term downside risk is mitigated by an established
customer base.
The Black Hawk facility has been negatively affected over the
past few years as additional properties have opened and
increased the competitive environment. Operating results are
likely to remain pressured in the near term, as the depth of the
market will be tested with the opening of an additional facility
in late 2001. While the Las Vegas facility's cash flow has been
relatively steady over the past few years, it is a small overall
contributor, and upside potential will be minimal.
Pro forma for the offering and based on current operating
trends, EBITDA coverage of interest expense is expected to be
about 2 times, and total debt to EBITDA more than 4x. Upon
consummation of the offering, a management fee will be paid to
Barden Development Inc., an entity controlled by Majestic's
owner. Pro forma financial flexibility is adequate, with more
than $6 million in cash on hand, moderate maintenance capital
expenditures, and an expected $15 million revolver.
Outlook: Stable
Ratings stability reflects the expectation that Majestic
Investor will maintain its market positions and that the
company's overall financial profile provides some cushion
against potential increased competitive pressures in its
markets.
NCI BUILDING: S&P Affirms Low-B Ratings & Revises Outlook
---------------------------------------------------------
Standard & Poor's revised its outlook on NCI Building Systems
Inc. to stable from positive. All ratings on the company are
affirmed.
The outlook revision reflects Standard & Poor's expectation that
the continuing downturn in industrial construction and softening
in commercial construction will prevent NCI's credit measures
from strengthening over the intermediate term to levels
supportive of a higher rating. Nonetheless, NCI's ongoing
efforts to reduce costs and improve operating efficiency should
allow it to maintain a financial profile appropriate for the
current ratings.
The ratings reflect NCI 's leading market shares and competitive
cost position, offset by cyclical demand for the company's
products, volatile raw material costs, and an aggressive
financial risk profile.
With annual sales of about $1 billion, NCI is a leading U.S.
manufacturer of metal products used in nonresidential
construction. The company manufactures metal roof and wall
systems, overhead doors, and engineered building systems, which
consist of structural beams and panels that are welded and
roll-formed in a factory and shipped to a construction site
ready for assembly. In addition, NCI is one of the largest
independent providers of metal coil coating and painting
services for a wide variety of applications. While the metal
construction industry as a whole has favorable long-term
prospects, uncertainty about the economy is currently causing
construction project delays that are expected to persist in the
near-term (about 70% to 75% of NCI's products are used in new
construction).
Orders from new accounts have allowed NCI to fare somewhat
better than competitors in this challenging environment (metal
building industry shipments have declined about 20% so far this
year). However, the company's operating margins (before
depreciation and amortization) have fallen somewhat from the
mid-teens percent area, primarily due to lower volumes, price
competition in components, and higher energy costs.
NCI's capital structure is fairly aggressive with debt to
capital of 56%. The company's focus on cost reductions and
modest capital spending needs, along with working capital
improvements, should enable it to continue to generate
discretionary cash flow for debt reduction. As a result, debt to
EBITDA and funds from operations to debt should range between 3
times and 3.5x and 15% to 20%, respectively over the
intermediate term.
Outlook: Stable
A leading industry position, strengthened through recent market
share gains and further improvements in operating efficiency,
should allow NCI to maintain credit quality even in periods of
cyclical weakness.
Ratings Affirmed
Ratings
NCI Building Systems Inc.
Corporate credit rating BB-
Senior secured bank loan rating BB-
Subordinated debt rating B
NEXTWAVE: Amended Plan Confirmation Hearing Set For October 30
--------------------------------------------------------------
The U.S. Bankruptcy Court scheduled an October 30, 2001 hearing
to consider confirming NextWave Telecom, Inc.'s Second Amended
Plan of Reorganization, dated August 6, 2001. (New Generation
Research, October 24, 2001)
OWENS CORNING: Committees Don't Support Fibreboard Examiner Bid
---------------------------------------------------------------
James J. McMonagle, the legal representative for future
claimants appointed in Owens Corning's chapter 11 proceedings,
and the Official Committee of Unsecured Creditors, submit a
joint objection to the motion by Plant Insulation Company for an
order appointing an examiner to investigate Fibreboard
Corporation
Plant's sole argument is that the appointment of an examiner to
investigate Fibreboard is mandatory because Fibreboard's
outstanding, liquidated and unpaid asbestos debts exceed
$900,000,000 and that "there is reason to believe that assets of
the Fibreboard Settlement Trust may have been diverted td help
pay Owens Coming's asbestos debt."
The Joint Objectors object to the Motion on three bases:
A. Plant Insulation has failed to meet its burden of
establishing facts warranting the appointment of an examiner,
B. This Court retains broad discretion to determine whether and
when an examiner should be appointed, and Plant has failed
to establish any basis for causing this Court to exercise
its discretion in favor of appointing an examiner at this
time, and
C. even if the Court were to decide, in its discretion, that an
examiner should be appointed, it should limit the timing,
scope and duration of the examiner's role so that it is no
broader than what is "appropriate" under the circumstances
of these cases.
Edmund M. Emrich, Esq., at Kaye Scholer LLP, in New York, New
York, states that Plant Insulation has the burden of
establishing facts warranting that relief as the party moving
for the appointment of an examiner. Mr. Emrich relates that
Plant Insulation has failed to satisfy that burden as its Motion
is predicated entirely upon its own unsubstantiated speculation
about what the Debtors may have done and its hypotheses
regarding the Debtors' possible motives. Mr. Emrich argues that
the motion noticeably lacks any probative facts in support of
the relief requested and thus should be denied.
Contrary to Plant's argument, Mr. Emrich contends that Plant
Insulation's position is based on an erroneous interpretation of
the Bankruptcy Code does not impose a mandatory obligation on
the bankruptcy court to appoint an examiner in every case in
which the debt threshold prescribed in the statute is met,
regardless of timing, need, expense or any other considerations.
Mr. Emrich explains that Plant Insulation's contention that
Section 1104(c)(2) removes any element of discretion from the
bankruptcy court is inconsistent with the language of the
statute because Section 1104(e)(2) does not evince a
Congressional intent to provide an inflexible system whereby the
appointment of an examiner is mandated without regard to timing,
need or expense. Rather, Section 1104 of the Bankruptcy Code
calls for the appointment of an examiner, after "notice and a
hearing," only "to conduct such an investigation of the debtor
as is appropriate" into matters such as "fraud, dishonesty,
incompetence, misconduct, mismanagement or irregularity" by the
present or former management of the debtor. Thus, Mr. Emrich
submits that by the very wording of the statute, a bankruptcy
judge has considerable discretion in determining what
investigation is "appropriate."
L. Gordon Harris, Esq., at Davis Polk & Wardell, in New York,
New York, tells the Court that in this case, there is presently
no need to appoint an examiner because numerous highly qualified
professionals retained by the Futures Representative, the
Creditors' Committee and the Asbestos Committee are thoroughly
investigating all important matters relating to the Debtors,
including the disposition of asbestos claims. Mr. Harris adds
that mountains of highly sensitive documents recently have been
provided to the Key Constituencies pursuant tr confidentiality
agreements and/or this Court's "Order Authorizing the Disclosure
of Certain Settlement And Claims Database Information Relating
to Pending and Resolved Asbestos Claims."
