/raid1/www/Hosts/bankrupt/TCR_Public/011116.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, November 16, 2001, Vol. 5, No. 225
Headlines
ANC RENTAL: Lays-Out Nov. Cash Budget & Secured Debt Analysis
ANC RENTAL: S&P Drops Rating to D After Bankruptcy Filing
ADVANCED BIOTHERAPY: Auditors Air Doubt on Ability to Continue
ADVOCAT: Pursues Talks for Waivers & Refinancing with Lenders
ALLIED WASTE: Fitch Rates Proposed Senior Notes Due '08 at BB-
AMERICAN RESTAURANT: General Economic Softness Hurts Q3 Revenues
AMES DEPARTMENT: Signs-Up Gemini Realty as Consultants
ATLAS AIR: DebtTraders Sees Less Cushion for Bondholders
BRIDGE INFO: Seeks Approval to Change Name to BIS Administration
BURLINGTON INDUSTRIES: Files for Chapter 11 Reorganization in DE
BURLINGTON: Case Summary & 50 Largest Unsecured Creditors
CELEXX CORP: Exploring Financing Options to Fund Operations
CHIQUITA BRANDS: DebtTraders Recommends Two Senior Note Issues
COMPANIA MEGA: S&P Junks Rating After Technical Default on Notes
CONDOR SYSTEMS: S&P Drops Ratings to D After Filing Chapter 11
COVAD COMMUNICATIONS: Net Loss Drops in Q3 Due to Reduced Costs
ECHOSTAR: Gets $5.5BB in Financing for Hughes Electronics Merger
EDISON: CalEnergy Sues SoCal Unit, Demanding Payments of $100MM+
ESAFETYWORLD: Fails to Comply with Nasdaq Listing Requirements
EXODUS COMMS: Seeks Approval of Small Asset Sale Procedures
FACTORY CARD: Deadline to Make Lease Decisions Moved to Jan. 31
FEDERAL-MOGUL: Wins Approval to Pay Pre-Petition Tax Obligations
FUELNATION INC: Auditors Express Doubt About Ability to Continue
GENEVA STEEL: Negotiating Forbearance Pact Under $110M Term Loan
GLENOIT CORPORATION: Wants More Time to Assume or Reject Leases
HEADWAY CORPORATE: Continues Talks to Resolve Cross-Defaults
INT'L FIBERCOM: Plan to Address Covenant Violations Underway
J.C. PENNEY: Operating Performance Swings Up in Third Quarter
KEY3MEDIA GROUP: Amends Senior Bank Credit Facility Agreement
LTV CORP: US Trustee Appoints Amended Creditors' Committee
LERNOUT & HAUSPIE: Belgian Court Sets Nov. 21 as Claims Deadline
LERNOUT & HAUSPIE: MedQuist Buys Medical Transcription Division
LODGIAN: Senior Facility Lenders Agree to Forbear Until Dec. 31
METALS USA: Chapter 11 Case Summary
NOVO NETWORKS: Revenues Drop Over 50% After Axistel's Closure
ORBITAL IMAGING: Reaches Deal to Undertake Debt Restructuring
PW EAGLE: Defaults on Certain Covenants Under Loan Agreements
PACIFIC GAS: Panel Seeks Okay to Retain Legislative Consultants
POLAROID CORPORATION: Signs-Up Ordinary Course Professionals
POLAROID CORP: Seeks Extension of 10-Q Filing Deadline for Q3
PRANDIUM: Eyes Chapter 11 Filing with Prepack Restructuring Plan
PROVIDIAN FINANCIAL: Fitch Concerned About Rising Credit Losses
RESPONSE BIOMEDICAL: Arranges Bridge Financing of up to $500K
REVLON CONSUMER: S&P Assigns Low-B and Junk Ratings
TELESYSTEM INT'L: Ability to Meet Current Obligations Uncertain
TELSCAPE INT'L: Court Extends Lease Decision Period to Dec. 21
US DIAGNOSTIC: Taps Imperial Capital to Pursue Financing Options
US OFFICE: Wilmington Court Approves Disclosure Statement
WARNACO GROUP: Engages Rosenman & Collins to Sue GE Capital
XETEL COMMS: Talking with Creditors to Restructure Obligations
BOOK REVIEW: Getting It To the Bottom Line:
Management by Incremental Gains
*********
ANC RENTAL: Lays-Out Nov. Cash Budget & Secured Debt Analysis
-------------------------------------------------------------
ANC Rental Corporation and certain of its affiliates are party
to three credit facilities that fund their non-vehicle domestic
working capital needs:
(A) The Borrowing Base Facility -- The Amended and
Restated Credit Agreement, dated as of June 30, 2000, among ANC
and Congress Financial Corporation, as administrative agent and
collateral agent, is a revolving facility in an aggregate
principal amount not to exceed $70 million (originally $175
million). The Borrowing Base Facility is guaranteed by most of
ANC's domestic subsidiaries, as Guarantors. The Borrowing Base
Facility is secured by a first-priority security interest in all
non-fleet assets of ANC and the Guarantors and 65% of the stock
of certain foreign subsidiaries of ANC and/or the Guarantors.
On September 28, 2001, the Borrowing Base Facility was amended
to prohibit ANC from borrowing additional amounts or issuing
additional letters of credit under the Borrowing Base Facility
without the consent of the majority of the lenders thereunder.
As of the Petition Date, no additional advances have been made
under the Borrowing Base Facility to ANC, and the entire amount
outstanding ($64 million) consists of contingent letters of
credit. On or about October 15, 2001 these agreements were
amended to include a Deposit and Control Agreement covering each
deposit account of the Debtors.
(B) The Supplemental Facility -- a revolving facility,
which converted into a two-year term loan maturing on May 31,
2003, provided by a syndicate of lenders led by Lehman Brothers,
Inc., as administrative agent. Pursuant to that certain
Collateral and Guarantee Agreement, dated June 30, 2000, the
Term Loan is guaranteed by the Guarantors and is secured by a
second-priority security interest in the Corporate Collateral.
As of the Petition Date, the Debtors had approximately $40
million outstanding under the Term Loan.
(C) The Senior Loan Agreement -- The Amended and Restated
Senior Loan Agreement, dated as of June 30, 2000, as amended,
among ANC and Lehman is presently in an aggregate principal
amount of $200 million (originally, $225 million). The loan is
convertible, at Lehman's option, into exchange notes issued
under an indenture, which notes ANC has agreed to register with
the SEC at the request of Lehman. On August 30, 2001, ANC and
the Guarantors granted a third-priority security interest in the
Corporate Collateral to the lenders under the Senior Loan
Agreement. Also, the lenders under the Senior Loan Agreement
received a pledge of the limited partnership interests in
certain fleet finance special purpose entities and the equity of
the general partners of these special purpose entities (but not
the general partnership interests in these entities). As of the
Petition Date, the Debtors had approximately $203.5 million
outstanding under the Senior Loan Agreement.
The Debtors tell Judge Walrath that they will present the
bankruptcy court with a request for authority to dip into their
secured Lenders' Cash Collateral. Through the end of the month,
the Company's cash position is okay, demonstrated by this
November Cash Budget:
ANC RENTAL CORPORATION
Cash Projection
November 13, 2001 to November 30, 2001
Beginning Cash Available $100,000,000
------------
US Receipts
Rental Revenue 101,155,000
Alamo Local 15,000,000
Accounts Receivable 10,925,000
------------
TOTAL US RECEIPTS $127,080,000
------------
US Disbursements
Fleet Operating Expenses $14,841,000
Personnel & Payroll 19,871,000
Travel, Meals and Entertainment 297,000
Transaction / Variable Expenses
Fuel 6,033,000
Airport/Agency Concession 0
Auto Liability 4,578,000
Other (4,135,000)
Facility Fixed 10,711,000
Other Operating Expense 6,607,000
TA/TO Commissions 5,276,000
Advertising 1,150,000
IT Consulting 2,089,000
IT Other 3,232,000
Car Rental/Sales Tax 20,304,000
Professional Fees (Normal) 1,250,000
Professional Fees (Bankruptcy) 0
Other Non-Operating 3,232,000
Liability Insurance Program 10,000,000
------------
Total Operating Expense $105,336,000
------------
US Capital Expenditures 750,000
------------
TOTAL US CASH DISBURSEMENTS $106,086,000
------------
Funding for Europe & Canada 6,000,000
------------
TOTAL DISBURSEMETS $112,086,000
------------
NET RECEIPTS $14,994,000
------------
Ending Cash Balance $114,994,000
============
The Debtors indicate that they will argue their Secured Lenders'
interests in the Cash Collateral are adequately protected, and
supply the Court with their computations to support their
contention that the Lenders' are oversecured with an ample
equity
cushion:
ANC RENTAL CORPORATION
Secured Asset Analysis
As of October 31, 2001
Secured Assets
Cash $100,000,000 (A)
Net Receivables 155,669,000
Net Inventory 4,541,000
Net Property and Equipment 247,278,000
Net Capitalized Software 153,000,000
------------
Total 660,488,000
Net Goodwill 84,855,000
Pledge of Foreign Stock 253,023,000 (B)
------------
Total Secured Assets $998,366,000
Secured Creditors
Borrowing Base Facility $64,000,000
Supplemental Facility 40,000,000
August 30 Pledged Security Interests 350,000,000 (C)
------------
Total Secured Obligations $454,000,000
------------
Excess of Secured Assets
over Secured Obligations $544,366,000
============
Notes: (A) As of November 9, 2001.
(B) Equity book value at October 31, 2001 of
foreign subsidiaries, including goodwill.
(C) Certain of these security interests may be
subject to avoidance pursuant to section 547 of
the Bankruptcy Code. The Company reserves the
right to contest such security interests.
(ANC Rental Bankruptcy News, Issue No. 9; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
ANC RENTAL: S&P Drops Rating to D After Bankruptcy Filing
---------------------------------------------------------
Standard & Poor's lowered its corporate credit rating on ANC
Rental Corp. to 'D' from triple-'C'-plus and removed it from
CreditWatch.
There is no rated corporate debt outstanding. On November 13,
2001, ANC, the parent of Alamo Rent-A-Car Inc. and National Car
Rental System, filed for Chapter 11 bankruptcy protection.
The company's already weak financial profile has deteriorated
further since the events of September 11, 2001, and the sharp
decline in airline passenger traffic. ANC is more exposed to
this sector, with over 90% of its business originating at
airport locations, versus some of its competitors, who have more
diverse operations.
As a result, the company's liquidity has weakened significantly,
leading to the October 1, 2001, deferral of a $70 million
principal payment as well as suspension of certain financial
covenants.
ADVANCED BIOTHERAPY: Auditors Air Doubt on Ability to Continue
--------------------------------------------------------------
Advanced Biotherapy Inc. has generated little revenue in the
past years, and has suffered recurring losses from operations
resulting in an accumulated deficit of $4,774,290 at September
30, 2001. The Company's auditors, Williams & Webster PS of
Spokane, Washington, in their October 30, 2001 report have
indicated that these conditions raise substantial doubt about
the Company's ability to continue as a going concern.
The Company has been in the development stage since its
formation in 1985 and has not realized any significant revenues
from its planned operations. It is primarily engaged in the
research and development of the treatment of autoimmune diseases
in humans, most notably, multiple sclerosis and rheumatoid
arthritis.
Going Concern
The Company incurred a net loss of $726,165 for the nine months
ended September 30, 2001. At September 30, 2001, as stated
above, the Company has an accumulated deficit during the
development stage of $4,774,290. The future of the Company is
dependent upon future profitable operations from the commercial
success of its medical research and development of products to
combat diseases of the human immune system and products for
treatment of viral and bacterial diseases of animals.
Management has established plans designed to increase the
capitalization of the Company and is actively seeking additional
capital that will provide funds needed to fund the research and
development and therefore the internal growth of the Company in
order to fully implement its business plans. For the twelve-
month period subsequent to September 30, 2001, the Company
anticipates that its minimum cash requirements to continue as a
going concern will be less than $800,000. The anticipated source
of funds may be the issuance for cash of additional debt and/or
equity instruments. In addition, management is actively seeking
a collaborative relationship with either a pharmaceutical or
biotechnology company. If successful, cash requirements may be
met through royalty or licensing fees.
ADVOCAT: Pursues Talks for Waivers & Refinancing with Lenders
-------------------------------------------------------------
Advocat Inc. (OTC Bulletin Board: AVCA) announced its results
for the third quarter ended September 30, 2001. The Company
reported a net loss of $9.9 million in the third quarter of
2001, including additional non-cash charges of approximately
$8.7 million based on an actuarial review of professional
liability costs, compared with net income of $149,000 after non-
recurring charges of $359,000 for the same period in 2000. Net
revenues increased 5% to $52.8 million compared with $50.3
million n the third quarter of 2000.
"Advocat's third quarter revenues were up as a result of higher
reimbursement rates in selected markets and a slight increase in
occupancy," stated Charles W. Birkett, M.D., chairman and chief
executive officer of Advocat Inc. "We also had $4.9 million in
net cash generated from operations in the third quarter. Our
earnings continue to be affected by higher costs related to
professional liability coverage, wages, bed taxes and utilities.
In the third quarter, we recorded additional non-cash charges of
approximately $8.7 for self-insured patient liability costs
based on an actuarial review. These charges were due to an
escalation in the number and size of claims anticipated to
affect our self-insured professional liability retention."
Net revenues for the third quarter ended September 30, 2001,
increased to $52.8 million compared with net revenues of $50.3
million in 2000. Patient revenues increased 7.5% to $41.9
million compared with $38.9 million in the third quarter of 2000
and were primarily due to increased Medicaid rates in Arkansas
and other states, increased Medicare utilization and Medicare
rate increases, and a 0.2% increase in occupancy in 2001
compared with 2000. Partially offsetting these increases, the
Company closed a facility in
August 2000. Resident revenues in the assisted living division
were down slightly to $10.1 million from $10.4 million in the
third quarter of 2000 primarily due to an 8.3% decrease in
resident days, partially offset by an increase in rates.
Management fees declined to $768,000 in 2001 from $934,000 in
2000 as a result of lower fees at four facilities. These
facilities incurred higher operating costs that reduced
management fees under a priority of distribution calculation in
the contract covering these four facilities.
"Advocat continues to show progress in building revenues through
our plan of increasing Medicare occupancy," continued Dr.
Birkett. "We are also optimistic about higher Medicare
reimbursement rates and rate increases in certain states. We
continue to focus on improving our operating efficiency without
lowering our high standards for patient care.
"Although Advocat continues to improve its operating
performance, our future viability is affected by increased
professional liability costs. The $8.7 million one-time charge
recorded in the third quarter is indicative of the charges
confronting our industry and the adverse legal climate facing
us."
Operating expenses, excluding the one-time $8.7 million charge
for professional liability costs, increased to $42.5 million in
the third quarter of 2001 compared with $38.6 million in the
third quarter of 2000. The increase in operating expenses was
primarily attributable to cost increases related to professional
liability, wages, bed taxes and utilities. Professional
liability, exclusive of the additional charges of $8.7 million,
increased to $2.4 million in 2001 from $2.0 million in 2000, an
increase of $0.4 million, or 20%. Wages increased to $23.0
million in 2001 from $21.2 million in 2000, an increase of $1.8
million or 8.6%. The increase in wages is due to increased
costs associated with increased Medicare census and tighter
labor markets in most of the areas in which the Company
operates, partially offset by reduced costs associated with
reduced Medicaid census.