Mr. Harris relates that the numerous professionals retained in
these cases are in the process of conducting extensive and
time-consuming investigations concerning, the very areas for
which an examiner is now sought. As a result, granting Plant's
Motion would saddle the Debtors' estates with an additional
layer of administrative expense that would be duplicative,
unnecessary and wasteful. Should it turn out that material
questions remain to be answered after the Key Constituencies'
existing professionals have concluded their investigation, Mr.
Harris submits that the Court could at that time consider
whether to appoint an examiner for specific purposes.
As acknowledged in the Motion, Plant Insulation has been
attempting to litigate its alleged rights of indemnity against
the Debtors for a long period of time. Mr. Harris believes that
it is fair to inquire therefore whether Plant's motive in
bringing the instant Motion is strategically driven as Plant
Insulation is effectively seeking to shift the cost of taking
discovery from itself to the Debtors' estates by means of its
examiner Motion. Mr. Harris asserts that it should be prohibited
from doing so because there is absolutely no reason why, at this
time, the Debtors' estates should bear these costs.
Regardless of whether this Court must appoint an examiner, as
Plant Insulation mistakenly insists, Mr. Harris says that there
can be no question that the Court has complete discretion to
determine the appropriate nature, scope, timing and duration of
the duties arid functions of an examiner. Clearly, this Court
has the power to carefully tailor the timing, duration and role
of an examiner to that which would be appropriate to, and would
advance, these cases. The role proposed by Plant is not
appropriate, Mr. Harris explains, because it would be wasteful
and inappropriate in this case for an examiner to be appointed
to perform an investigation that will clearly duplicate the
investigations that are being undertaken by the Key
Constituencies.
The Joint Objectors submit that, to the extent this Court in the
exercise of its discretion appoints an examiner at an
appropriate point in these proceedings, the examiner's role
should be limited to reviewing the findings and conclusions
ultimately reached by the Key Constituencies. By so doing, the
Joint Objectors asserts that the Court will avoid needless
duplication of effort and save the estates yet another layer of
administrative expense.
Asbestos Claimants' Committee Responds
The Official Committee of Asbestos Claimants submits this
response to the Motion of Plant Insulation Company for an Order
Appointing an Examiner to Investigate Fibreboard Corporation.
Matthew G. Zaleski, Esq., at Campbell & Levine LLC, in
Wilmington, Delaware, states that the Asbestos Claimants
Committee does not object to parties in interest investigating
the issues raised by Plant Insulation in the Motion but submits
that in light of the expenses associated with the appointment of
an examiner and the inadequacy of Plant's showing in the Motion,
the Court should refrain from appointing an Examiner at this
time.
In its Motion, Mr. Zaleski contends that Plant Insulation does
no more than make sweeping assertions as to potential
improprieties without any support therefor. The Asbestos
Claimants Committee submits, in light of the Court's recently
entered Order Authorizing The Disclosure Of Certain Settlement
And Claims Database Information Relating To Pending And Resolved
Asbestos-Related Claims, that Plant Insulation, subject to the
execution of an appropriate confidentiality stipulation, be
permitted to conduct its own investigation as to facts related
to Fibreboard and that the necessary materials be made available
to Plant's counsel. If after such an investigation by Plant
Insulation that sufficient facts can be shown to suggest further
examination is warranted, Mr. Zaleski states that an Examiner
may be appointed at that time.
U.S. Trustee Comments
Frank J. Perch III, Esq., representing the United States Trustee
for the District of Delaware, tells the Court that the UST
generally takes no position regarding the factual allegations of
the Motion and leaves the movant to its burden. By the filing of
this Statement, Mr. Perch states that the UST does not intend to
endorse the allegations of the Motion regarding any alleged
diversion of funds from the Fibreboard Trust. However, the UST
agrees with the movant that if the debt threshold is met, the
appointment of an examiner is mandatory. Therefore, if the Court
finds that any of the Debtors have more than $5,000,000 in fixed
liquidated unsecured debts, other than debts for goods, services
or taxes, or owing to an insider, Mr. Perch submits that the
Court must enter an Order directing the UST to appoint an
examiner. (Owens Corning Bankruptcy News, Issue No. 20;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
OWENS CORNING: Hearing on Fibreboard Examiner Motion is Monday
--------------------------------------------------------------
The U.S. Bankruptcy Court scheduled an October 29, 2001 hearing
to consider Plant Insulation Company's motion to appoint an
examiner to investigate Fibreboard Corp. in the Owens Corning
case. (New Generation Research, October 24, 2001)
PACIFIC GAS: Intends To Amend & Assume Big Valley Lumber PPA
------------------------------------------------------------
Pursuant to the Court's order providing for procedures to seek
proposed assumptions by Pacific Gas and Electric Company of
Power Purchase Agreements with Qualifying Facilities (QFs) by
Notice rather than Motion, the Debtor gives Notice of its
intention to assume the Power Purchase Agreement between PG&E
and Big Valley Lumber Company, pursuant to 11 U.S.C. Section 365
and Rules 6006 and 9019 of the Federal Rules of Bankruptcy
Procedure.
The QF operates a power generation facility with the capacity of
7500 kW. The QF is a counter-party to a PPA, which provides for
the purchase of power by PG&E from the QF.
PG&E acknowledges that prior to the commencement of its
bankruptcy case, PG&E failed to pay in full the amounts due
under the PPA, resulting in pre-petition claims for payment to
the QF in the undisputed amount of $580,466.72 (the Pre-Petition
Payables). QF claims approximately $208,000 in additional Pre-
Petition Payables.
PG&E now proposes to enter into an Assumption Agreement to
assume the PPA.
Pursuant to the Assumption Agreements:
-- October 16, 2001 shall be the effective date for PG&E's
assumption of the PPA, provided that all conditions as set forth
in the Assumption Agreement are met.
-- the QF waives certain potential administrative and pre-
petition claims, including:
(a) any claim to receive any difference between a
"market rate" and the contract price for energy and
capacity delivered to PG&E from and after April 6,
2001 through the effective date for PG&E's
assumption of the PPA;
(b) any claim to recover "pecuniary loss" damages in
connection with assumption of the PPA pursuant to
Bankruptcy Code section 365(b)(l)(B); and
(c) any claim to offset amounts against the Prepetition
Payables or Cure Amount.
-- Big Valley is authorized to terminate the PPA post-
assumption upon short written notice to PG&E without further
order of the Bankruptcy Court;
-- PG&E waives any damages claim that might arise out of
such termination;
-- In the event Big Valley terminates the PPA, PG&E will
acknowledge to the Independent Service Operator that Big Valley
is not obligated to sell energy to PG&E order the PPA, and the
parties will enter into a standard "Interconnection Agreement."
PG&E believes that approval of the Assumption Agreement is in
the best interest of the estate.
The proposed Assumption Agreement shall be approved by the Court
without a hearing unless a party, within 10 days of the service
of this Notice, files and serves upon counsel for PG&E and the
Official Committee of Unsecured Creditors an objection to the
proposed Assumption Agreement, along with any pleadings,
declarations or other materials in support of such objection. In
the event that an objection to the proposed Assumption Agreement
is timely filed and served, counsel for PG&E shall promptly
obtain a hearing date from the Court and shall notify all
objecting parties and the Official Committee of Unsecured
Creditors of the scheduled hearing date on the objection.