Advocat previously announced that it had signed a letter of
intent to sell its Canadian subsidiary, Diversicare Canada
Management Services Co., for $8 million. No definitive purchase
agreement has been reached with the proposed buyer, nor have the
consents necessary been received. Although the letter of
intent, by its terms, expired on July 31, 2001, Advocat
continues its efforts to seek consents to allow the transaction
to close as described. No assurances can be given that the sale
of Diversicare Canada will be consummated.
At September 30, 2001, the Company had negative working capital
of $61.2 million primarily as a result of $58.9 million of debt
being classified as current liabilities due to Advocat's
covenant non-compliance and other cross-default provisions. The
Company remains in active discussions with its lenders regarding
potential waivers, amendments and refinancing alternatives and
is hopeful that it can reach terms that will not further
jeopardize the future of Advocat. During the third quarter,
Advocat extended the maturity of $2.4 million in mortgage notes
from August 2001 to August 2002.
Advocat Inc. operates 120 facilities including 56 assisted
living facilities with 5,453 units and 64 skilled nursing
facilities containing 7,230 licensed beds as of September 30,
2000. The Company operates facilities in 12 states, primarily
in the Southeast, and four provinces in Canada.
ALLIED WASTE: Fitch Rates Proposed Senior Notes Due '08 at BB-
--------------------------------------------------------------
Fitch has assigned an indicative rating of 'BB-' to Allied Waste
Industries' (NYSE: AW) proposed $500 million senior secured
notes due 2008. The notes will be issued under Rule 144A and
will rank pari passu with existing AW and Browning-Ferris
Industries (BFI) senior secured notes. Proceeds from the notes
will be used to ratably pay down a portion of the tranche A, B,
and C term loans under the company's senior secured bank credit
agreement. The Rating Outlook is Stable.
The indicative rating assumes that AW is successful in
negotiating amendments to its bank agreement, which would allow
for the proposed bond transaction and for relief under certain
financial covenants. At that time, the following ratings would
also be affirmed:
Allied Waste North America
* $1.3 billion senior secured credit facility 'BB';
* $3.7 billion tranche A, B, & C loan facilities 'BB';
* $2.3 billion senior secured notes 'BB-';
* $2.0 billion senior subordinated notes 'B'.
Browning-Ferris Industries (BFI)
* $730 million senior secured notes, debentures & MTNs 'BB-'
The ratings reflect the company's geographically diverse asset
base, strong market positions, high EBITDA margins and solid
cash flow generating ability. Offsetting factors include AW's
very high leverage position and softer industry fundamentals.
While AW expects EBITDA could potentially decline by mid-single
digits to $1.85-$1.95 billion during 2002 from expected 2001
levels of $1.93-$1.94, the lower EBITDA guidance is consistent
with Fitch's expectation for financial results during a weak
economy. Moreover, reduced capital spending, declining BFI
acquisition related expenditures and relatively solid free cash
flow generation should allow for debt reduction of more than
$300 million during 2002 in spite of softer economic conditions.
Economic weakness throughout the country has resulted in softer
volumes especially from higher margin industrial and special
roll off waste and lower landfill volumes. In order to attract
additional volumes, pricing has come under pressure in these
markets. In addition, EBITDA has also been negatively impacted
by the dramatic drop in commodity prices that are expected to
result in year-over-year lower revenues and EBITDA of $150
million and $75 million during 2001. The decline in EBITDA due
to lower commodity prices comprises more than half the lower
EBITDA estimate for 2001.
AW intends to restructure its operations by expanding the number
of field personnel. The additional personnel are expected to
improve customer service and to drive operational efficiencies
in areas such as routing and maintenance. While SGA is
anticipated to rise in the first half of 2002 due to the $15
million expense associated with the added employees, AW expects
to offset the expense with lower operating costs and
improvements to response to protect market position. The new
structure will further decentralize AW's organization and will
allow the company to continue to manage the business at lower
levels.
Credit statistics at December 31, 2002, are expected to remain
flat to slightly lower from projected 2001 levels. In
particular, leverage (debt/EBITDA) should remain in the high 4
times and interest coverage (EBITDA/interest) should continue to
be in the low 2x. The expected financial results represent a
delay in improvement Fitch had expected, but does not represent
a deterioration in credit quality.
AW amended its bank covenants in January 2001 to push out the
scheduled tightening of covenants following the BFI merger. The
current amendments would be a modest loosening from existing
levels and would allow for some room under the covenants due to
the weak economic conditions.
DebtTraders reports that Allied Waste North America's 10.000%
bonds (ALLIED4) due in 2009 trade slightly above par. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ALLIED4for
real-time bond pricing.
AMERICAN RESTAURANT: General Economic Softness Hurts Q3 Revenues
----------------------------------------------------------------
Total revenues from continuing operations of American Restaurant
Group, Inc. decreased to $68.3 million in the third quarter of
2001 from $73.0 million in the third quarter of 2000. After
increasing 15.4% in the third quarter of 2000 compared to 1999,
same-store sales decreased 8.7% in the third quarter of 2001
compared to 2000. The magnitude of the unusual revenue increase
of the prior year, general economic softness in 2001, and the
economic and consumer reactions to the disastrous September 11th
terrorist attacks in the United States contributed to this
year's same-store sales decline.
Profit from continuing operations decreased to $2.9 million in
the third quarter of 2001 from $5.8 million in the third quarter
of 2000. As a percentage of revenues, profit from continuing
operations decreased to 4.2% in the third quarter of 2001
compared to 8.0% in the third quarter of 2000.
* * *
Total revenues from continuing operations increased to $226.8
million in 2001 from $226.6 million in 2000. After increasing
10.7% in 2000, same-store sales decreased 2.7% in 2001. There
were 105 Black Angus restaurants operating as of September 24,
2001 and 103 Black Angus restaurants operating as of September
25, 2000.
Profit from continuing operations decreased to $18.8 million in
2001 from $20.3 million in 2000. As a percentage of revenues,
profit from continuing operations decreased to 8.3% in 2001 from
9.0% in 2000.
* * *
In October, Standard & Poor's assigned its single-'B' rating to
American Restaurant Group Inc.'s proposed $165 million senior
secured notes due in 2006 to be issued under Rule 144A. The
proceeds, the report said, would be used to refinance the
company's $150 million senior secured notes due in 2003 and for
general corporate purposes. A single-'B' corporate credit
rating was also assigned to the company.
Leverage is high, S&P explains, with total debt to EBITDA above
5.0 times. Cash flow protection measures are thin, with EBITDA
covering interest only about 1.4x. Some financial flexibility
exists through a $15 million credit facility.
AMES DEPARTMENT: Signs-Up Gemini Realty as Consultants
------------------------------------------------------
Ames Department Stores, Inc. and its debtor-affiliates desire to
retain and employ Gemini Realty Advisors LLC as their real
estate consultants in these chapter 11 cases. By this
application, the Debtors request that the Court enter an
order approving the employment, nunc pro tunc to October 1,
2001, of Gemini to perform real estate consulting services for
the Debtors.
David H. Lissy, Esq., the Debtor's Senior Vice President and
General Counsel, relates that as part of their reorganization
efforts, the Debtors intend to commence a strategic analysis of
their real estate portfolio, including an evaluation of the
Debtors' leasehold and fee owned interests, to determine the
current value of the Debtors' existing real estate portfolio,
the current supply of and demand for comparable space, and the
overall pricing and marketability of such space. Based upon this
Real Estate Analysis, the Debtors will be able to discuss with
its statutory creditors' committee why its reorganization as a
going concern yields the most beneficial result for creditors.
Mr. Lissy submits that the Debtors also require assistance in
determining the desirability and availability of any potential
lease modifications or dispositions. Furthermore, to the extent
the Debtors determine certain stores are not part of the core
configuration of ongoing stores and, thus, should be closed, the
Debtors require assistance in determining whether the leases and
other real property interests for such closed stores have value.
The Debtors have determined that it is prudent to retain the
services of a real estate consultant to ensure the Real Estate
Analysis is conducted effectively.
Subject to the approval of the Court, and in order to maximize
the value of the Debtors' real estate portfolio, the Debtors
seek to employ Gemini to serve as special real estate
consultants to:
A. create one or more property databases to aid in collecting,
integrating, and analyzing the Debtors' real estate
portfolio data;
B. obtain pricing and other relevant terms of recently closed
comparable property sales and property leases, and obtain
quoted pricing and terms for any proposed sale and lease
transactions by the Debtors;
C. develop valuation, pricing, and sales optimization models
which, among other things, will permit analysis of any
differential in net present values between potential income
streams for the lease of any of the Debtors' properties and
the remaining lease obligations on those properties;
D. create interim and final reports reflecting preliminary and
final valuation results;
E. in consultation with the Debtors' other professionals,
prepare a long-term business plan to maximize the value of
the real estate portfolio;
F. evaluate the correlation of store performance to the quality
of the real estate to forecast possible future store
closings and relocations;
G. evaluate and negotiate potential bulk sales and/or financing
transactions; and
H. negotiate with landlords regarding the terms of possible rent
reductions, lease amendments, cure claims, and lease
terminations.
Mr. Lissy tells the Court that the employment of Gemini by the
Debtors is necessary, essential, and in the best interests of
the administration of these chapter 11 cases, as well as in the
best interests of the Debtors, their estates, their creditors,
and all parties in interest, and should be approved. Gemini has
stated its desire and willingness to act in these cases and
render the necessary professional services as real estate
consultants to the Debtors. Mr. Lissy says that Gemini is well
qualified to perform the real estate consulting services, and
the Debtors know of no reason why Gemini should not be retained.
Mr. Lissy informs the Court that the Debtors selected Gemini as
their special real estate consultants based upon Gemini's
substantial experience in rendering real estate consulting
services to troubled companies. Gemini also has extensive
experience in valuing retail properties, especially for
companies attempting to reorganize under chapter 11. For
example, over the past few years Gemini has valued hundreds of
retail leases and possesses first hand knowledge of many of the
major markets throughout the United States. Mr. Lissy relates
that the Debtors solicited proposals from other well-known real
estate consultants and believe the terms of the Engagement
Letter are highly competitive and favorable to the Debtors'
estates. Accordingly, the Debtors submit Gemini is well
qualified to represent them during the pendency of their chapter
11 cases.
Richard Hauer, a principal of Gemini Realty Advisors LLC, states
that no officer or employee of Gemini has any connection with
the Debtors, their creditors, or any party in interest in
connection with these chapter 11 cases.
Subject to this Court's approval, Mr. Hauer informs the Court
that Gemini will charge for its services on an hourly basis in
accordance with its customary hourly rates in effect on the date
such services are rendered. The current range of 2002 hourly
rates, subject to adjustment, charged by Gemini, is:
Partner $300
Associate $200
Administrative Assistant $100
In the normal course of business, Gemini revises its hourly
rates during the year and hereby requests that the
aforementioned rates be revised to the regular hourly rates
which will be in effect at such time.
Mr. Lissy contends that Gemini began providing services to the
Debtors in these chapter 11 cases on October 1, 2001 to
accommodate the Debtors' needs to rapidly develop a business
plan relating to their real estate portfolio. Because the
appointment of Gemini on the terms and conditions set forth in
the Engagement Letter is necessary and in the best interests of
the Debtors, their estates, and their creditors, the retention
of Gemini, nunc pro tunc to October 1, 2001, should be approved.
(AMES Bankruptcy News, Issue No. 8; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
ATLAS AIR: DebtTraders Sees Less Cushion for Bondholders
--------------------------------------------------------
Michael B. Kanner, CFA, an analyst at DebtTraders, says that
"everything that has transpired since the date of our last
update leads us to believe that Atlas' business continues to
deteriorate."
Atlas Air, Inc.'s total operating revenue declined by 28% from
the prior year to $150.7 million. "Although Atlas has $359
million of cash and investments on its balance sheet as of
September 30, this is substantially lower than the $404 million
at the end of the second quarter," Mr. Kanner continues. "If the
economy continues to remain weak for the next several quarters,
as we believe it will, we expect the cash burn at Atlas to
continue. By this time next year, the cash and investments total
could be significantly lower than current levels, significantly
impacting the cushion afforded bondholders."
Meanwhile, DebtTraders reports that Atlas Air's 10.750% bonds
due in 2005 are currently trading between 77 and 82. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ATLAS2for
real-time bond pricing.
BRIDGE INFO: Seeks Approval to Change Name to BIS Administration
----------------------------------------------------------------
In connection with Bridge Information Systems, Inc.'s sale of a
substantial portion of their assets to Reuters, the Debtors seek
the Court's permission to change its name from Bridge
Information Systems, Inc., to BIS Administration.
Since there were no objections, Judge McDonald grants the relief
requested. Other Debtor entities have also taken all necessary
steps to acquire these new names:
Old Debtor Names New Debtor Names
---------------- ----------------
Bridge Information Systems, Inc. BIS Administration, Inc.
Bridge Information Systems BIS America
Administration,
America, Inc. Inc.
Bridge Data Company BDC Administration, Inc.
Bridge News International, Inc. BNI Administration, Inc.
Bridge Trading Technologies, Inc. BTT Administration, Inc.
Bridge Transaction Services, Inc. BTS Administration, Inc.
Bridge Ventures, Inc. BV Administration, Inc.
BTS Securities, Inc. BTSS Administration, Inc.
BTT Investments, Inc. BTTI Administration, Inc.
StockVal, Inc. SV Administration, Inc.
Bridge International Holdings, Inc. BIH Administration, Inc.
Bridge Information Systems BIS International
International, Inc. Administration, Inc.
Wall Street on Demand, Inc. WSOD Administration, Inc.
(Bridge Bankruptcy News, Issue No. 20; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
BURLINGTON INDUSTRIES: Files for Chapter 11 Reorganization in DE
----------------------------------------------------------------
Burlington Industries, Inc. (NYSE: BUR) announced its intention
to accelerate its initiatives to transition and modify its
business model in order to better serve its customers' expanding
needs in the global supply chain. In order to implement the
company's new business model, Burlington Industries and certain
of its U.S. subsidiaries filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code.
The emerging business model, which is centered on elevating the
company's ability to bring fabric innovation and distinctive
products to the market, consists of four main components:
-- Continuing to build its highly successful Lees Carpets
business
-- Expanding global sourcing partners and leveraging its
own styling and technology capabilities internationally
through Burlington WorldWide Limited, a recently formed
subsidiary based in Hong Kong
-- Providing unsurpassed performance and fabric innovation
through the advanced proprietary technology developed by
Nano-Tex, LLC
-- Building upon and accelerating the manufacturing
improvements made in its North American operations
George W. Henderson, III, Chairman and CEO, commented, "Our
business model going forward adds worldwide reach to our North
American capability to provide products, services and global
solutions to our customers. The ability to enhance products
with the advanced technology of Nano-Tex and extend our reach
beyond our borders through Burlington WorldWide Limited
increases the value of our product development and technology
capabilities while providing us access to broader, more
comprehensive product lines. Our Lees Carpets business
continues to serve the market with innovative flooring solutions
and industry firsts. We are creating a more flexible and
responsive company capable of meeting the diversified and ever
changing needs of our customers."