(Pacific Gas Bankruptcy News, Issue No. 16; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
PHAR-MOR: Receives Court Approval for $135MM in DIP Financing
-------------------------------------------------------------
Phar-Mor, Inc. announced that it obtained final approval from
the United States Bankruptcy Court in the Northern District of
Ohio of its $135 million debtor-in-possession revolving credit
facility through Fleet Retail Finance, the Company's principal
secured lender.
The DIP Facility approved by the Court finalizes the interim
financing in place when the Company filed for Chapter 11
protection on September 24, 2001.
Credit available under the DIP Facility is the lesser of the
Availability (as defined in the Facility) or $135 million.
Maximum credit availability under the DIP Facility declines to
$100 million on the earlier of the Company's election or
December 23, 2001. The DIP Facility also establishes a first
priority lien and security interest in all of the assets of the
Company and contains a financial covenant that requires the
Company to maintain a minimum excess borrowing availability of
$8 million.
The Company had $54.8 million in excess borrowing availability
under the DIP Facility on October 23, 2001. Borrowings under
the DIP Facility may be used for working capital needs and
general corporate purposes.
The DIP Facility expires on the earlier of the Company's
emergence from bankruptcy as a reorganized entity or September
24, 2003.
Phar-Mor is a retail drug store chain operating 139 stores under
the names "Phar-Mor," "Pharmhouse" and "The Rx Place" in 24
states. Phar-Mor's online store is accessible at
http://www.pharmorwebrx.com and through the company's Web site
at http://www.pharmor.com On September 24, 2001, Phar-Mor
filed for bankruptcy protection under Chapter 11 of the U.S.
Bankruptcy Code. On October 3, 2001, the Company announced that
it would close 65 of its stores.
POLAROID: Paying $3 Million of Prepetition Customer Obligations
---------------------------------------------------------------
Polaroid Corporation sought and obtained authority to pay
approximately $3,000,000 for customer programs in the ordinary
course of business and to continue these customer programs post-
petition.
According to Polaroid Corporation EVP and Chief Administrative
Officer Neal D. Goldman, majority of the amounts to be paid will
arise post-petition and will thus be entitled to administrative
expense priority. Nevertheless, Mr. Goldman notes, certain of
the customer practices may give rise to post-petition payment
obligations from pre-petition practices. For that reason, the
Debtors also sought and obtained authority to make such payments
in the ordinary course.
Judge Walsh likewise directed all applicable banks and other
financial institutions to receive, process, honor and pay checks
drawn on the Debtors' accounts due to the customer practices,
whether such checks were presented prior to or after the
Petition Date.
"I believe that the uninterrupted maintenance of the Debtors'
customer programs is essential to attracting new customers and
maintaining existing customer satisfaction," Mr. Goldman tells
the Court.
The markets for the Debtors' products are extremely competitive,
Timothy P. Olson, Esq., at Skadden, Arps, Slate, Meagher & Flom
LLP, in Chicago, explains. Thus, Mr. Olson tells the Court, the
customer programs are integral to the Debtors' ability to induce
customers to purchase some of the Debtors' higher margin
products. According to Mr. Olson, halting the customer programs
would:
(1) disrupt business operations,
(2) generate adverse publicity, and
(3) undermine the Debtors' relationship with its customers.
The Debtors' customers include big-box retailers, warehouse
stores and specialized industry buyers, Mr. Olson relates. To
accommodate these customers' needs, Mr. Olson says, the Debtors
maintain various customer return programs and warranty programs.
Through these warranty programs, the Debtors reimburse their
customers for their efforts and expenditures in handling
warranty claims. Generally, Mr. Olson explains, the Debtors
provide these reimbursements through setoffs or deductions
related to the customers' purchase orders, and no actual cash
outlay by the Debtors is required. The Debtors estimate that
$1,500,000 of future obligations will be paid under the warranty
programs.
The Debtors also provide certain consumer rebates in store
redemptions, Mr. Olson continues. The Debtors owe approximately
$1,250,000 under these programs, Mr. Olson reports.
In addition, Mr. Olson advises the Court, the Debtors provide
certain of their commercial dealers with direct incentives,
discounts or rebates to encourage sales and productivity. These
are specifically tailored to each customer, Mr. Olson says, and
examples include specially packaged products and bulk discounts.
According to Mr. Olson, the rebates to commercial dealers are
generally satisfied through deductions taken by the dealer or
credits granted to the dealer in connection with the dealers'
purchase of goods from the Debtors.
Mr. Olson claims that these programs are necessary to keep the
Debtors and their customers at competitive levels in the
marketplace. The Debtors must make payments under their customer
programs in order to maintain business with their customers in
the future, Mr. Olson tells Judge Walsh. Moreover, Mr. Olson
informs the Court, the Debtors' customers owe money to the
Debtors for goods purchased. If the Debtors do not receive
authority to accept product returns and pay warranty claims,
rebates, co-operative advertising, promotional funds, and other
customer programs, Mr. Olson warns, customers likely could and
would assert the right to setoff payments owed to them by the
Debtors against the respective amounts they owe to the Debtors.
The Debtors are convinced that honoring their existing customer
practices is critical to their continued operations. Valuable
business relationships with customers will be severely
jeopardized, Mr. Olson cautions, if the Debtors are not allowed
to continue these practices. Even a short delay could cause
serious and irreparable harm to the value to the Debtors'
estates, Mr. Olson says.
The total amount to be paid or credited to customers 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, Mr. Olson adds.
Persuaded that maintenance of the customer practices is
essential to the continued vitality of the Debtors' business,
Judge Walsh authorized the Debtors to honor and continue their
customer practices on a post-petition basis, provided that the
total amounts paid on account of such pre-petition Customer
Practices shall not exceed $3,000,000.
Judge Walsh makes it clear that the authority to make payments
and honor obligations is subject to any requirements imposed
upon the Debtors under any approved debtor-in-possession
financing facility or order with respect to the use of pre-
petition lenders' cash collateral. (Polaroid Bankruptcy News,
Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900)
RAILWORKS CORP.: Wins Final Court Nod For $165MM DIP Financing
--------------------------------------------------------------
RailWorks Corp. received final court approval of $165 million in
debtor-in-possession (DIP) financing arrangements from members
of its existing creditor group, Dow Jones reported. The DIP
financing includes $65 million in credit agreements and a $100
million bonding facility. The order will allow the rail system
products supplier to use cash subject to the liens of its pre-
petition lenders, led by Bank of America N.A.
Judge E. Stephen Derby of the U.S. Bankruptcy Court in Baltimore
overruled several objections by creditors and sureties and said
he would approve a final financing order. Baltimore-based
RailWorks filed for chapter 11 bankruptcy protection last month.
The filing did not include RailWorks' Canadian operations. (ABI
World, October 24, 2001)
SAFETY-KLEEN: Employs Howrey Simon As Investigative Counsel
-----------------------------------------------------------
The Safety-Kleen Corp. Debtors ask Judge Walsh to authorize them
to employ the law firm of Howrey Simon Arnold & White as special
counsel to represent and assist the Debtors in the investigation
and prosecution of claims or causes of action against third
parties. No details regarding what these claims or causes of
action might be are provided. The Debtors assure Judge Walsh
that Howrey will not be rendering any services typically
performed by the Debtors' general bankruptcy counsel, nor will
the firm be responsible for the Debtors' restructuring effort.
By delineating Howrey's limited role, there will be no overlap
of services or charges.
At present, Howrey's standard hourly rates are:
Attorneys $200-$540
Economists, analysts $ 95-$430
Legal assistants $ 80-$250
More specifically, the hourly rates and persons expected to be
employed in these cases are:
Name Rate
---- ----
Robert H. Shulman $480
Mindy G. Davis $415
Brent H. Allen $340
Donna M. Drake $295
Christine S. Davis $230
Robert F. Clark $165
Amy R. McPhail $120
These hourly rates are subject to periodic adjustments to
reflect economic and other conditions. Other attorneys and
professionals from Howrey may from time to time also serve the
Debtors in connection with the firm's engagement.
Mindy G. Davis, a member of Howrey, avers to Judge Walsh that
the firm is a disinterested party and neither holds nor
represents any interest adverse to the Debtors or these estates
in the matters for which services are to be rendered.
In the absence of any objection, and given the limited role of
Howrey, Judge Walsh promptly authorizes and approves this
employment. (Safety-Kleen Bankruptcy News, Issue No. 21;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
SELAS CORP.: Board Votes to Suspend Current Quarterly Dividend
--------------------------------------------------------------
Selas Corporation of America (Amex: SLS) reported a net loss of
$1,376,000 for the quarter ended September 30, 2001 versus
income of $402,000 for the similar quarter in 2000. Sales were
$21,372,000 for the third quarter 2001 compared with $28,394,000
for the quarter ended September 30, 2000.
For the nine months ending September 30, 2001, Selas reported a
loss of $943,000 compared with income of $2,622,000 in 2000.
Sales were $78,800,000 for the first nine months of 2001
compared with $90,913,000 for the similar period of 2000.
Because of the third quarter results, Selas was not in
compliance with one of the financial covenants in its bank
credit agreement at September 30, 2001. Selas is in discussions
with its bank concerning a possible waiver and readjustment of
this covenant.
Mark S. Gorder, President and Chief Executive Officer of Selas,
said that problems in the Company's European operations
accounted for the loss in the third quarter, adding that the
remainder of Selas was marginally profitable in spite of the
economy.
"Our recently announced $13 million order from Voest Alpine
Stahl Linz, which uses our latest technology for producing new
automotive steel grades, will energize our European operations,
but we will not feel its impact until early 2002," Gorder said.
In light of the third quarter and nine month results, the Selas
Board of Directors voted to suspend the dividend for the current
quarter.
Selas is a diversified firm with international operations and
sales that engages in the design, development, engineering and
manufacturing of a range of products including precision medical
and electronic products, heat technology equipment and systems,
and cable winch products.
SUN HEALTHCARE: Enters Into 3rd DIP Financing Pact Amendment
------------------------------------------------------------
At Sun Healthcare Group, Inc.'s behest, the Court issued an
Interim Order authorizing the Debtors to enter into the Third
Amendment to Revolving Credit Agreement and authorizing payment
in connection with this.
The Third Amendment provides, inter alia, for extension of the
Financing Agreement to February 28, 2002. The CIT
Group/Business Credit, Inc. as Lenders' Agent and Heller
Healthcare Finance, Inc., as Collateral Agent, and the
consortium of DIP Lenders will continue providing the Debtors
with sufficient liquidity to meet their working capital needs
pending the effective date of a plan of reorganization.
In addition, the Third Amendment provides that:
(A) The Debtors will pay to the Lenders' Agent, for pro rata
distribution by it to the Lenders,
(1) an amendment fee in the amount of $400,000, payable on
the closing date of the extension and
(2) an additional extension fee in the amount of $60,000,
payable on the 15th day of each month, from November,
2001 through and and including February 2002 unless,
prior to any such date, certain conditions relating to
the repayment of the loans have been satisfied (the
Amendment and Extension Fees);
(B) A covenant will be added requiring that a plan and
disclosure statement be filed in the Debtors' chapter 11
cases by November 15, 2001;
(C) The commitment under the DIP Facility will be reduced to
$150,000,000;
(D) The EBITDA covenants will be amended to:
Month EBITDA
----- ------
August 2001 $ 30,400,000
September 2001 $ 28,000,000
October 2001 $ 30,800,000
November 2001 $ 31,600,000
December 2001 $ 32,700,000
January 2002 $ 32,200,000
February 2002 $ 29,500,000
(D) GMAC Commercial Credit LLC, a Lender, will not agree to
extend the Maturity Date and has instead decided not to
continue as a Lender, and the Lenders other than GMAC have
decided to assume GMAC's share of the Commitment;
(E) As a result of the reduction in the number of Lenders,the
definition of "Required Lenders" under the Financing
Agreement will be increased ot seventy pencent;
(F) Incentive pricing in interest rate margins will be
eliminated;
(G) Minor changes to the reporting covenants will be made; and
(H) The minimum credit availability covenant will be amended to
$15 million, with removal of the requirement that one of all
proceeds realized from any sale of the Debtors' fixed
assets go towards increasing the minimum credit availability
(with the exception of any sale of the fixed assets of
CareerStaff, Inc.).
(Sun Healthcare Bankruptcy News, Issue No. 24; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
TELEX COMM.: Will Not Make Interest Payment On Senior Sub Notes
---------------------------------------------------------------
Telex Communications, Inc. modified and extended the expiration
date for, its previously announced Exchange Offer and Consent
Solicitation in connection with its proposed debt restructuring
plan. The Exchange Offer and Consent Solicitation relate to the
Telex 10-1/2% Senior Subordinated Notes Due 2007 (CUSIP No.
879569AD3) and Telex (formerly known as "EV International,
Inc.") 11% Senior Subordinated Notes Due 2007 (CUSIP No.
269263AC3) (together the Senior Subordinated Notes).
The Exchange Offer and Consent Solicitation have been extended
to, and are now scheduled to expire at, 5:00 P.M., New York City
time on Wednesday, November 7, 2001. The Exchange Offer and
Consent Solicitation are being made pursuant to the Amended and
Supplemented Consent Solicitation Statement and Exchange
Offering Memorandum dated October 24, 2001 and the related
Consent and Letter of Transmittal which more fully set forth the
terms of the Exchange Offer and Consent Solicitation. Holders of
Senior Subordinated Notes may obtain further information by
calling Telex's Information Agent, Jefferies & Company, Inc.,
Attention: Adam Fakhri or Robert Basic, at (310) 575-5200, or by
facsimile at (310) 575-5165.
In order to effect the restructuring plan, including the
Exchange Offer, Telex is soliciting consents to authorize the
transfer of Telex's assets and liabilities to a new operating
company, to amend the indentures governing the Senior
Subordinated Notes to eliminate various restrictive covenants,
and the restructuring transactions, as described in the Amended
and Supplemented Consent Solicitation Statement and Exchange
Offering Memorandum.
Holders of the Senior Subordinated Notes are being offered the
opportunity to exchange all of the outstanding Senior
Subordinated Notes for securities to be issued by Telex or, if
the Telex assets are transferred to a new operating company, by
such new operating company. Holders will have the option to
exchange their Senior Subordinated Notes for: (i) units
consisting of an allocable portion of 13% Senior Subordinated
Discount Notes Due 2006 of the issuer having an aggregate deemed
issue price of $56.25 million, and an allocable portion of
shares of the capital stock of the issuer (at least
approximately 99% of Telex if Telex is the issuer, or 100% of
any new operating company formed if the Telex assets are
transferred to the new operating company); or (ii) units
consisting of an allocable portion of Warrants to purchase
shares of the capital stock of the issuer which will represent
up to an aggregate of 25% of the capital stock of the issuer
subject to the satisfaction of specified EBITDA requirements.