The voluntary petitions for reorganization were filed in the
U.S. Bankruptcy Court for the district of Delaware.
International operations, joint venture partnerships, Nano-Tex,
LLC and Burlington WorldWide Limited were not included in the
filing.
Henderson continued, "This filing is necessitated by the excess
level of debt in our capital structure which prevents us from
making the changes we deem necessary to our future success."
Burlington Industries also announced it has received a
commitment for a facility of up to $190 million in debtor-in-
possession (DIP) financing underwritten by J.P. Morgan Chase &
Co., which, subject to court approval, will augment the
company's liquidity to provide adequate funding for operations
during the reorganization period. The company expects to
generate positive cash flow during fiscal 2002. The company
anticipates no disruption to daily operations at the company's
headquarters and manufacturing plants or to the delivery of
customer orders. Its main priority continues to be delivering
innovative, high-quality products and services on time.
"This decision was not made lightly and we believe it is in the
best interest of the long-term viability of the company," said
Henderson, commenting on the restructuring action. "We
recognize the need for aggressive and comprehensive change in
our business model and we can no longer afford the time needed
to incrementally transition the company. By utilizing the
Chapter 11 process, we can control and guide our reorganization
activities under the protection of the court to expedite the
debt and operational restructuring that we have been pursuing
and at the same time ensure that our daily operations continue
uninterrupted.
"We currently have good liquidity. As a result of our working
capital and operational improvements achieved during the year,
we currently have approximately $60 million cash on hand. This
cash, along with the DIP, financing, once approved, will provide
the funds we need to operate during the reorganization process."
Henderson continued, "Our restructuring efforts over the last 2
1/2 years have resulted in significant progress towards
transitioning Burlington to better compete with and serve the
needs of an emerging global environment. We made tough
decisions and streamlined many of our businesses. While we have
met the goals set in these plans, outside factors, including a
continuing flood of low-cost and often subsidized foreign
imports and a slowdown in consumer spending have hit the textile
industry hard.
"A key factor that led Burlington to take these steps is the
U.S. Government's history of using the textile industry as a
bargaining chip in international relations. The results have
been devastating for the industry, leading to job losses, plant
closing and liquidations. Imports have been growing rapidly for
many years, but since 1999, the volume of imported apparel has
grown at five times the rate of consumption, squeezing out U.S.-
made products to the point that four out of five garments sold
in this country today are imported.
"To make matters worse, we are not competing on a level playing
field. This flood of textile and apparel imports includes not
only products subsidized by foreign governments, but billions of
dollars of goods that are imported illegally. Our government,
with the exception of support from elected officials in our
region, has made no effective response to these unfair trade
practices, and our industry does not have reciprocal access to
the markets of the exporting countries."
In a closing comment Henderson stated, "The intensity of these
challenges has worsened with the recent economic decline and
uncertainty, and additional slowing in retail sales since
September. It has become clear that we need to accelerate our
efforts to reshape the company so that we can serve our
customers' needs and add value to the company long-term. We are
committed to meeting the challenges of our industry head on and
emerging from this process a stronger, leaner and more
profitable enterprise."
Burlington Industries, Inc. is one of the world's largest and
most diversified manufacturers of softgoods for apparel and
interior furnishings.
BURLINGTON: Case Summary & 50 Largest Unsecured Creditors
---------------------------------------------------------
Lead Debtor: Burlington Industries Inc.
3330 W Friendly Avenue
Greensboro, NC 27410-4800
Bankruptcy Case No.: 01-11282
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
B.I. Transportation, Inc. 01-11283
BH/M-II Inc. 01-11284
BI Properties Inc. 01-11285
BI Properties I Inc. 01-11286
BII Mexico Holdings I, Inc. 01-11287
BII Mexico Holdings II, Inc. 01-11288
BII Mexico Laundry Holding Co. 01-11289
BII Mexico Yarns Holding Co. 01-11290
Burlington Apparel Services
Company 01-11291
Burlington Fabrics, Inc. 01-11292
Burlington Fabritex USA, Inc. 01-11293
Burlington Industries I, LLC 01-11294
Burlington Industries II, LLC 01-11295
Burlington Industries III, LLC 01-11296
Burlington Industries IV, LLC 01-11297
Burlington Industries V, LLC 01-11298
Burlington International
Services Company 01-11299
Burlington Investment Inc. 01-11300
Burlington Investment II Inc. 01-11301
Burlington Mills Corporation 01-11302
Burlington Mills, Inc. 01-11303
Burlington Worldwide, Inc. 01-11304
Burlington Worsteds Inc. 01-11305
Distributex, Inc. 01-11306
Type of Business: The Debtor, along with its subsidiaries, is
one of the world's largest and most
diversified manufacturers of softgoods for
apparel and interior furnishings. Leading
products include: (a) fabrics supplied to
manufacturers of a wide variety of apparel
(b) interior furnishings, including
draperies, window coverings, bedding
ensembles and table linens; and (c) tufted
synthetic carpets and carpet tiles for
commercial use.
Chapter 11 Petition Date: November 15, 2001
Court: District of Delaware
Debtors' Counsel: Daniel J. DeFranceschi, Esq.
Richards, Layton & Finger
One Rodney Square, P.O. Box 551
Wilmington, DE 19899
Tel: 302 658-6541
Fax: 302-651-7701
-and-
David G. Heiman, Esq.
Richard M. Cieri, Esq.
Jones, Day, Reaves & Pogue
North Point, 901 Lakeside Avenue
Cleveland, Ohio 44114-1190
Tel: 216-586-3939
Fax: 216-579-0212
Total Assets: $1,184,995
Total Debts: $1,106,956
Debtor's 50 Largest Consolidated Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
The Bank of New York Unsecured Claims $150,000,000
Indenture Trustee for the
7 25% Notes Due 2005
Attn: Ming Shiang
Vice President
5 Penn Plaza, 13th Floor
New York, NY 10001-1810
Tel: 212-896-7197
Fax: 212-896-7298
El DuPont NeMour Trade Debt $8,102,420
Attn: Bob Novotny
Chestnut Run Plaza
Bldg. 728, Room 133
Wilmington, DE 19880
Tel: 302-892-7215
Fax: 302-999-4064
Unifi Inc. Trade Debt $1,529,883
Billy Moore
7201 W. Friendly Avenue
Greensboro, NC 27410
Tel: 336-316-5664
KOSA Trade Debt $1,222,550
Attn: Frank Tammel
PO Box 651558
4501 Charloote Park Dr
Charlotte, NC 28265-1558
Tel: 704-586-7497
Fax: 704-480-4848
CIBA Specialty Chemical Trade Debt $765,857
Attn: Jack Larkins
PO Box 7247-7318
Tel: 336-377-2204
Fax: 336-801-2808
Carolina Mills, Inc. Trade Debt $693,512
Mike Groce
618 Carolina Avenue
PO Box 157
Maiden, NC 28650
Tel: 800-438-4865
Fax: 828-428-2335
Staple Cotton Co-op Assoc. Trade Debt $637,816
Attn: Meredith Allen
214 W Market St.
PO Box 30550
Nashville, Tn 37241-0550
Tel: 662-453-6231
Fax: 662-453-5347
Carolina Power & Light Utility $632,618
Company
Attn: David Phipps
420 W. Gannon Avenue
Raleigh, NC 27698-0001
Tel: 919-269-4715
Drake Extrusion Trade Debt $596,276
Attn: David Turner
PO Box 60209
11 Front St.
Charlotte, NC 28260
Tel: 276-632-0159 x 105
Fax: 276-634-0224
Chase Bank of Texas Trade Debt $523,135
David Stanford
A/C Plains Cotton
Co-Op Assoc.
PO Box 200071
A/C 1274760
Houston, TX 77216
Tel: 806-762-7265
Fax: 806-762-7335
Harriet & Henderson Trade Debt $491,807
Walt Brown
PO Box 65652
Charlotte, NC 28265-0652
Tel: 336-228-7897
Fax: 252-438-3937
Ronile Inc. Trade Debt $490,290
Attn: Eddie Prillaman
Dept. 79227
701 Orchard Ave.
Rocky Mount, VA 24151
Tel: 540-484-4678
Fax: 540-483-4675
Synthetic Industries Trade Debt $437,043
PO Box 414372
Tel: 706-271-5623
Fax: 706-625-0769
HSBC Business Credit Trade Debt $402,807
7201 W. Friendly Avenue
Greensboro, NC 27410
Tel: 336-316-5664
Fax: 336-294-4751
Colbond, Inc. Trade Debt $361,899
Chuck Wagner
Nonwovens, Inc.
Dept. 19996
100 Abutment Rd.
Dalton, GA 30721
Tel: 828-665-5072
Fax: 858-665-5005
ABCO Industries Trade Debt $310,173
Attn: Al Bell
PO Box 75447
Charlotte, NC 28275-0447
Tel: 864-253-8400
Fax: 864-576-9378
Conso Products Trade Debt $282,196
Bob Stiso
PO Box 116210
Atlanta, GA 30368-6210
Tel: 212-686-7676
Fax: 212-686-9890
Colonial Printing Co. Trade Debt $277,454
75 Greeson Bend Rd.
Chatsworth, GA 30705
Tel: 706-695-7431
Fax: 706-695-1081
Texturing Services, Inc. Trade Debt $272,554
Attn: Douglas Stanley
PO Box 14862
Greensboro, NC 27415
Tel: 336-342-9085
Fax: 336-342-9745
HSBC Business Credit Trade Debt $269,605
Attn: John Garris
1823 Boone Rail Road
Sanford, NC 27330
Tel: 919-770-6383
Fax: 919-718-5495
Exxon Chemicals America Trade Debt $265,432
George McGlamery
Dept AT40161
400 Interstate Pkwy
SE
Atlanta, GA 31192
Tel: 770-956-2727
Fax: 770-956-2735
Yorkshire Americas Inc. Trade Debt $261,784
Attn: Louis Lopez
3001 N. Graham St.
Charlotte, NC 28206
Tel: 704-372-5890
Fax: 704-376-3091
Frontier Spinning Mills Trade Debt $260,371
Attn: John Garris
1823 Boone Trail Road
Sanford, NC 27330
Tel: 919-770-6383
Fax: 919-718-5495
WWD Partners LLC Trade Debt $250,528
110 West 40th Street
Suite 604
New York, NY 10018
Tel: 336-292-3177
Fax: 336-852-6640
M.S. Carriers Trade Debt $249,244
Universal Textile Trade Debt $240,659
Technologies
Printer Space Print Trade Debt $214,395
Exxon Chemical America Trade Debt $203,482
Buffalo Color Corporation Trade Debt $192,333
Connecticut General Life Insurance $183,257
Insurance Co
Caraustar Trade Debt $172,803
Capital Factors Trade Debt $170,576
Formosa Plastics Trade Debt $160,650
Textile Rubber & Trade Debt $159,632
Chemical Co.
Dominion Virginia Power Trade Debt $158,527
Galey & Lord Trade Debt $149,957
Wellman, Inc. Trade Debt $141,565
Sulzer Textile, Inc. Trade Debt $136,824
Mount Vernon Mills I Trade Debt $135,336
CSI/Crown Inc. Trade Debt $129,648
Pakdale Mills, Inc. Trade Debt $129,142
DFS Acceptance Trade Debt $128,209
Seydel Wooley & Co. Trade Debt $123,505
Southeastern Freight Trade Debt $120,076
Pevler Coal Sales Co. Trade Debt $119,699
Amoco Fabrics & Fibers Trade Debt $116,906
Colorite Polymers Trade Debt $116,875
Wayn-Tex, Inc. Trade Debt $107,831
Rosenthal & Rosenthal Trade Debt $106,562
CELEXX CORP: Exploring Financing Options to Fund Operations
-----------------------------------------------------------
CeleXx Corporation has had a short operating history, and since
its inception the Company has generated approximately $7.5
million of losses from operations. As of June 30, 2001, it had
an accumulated deficit of approximately $11.1 million. To
successfully execute its business plan, the Company says it will
require substantial additional capital from equity or debt
financings in order to meet its projected working capital and
other cash requirements. Moreover, the sale of additional equity
or other securities could result in additional dilution to its
stockholders. Celexx may not be able to secure any additional
financing on acceptable terms, if at all.
The Company's total revenue during fiscal 2001 increased by
$16,508,421, or 411%, from $4,020,232 during fiscal 2000. This
increase was due primarily to (a) acquisition of CMI during
April 2000, and (b) increased service revenue generated by our
Performance Media Group, whose revenue increased 279% over
fiscal 2000.
Cost of revenue increased as a percentage of net revenue to
75.5% during fiscal 2001, compared with 69.5% for the fiscal
year ended June 30, 2000. Correspondingly, gross profit margins
decreased from 30.5% of revenue in 2000 to 24.5% for the year
ended June 30, 2001. The increase in absolute dollars, and
corresponding decrease in gross profit margins, was due in part
to the inclusion of the results of CMI (acquired in April, 2000)
in the consolidated results of operations. Additionally, CMI's
business involves substantial systems design and
installation work where profit margins on hardware components
are historically lower than gross profit margins on the sale of
information technology solutions and services.
Consolidated net loss increased by $1.5 million to $5.7 million
for the year ended June 30, 2001 compared with $4.5 million for
the period ended June 30, 2000, reflecting primarily the $2.7
million write-down in the value of marketable securities.
* * *
In October, as reported in the Troubled Company Reporter, CeleXx
was in default on its promissory note to David Burke, Sr. in the
amount of $914,000. Approximately $414,000 of the note became
due on October 1, 2001, with the balance due in April of 2002.
"The Company is aggressively pursuing a remedy," CeleXx said at
that time. According to the same report, the company's auditors
also warned that they might issue a "going concern" note about
the company's financial position.
CHIQUITA BRANDS: DebtTraders Recommends Two Senior Note Issues
--------------------------------------------------------------
Chiquita Brands International announced on Monday morning,
November 12, that it reached an agreement with creditors on the
long anticipated financial restructuring of the Company,
DebtTraders reports.
The restructuring will be accomplished via a prepackaged
bankruptcy filing.
The existing $775 million of senior notes plus accrued interest
will be exchanged for $250 million of new senior notes and 87.75
percent of the equity of Chiquita (35.1 million of the 40
million shares to be issued). The $86 million of subordinated
notes plus accrued interest will be exchanged for 7.75 percent
of the equity of the Company (3.1 million shares). Preferred
stockholders will receive 0.62 percent of the equity plus
warrants to purchase an additional 4.2 million shares. Current
common stockholders will receive 1.38 percent of the equity plus
warrants to purchase an additional 9.2 million shares.
Chiquita's existing management will receive 1 million shares
plus warrants. "We expect that the prepackaged plan will be
approved sometime during the first quarter," says DebtTraders
analyst Michael B. Kanner, CFA, (1 212-247-5300).
"At a dollar price below the low 80s," Mr. Kanner adds,
"DebtTraders reiterates its BUY recommendation of June 11 on the
9.625% and the 9.125% senior notes (both due 2004) of Chiquita
Brands International. Our BUY recommendation is based on a
combination of the relatively high yield (20+%) and SAFETY
rating on the issue of 86%, which aggregate to an ATTRACTIVENESS
of 90%. We believe the bonds to be worth between an 82 and 91
dollar price."
DebtTraders reports that Chiquita Brands' 10.250% bonds due in
2006 (CQB4) are currently trading in the low 80's. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CQB4for
real-time bond pricing.
COMPANIA MEGA: S&P Junks Rating After Technical Default on Notes
----------------------------------------------------------------
Standard & Poor's lowered its long-term, foreign currency rating
on Argentine-based Compania MEGA S.A.'s (MEGA) notes to triple-
'C'-plus from single-'B'. At the same time, the CreditWatch
status of the company's rating, which was placed on CreditWatch
with negative implications on Oct. 12, 2001, has been revised to
CreditWatch with developing implications.
The rating downgrade reflects uncertainty about the timeliness
of the payment of US$470 million notes on Dec. 31, 2001, if the
exchange of the notes does not occur before that date. The
company has informed Standard & Poor's that it has called for a
bondholders' meeting for Dec. 14 to remedy the technical
default. It is a condition for the exchange that no event of
default exists at the time of the exchange. Furthermore, there
are other conditions, including the approval by the Argentine
Federal Executive Power of the collateral assignment of the
pipeline concession, which has to be met or waived by the
bondholders, and the funding of the reserve accounts, according
to the financing documents, in order for the exchange to occur.
Given the tight time schedule imposed by the late bondholders'
meeting, it is a concern of Standard & Poor's that the notes are
paid in a timely manner on Dec. 31, 2001, if the exchange does
not occur between Dec. 17 and Dec. 28, 2001. Even though
Standard & Poor's believes the sponsors will provide the
necessary funds to pay out the notes, given the tight time
schedule, timeliness becomes crucial.
The CreditWatch with developing status reflects that in the
event that MEGA resolves the conditions for the exchange of the
notes before Dec. 31, 2001, a rating upgrade could take place.
However, if these pending issues are not resolved and the
sponsors are not able, for any reason, to timely provide all
funds necessary to comply with the payment of MEGA's notes, the
rating will be further downgraded.
CONDOR SYSTEMS: S&P Drops Ratings to D After Filing Chapter 11
--------------------------------------------------------------
Standard & Poor's lowered its ratings on Condor Systems Inc. to
'D'. The ratings are removed from CreditWatch, where they were
first placed on April 24, 2001. The San Jose, California-based
company has filed for protection under Chapter 11 of the
Bankruptcy Code. Management cited a heavy debt burden and a
slowing marketplace.
Ratings Lowered To 'D'; Removed From Creditwatch
TO FROM
Condor Systems Inc.
Corporate credit rating D CCC-
$100 mil. 11.875% sr. subd. notes
Series B due 5/1/09 D CC
Bank loan rating
$50 mil. sr. secd. credit facility D CCC-
COVAD COMMUNICATIONS: Net Loss Drops in Q3 Due to Reduced Costs
---------------------------------------------------------------
Covad Communications, (OTCBB:COVD) announced its financial
results for the third quarter of 2001.
Revenue for the quarter ended September 30, 2001 was $84.8
million, which is a 115 percent increase over the third quarter
2000 revenue of $39.5 million. Revenue for the quarter ended
June 30, 2001, was $87.1 million. The decrease was attributable
to the loss of approximately $6.4 million of revenues due to the
shutdown of the company's BlueStar subsidiary during the second
quarter of 2001.
Covad had a 24 percent improvement in loss from operations
quarter over quarter and a 53 percent improvement from the same
quarter in 2000. For the quarter ended September 30, 2001 loss
from operations was $108.1 million compared to the second
quarter loss from operations of $141.8 million and the third
quarter 2000 loss from operations of $229.0 million. Net loss of
$139.7 million for the quarter ended September 30, 2001, was a
20 percent improvement from the second quarter of 2001 and a 43
percent improvement over the third quarter of 2000.
The decrease in net loss from the second quarter to the third
quarter was driven by a 15 percent decrease in network and
product costs and a 23 percent decrease in sales, marketing,
general and administrative costs. Loss per share improved 22
percent to a loss of $0.79 in the third quarter of 2001 from a
loss of $1.01 in the second quarter of 2001. This is a 50
percent decrease from the loss per share of $1.58 in the third
quarter of 2000.
Revenue for the nine months ended September 30, 2001 was $243.1
million, representing a 135 percent increase over revenue of
$103.5 million for the same period of 2000. Loss from operations
for the nine months ended September 30, 2001 was $424.6 million,
including $19.6 million in charges for restructuring and
adjustments to the recorded value of long-lived assets, compared
with a loss from operations of $500.0 million for the nine
months ended September 30, 2000.
"Our business is strong enough that we were able to overcome
many third quarter challenges, including closure of our BlueStar
subsidiary, with only a slight reduction in revenue," said
Charles E. Hoffman, CEO and president of Covad. " We continue to
lower our cash requirements and improve our results through
effective cost control measures and operational efficiencies
throughout our organization. We have introduced new products
such as TeleSOHO, a product for the teleworker, and plan to
introduce more services in the next few months. The focus on our
cost controls and new products should help us build upon the
successes of the first nine months of this year."
Covad's subscriber lines in service increased four percent to
346,000 lines, compared with 333,000 lines at June 30, 2001.
Lines in service at the end of the third quarter of 2001
increased 69 percent from Covad's subscriber lines in service of
205,000 at September 30, 2000.
On October 25, 2001, the US Bankruptcy Court for the District of
Delaware entered an order approving the Disclosure Statement for
Covad Communications Group, Inc. and the Bankruptcy Court also
set December 13, 2001 as the date to consider confirmation of
the reorganization plan.
Covad announced on November 13, 2001 that it secured additional
funding, with a value of $150 million, through agreements with
SBC Communications. This funding provides the cash needed to
grow the company to cash flow positive by the second half of
2003. During the third quarter of 2001, Covad used less than $70
million in cash, down from approximately $112 million for the
second quarter of 2001. The monthly average cash burn during the
third quarter was less than $23 million. Including the cash
reserved for the payment of claims to bondholders and other
creditors as part of Covad's pre-negotiated restructuring,
Covad's cash balance as of September 30, 2001 was $476.8
million.
Covad expects the fourth quarter to show limited to no growth in
revenue with continued reductions in the loss from operations
based on expected improvements in the overall cost structure of
the business.
"We are making tremendous progress in our business in these
difficult times, and we believe we have come a long way toward
assuring the long term viability of Covad," stated Hoffman. "Our
expected emergence from the bankruptcy process in January 2002,
our recent funding announcement, our new products and our
continued focus on the customer in all we do should strengthen
our position as the leading independent provider of broadband
services."
Covad is the leading national broadband service provider of
high-speed Internet and network access utilizing Digital
Subscriber Line (DSL) technology. It offers DSL, IP and dial-up
services through Internet Service Providers, telecommunications
carriers, enterprises, affinity groups and PC OEMs to small and
medium-sized businesses and home users. Covad services are
currently available across the United States in 94 of the top
Metropolitan Statistical Areas (MSAs). Covad's network currently
covers more than 40 million homes and business and reaches
approximately 40 to 45 percent of all US homes and businesses.
Corporate headquarters is located at 4250 Burton Drive, Santa
Clara, CA 95054. Telephone: 1-888-GO-COVAD. Web Site:
http://www.covad.com
ECHOSTAR: Gets $5.5BB in Financing for Hughes Electronics Merger
----------------------------------------------------------------
EchoStar Communications Corporation (Nasdaq:DISH) announced
today that Credit Suisse First Boston has joined Deutsche Bank
to provide approximately $5.5 billion to finance the company's
announced merger with Hughes Electronics (NYSE: GM, GMH).
Credit Suisse First Boston's $2.75 billion commitment replaces
General Motors' temporary bridge financing and adds to the
previously announced $2.75 billion bridge commitment from
Deutsche Bank to provide EchoStar with the total expected $5.5
billion of financing necessary to consummate the merger.
Credit Suisse First Boston (CSFB) is a leading global investment
bank serving institutional, corporate, government and individual
clients. CSFB's businesses include securities underwriting,
sales and trading, investment banking, private equity, financial
advisory services, investment research, venture capital,
correspondent brokerage services and retail online brokerage
services. It operates in over 87 locations across more than 39
countries on 6 continents and as some 28,000 staff worldwide.
The Firm is a business unit of the Zurich based Credit Suisse
Group, a leading global financial services company. For more
information, visit http://www.csfb.com.\
With assets of almost EUR 1 trillion and over 97,000 employees,
Deutsche Bank offers its clients unparalleled financial services
throughout the world in over 70 countries. It ranks among the
leaders in Asset Management, Capital Markets, Corporate Finance,
Custody, Cash Management and Private Banking. Deutsche Bank is
organized in two customer-oriented Groups: "Corporate and
Investment Bank" (CIB) and "Private Clients and Asset
Management" (PCAM). For more information, visit
http://www.db.com
EchoStar Communications Corp. and its DISH Network provide
state-of-the-art direct-broadcast satellite TV service that is
capable of offering over 500 channels of digital video and CD-
quality audio programming, as well as advanced satellite TV
receiver hardware and installation. EchoStar is included in the
Nasdaq-100 Index (NDX). DISH Network currently serves over 6.43
million customers. For more information, visit
http://www.dishnetwork.com
As a result of the announced merger, Standard & Poor's placed
Echostar's low-B ratings on CreditWatch with developing
implications, reflecting the probability that the ratings could
either be raised or lowered.
EDISON: CalEnergy Sues SoCal Unit, Demanding Payments of $100MM+
----------------------------------------------------------------
Geothermal power plants managed by CalEnergy Operating
Corporation filed suit in Imperial County Superior Court
charging Southern California Edison with breach of contract for
not making payments of more than $100 million for renewable
power supplied during the California energy crisis.
David L. Sokol, chairman of CalEnergy's parent company, said,
"Our patience, and our ability to carry Edison's past-due debt,
has run out. It has been a year since Edison first stopped
making payments to CalEnergy and other renewable energy
producers. We entered into a settlement with Edison for payment
six months ago. It now is reneging on its agreements with
renewable energy producers. Edison protects its shareholders
while little players across the state, including vendors and
landowners in Imperial County, suffer. Putting us last in line
to receive payment is the final insult."
Edison has built up a cash hoard of $3.3 billion, which has
recently grown by $10 million a day, Sokol said. It has
repeatedly broken agreements despite assistance from renewable
generators in keeping Edison out of bankruptcy and restoring it
to creditworthiness. Sokol also said that Edison's repeated
refusal to pay CalEnergy, under a written agreement reached June
15, casts doubt on Edison's ability or intent to live up to its
Oct. 2 settlement with the California Public Utility Commission.
In addition to demanding back payment, the lawsuit calls on
Edison to begin paying the agreed fixed price for CalEnergy's
electricity. Every month that Edison delays paying that price
brings a windfall to Edison of tens of millions of dollars from
CalEnergy and other renewable energy providers, Sokol said.
"It's doubtful that the CPUC anticipated Edison reneging on its
past debts and getting this windfall through its settlement
agreement," he added.
In November of last year, Edison stopped paying for the
geothermal energy CalEnergy was providing under contract for the
utility's California customers. CalEnergy and other renewable
generators continued to provide power to Edison without being
paid. This helped to stabilize California's energy supply while
the state was paying millions of dollars a day for out-of-state,
fossil-fueled electricity at a time of high natural-gas prices
and rolling blackouts.
In March, CalEnergy affiliates won a judgment in Imperial County
Superior Court releasing them from their contract with Edison.
They began selling their geothermal energy on the open market.
In June, Edison reached a written agreement with CalEnergy and
other alternative energy generators in which it agreed to pay
them for energy going forward. In addition, Edison agreed to
make immediate partial payment on past-due amounts and to pay
the balance once steps were taken to make it creditworthy. With
that agreement, CalEnergy resumed selling its generation to
Edison at a rate pegged to natural gas prices.
On Oct. 2, Edison reached its agreement with the CPUC that
restored the utility to creditworthiness. However, since then
it has made no payment to CalEnergy for the past-due amount,
despite two demand letters, and has refused to acknowledge that
it will live up to its agreement.
Further, Edison has taken the position that it will pay the in-
state, renewable energy generators last, after the big banks and
the large, out-of-state fossil-fuel generators. "We wanted to
avoid this litigation, but Edison's outrageous behavior has left
us no choice," Sokol said.
"Edison has demonstrated a pattern of failing to live up to
contracts and agreements with CalEnergy and other renewable
energy providers throughout the energy crisis," Sokol said. "By
failing to keep its promise to honor its agreement with us and
other renewable suppliers, Edison has prevented CalEnergy from
catching up on payments to its creditors in the Imperial Valley
area, including approximately $4 million to local landowners who
receive royalties for geothermal rights. This has cascaded
throughout the local economy."
Even without receiving payment for five months, CalEnergy
continued to provide its clean, renewable energy to Edison and
the state and continued its tax payments to the benefit of the
county, school districts and others, Sokol noted. CalEnergy
refrained from taking legal action that would have forced Edison
into bankruptcy, and it supported legislative efforts to make
Edison creditworthy.
"We have supported Edison's efforts to be restored to
creditworthiness, in light of California's energy crisis," Sokol
said. "Edison was happy with our support and assured us it
would live up to its promises during its protracted fight to
avoid bankruptcy. We are owed more than $100 million and deserve
to be paid. It is too bad it takes a lawsuit to make that
happen."
ESAFETYWORLD: Fails to Comply with Nasdaq Listing Requirements
--------------------------------------------------------------
eSAFETYWORLD, Inc. (Nasdaq:SFTY), which specializes in serving
the critical environment and personal care markets and provides
consulting and support services to emerging companies, announced
that on October 22, 2001, it received a Nasdaq Staff
Determination indicating that as of such date Nasdaq had not
received the Company's Annual Report on Form 10-KSB for its
fiscal year ended June 30, 2001, that it had failed to comply
with Nasdaq Marketplace Rule 4310(c)(14) and that its common
stock was, therefore, subject to delisting from the Nasdaq
SmallCap Market on October 30, 2001.
The Company subsequently filed its Annual Report on Form 10-KSB
for its fiscal year ended June 30, 2001 and requested a hearing
before a Nasdaq Listing Qualifications Panel to review the Staff
Determination. On November 5, 2001, the Company received another
Nasdaq Staff Determination indicating that the Nasdaq staff has
determined to delist its common stock from The Nasdaq Stock
Market pursuant to Nasdaq Marketplace Rules 4300, 4330(a)(3),
4310c(16), 4350c, 4350(d)(2)c and 4310c(13) because of concerns
about the content of and procedures relating to its recent press
releases, its reported financial results, including revenues,
and other matters. The Company has requested a hearing before a
Nasdaq Listing Qualifications Panel to review this Staff
Determination. Nasdaq has informed the Company that it has a
hearing scheduled before a Nasdaq Listing Qualifications Panel
on December 13, 2001. At this hearing, the Company will be
required to demonstrate its ability to sustain long term
compliance with all applicable Nasdaq maintenance requirements.