Telex's restructuring plan is intended to significantly reduce
Telex's outstanding debt, increase its financial flexibility and
improve its cash flow. In anticipation of completing the debt
restructuring, Telex will not make the interest payment that was
due on September 17, 2001 under its 11% Senior Subordinated
Notes and will not make the November 1, 2001 interest payment
that is due on its 10-1/2% Senior Subordinated Notes.
The Exchange Offer and Consent Solicitation are conditioned
upon, among other things, the consent of the lenders under
Telex's senior secured credit facility and senior secured notes
to the restructuring transactions, and waivers of defaults under
the senior secured credit facility and senior secured notes, and
obtaining additional senior secured financing.
As of this date, tenders of approximately $27.5 million
principal amount of the 10-1/2% Senior Subordinated Notes, and
tenders of approximately $18.5 million principal amount of the
11% Senior Subordinated Notes, have been received pursuant to
the Exchange Offer.
Telex is a leader in the design, manufacture and marketing of
sophisticated audio, wireless and multimedia communications
equipment for commercial, professional and industrial customers.
Telex provides high value-added communications products designed
to meet the specific needs of customers in commercial,
professional and industrial markets, and, to a lesser extent, in
the retail consumer electronics market.
TELIGENT INC.: Has Until December 17 To File Reorganization Plan
----------------------------------------------------------------
The U.S. Bankruptcy Court in Manhattan gave Teligent Inc. more
time to file a reorganization plan and solicit acceptance of the
proposal without having to contend with competing plans from
creditors and others, but the company was given less time than
it had asked for, Dow Jones reported. U.S. Bankruptcy Judge
Stuart Bernstein extended the bankrupt broadband-communication
service provider's plan-filing exclusivity to December 17 and
its exclusive period to seek plan votes through February 15.
Teligent had asked the court for a 180-day exclusivity
extension, which would have extended its plan-filing exclusivity
through March 18 and its vote-solicitation exclusivity through
May 20.
Teligent disclosed in a Securities and Exchange Commission
filing on Monday that it had reached a new agreement to sell its
assets for $72.5 million in cash, stock, warrants and assumed
liabilities. Teligent Acquisition Corp., a group formed by
Teligent Chief Operating Officer Jim Continenza, had agreed to
buy the assets for $117.5 million, subject to higher offers. The
management-led group's offer price consisted of $112.5 million
in cash and $5 million of Teligent Acquisition stock. Under the
new deal, Teligent Acquisition will pay $72.5 million in cash,
plus shares in the buyer to be determined under a formula set
out in the agreement, plus warrants to buy 2.25 million of the
buyer's common shares.
The Vienna, Va.-based company filed for chapter 11 bankruptcy
protection on May 21 after violating covenants of an $800
million credit agreement. The company's petition listed assets
of $1.2 billion and debts of $1.6 billion. (ABI World, October
24, 2001)
TRI-NATIONAL: Senior Care Extends Tender Offer to December 31
-------------------------------------------------------------
Senior Care Industries Inc. (OTCBB:SENC) says it has been
informed that Tri-National Development Corp. (OTCBB:TNAV) filed
voluntary Chapter 11 in the United States Bankruptcy Court in
San Diego, Case No.01-10964-JH.
The case was assigned to Judge John Hargrove, the same judge who
was hearing the involuntary bankruptcy case that had been filed
by a group of creditors including Senior Care in August of this
year.
The tender offer to Tri-National shareholders that was made by
Senior Care earlier this year was scheduled to expire on Oct.
31, 2001. Senior Care announced that the tender offer will now
be extended to December 31, 2001.
Senior Care also announced that because of the bankruptcy
filing, it would accept only 51% of outstanding shares of Tri-
National and would refuse to purchase any shares above that
percentage.
Senior Care said the primary reason for the extension was
twofold. First of all, Senior Care has received a second series
of comments from the Securities & Exchange Commission and is
presently in the process of responding to those comments on the
amended registration statement that was filed on Sept. 11, 2001.
Secondly, because the tender is hostile, Senior Care had been
unable to obtain information from Tri-National that is necessary
to respond to the SEC comments. Senior Care now hopes that the
information provided by the bankruptcy schedules will give it
sufficient information to be able to respond.
About Senior Care
Senior Care develops housing for seniors and is presently
developing 233 single family senior "smart homes" near Palm
Springs, Calif., 54 town houses in Las Vegas, and 56 apartments
for seniors at Senior Care's West Valley Apartment complex in
New Mexico. Sales of Senior Care's Evergreen Manor II
condominium project in Los Angeles have been brisk, according to
management.
VAIL RESORTS: S&P Revises Ratings Outlook to Negative
-----------------------------------------------------
Standard & Poor's revised its outlook on Vail Resorts Inc. to
negative from stable.
The outlook revision on Vail Resorts (BB-/Negative/--) reflects
the weaker-than-expected operating environment and the
increasingly challenging business fundamentals the company faces
for the remainder of this year as well as into 2002. Material
declines in leisure travel combined with economic uncertainty
following the Sept. 11, 2001, attacks in the U.S., are expected
to negatively affect financial performance in the near term.
Longer term visibility is poor, as skier visitation trends--a
key driver of profitability--could be pressured by slowing
economic conditions, softening demand for discretionary leisure
activities, and security issues related to travel.
In addition, the company's financial performance is vulnerable
to changing weather patterns, an important element of
potentially significant cash flow volatility. The company has
some cushion to absorb weaker trends in skier visitation, but a
greater-than-expected decline in skier visits due to either
tough operating conditions or poor snowfall, could pressure the
ratings.
The ratings continue to reflect Vail's good operating
performance and diversified revenue mix, offset by limited
geographic diversity and the risks associated with operating in
a highly seasonal and cyclical industry. Financial risk is
fairly high, as weather patterns can cause material cash flow
swings.
Vail operates four main ski resorts in Colorado and the Grand
Teton Lodge Co. in Jackson Hole, Wyo., and engages in real
estate activities related to its property holdings. The 1999
acquisition of the Grand Teton Lodge added important operating
diversity as the company's first holding outside of the Colorado
market. In addition, the property achieves its peak revenues
from April to November, which helps mitigate ski business
seasonality by increasing the portion of Vail's revenues derived
from summer activities to more than 20% of total revenue.
Ongoing acquisition activity is positive from a business risk
perspective, helping to reduce the company's weather dependency
and seasonality, and improving geographic and revenue diversity.
Still, Vail has been expanding its presence in the hospitality
segment, which is suffering from the economic uncertainty and
travel-related issues resulting from the September 11, 2001
events.
Since 1985, skier visits have been flat across the industry
while the sector has been undergoing a period of consolidation.
The number of resorts has fallen markedly, due in part to
increasing costs for infrastructure and other capital
improvements that are required for resorts to remain
competitive. Still, the industry remains highly fragmented. Vail
is well-positioned, with its 9% share of the U.S. skier market
and more than 40% of the Colorado ski market.