There can be no assurance that the Panel will grant the
Company's request for continued listing.
If the Company's stock does not satisfy Nasdaq's listing
requirements, it may apply for quotation of its common stock on
any other organized market or quotation system on which the
common stock may be eligible for trading, such as the NASD's OTC
Electronic Bulletin Board or pinksheets.com. There can be no
assurance that the Company's common stock will be accepted for
listing or trading on either of these quotation systems. A
delisting of the Company's common stock from Nasdaq could have
an adverse effect on the market price of its common stock and
the ability and capacity of persons to acquire or sell shares of
its common stock.
eSAFETYWORLD markets and distributes disposable industrial
safety products to companies having employees working in
manufacturing, construction or critical environments and those
employees being exposed to environmental hazards. Its e-Commerce
Web site is located at http://www.esafetyworld.com The Company
also offers its customers a 360 degree ordering solution by
making toll free numbers and catalogs available for customers
who prefer traditional ordering methods. The Company also
operates a consulting/accelerator consulting group to serve
emerging or promising businesses.
EXODUS COMMS: Seeks Approval of Small Asset Sale Procedures
-----------------------------------------------------------
Prior to the Petition Date, on a regular basis, and in the
ordinary course of their businesses, Exodus Communications, Inc.
disposed of surplus assets that were no longer needed or wanted.
Similar dispositions of Miscellaneous Assets will be necessary
and/or desirable during the course of these chapter 11 cases to
complete the Debtors restructuring initiatives.
Thus, by a motion, the Debtors move for entry of an order
establishing procedures for the Debtors' contemplated sales of
certain miscellaneous assets, including certain furniture,
fixtures and equipment. The Debtors also seek authority to
continue to sell Miscellaneous Assets on an expedited basis,
upon notice to counsel to the Creditors' Committee, counsel to
the Bank Agent to the proposed DIP Lenders, the United States
Trustee and any person or entity asserting an interest in such
Miscellaneous Assets, without need for obtaining further Court
approval so long as the transaction falls within certain
parameters.
David R. Hurst, Esq., at Skadden Arps Slate Meagher & Flom LLP,
in Wilmington, Delaware, informs the Court that the
Miscellaneous Assets consist primarily of furniture, fixtures
and equipment and personal property used in the operation of the
Debtors' businesses, including, but not limited to, surplus
power generators, HVAC equipment, office furniture, supplies and
other equipment, computers, warehouse materials and equipment,
other excess or obsolete inventory, miscellaneous small
machinery and other similar items.
The Debtors believe that it will prove impractical, and will
result in unnecessary delay and cost to the estates, to seek
this Court's approval of each particular Miscellaneous Asset
Sale. Accordingly, the Debtors propose and request that the
Court dispense with the requirements of notice and a hearing for
each Miscellaneous Asset Sale, and that certain uniform
procedures be established to permit the Debtors to undertake
Miscellaneous Asset Sales. The Debtors believe that such
procedures will maximize the likelihood that the Debtors can
effectively negotiate and consummate the Miscellaneous Asset
Sales, while simultaneously protecting the legitimate interests
of all of the estates' creditors. The Debtors seek to sell such
Miscellaneous Assets because, in many instances, they are
located in facilities or IDCs that the Debtors have already
vacated pursuant to restructuring initiatives commenced prior to
and after the Petition Date.
The Debtors propose to establish an expedited notice procedure
that provides notice of sales of Miscellaneous Assets to the
Notice Parties. Such notice will allow these parties to preview
particular proposed dispositions of assets valued in excess of
$125,000 and object to such sales, and also will provide a
procedure for resolving such objections. Specifically, the
Debtors propose that the Miscellaneous Asset Sales be structured
in accordance with the procedures described below:
A. Level 1 Sales - With respect to any single Miscellaneous
Asset or related group of Miscellaneous Assets with a sale
price of less than or equal to $125,000, the Debtors shall be
permitted to accept and consummate any offer that the
Debtors determine, in their sound business judgment and in
their sole and absolute discretion, to be a fair and
reasonable offer for such Miscellaneous Asset or group of
Miscellaneous Assets. The Debtors shall provide notice of
all Level 1 Sales to the Notice Parties not later than the
10th business day following the date on which any such Level
1 Sales are actually consummated.
B. Level 2 Sales - With respect to any single Miscellaneous
Asset or related group of Miscellaneous Assets with a sale
price of greater than $125,000 but less than or equal to
$1,000,000:
1. as soon as practicable after the Debtors' negotiation of
a definitive agreement for a Level 2 Sale, the Debtors
will provide to the Notice Parties a written
description of the sale. The Sale Summary shall
identify or describe the Purchaser, the Asset(s) to be
sold, the purchase price to be paid, and the book
value of the Asset(s) to be sold, if available.
2. the Notice Parties shall be permitted 5 business days
from the date of the Debtors' submission to review the
Sale Summary. If all Notice Parties affirmatively
assent to the Level 2 Sale pursuant to the terms and
conditions described in the Sale Summary, or fail to
notify the Debtors in writing of their objection to
the Level 2 Sale prior to the expiration of the Level
2 Review Period, the Debtors shall be authorized to
consummate the Level 2 Sale without notice and a
hearing or entry of a further order of the Court. The
notice of objection will only be served upon the
Debtors; it will not be filed with the Court.
3. if a Notice Party timely objects to the Level 2 Sale
described in a Sale Summary, but withdraws for any
reason its objection to such sale, the Debtors shall
be authorized to consummate the Level 2 Sale without
notice and a hearing or entry of a further order of
the Court.
4. if a Notice Party timely objects to the Level 2 Sale
described in a Sale Summary and does not withdraw the
objection, the Debtors shall have the option of:
a. foregoing consummation of the Level 2 Sale that is
the subject of the objection,
b. modifying the terms of the Level 2 Sale in a way
that results in the objecting Notice Party
withdrawing the objection, or
c. upon notice and a hearing, seeking an order from
the Court authorizing the Debtors to consummate
the Level 2 Sale over the objecting Notice
Party's objection. In the event that the Debtors
opt to seek an order of the Court, any notice
party having timely objected shall be permitted
to file papers in support of its objection with
the Court.
Mr. Hurst contends that all Miscellaneous Asset Sales
consummated pursuant to the foregoing procedures will be made
free and clear of any liens, claims, interests or encumbrances
of any entity in the Miscellaneous Assets. Mr. Hurst assures the
Court that any party asserting an Interest in the Miscellaneous
Assets will be protected by having that Interest attach to the
net proceeds of the sale(s), subject to any claims and defenses
the Debtors may possess with respect thereto. In addition, the
Debtors will not be able to sell Miscellaneous Assets to
"insiders" without clearly disclosing this fact in bold print on
the face of the notices to the Notice Parties.
The Debtors submit that the establishment of the procedures is
desirable and in the best interests of the Debtors' estates,
their creditors and other parties in interest in these cases.
Mr. Hurst points out that the Miscellaneous Assets have little
utility to the Debtors' ongoing operations but their sale will
generate additional value for the Debtors' estates and
creditors. Furthermore, the Debtors are in the process of
winding down operations at certain IDCs and will face
significant hardship with respect to some of the Miscellaneous
Assets if such assets must be moved to and stored at alternative
locations pending disposition. Mr. Hurst says that these
procedures will conserve the Debtors' resources, promote
judicial economy, make cost effective the smaller Miscellaneous
Asset Sales that otherwise would be prohibitively expensive, and
will expedite the sale of more valuable assets in a cost-
effective manner that provides the most benefit to the Debtors'
estates and creditors.
The Debtors submit that they have good business justification
for conducting the Miscellaneous Asset Sales, which provide
little or no ongoing benefit to the Debtors, and the value of
which will likely diminish with each passing day. Mr. Hurst
submits that most of the Miscellaneous Assets are stored in
locations that are scheduled to close, in which case the Debtors
would either be forced to incur additional costs to move and
store these assets or to abandon them where such costs were
prohibitive. Mr. Hurst asserts that the establishment of and
adherence to the Sale Procedures will permit the estates to
maximize the value of the Miscellaneous Assets by avoiding the
cost and delay associated with obtaining Court approval of each
individual sale and by reducing the chance that otherwise
salable assets would be abandoned rather than sold. (Exodus
Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
FACTORY CARD: Deadline to Make Lease Decisions Moved to Jan. 31
---------------------------------------------------------------
The United States Bankruptcy Court for the District of Delaware
approves Factory Card Outlet's motion to extend the time by
which they must assume or reject Leases. The deadline is
extended to January 31, 2002, which is the earlier consummation
of the Debtors' Chapter 11 plan of reorganization.
The Court also ruled that during any portion of the period from
November 1, 2001 through January 31, 2002, the Debtors shall pay
to the applicable landlord in the event that the Debtors conduct
store closing sales.
Factory Card Outlet Corporation, one of the largest chains of
company-operated superstores in the card, party supply and
special occasion industry in the United States, filed for
chapter 11 protection on March 23, 1999 in the District of
Delaware. Daniel J. DeFrancheschi of Richards Layton & Finger,
P.A., represents the Debtor in their restructuring effort. As of
August 4, 2001, the company listed $77,551,000 in assets and
$92,141,000 in debt.
FEDERAL-MOGUL: Wins Approval to Pay Pre-Petition Tax Obligations
----------------------------------------------------------------
Federal-Mogul Corporation and its debtor-affiliates sought and
obtained authority from the Court to pay the accrued and unpaid
payroll, sales and use taxes, and the property and franchise
taxes to the relevant taxing authorities. To the extent that any
transfers, deposits or checks issued by the Debtors pre-petition
on account of the these taxes have not cleared as of the
Petition Date, the Debtors also obtained authorization of the
bank's honoring of such transfers on or after the Petition Date.
In the ordinary course of their business, the Debtors withhold
certain payroll taxes from their employees' paychecks, which
amounts are remitted periodically to the appropriate federal,
state or local taxing authorities. The Debtors' employees are
paid through four different payroll systems. Under three of
these payroll systems, wire transfers or direct deposits for all
accrued payroll and payroll taxes for salaried employees through
the end of September, 2001, will have been issued prior to the
Petition Date. Under the remaining payroll system, two weeks of
accrued payroll and payroll taxes will remain outstanding as of
the Petition Date. In addition, under all four payroll systems,
one week of accrued payroll and payroll taxes for employees paid
on an hourly basis will remain outstanding as of the Petition
Date. The estimated amount of the Debtors' accrued and unpaid
payroll taxes under all payroll systems, as of the Petition
Date, is approximately $3,500,000.
The Debtors sell a limited number of products through the
internet, resulting in the collection of state sales tax from
their customers, which are subsequently remitted to the
applicable taxing authorities. The Debtors also incur use taxes
as a result of the purchase or use of various taxable equipment
and supplies. Use taxes accrue and are paid at various intervals
to the relevant taxing authorities. The Debtors are required to
make more than 780 separate filings of sales and use taxes to
various taxing authorities during each year. As of the Petition
Date, the estimated aggregate amount of the Debtors' accrued and
unpaid sales and use taxes is approximately $250,000.
The Debtors are obligated to pay property taxes on real and
personal property that they own within the United States. The
Debtors are required to make more than 100 separate filings of
real and personal property taxes to various taxing authorities
during each year. As of the Petition Date, the estimated
aggregate amount of the Debtors' accrued and unpaid real and
personal property taxes is approximately $3,000,000.
The Debtors are also obligated to pay franchise taxes to
numerous state taxing authorities in order to maintain their
corporate existence or to be authorized to operate their
businesses. The Debtors are required to make more than 200
separate filings of franchise taxes to various taxing
authorities during each year. As of the Petition Date, the
estimated aggregate amount of the Debtors' accrued and unpaid
franchise tax is approximately $250,000.
As of the Petition Date, the Debtors' estimated aggregate pre-
petition liability for all of the aforementioned taxes is
approximately $4,000,000.
Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young & Jones,
P.C., in Wilmington, Delaware, tells the Court that the banks
have agreed to keep the Debtors' disbursement accounts which are
dedicated to paying payroll and payroll taxes open following the
Petition Date. The Debtors have instructed the banks not to
honor checks issued pre-petition following the Petition Date
with respect to the Debtors' other disbursement accounts through
which pre-petition payments for non-payroll taxes might be
outstanding. Accordingly, the Debtors seek authorization to
reissue any check, which was drawn in payment of any pre-
petition tax approved herein that was not cleared by a bank or
financial institution.
In many of the states in which the Debtors' do business, Ms.
Jones relates that sales and use taxes are administered by the
same taxing authorities, and are collected and enforced in the
same manner. Although few of the states in which the Debtors do
business have statutes which expressly treat use taxes as "trust
taxes," many of the states' taxing authorities assert various
penalties and enforcement actions as if use taxes constituted
sales taxes. Given the over 780 sales and use tax filings that
the Debtors prepare each year, Ms. Jones believes it would be
extremely costly for the Debtors' estates to resolve any
disputes and defend any actions that the various taxing
authorities assert regarding the issue of whether use taxes are
entitled to the same treatment as sales taxes.
In many states that have laws providing that certain taxes
constitute "trust fund" taxes, Ms. Jones informs the Court that
officers and directors of the collecting entity may be held
personally liable for nonpayment of such taxes. Therefore, to
the extent the payroll, sales and use taxes of the Debtors are
not paid, Ms. Jones claims that the Debtors' officers and
directors may be subject to lawsuits in such jurisdictions
during the pendency of these chapter 11 proceedings. Ms. Jones
contends that such potential lawsuits would prove extremely
distracting to the Debtors, and to the officers and directors
whose attention to the reorganization process is required and to
this Court, which might be asked to entertain various motions
seeking injunctions with respect to the potential state court
actions. Accordingly, Ms. Jones asserts that it is in the best
interests of the Debtors' estates and the reorganization policy
of the Bankruptcy Code to eliminate the possibility of the
foregoing distractions by payment of these payroll, sales and
use taxes.
In some of the states in which the Debtors do business, Ms.
Jones submits that liens can attach to real and personal
property on which the Debtors have unpaid property taxes,
entitling the taxing authorities to post-petition interest or
other adequate protection. Since real and personal property
taxes effectively may have the same priority as secured claims
against the Debtors' estates, the Debtors submit that payment of
property taxes at this time will not prejudice the rights of the
Debtors' general unsecured creditors.
The Debtors are informed and believe that certain taxing
authorities may cause the Debtors to be audited or may suspend
the Debtors' authority to conduct business or take other
corporate actions if the franchise taxes are not paid. Given the
over 200 different franchise tax filings that the Debtors submit
each year, Ms. Jones states that handling such audits or such
suspensions of the Debtors' qualifications to do business would
be extremely disruptive to the Debtors' business operations and
would divert their attention away from the reorganization
process.
All the applicable taxes discussed in this Order are entitled to
priority status and must be provided for in full under any plan
of reorganization. Accordingly, Ms. Jones asserts that the
payment of the taxes at this time will affect only the timing of
payment, will avoid the accrual of interest or penalty charges
on such claims, and will not prejudice the rights of the
Debtors' general unsecured creditors. (Federal-Mogul Bankruptcy
News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
FUELNATION INC: Auditors Express Doubt About Ability to Continue
----------------------------------------------------------------
The report of the FuelNation Inc.'s independent certified public
accountants on their audit of the Company's December 31, 2000
financial statements contained uncertainties relating to the
Company's ability to continue as a going concern. The Company
incurred a loss of $489,684 for the three months ended March 31,
2001, and had a working capital deficiency of $64,557 at March
31, 2001. Total stockholder equity is $2,059,102. These factors
among others raise substantial doubt about the Company's ability
to continue as a going concern for a reasonable period of time.
The Company's continuation as a going concern is dependent upon
its ability to generate sufficient cash flow to meet its
obligations on a timely basis. The Company's primary source of
liquidity has been from the cash generated through the private
placement of equity and/or debt securities and from advances
from its officers and directors. The Company has completed the
transaction with Triad Petroleum LLC purchasing technology in
order to eventually achieve profitable operations. However,
there can be no assurance that the Company will be successful in
achieving profitable operations or acquiring additional capital
or that such capital, if available, will be on terms and
conditions acceptable to the Company. Additionally, the Company
is in negotiations of an acquisition of the operations of a
compatible corporation. In addition, arrangements are in place
to raise additional equity through private placements and equity
financing through an equity line of credit and, according to the
Company, are moving forward towards completion.
While FuelNation has generated no prior revenue its salaries and
wages including related taxes were $92,836 for the three months
ended March 31,2001 as a result of employment of executive
officers and technical staff to support the related technology.
Management anticipates a further increase in Salaries and Wages
as the Company looks to position itself for global expansion.
Legal and professional fees were $135,317 for the three months
ended March 31,2001 primarily as a result of expenses associated
with the engagement of outside professionals to assist the
Company in connection with preparing private placement
offerings.
The $41,880 of marketing and promotion costs for the three
months ended March 31,2001 relate to the advertising of
technology. Management anticipates further increases in these
costs as the Company continues with its expansion plans.
Other general and administrative expenses were $87,270 for the
three months ended March 31,2001. The major costs came from
insurance, investors services and utilities and continued
expansion of overall operations.
Liquidity and Capital Resources
For the three months ended March 31, 2001 net cash used in
operating activities was $24,039. This was primarily
attributable due to a net Loss for the period of $489,684 and
offset by a increase in accounts payable of $ 400,197.
Net cash used in investing activities for the three months ended
March 31, 2001, was $100,062 due to payments made for the
continual development of the technology.
Net cash provided by financing activities for the three months
ended March 31, 2001 was $126,500, which was comprised of the
sale of common stock in private placements pursuant to a
Regulation D Offering.
As of March 31, 2001, the Company had cash of $15,597 and a
working capital deficiency of $64,557.
The Company's ability to meet its future obligations in relation
to the orderly payment of its recurring obligations on a current
basis is totally dependent on its ability to attain a profitable
level of operations; receive required working capital advances
from the Company's shareholders or obtain capital from outside
sources.
GENEVA STEEL: Negotiating Forbearance Pact Under $110M Term Loan
----------------------------------------------------------------
Geneva Steel Holdings Corp. (Nasdaq: GNVH) announced that,
beginning Wednesday, its wholly-owned subsidiary Geneva Steel
LLC is commencing a temporary shutdown of most of its production
operations. The Company has been generating negative cash flow
for many months and cannot continue to fund operating losses.
The temporary shutdown is intended to conserve cash during the
current weak market.
"This situation is the direct result of a prolonged period of
low-priced imports combined with weak domestic demand for the
Company's products," said Ken Johnsen, Geneva's president and
chief executive officer. "We expected that improved demand this
fall and President Bush's initiation of a Section 201 trade case
would help avoid a temporary shutdown. Unfortunately, the
weakness in the economy, exacerbated by the tragic events of
September 11, has postponed any increase in demand, and any
Section 201 trade relief is still months away."
Geneva's hot end facilities, caster and rolling mill are
currently in the process of being idled. Work-in-process
inventory will be finished and offered for sale along with
existing finished product inventory. The Company's ERW pipe
mill may possibly continue to operate and sell both API pipe and
piling. The Company's finishing facilities may also operate
using purchased feed stock to the extent justified by market
conditions. The Company expects to record a charge during the
fourth calendar quarter in connection with the temporary
shutdown.
Most of the Company's employees will be laid off during the
temporary shutdown. The few employees who remain will be
dedicated to preserving the Company's facilities and
implementing a strategy designed to create a stronger, more
financially stable Company. Geneva intends to resume full
production as soon as market conditions sufficiently improve.
On Thursday, November 8, 2001, the Company entered into an
amendment of its line of credit. The amendment provides
temporary relief from certain financial covenants and tests with
which the Company could not otherwise comply. The amendment
also requires that the Company's maximum borrowings under the
line of credit decline from $8.25 million to zero by December
21, 2001, at which time the line of credit will expire. The
amendment contains certain other covenants regarding, among
other things, maintenance of minimum excess collateral starting
at $24.75 million and declining to $21.0 million by December 21,
2001. The amendment provides, among other things, that the
lenders will forbear from exercising any rights based on alleged
defaults relating to the temporary shutdown until December 21,
2001, unless certain events occur. The Company is pursuing
financing to be secured by accounts receivable and inventory
from other potential lenders. The Company also intends to seek
additional financing from other sources that may be available.
In the interim, the Company intends to fund its activities
through proceeds from the sale of inventory and the collection
of accounts receivable. There can be no assurance that such
sources of liquidity will be adequate or that the Company will
have access to the proceeds of inventory and accounts receivable
or other sources of financing.
The Company is negotiating a forbearance agreement with the
lenders under the Company's $110 million term loan, which is
partially guaranteed pursuant to the Emergency Steel Loan
Guarantee Program. The forbearance agreement under discussion
provides, among other things, that the lenders will forbear from
exercising any rights based upon alleged defaults relating to
the temporary shutdown until December 21, 2001, the date upon
which the Company's line of credit expires, unless certain
events occur. The term loan is secured by a first-priority lien
on the Company's fixed assets and a second priority lien (second
only to the line of credit) on the Company's accounts receivable
and inventory. The Company and the term loan lenders are also
currently in negotiations regarding the Company's proposal to
use proceeds from accounts receivable and inventory to fund
Company activities following expiration of the line of credit on
December 21, 2001. Under the terms of the line of credit and
the term loan and related documents, the line of credit lenders
(until the line of credit has been terminated) and the term loan
lenders (after the line of credit has been terminated), are
entitled to collect the proceeds from the collection of accounts
receivable and the sale of inventory during a period of default.
There can be no assurance that the Company and the lenders will
ultimately reach agreement regarding the forbearance agreement.
The Company has scheduled a meeting of vendors to discuss the
Company's situation. During the meeting, the Company's existing
vendors will be asked to cooperate with the Company in
maintaining the Company's liquidity and compliance with its loan
and forbearance agreements through the temporary shutdown
period. Only representatives of the Company's vendors will be
invited to attend the meeting.
If the Company is unable to obtain cooperation from its vendors
or comply with its credit, term loan or forbearance agreements
or the term lenders are unwilling to enter into a forbearance
arrangement or any extension on terms acceptable to the Company
or otherwise allow the Company to retain proceeds from accounts
receivable and inventory, the Company will have insufficient
liquidity to continue operations. In such a circumstance, the
Company would likely be forced to file a Chapter 11 proceeding
and seek a court order allowing the Company to receive proceeds
from the liquidation of inventory and accounts receivable.
There can be no assurance that the lenders will voluntarily
forbear or, in the alternative, that the Company would be
successful in seeking court authorization to use proceeds from
accounts receivable and inventory.
GLENOIT CORPORATION: Wants More Time to Assume or Reject Leases
---------------------------------------------------------------
Glenoit Corporation and its debtor-affiliates ask the United
States Bankruptcy Court for the District of Delaware to further
extend the time for the Debtors to assume or reject unexpired
leases of nonresidential real property under which any of the
Debtors is a lessee.
The Debtors lease various locations around the country that they
use as manufacturing facilities, office space, distribution
facilities, and warehouse space.
The Debtors previously obtained from this Court an extension of
time to assume or reject the Leases, the most recent through
November 5, 2001. The Debtors seeks to further extend the
deadline for approximately ninety days through February 5, 2002.
With the assistance of their professionals and the support of
many of their creditors, the Debtors are examining and seeking
various alternatives to allow them to dispose their divisions as
going concern or to emerge from Chapter 11. The Debtors filed
and successfully prosecuted a motion to sell a portion of their
operation and may file similar motions in the future.
The ability to assume or reject the Leases is highly beneficial
during this time. Forcing the Debtors to assume or reject the
Leases would mean facing the risk that new leases for important
facilities could not offer or could only be for a higher rents a
landlord could demand; or assume and face the risk of
substantial administrative liability for the estates if a
purchaser does not want the property or if it is not needed for
the Debtors' reorganization.
In addition, the Debtors are currently working with the Secured
Lenders to develop an exit strategy, which the debtors hope to
finalize by mid-December of this year.
Headquartered in New York City, Glenoit Corporation is a
domestic manufacturer of small rugs, knit pile fabrics and an
importer and manufacturer of home products such as quilts,
comforters, shams, shower curtains, table linens, pillows and
pillowcases with operations in North Carolina, Ohio, California
and Canada. The Company filed for Chapter 11 protection on
August 8, 2000 in the US Bankruptcy Court for the District of
Delaware. Joel A. Waite at Young, Conaway, Stargatt & Taylor
represents the Debtors in their restructuring efforts.
HEADWAY CORPORATE: Continues Talks to Resolve Cross-Defaults
------------------------------------------------------------
Headway Corporate Resources, Inc., (Amex: HEA) announced its
third quarter results for the period ended September 30, 2001.
Revenues decreased $15.5 million or 17% to $76.1 million for the
three months ended September 30, 2001, from $91.7 million for
the same period in 2000. Net loss for the three months ended
September 30, 2001 was $2.0 million compared to net income of
$0.9 million for the third quarter ended September 30, 2000.
Revenues for the nine months ended September 30, 2001, decreased
13% to $249.0 million, from $284.6 million a year earlier. The
net loss for the nine months ended September 30, 2001 was $0.9
million compared to net income of $4.5 million for the nine
months ended September 30, 2000. The decrease was attributable
to an overall decline in the demand for the Company's staffing
and executive search services as a direct result of weakness in
the economy.
"We are currently in the throes of an economic slowdown," stated
Gary Goldstein, Chairman and CEO, "which is having a major
negative impact on our results. The financial sectors, in
general, and those situated in New York, in particular, where
the Company derives a substantial percentage of its revenues,
have instituted hiring freezes for both temporary and permanent
positions. Some of this slowdown is a result of the soft economy
but the events of September 11, 2001 have added to the
weakness."
"It is of little consolation to all of us to note that our
performance is consistent with the performance of similar
staffing and executive search companies," Mr. Goldstein
continued, "and prospects for the remainder of the year will
continue to be impacted by the performance of the general
economy, particularly as it affects the New York region."
Mr. Goldstein concluded, "The Company has taken steps to reduce
costs and is actively studying opportunities to develop
alternate sources of income. We are hopeful that the economic
forecasts for an improving economy evidencing itself early next
year prove accurate as our business usually follows the
performance of the overall economy."
The Company also said that it is currently in violation of a
non-financial covenant of its Senior Credit Facility, creating
an event of default. The existence of events of default under
the Senior Credit Facility creates cross-defaults under the
Senior Subordinated Notes and the Preferred Stock. The Company
is currently negotiating with the Senior Lenders, the Senior
Subordinated Notes holders and the Preferred Stockholders to
resolve the default.
Headway Corporate Resources, Inc. is a leader in providing
strategic staffing solutions and personnel worldwide. Its
operations include information technology staffing, temporary
staffing, executive search, permanent placement and outsourced
human resources administration. Headquartered in New York, its
offices span the nation, with offices in California,
Connecticut, Florida, New Jersey, North Carolina, Texas and
Virginia. It also operates in Illinois, Massachusetts, the
United Kingdom, Japan, Hong Kong and Singapore through the
Whitney Group, its high-end executive search division.
INT'L FIBERCOM: Plan to Address Covenant Violations Underway
------------------------------------------------------------
International FiberCom Inc. (Nasdaq:IFCI) announced that it has
filed with the Securities and Exchange Commission for an
extension of the filing date for its third quarter 10-Q report
to Nov. 19, 2001.
As a result, it has also canceled its conference call for
investors scheduled for this week.
The company indicated that this postponement was necessary due
to the extraordinary efforts that it has been making to provide
information to its commercial banking syndicate and to prepare a
plan to address covenant violations that occurred as a result of
the expected third-quarter losses and pending restructuring
charges it has previously announced.
Joseph P. Kealy, chairman, president and CEO, said: "We continue
to downsize, cut costs and restructure our operations to address
the dramatic slowdown in the economy and the deterioration in
the telecommunications industry. Despite our continued cost
reduction efforts over the last four weeks, our cash flow has
deteriorated in this very difficult business environment.
"We are taking proactive steps with a number of our customers
regarding collection of our trade accounts receivable."
The company also announced that Patrick Galligan, 40, has joined
it as chief financial officer. Galligan replaces Gregory B.
Hill, 33, who resigned to pursue other interests. Hill continues
to provide consulting services to the company.
Galligan joins the company from Toll Brothers (NYSE:TOL), a
national luxury homebuilder, where he served as assistant vice
president/regional controller. He joined Pennsylvania-based Toll
Brothers in 1992 as a division controller and was appointed
assistant corporate controller within two years. He earned his
bachelor of arts degree in finance, as well as his MBA, from
Temple University in Philadelphia.
J.C. PENNEY: Operating Performance Swings Up in Third Quarter
-------------------------------------------------------------
J. C. Penney Company, Inc. (NYSE: JCP) reported that earnings
from continuing operations, before the effects of non-comparable
items, were $0.13 per share in the third quarter, in line with
management's expectations. This compares with a loss of $0.24
per share in last year's period. Including the effects of non-
comparable items in both years, the Company recorded earnings
from continuing operations of $0.09 per share in this year's
third quarter compared with a loss of $0.30 per share last year.
Allen Questrom, Chairman and Chief Executive Officer, said,
"Third quarter results demonstrate that the Company is
continuing to make progress in its efforts to improve the
profitability of its businesses. While the economic environment
has become more challenging, we have maintained sales momentum
and improved operating profits. Department Stores generated a
5.1 percent comparable store sales increase, which indicates
that merchandise assortments, together with marketing efforts,
are bringing the customer back to JCPenney. Eckerd has continued
to generate strong comparable store sales increases, with
improving front-end sales, and operating profits have exceeded
plan. While Catalog sales have declined, inventory management
and expense initiatives had a positive impact on results."
Questrom added, "There is no question that the retailing and
economic environment has changed in the last two months, making
it very difficult, if not impossible, to forecast with any
degree of certainty. However, we believe that our merchandise
assortments and marketing programs position us well for the
holiday season. We continue to expect operating earnings to be
in the range of $0.30 to $0.35 per share for the year."