Improvements in operating performance in fiscal 2001 reflect a
return to more normal ski conditions, following some years of
unfavorable weather patterns that had a negative impact on the
financial performance of the ski industry's leading operators.
For the fiscal year ended July 31, 2001, EBITDA plus rent
expense coverage of interest plus rent expense was about
3.2 times compared with 2.9x in fiscal years ended 2000 and
1999, respectively, and 5.5x in fiscal 1998. EBITDA margins are
about 23%. Amid the current general economic slowdown and
uncertain impact on revenue growth, management is exercising
disciplined cost control. Still, lack of revenue visibility and
the potential impact on margins and profitability are major
concerns in the near term.
At July 31, 2001, total debt to EBITDA was approximately 3x.
Financial flexibility benefits from borrowing availability under
the company's $450 million credit facility maturing in 2002.
Capital spending for resort operations is expected to be about
$50 million in 2002. Maintenance requirements are lower than
budgeted capital spending, providing an additional degree of
flexibility. Acquisitions of high quality, winter or summer
resorts are likely in the near term.
Outlook: Negative
The ratings could be pressured if key credit measures and
financial flexibility deteriorate as a result of declining skier
visits, continued slowing in economic or travel trends,
unfavorable weather patterns, or increasing competitive
pressure.
VSOURCE: Schedules Shareholders Meeting on Nov. 20 in San Diego
---------------------------------------------------------------
The 2001 Annual Meeting of Stockholders of Vsource, Inc., will
be held on Tuesday, November 20, 2001, at 10:00 a.m. local time,
at the San Diego Marriott Hotel & Marina, 333 West Harbor Drive,
San Diego, California:
1. To elect seven directors to serve until the 2002
Annual Meeting of Stockholders or until their
successors have been duly elected and qualified
(Proposal No. 1);
2. To consider amendments to the Company's certificate of
incorporation, which would:
(a) not effect a reverse split but which would
increase the authorized number of shares of common
stock from 100,000,000 shares to 500,000,000 shares;
or
(b) effect a reverse split of outstanding common
stock at an exchange ratio of five-for-one and
increase the authorized number of shares of common
stock from 100,000,000 shares to 200,000,000 shares;
or
(c) effect a reverse split of outstanding common
stock at an exchange ratio of ten-for-one and increase
the authorized number of shares of common stock from
100,000,000 shares to 200,000,000 shares; or
(d) effect a reverse split of outstanding common
stock at an exchange ratio of ten-for-one with no
increase in the authorized number of shares of common
stock; or
(e) effect a reverse split of outstanding common
stock at an exchange ratio of fifteen-for-one with no
increase in the authorized number of shares of common
stock.
VSource's Board of Directors would retain discretion
to elect to implement one of the approved amendments,
or to elect not to implement any of them (Proposal No.
2).
3. To consider the issuance of common stock to repay
obligations under the Bridge Loan Agreement which
VSource assumed in connection with the acquisition of
substantially all of the assets of NetCel360 Holdings
Limited (Proposal No. 3);
4. To consider the issuance of common stock upon
conversion of the Series 3-A Preferred Stock, which is
issuable upon conversion of the Series A Convertible
Notes (Proposal No. 4);
5. To consider the issuance of common stock upon the
exercise of outstanding warrants ssued pursuant to
the Exchangeable Note and Warrant Purchase Agreement
(Proposal No. 5);
6. To consider the adoption of the 2001 Stock
Option/Stock Issuance Plan to allow employees,
directors and consultants to be granted equity awards,
including options to acquire shares of common stock
(Proposal No. 6);
7. To consider the adoption of the Employee Stock
Purchase Plan (Proposal No. 7); and
8. To transact any other business that is properly
brought before the meeting or any adjournment(s)
thereof.
Stockholders of record at the close of business on October 8,
2001, will be entitled to notice of, and to vote at, the
meeting or any adjournment or postponement thereof.
W.R. GRACE: Settling Tax Disputes With Washington State
-------------------------------------------------------
W. R. Grace & Co.-Conn. asks Judge Farnan for his approval of a
Stipulation and Order between Grace and the Department of
Revenue of the State of Washington resolving certain tax
disputes.
The Tax Dispute
In January 1994, Grace filed an action in the Thurston County
Superior Court in the State of Washington seeking to enjoin
collection of three tax assessments issued by the Department of
Revenue covering the tax periods from January 1980 through
December 1990. The Department of Revenue asserted, among other
matters, affirmative defenses of issue preclusion and a
counterclaim for the unpaid taxes, penalties, and interest.
The Superior Court awarded a judgment against Grace totaling
$1,311,535.00, consisting of taxes of $654,267.00 plus
prejudgment interest of $657,268.00.
Grace and the Department of Revenue each appealed to the
Washington Supreme Court from the orders of the Superior Court.
The Washington Supreme Court did not find it necessary to reach
all issues raised in the appeals. That court decided a
retroactivity issue in favor of Grace, but rejected Grace's
claims for constitutional relief, affirming the Superior Court
on those key points, and remanded the case to the Superior Court
for further action consistent with the Washington Supreme
Court's opinion.
Grace filed a petition for writ of certiorari in the United
States Supreme Court. The Department of Revenue filed a
conditional cross-petition for writ of certiorari. The United
States Supreme Court denied both petitions.
On June 27, 2000, Grace paid $1,470,414.20 into the registry of
the Superior Court, an amount Grace contended was sufficient to
satisfy the judgment against it plus post-judgment interest.
That money remains in the registry of the Superior Court.
The "Tax Dispute' refers to these actions and proceedings,
including all issues that were raised or could have been raised
in these actions, and including all taxes, interest, penalties,
costs, or other amounts that were, could have been, or could be
assessed, ordered, or paid for the Tax Periods. By this Motion,
Grace seeks Court authority to enter into the Stipulation and
asks Judge Farnan's approval of the Stipulation.
The Stipulation
The Stipulation resolves the Tax Dispute. Pursuant to the terms
of the Stipulation, Grace and the Department of Revenue agree to
the entry of a final order in the Superior Court that:
(a) denies all claims of Grace on the merits,
(b) awards the Department of Revenue the amount Grace has
already paid into the registry of the Superior Court,
and
(c) discharges any claims the Department of Revenue may
have against Grace for the Tax Periods (beyond the
amount Grace has paid into the registry of the
Superior Court), all with prejudice.
The Parties agree to waive any possible right that either party
may have to appeal such final order. Grace agrees that it will
not commence any legal, administrative, or other claim or action
of any kind to recover the sum it has paid to satisfy the
judgment in this action based on taxes assessed during the Tax
Period. The Department of Revenue agrees that payment of the
funds in the registry of the Superior Court shall be in full
satisfaction of the judgment entered against Grace and any other
claim against Grace for the Tax Period.
Grace's Arguments for Approval
In arriving at the Stipulation, Grace was guided by the factors
established by relevant case law regarding the reasonableness of
such settlements. Those factors include:
(a) The probability of success in the litigation;
(b) The complexity, expense and likely duration of the
litigation;
(c) All other factors relevant to making a full and fair
assessment of the wisdom of the proposed compromise;
and
(d) Whether the proposed compromise is fair and equitable
to the Debtors, their creditors, and other parties in
interest.