Department Stores and Catalog
Third quarter LIFO operating profit increased 83 percent to $148
million, compared with $81 million last year. Comparable store
sales increased by 5.1 percent with most merchandise categories
having sales gains. Women's apparel, children's, and home
furnishings generated the strongest results. Sales reflected
current and more fashionable assortments and more aggressive
marketing programs. Catalog sales decreased 17.7 percent, but
Catalog did contribute to the operating profit improvement.
Department Stores and Catalog gross margin increased by 140
basis points as a percent of sales, primarily as a result of
strong consumer response to back-to-school and Fall merchandise
offerings combined with improved inventory productivity. SG&A
expenses decreased by 1.5 percent and were leveraged. Expense
reductions from cost saving initiatives more than offset higher
planned advertising.
Eckerd Drugstores
Third quarter LIFO operating profit totaled $30 million compared
with a loss of $63 million last year. Improvement in Eckerd's
operating profit continued to be principally related to
comparable store sales growth and leveraging of SG&A expenses.
Comparable store sales increased by 8.4 percent during the
quarter, with pharmacy sales increasing 11.2 percent and front-
end sales increasing 3.1 percent. Pharmacy sales were strong
and front-end sales productivity continues to accelerate as a
result of pricing, marketing, and store reconfiguration
initiatives. The strongest front-end merchandise categories for
the quarter were cosmetics, skin care, vitamins, baby and
hygiene products, candy, seasonal merchandise, household
products, and food, snacks, and beverages. Gross margin for the
quarter increased by 50 basis points as a percent of sales,
reflecting a better mix of products and improvements in
pharmacy. Gross margin included a LIFO charge of $12 million in
this year's quarter and $13 million last year. SG&A expenses
decreased by 3.4 percent, and improved by 240 basis points as a
percent of sales, from a combination of strong sales and cost
saving programs.
Non-Comparable Items
Non-comparable items included in other unallocated and
restructuring and other charges totaled $17 million in the third
quarter. Non-comparable items are comprised primarily of
expenses related to the centralized merchandise process (ACT)
and real estate gains and losses.
J. C. Penney Company, Inc. is one of America's largest
department store, drugstore, catalog and e-commerce retailers,
employing approximately 270,000 associates. The Company
operates approximately 1,080 JCPenney department stores in all
50 states, Puerto Rico, and Mexico. In addition, the Company
operates approximately 50 Renner department stores in Brazil.
Eckerd operates approximately 2,650 drugstores throughout the
Southeast, Sunbelt, and Northeast regions of the U.S. JCPenney
Catalog, including e-commerce, is the nation's largest catalog
merchant of general merchandise. J. C. Penney Company, Inc. is
the sponsor of JCPenney Afterschool, a partnership committed to
providing kids with high-quality afterschool programs to help
them reach their full potential.
DebtTraders reports that J.C. Penney Company Inc.'s 7.250% Bonds
due in 2002 (JCP1) are trading between 99.5 and 100.5. Go to
http://www.debttraders.com/price.cfm?dt_sec_ticker=JCP1for
real-time bond pricing.
KEY3MEDIA GROUP: Amends Senior Bank Credit Facility Agreement
-------------------------------------------------------------
Key3Media Group, Inc. (NYSE:KME), the world's leading producer
of information technology tradeshows and conferences, announced
financial results for the third quarter and the nine months
ended September 30, 2001 and provided an update on its business
and financial outlook, including full year 2001 guidance.
Third Quarter 2001 Results
Revenues for the quarter ended September 30, 2001 were $51.5
million, compared to revenues of $60.5 million in the third
quarter of 2000. Adjusted EBITDA (earnings before interest,
taxes, depreciation and amortization), after adjustments to
exclude the effect of a reversal of $7.0 million in previously
recorded non-cash stock based compensation charges, was $7.1
million in the third quarter of 2001, compared to adjusted
EBITDA of $18.1 million in the same quarter of 2000. The third
quarter of 2001 included results from the NetWorld+Interop/
Paris tradeshow, which was held in the fourth quarter of 2000.
Networld+Interop/Paris contributed approximately $10.2 million
of revenue and $6.3 million of EBITDA in 2000 and $10.8 million
of revenue and $6.6 million of EBITDA in 2001.
Operating income was $3.8 million in the third quarter of 2001
compared to $6.4 million in 2000. The Company reported a net
loss in the third quarter of $3.7 million, or $0.05 per diluted
share, compared to a net loss of $2.1 million, or $0.04 per
diluted share, in the third quarter of 2000.
Nine-Month Results
Revenues for the first nine months of 2001 were $175.2 million
compared to $175.6 million in 2000. Before non-cash charges for
stock-based compensation, EBITDA was $44.2 million in the nine-
month period compared to $51.8 million in 2000. Excluding
contributions from Networld+Interop/Paris and SOFTBANK Forums
Japan, revenues for this period would have been $152.8 million
and adjusted EBITDA would have been $33.1 million. For the nine
months ended September 30, 2001, Key3Media recognized a reversal
of $1.8 million of non-cash stock-based compensation expense
compared to $3.4 million of non-cash stock-based compensation
expense for the same period in 2000. Operating income was $10.3
million in the nine-month period compared to operating income of
$20.9 million in 2000. In the nine months ended September 30,
2001, the Company reported a net loss of $20.2 million compared
to a net loss of $0.7 million in 2000.
Full-Year 2001 Guidance
For the full year 2001, the Company now expects to report
revenue in the range of $250 - $260 million and adjusted EBITDA
in the range of $62 - $68 million, compared to 2000 revenue of
$286 million and adjusted EBITDA of $102 million. This updated
2001 guidance includes expected contributions of approximately
$4.1 million of EBITDA from the acquisition of SOFTBANK Forums
Japan, Inc. and approximately $4.2 million of EBITDA from other
recently completed acquisitions - pulver.com's two major brands
(Voice on the Net (VON) Conferences and Session Initiation
Protocol (SIP) Summits), significant assets of BCR Enterprises,
Inc., and assets comprising the Next Generation Networks and
Next Generation Ventures brands. Previously, the Company
expected to report revenue in the range of $275 - $285 million
and adjusted EBITDA in the range of $80 - $90 million for the
full year 2001.
Amendment to Bank Credit Agreement
Key3Media also announced that it has entered into an agreement
to amend its senior bank credit facility to avoid future
potential covenant compliance issues under the facility. The
Company also announced that, as a condition to the credit
agreement amendment, it plans to raise at least $50 million from
the sale of convertible preferred or common stock. The Company
has signed an agreement under which a related party has
committed to purchase $25 million of convertible preferred
stock, subject to certain conditions. The amount of convertible
preferred or common stock that Key3Media sells will depend on
market conditions.
It is expected that the convertible preferred stock will be
entitled to quarterly dividends at the annual rate of 5.5% and
will be convertible into common stock at any time at a
conversion price of $5.75, subject to customary anti-dilution
adjustments. The Company will have the right not to pay cash
dividends in any quarter, in which event the liquidation
preference will increase by the amount of the missed dividends.
Because the dividend, liquidation, conversion and voting rights
of the preferred stock will be determined by reference to the
liquidation preference, these rights will increase with the
liquidation preference.
"Continuing economic uncertainty and reduced marketing budgets
in the IT industry continue to impact Key3Media's results," said
Fredric D. Rosen, Chairman and CEO. "Despite a challenging
market, we remain focused on growing the company for the future
- by strengthening our balance sheet, enhancing our strong
portfolio of existing IT brands and leveraging the value of
face-to-face marketing. We are also continuing to aggressively
manage expenses and are taking steps to further reduce expenses
by approximately $10-15 million on an annual basis. While
there's no doubt the environment we're operating in is
difficult, we continue to believe in the potential of this
industry and remain committed to delivering increased value to
shareholders."
Key3Media Group, Inc., is the world's leading producer of
information technology tradeshows and conferences, serving more
than 6,000 exhibiting companies and 1.5 million attendees
through 60 events in 18 countries. Key3Media's products range
from the IT industry's largest exhibitions such as COMDEX and
NetWorld+Interop to highly focused events featuring renowned
educational programs, custom seminars and specialized vendor
marketing programs. For more information about Key3Media, visit
http://www.key3media.com
LTV CORP: US Trustee Appoints Amended Creditors' Committee
----------------------------------------------------------
Donald M. Robiner, United States Trustee for Ohio/Michigan
Region 9, has revised the appointments of members to the
Official Committee of Unsecured Creditors of The LTV
Corporation. The members of the current panel are:
United Steel Workers of America
c/o David Jury
5 Gateway Center
Pittsburgh, PA 15222
(412) 562-2545
Citizens Gas & Coke Utility
c/o Stephen F. Shay
2020 North meridian Street
Indianapolis, IN 46202
(317) 264-8802
Omnisource Corporation
c/o Julie Schultz
1610 North Clinton Street
Fort Wayne, IN 46808
(219) 423-8542
Shiloh Industries, Inc.
c/o Mark S. Wayman
5389 West 130th Street
Cleveland, Ohio 44130
(216) 898-4295
Cleveland-Cliffs, Inc.
c/o William R. Calfee
1100 Superior Avenue
Cleveland, Ohio 44114-2589
(216) 694-5547
Pension Benefit Guaranty Corporation
c/o Ajit Gadre
1200 K Street NW
Washington, DC 20005-4026
(202) 326-4070, ext. 3655
Koppers Industries
c/o Donald Davis
436 Seventh Avenue
Pittsburgh, PA 15219
(412) 227-2577
Marblehead Lime, Inc.
c/o Suzanna E. Ritzler
390 East Joe Orr Road
Chicago Heights, Illinois 60411
(708) 757-1240
Bearing Service Company of Pennsylvania
c/o William Banks
RIDC Industrial Park
630 Alpha Drive
Pittsburgh, Pennsylvania 15238
(412) 963-7710
The Interlake Steamship Company
c/o John B. Hopkins
4199 Kinross Lakes Parkway
Richfield, Ohio 44286
(330) 659-1402
Firstenergy
c/o Rick C. Giannantonio
Legal Department
76 South Main Street
18th Floor
Akron, Ohio 44308
(303) 384-5893
Wabash Alloys LLC
A Division of Connell L.P.
c/o Kathleen Murphy
One International Place
Fort Hill Square
Boston, Massachusetts 02110
(617) 737-2700
Ralph Hennie
c/o Walter & Haverfield LLP
1300 Terminal Tower
Cleveland, OH 44113-2253
(216) 781-1212
The Pangere Corporation
c/o Steve N. Pangere
Corporate Office
4050 West 4th Avenue
Gary, IN 46404-1718
(219) 949-1368
Praxair, Inc.
C/o John J. Ferrara
39 Old Ridgebury Road
Danbury, Connecticut 06810-5113
(203) 837-2104
Praxair, Inc., replaces Roll Coater, Inc., of Indianapolis,
Indiana, which resigned from the Committee. (LTV Bankruptcy
News, Issue No. 17; Bankruptcy Creditors' Service, Inc.,
609/392-00900)
LERNOUT & HAUSPIE: Belgian Court Sets Nov. 21 as Claims Deadline
----------------------------------------------------------------
Lernout & Hauspie Speech Products N.V. wishes to advise
creditors that, pursuant to the Judgment dated October 24, 2001,
of the Ieper, Belgium Commercial Court, creditors wishing to
assert claims as part of the Belgian bankruptcy liquidation
proceeding of L&H NV must file their declaration of receivables
with the clerk's office of the Commercial Court at Ieper, Grote
Markt 10, Ieper, Belgium, on or before November 21, 2001.
The prior filing of a proof of claim with the United States
Bankruptcy Court for the District of Delaware in connection with
Lernout & Hauspie Speech Products N.V.'s chapter 11 bankruptcy
case or the filing of a declaration of receivables with the
Ieper Commercial Court in connection with the Company's prior
concordat proceeding is not a substitute for filing a claim with
the Ieper, Belgium Commercial Court as part of the Company's
Belgian bankruptcy liquidation proceeding.
Creditors that wish to assert claims against Lernout & Hauspie
Speech Products N.V. should consult their counsel to determine
the advisability of filing such claims in the Belgian bankruptcy
liquidation proceeding. Creditors of Dictaphone Corporation and
L&H Holdings USA, Inc. (both of which also have chapter 11
bankruptcy cases pending before the United States Bankruptcy
Court for the District of Delaware) are not required to file
claims with the Ieper, Belgium Commercial Court in the Belgian
bankruptcy liquidation proceeding unless they specifically are
asserting claims against Lernout & Hauspie Speech Products N.V.
LERNOUT & HAUSPIE: MedQuist Buys Medical Transcription Division
---------------------------------------------------------------
MedQuist Inc. (NASDAQ: MEDQ), the leading provider of electronic
transcription and medical document management solutions,
announced its acquisition of Lernout & Hauspie Medical Solutions
Holdings, Inc., the third largest medical transcription company
in the United States.
Consideration for this stock transaction was roughly $25 million
cash.
L&H's medical transcription division has approximately 1,000
employees located throughout the country with headquarters
located in Madison, WI. On October 29th, the U.S. bankruptcy
court approved MedQuist as the highest auction bidder for L&H's
medical transcription division. On Monday of this week, the
Belgian bankruptcy court approved the transaction, clearing the
way for the closing of the acquisition.
"MedQuist's acquisition of L&H's transcription business enhances
our medical transcription service offering," stated David Cohen,
MedQuist's Chairman and CEO. "We are very excited about adding
L&H's talented transcriptionists and management to the MedQuist
team."
MedQuist is the largest electronic medical transcription service
company in the United States.
LODGIAN: Senior Facility Lenders Agree to Forbear Until Dec. 31
---------------------------------------------------------------
Based on its third quarter 2001 results, Lodgian, Inc., (NYSE:
LOD) is not in compliance with the financial covenants related
to its Senior Secured Loan Credit Facility, on which, as of
November 14, 2001, the Company has outstanding borrowings of
$196.2 million. However on November 13, 2001, the Company
reached an agreement in principle with the lenders of this
facility (the senior lenders) with respect to the financial
covenant violations, pursuant to which the senior lenders agreed
to forbear from the exercise of their default-related remedies
against the Company until December 31, 2001 (unless an
additional event of default occurs earlier). The Company
expects to formally execute the forbearance agreement within the
next few days. The forbearance agreement also reduced the
commitment on the working capital revolver from $25.0 million to
$13.4 million leaving the Company with $3.0 million of unused
availability on the working capital revolver portion of the
senior facility. The forbearance agreement also requires that
the remaining $3.0 million be used only to pay the interest in
respect of the senior facility due on November 15, 2001, and
that the Company make semimonthly interest payments on the
senior facility. The Company also anticipates that it will not
be able to make the remaining $36.0 million of required special
amortization payments to its senior lenders due December 31,
2001, and is working with its senior lenders to seek an
acceptable resolution of these problems. There can be no
assurance that the Company will be successful in such
negotiations and there is no certainty as to what actions the
senior lenders may take if the Company is unable to negotiate a
resolution.