Grace tells Judge Farnan it is basic to the process of
evaluating proposed settlements that the terms of the compromise
be compared with the likely rewards of litigation. This rule
does not require that Judge Farnan hold a full evidentiary
hearing before a compromise can be approved, but rather, that he
canvass the issues and see whether the settlement falls below
the lowest point in a range of reasonableness.
When considering the merits of the Stipulation, Grace focused on
the expenses that Grace would likely incur in connection with
attempting to litigate and resolve the Tax Dispute in the
Superior Court. Grace also considered:
(a) the risk that the Superior Court might determine that
the amount paid by Grace into the registry of that court was
insufficient to satisfy the judgment and accrued post-judgment
interest;
(b) the risk of a possible additional judgment if the
Superior Court were to grant further consideration of, and
accept, the Department of Revenues counterclaim, affirmative
defense, and related contentions that were not addressed by the
Washington Supreme Court;
and
(c) the unlikelihood that the Superior Court would reduce
or otherwise mitigate the existing judgment against Grace.
Based on its consideration of these factors, Grace concluded
that the proposed settlement is in the best interests of Graces
estate, creditors, and other parties in interest. Accordingly,
Grace is confident that the Stipulation meets the standards
required for approval of this stipulation. Providing Grace with
the authority to enter into the Stipulation is clearly
beneficial to Grace's estate and creditors, as it will enable
Grace to avoid unnecessary litigation and will enable Grace to
focus its efforts on the reorganization of its estate.
Accordingly, Grace requests that Judge Farnan approve the
Stipulation and the compromise described in it. (W.R. Grace
Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
W.R. GRACE: Releases Third Quarter Operating Results
----------------------------------------------------
W.R. Grace & Co. (NYSE: GRA) reports that 2001 third quarter
pre-tax income from core operations was $53.8 million compared
with $53.0 million in the third quarter of 2000, a 1.5%
improvement. Sales totaled $448.1 million compared with $415.7
million in the prior year quarter, a 7.8% increase. Excluding
currency translation impacts, the increase in sales was 10.3%.
The quarter was favorably impacted by strong demand for refining
catalysts and revenue and earnings from acquisitions. A poor
business climate, particularly in September, and the translation
effects of a strong U.S. dollar served to dampen quarterly
operating results. Third quarter net income was $19.8 million,
or $0.30 per diluted share (EPS), compared with $34.1 million or
$0.51 per diluted share in the third quarter of 2000. The
current quarter included net income effects of $4.8 million for
Chapter 11 expenses and $3.8 million for noncore charges (net of
tax), primarily for legacy environmental risks, a combined $0.13
impact on EPS.
"Growth in sales for the quarter came largely from accretive
acquisitions and a continued strong environment for refining
catalysts," said Grace Chairman, President and Chief Executive
Officer Paul J. Norris. "We delivered good operating results
despite pressure on margins from a sluggish world economy that
was further shocked by the events of September 11. Our Six
Sigma activities have helped to mitigate the pressure on
margins, and I am pleased to see that our businesses continue to
be resilient to challenging external factors. However, we are
not immune to the current economic slowdown and are taking steps
to position the Company for a more difficult environment."
Year-to-date, Grace reported sales of $1,294.1 million, a 7.3%
increase versus 2000. Excluding currency translation impacts,
sales were up 10.4%. Pretax income from core operations for the
nine-month period was $140.3 million versus $151.5 million in
2000, a 7.4% decrease. The year-to-date operating margin was
10.8%, down 1.8 percentage points from the prior year due
primarily to higher costs of natural gas and certain raw
materials and the negative effects of foreign currency
translation. Net income and diluted EPS were $57.4 million and
$0.88 compared to $92.9 million and $1.36, respectively, for the
first nine months of 2000. Chapter 11 expenses, lower noncore
income and added net interest expense negatively affected year-
to-date comparisons by a combined $0.35 per share.
CORE OPERATIONS
Davison Chemicals
Refining Catalysts, Chemical Catalysts and Silica Products
Third quarter sales for the Davison Chemicals segment were
$224.9 million, up 12.7% from the prior year. Excluding
currency translation impacts, sales were up 14.7%. Operating
income of $33.6 million was consistent with the 2000 third
quarter but operating margin of 14.9% was 1.9 percentage points
lower. Operating income and margins were negatively impacted by
higher production costs and currency translation. Year-to-date,
sales were $656.0 million, up 11.8% from 2000 (excluding
currency translation impacts, sales were up 14.7%), with
operating income of $94.8 million versus $104.0 million for the
year-ago period.
Sales of refining catalysts, which include fluid cracking
catalysts and additives and hydroprocessing catalysts, were up
20.0% (21.9% excluding currency translation impacts) compared to
the 2000 third quarter owing to favorable world demand for
petroleum products and the consolidation of sales from Grace's
hydroprocessing catalyst joint venture. Refining catalyst sales
were strongest in Europe and Asia Pacific where the benefits of
the joint venture, formed in March, were most notable. Sales of
chemical catalysts decreased 6.5% from the third quarter of 2000
due to soft demand for polyolefin catalysts as well as other
chemical catalysts. Sales of silica products were up 9.3%
(12.1% before currency translation impacts), primarily from
three acquisitions completed in the past year which expanded the
silicas product line into colloidal and precipitated silicas,
chromatography columns and separations media. The market demand
for chemical catalysts and silica products are most directly
affected by general economic activity.
Performance Chemicals
Construction Chemicals, Building Materials and Container
Products
Third quarter sales for the Performance Chemicals segment were
$223.2 million, up 3.2% from the prior year, despite a softening
of construction activity in the U.S. and certain other
countries. Excluding currency translation impacts, sales were
up 6.2%. Operating income was $30.6 million, essentially even
with the prior year quarter. Operating margin was 13.7%,
approximately 0.5 percentage points lower than the 2000 third
quarter. Year-to-date sales were $638.1 million, up 3.2% from
2000 (6.5% before currency translation impacts), while operating
income was $78.9 million versus $80.8 million for the year-ago
period.
Sales of specialty construction chemicals, which include
concrete admixtures, cement additives and masonry products, were
up 6.2% versus the year-ago quarter (9.1% excluding currency
translation impact). Volume increases were experienced in every
region, with the Pieri S.A. acquisition, completed in July,
favorably impacting European sales. Sales of specialty building
materials, which include waterproofing and fire protection
products, were up 5.6% for the quarter (6.8% excluding currency
translation impacts), reflecting strong waterproofing sales in
North America and Europe. Sales of container products, which
include container sealants, closure systems and coatings, were
down 3.3% from the third quarter of 2000 (up 1.1% before the
effect of currency translation). The results reflect a
continued decline in demand for metal food packages in favor of
plastic and paper substitutes.
CHAPTER 11 PROCEEDINGS
On April 2, 2001, Grace and 61 of its United States subsidiaries
and affiliates, including its primary U.S. operating subsidiary
W. R. Grace & Co.-Conn., filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the District of
Delaware (the "Filing"). Grace's non-U.S. subsidiaries and
certain of its U.S. subsidiaries were not a part of the Filing.
Since the Filing, all motions necessary to conduct normal
business activities have been approved by the Bankruptcy Court.
Motions related to the process under which asbestos claims will
be quantified and measured are pending before the Court.
OTHER MATTERS
On July 31, 2001, Grace's French subsidiary, W. R. Grace SAS,
acquired Pieri S.A., a leading supplier of specialty chemicals
to the European construction industry with 2000 revenues of
approximately $25 million.
Grace is a leading global supplier of catalysts and silica
products, specialty construction chemicals and building
materials, and container products. With annual sales of
approximately $1.6 billion, Grace has over 6,000 employees and
operations in nearly 40 countries. For more information, visit
Grace's Web site at http://www.grace.com
WARNACO GROUP: Exclusive Period to File Plan Extended to Feb. 6
---------------------------------------------------------------
Warnaco Group Inc. has won court approval for a 120-day
extension of its exclusive periods to file a reorganization plan
and solicit plan acceptances. In approving the extension, Judge
Richard Bohanon concluded in an Oct. 18 order that the extension
was in the best interests of the company and its creditors. The
order extends the bankrupt apparel maker's plan filing
exclusivity to Feb. 6, 2002, and the exclusive plan vote
solicitation period to April 9, 2002. Also at the Oct. 18
hearing, Judge Bohanon approved Warnaco's request to hire
accounting firm FTI Consulting Inc. to assist the company's
special counsel as well as financial adviser Bear Stearns & Co.
to provide services in connection with the sale of certain
company assets.
The company said it has made some progress since filing for
bankruptcy protection on June 11. Most notably, it obtained $600
million in debtor-in-possession (DIP) financing to pay for
business expenses including employee salaries, and recently
hired Antonio C. Alvarez as chief restructuring officer. As
reported, the New York-based company's bankruptcy petition
listed assets of $2.37 billion and liabilities of $3.07 billion
as of April 7. (ABI World, October 24, 2001)
XEROX CORPORATION: S&P Drops Credit Ratings To Lower-B's
--------------------------------------------------------
Standard & Poor's lowered its ratings on Xerox Corp. and related
entities. The downgrade reflects Standard & Poor's expectation
that non-finance revenue and operating income will be
significantly less than expected for both 2001 and 2002.
Standard & Poor's previous rating had incorporated the
expectation that Xerox' non-finance EBITDA would show
significant sequential improvement in 2001.
The outlook is stable.
The ratings on Xerox Corp. reflect the company's good position
in its core document-processing business, a sizable recurring
revenue base, and a broad product lineup, offset by highly
competitive industry conditions with diminished growth
expectations. The ratings also reflect Standard & Poor's
expectations of substantial, ongoing debt reductions and
successful renegotiation of Xerox' bank facility maturing in
October 2002.
Xerox has made material progress in executing its turnaround
program, including: asset sales totaling more than $2 billion,
significant cost reduction and cash conservation actions, and
agreements to transition the majority of Xerox' equipment
financing business to third parties. However, economic weakness
and diminished capital spending levels have reduced Xerox'
prospects for significant improvement in operating earnings and
debt protection measures in the near term.
Xerox has substantially completed its $1 billion cost reduction
program announced last year, while improved asset management and
asset sales should continue to provide sufficient liquidity and
financial flexibility to meet near-term debt maturities
(excluding the $7 billion bank facility).
Outlook: Stable
The current rating incorporates the expectation that Xerox will
successfully renegotiate its bank facility and, as the economy
allows, significantly improve operating profit for fiscal 2002
from currently expected 2001 results.
Ratings Lowered TO FROM
Xerox Corp.
Corporate credit rating BB/Stable/B BBB-/Negative/A-3
Senior unsecured debt BB BBB-
Subordinated debt B+ BB+
Preferred stock B BB
Commercial paper B A-3
Xerox Credit Corp.
Corporate credit rating BB/Stable/B BBB-/Negative/A-3
Senior unsecured debt BB BBB-
Commercial Paper B A-3
Xerox Capital (Europe) PLC
Senior unsecured debt* BB BBB-
Commercial paper* B A-3
*Guarantor Xerox Corp.
BOOK REVIEW: THE ITT WARS: An Insider's View of Hostile
Takeovers
-------------------------------------------------------
Author: Rand Araskog
Publisher: Beard Books
Softcover: 236 pages
List Price: $34.95
Review by Gail Owens Hoelscher
This book was originally published in 1989 when the author was
Chairman and Chief Executive Officer of ITT Corporation, a $25
billion conglomerate with more than 100,000 employees and
operations spanning the globe with an amazing array of
businesses: insurance, hotels, and industrial, automotive, and
forest products. ITT owned Sheraton Hotels, Caesars Gaming, one
half of Madison Square Garden and its cable network, and the New
York Knickerbockers basketball and the New York Rangers hockey
teams. The corporation had rebounded from its troubles of the
previous two decades.
Araskog was made CEO in 1978 to make sense of years of wild
acquisition and growth. Under Harold Greenen, successor to ITT's
founder and champion of "growth as business strategy," ITT's
sales had grown from $930 million in 1961 to $8 billion in 1970
and $22 billion in 1979. It had made more than 250 acquisitions
and had 2,000 working units. (It once acquired some 20 companies
in one month.)
ITT's troubles began in 1966, when it tried to acquire ABC.
National sentiments against conglomerates became endemic; the
merger became its target and was eventually abandoned. Next came
a variety of allegations, some true, some false, all well
publicized: funding of Salvador Allende's opponents in Chile's
1970 presidential elections; influence peddling in the Nixon
White House; underwriting the 1972 Republican National
Convention. ITT's poor handling of several antitrust cases was
also making headlines.
Then came recession in 1973. ITT's stock plummeted from 60 in
early 1973 to 12 in late 1974. Geneen found himself under fire
and, in Araskog's words, the "succession wars" among top ITT
officers began. Geneen was forced out in 1077, and Araskog, head
of ITT's Aerospace, Electronics, Components, and Energy Group,
with more than $1 billion in sales, won the CEO prize a year
later.
Araskog inherited a debt-ridden corporation. He instituted a
plan of coherent divesting and reorganization of the company
into more manageable segments, but was cut short by one of the
first hostile bids by outside financial interests of the 1980's,
by businessmen Jay Pritzker and Philip Anschutz. This book is
the insider's story of that bid.
The ITT Wars reads like a "Who's Who" of U.S. corporations in
the 1970s and 1980s. Araskog knew everyone. His writing reflects
his direct, passionate, and focused management style. He speaks
of wars, attacks, enemies within, personal loyalty, betrayal,
and love for his company and colleagues. In the book's closing
sentences, Araskog says, "We fought when the odds are against
us. We won, and ITT remains one of the most exciting companies
of the twentieth century, we hope to keep the wagon train moving
into the twenty-first century and not have to think about making
a circle again. Once is enough."
Araskog wrote a preface and postlogue for the Beard Books
edition, and provide us with ten years of perspective as well as
insights into what came next. In 1994, he orchestrated the
breakup of ITT into five publicly traded companies. Wagon
circling began again in early 1997 when Hilton Hotels made a
hostile takeover offer to ITT Corporation. Araskog eventually
settled for a second-best victory, negotiating a friendly merger
with the Starwood Corporation, in which ITT shareholders became
majority owners of Starwood and Westin Hotels, with the
management of Starwood assuming management of the merged entity.
Today, Mr. Araskog heads his own investment company in Palm
Beach, Florida.
*********
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
de Roda, Aileen Quijano, 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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re-mailing and photocopying) is strictly prohibited without
prior written permission of the publishers. Information
contained herein is obtained from sources believed to be
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The TCR subscription rate is $575 for 6 months delivered via e-
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*** End of Transmission ***