The Company anticipates that because of limited liquidity it
will not be making the $12.3 million interest payment due
January 15, 2002, to the holders of the Company's Senior
Subordinated Notes. In addition, as a result of the events of
noncompliance with respect to its Senior Secured Loan Facility,
the Company's Senior Subordinated Notes and the CRESTS are also
in noncompliance due to cross-default provisions in those
agreements. The Company intends to attempt to negotiate a debt
restructuring with both the holders of the Senior Subordinated
Notes and the holders of the CRESTS. There can be no assurances
that the Company will be successful in such negotiations and
there is no certainty as to what actions the lenders may take if
the Company is unable to negotiate a resolution.
Summary Of Third Quarter 2001 Results
Total revenues for the third quarter 2001 were $111.4 million
compared to $155.2 million for the third quarter of 2000. Of
this $43.8 million decrease (a 28.2% decrease), $24.9 million is
due to the disposition of 9 hotels in the owned portfolio.
Revenues for hotels owned as of September 30, 2001, on a same
unit basis, were $111.4 million for the third quarter 2001 and
$130.3 million for the third quarter 2000 (a decline of 14.5%).
RevPAR for the third quarter 2001, for hotels owned as of
September 30, 2001, on a same unit basis, decreased 14.1% as
compared to the third quarter 2000. This primarily was as a
result of a decline in occupancy of 11.3%, as well as a 3.2%
decrease in average daily rates. After adjusting for $2.0
million of unusual overhead and other costs, primarily related
to nonrecurring professional and legal fees, severance, one-time
bonus charges, account write-offs and provisions, third quarter
2001 EBITDA was $22.3 million, a 33.5% decrease compared to
third quarter 2000 EBITDA on a same unit basis. This decrease
was primarily due to a general decline in the industry,
particularly in certain of the Company's markets which factors
were exacerbated by the events of September 11, 2001. Also
contributing to the reduction in same unit EBITDA were higher
utility, property insurance and property tax costs, which
assuming a constant percentage of revenues, negatively impacted
same unit EBITDA by an aggregate $3.3 million. The Company
incurred a loss of $18.3 million ($0.64 loss per share) for the
third quarter 2001 compared to net income of $0.5 million ($0.02
per share) for the third quarter 2000.
Summary Results For The Nine Months
Ended September 30, 2001
Total revenues for the 2001 period were $352.0 million compared
to $454.6 million for the 2000 period. Of this $102.6 million
decrease (a 22.6% decrease), $82.9 million is due to the
disposition of 9 hotels in the owned portfolio. Revenues for
hotels owned as of September 30, 2001, on a same unit basis were
$346.7 million for the 2001 period and $371.7 million for the
2000 period (a decline of 6.7%). RevPAR for the 2001 period,
for hotels owned as of September 30, 2001, on a same unit basis,
decreased 6.2% as compared to the 2000 period. This primarily
was as a result of a decline in occupancy of 7.0%, partially
offset by a 0.8% increase in average daily rates. After
adjusting for $7.6 million of unusual overhead and other costs,
primarily related to nonrecurring professional and legal fees,
severance, one-time bonus charges, account write-offs and
provisions, EBITDA for the 2001 period was $72.5 million, a
22.8% decrease compared to EBITDA of $93.9 million for the 2000
period, on a same unit basis. This decrease was primarily due
to a general decline in the industry, particularly in certain of
the Company's markets which factors were exacerbated by the
events of September 11, 2001. Also contributing to the reduction
in same unit EBITDA were higher utility, franchise fees,
property insurance and property tax costs, which, assuming a
constant percentage of revenues, negatively impacted same unit
EBITDA by an aggregate $9.1 million.
The Company realized a gain on asset dispositions for the nine
months ended September 30, 2001, of $24.2 million. The Company
incurred a loss of $32.0 million for the nine months ended
September 30, 2001, compared to a loss of $56.5 million for the
nine months ended September 30, 2000.
Significant Events Subsequent To September 30, 2001
The Company has been notified by the New York Stock Exchange
(the Exchange) that it is not in compliance with the Exchange's
continuing listing requirements because the Company's total
market capitalization has fallen below $15 million over a
consecutive thirty trading day period. Pursuant to Exchange
requirements relating to this listing standard, the Company is
required to promptly demonstrate to the Exchange that the
Company has a plan to come into compliance with the minimum
market capitalization requirement. In this regard, the Company
has scheduled a meeting with the Exchange to present its
business plan going forward. However, in particular, because
the Company's share price has been less than $1.00, there can be
no assurance that the Company's plans will be acceptable to the
Exchange.
2001 Outlook Update
Since the start of 2001, the Company has sold six hotel
properties for gross proceeds of $76.4 million and used $65.5
million of these proceeds to reduce debt. Between January 1,
2000 and November 14, 2001, the Company sold 29 properties for
gross proceeds of $285.2 million and used $216.6 million of
these proceeds to reduce debt. Currently the Company is
exploring the possibility of restructuring its outstanding debt.
However, there can be no assurances that the Company can
complete a restructuring nor can there be any assurances that,
if completed, the restructuring will be on more favorable terms.
Amidst the challenges of the current economic environment and
the specific challenges peculiar to the Company, particularly
those adversely impacting the hospitality industry and the
Company since the events of September 11, 2001, management
considers the restructuring of its debt obligations to be
critical if the Company is to have sufficient liquidity to fund
its operating, capital expenditure and debt service obligations
beyond December 31, 2001. If the Company is unsuccessful in
obtaining waivers or amendments to cure existing or probable
future events of noncompliance with its debt covenants and is
unsuccessful in achieving a restructuring of its current debt
obligations on terms sufficient to provide the Company with the
liquidity necessary to fund its operating capital expenditure
and debt service obligations, the auditors' report on financial
statements for the year ending December 31, 2001, will likely
contain a modification as to the Company's ability to continue
as a going concern. As a result of the Company's noncompliance
with the financial covenants related to its Senior Secured Loan
Credit Facility, the Company's uncertainty regarding its future
operating results and liquidity and the probable associated
implications for its debt obligations, the Company has
classified all of its outstanding debt and the CRESTS as current
liabilities.
Management Changes
On October 12, 2001, Thomas Gryboski, the Company's Vice
President of Legal Affairs and Secretary resigned to pursue
other opportunities. The resignation takes effect on November
15, 2001.
On November 13, 2001, Richard Cartoon was appointed Executive
Vice President and Chief Financial Officer, Michael Amaral was
appointed Senior Vice President of Operations and Daniel Ellis
was appointed Vice President of Legal Affairs and Secretary.
Lodgian, Inc. owns or manages a portfolio of 106 hotels with
approximately 19,893 rooms in 32 states and Canada. The hotels
are primarily full service, providing food and beverage service,
as well as meeting facilities. Substantially all of Lodgian's
hotels are affiliated with nationally recognized hospitality
brands such as Marriott, Holiday Inn, Crowne Plaza, Radisson and
Hilton. Lodgian's common shares are listed on the New York Stock
Exchange under the symbol "LOD."
METALS USA: Chapter 11 Case Summary
-----------------------------------
Lead Debtor: Metals USA Inc
dba Mollie Marie Acquisition Corp
Three Riverway Suite 600
Houston, TX 77056
Bankruptcy Case No.: 01-42530
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.:
------ ---------
Metals USA Management Co LP 01-42531
MUSA GP Inc 01-42532
MUSA LP Inc 01-42533
Metals USA Finance Corp 01-42534
Metals USA Realty Company 01-42535
Metals Receivables
Corporation 01-42536
Jeffreys Real Estate
Corporation 01-42537
Aerospace Specification
Metals Inc 01-42538
Aerospace Specification
Metals-UK Inc 01-42539
Allmet Building Products LP 01-42540
Allmet GP Inc 01-42541
Allmet LP Inc 01-42542
Cornerstone Building
Products Inc 01-42543
Cornerstone Metals
Corporation 01-42544
Cornerstone Patio Concepts
LLC 01-42545
Harvey Titanium Ltd 01-42546
Interstate Steel Supply
Company of Maryland 01-42547
i-Solutions Direct Inc 01-42548
Metalmart Inc 01-42549
Metals Aerospace
International Inc 01-42550
Metals USA Building
Products Southeast Inc 01-42551
Metals USA Carbon Flat
Rolled Inc 01-42552
Metals USA Flat Rolled
Central Inc 01-42553
Chapter 11 Petition Date: November 14, 2001
Court: Southern District of Texas (Houston)
Judge: William R. Greendyke
Debtors' Counsel: Zack A. Clement, Esq.
Fulbright & Jaworski
1301 McKinney
Ste 4100
Houston, TX 77010-3095
713-651-5434
NOVO NETWORKS: Revenues Drop Over 50% After Axistel's Closure
-------------------------------------------------------------
Novo Networks, Inc. (Nasdaq:NVNW) announced financial results
for the fiscal 2002 first quarter ended September 30, 2001.
Revenues for the three-month period ended September 30, 2001
were $8.7 million compared to $18.6 million in the year-ago
quarter. The decline in revenues is attributable to a
significant downturn and discontinuance of Axistel's data
wholesale and prepaid calling card businesses. The decrease in
revenue was also attributable to lower rates charged per minute
for the Company's voice traffic. Selling, general and
administrative expenses were $5.9 million compared to $6.7
million in the year-ago quarter. This decrease is principally
due to a $2.7 million decrease in personnel-related costs offset
by a one-time, non-cash reserve for doubtful receivables.
Reflecting non-cash items, including depreciation and
amortization of approximately $0.6 million and equity in loss of
affiliates of approximately $0.4 million, the Company reported a
net loss of $7.5 million compared to a net loss of $16.2 million
in the first quarter of fiscal 2001.
During the quarter, certain of the Company's operating
subsidiaries - including Novo Networks Operating Corp., AxisTel
Communications, Inc. and e.Volve Technology Group, Inc. - filed
voluntary petitions for protection under Chapter 11 of the U.S.
Bankruptcy Code. The Company has since filed a reorganization
plan and disclosure statement with the U.S. Bankruptcy Court for
the District of Delaware regarding a plan to restructure the
debt and other financial obligations of the subsidiaries while
refocusing the surviving entity on e.Volve's existing
international telecommunications services. A hearing on the
subsidiaries' proposed disclosure statement has been rescheduled
from November 5, 2001 to December 7, 2001. The subsidiaries
continue to operate and manage their business as debtors-in-
possession. However, the Company can give no assurances that it
will be successful in reorganizing its affairs in its bankruptcy
proceedings.
Subsequent to the close of the quarter, the Company received a
Staff Determination from The Nasdaq Stock Market regarding its
failure to comply with the exchange's public interest and
residual equity interest requirements.
The Nasdaq Stock Market also notified the Company of its
intention to delist the Company's securities from the Nasdaq
National Market system. On October 30, 2001 Novo Networks filed
a notice of appeal and requested a hearing before a Nasdaq
Listing Qualifications Panel to review the Staff Determination,
which has temporarily stayed delisting of the Company's
securities pending the Panel's decision. A hearing date has been
scheduled for December 13, 2001. There is no assurance the Panel
will grant the Company's request for continued listing or that
the Company's securities will trade publicly in the future.
Should the Company's securities cease to trade on Nasdaq, the
Company believes that an alternative trading venue will be
available and is investigating such alternatives.
ORBITAL IMAGING: Reaches Deal to Undertake Debt Restructuring
-------------------------------------------------------------
Orbital Imaging Corporation announced a corporate management
restructuring Tuesday. Lt. General (Ret.) James A. Abrahamson,
a member of the ORBIMAGE board of directors since 1998, was
named Chairman of the Board. General Abrahamson directed the
Air Force's Strategic Defense Initiative for many years and,
after retiring from the Air Force, served as a senior executive
at Hughes Aircraft Corporation and served as Chairman of Oracle
Corporation.
"The company believes we have both the assets and the spirit to
recover from our recent satellite loss and we expect to succeed
in this exciting marketplace," said General Abrahamson, who also
serves as the Chairman of Stratcom International. Gilbert D.
Rye, who was promoted from President and CEO to Vice Chairman,
will work closely with General Abrahamson on strategic
initiatives for the company.
Matthew O'Connell, General Counsel and Chief Operating Officer
of Crest Communications Holdings, New York City, was named
Acting President and CEO. Mr. O'Connell, who also sits on the
Board of Directors, has over 20 years experience in media
mergers, acquisitions and corporate finance. He has also held
senior positions at Sony Warner Network, a joint venture of Sony
and Time-Warner, Cablevision Systems Corporation, a publicly-
held cable television company, and Osborn Communications
Corporation, a publicly-held radio and television station
operator. Mr. O'Connell said, "Now that ORBIMAGE has reached
agreement with its investors on a restructuring of its debt, the
Company is well positioned to move forward to next year's launch
of OrbView-3 and to benefit from the increased demand for high
quality satellite imagery."
In connection with the restructuring, Armand A. Mancini was
promoted to Executive Vice President and Chief Financial
Officer.
ORBIMAGE is a leading global provider of Earth imagery products
and services, with a planned constellation of four digital
remote sensing satellites. The company currently operates the
OrbView-1 atmospheric imaging satellite launched in 1995, the
OrbView-2 ocean and land multispectral imaging satellite
launched in 1997, and a worldwide integrated image receiving,
processing and distribution network. Currently under
development, ORBIMAGE's OrbView-3 high-resolution satellite will
offer one-meter panchromatic and four-meter multispectral
digital imagery on a global basis. ORBIMAGE is also the U.S.
distributor of worldwide imagery from the Canadian RADARSAT-2
satellite.
ORBIMAGE currently offers one-meter high-resolution panchromatic
imagery of major U.S. and international urban areas through its
OrbView Cities catalog, available at http://www.orbimage.com .
In addition, ORBIMAGE distributes imagery from Canada's
RADARSAT-1 satellite and Russia's SPIN-2 satellite. ORBIMAGE
also offers the SeaStar Pro Fisheries Information Service, which
provides fish finding maps derived from OrbView-2 satellite
imagery of the world's oceans to fishing customers worldwide.
More information about ORBIMAGE can be found at
http://www.orbimage.com
PW EAGLE: Defaults on Certain Covenants Under Loan Agreements
-------------------------------------------------------------
PW Eagle, Inc. (Nasdaq:PWEI) reported its financial results for
the three and nine months ended September 30, 2001. A summary of
the unaudited results for the third quarter and for the nine
months ending September 30, 2001 and 2000 is set forth in the
following table:
Income Statement Information
(In thousands, except for per share amounts)
3 months ended 9 months ended
Sept. 30, Sept. 30,
(unaudited) (unaudited)
------------------ ------------------
2001 2000 2001 2000
------------------ ------------------
Net sales $65,510 $85,618 $197,818 $284,965
Gross profit $3,975 $21,176 $23,960 $87,149
Net income (loss) $(5,303) $4,559 $(7,215) $26,924
EBITDA $(3,351) $12,786 $4,178 $60,337
The Company also reported that while it has made all required
principal and interest payments to its senior and subordinated
lenders, it was in default of certain covenants under its loan
agreements. The Company is in discussions with the holders of
its senior and subordinated debt as well as other parties with
respect to revising the Company's capital structure and
eliminating the current covenant defaults. The Company's goal is
to reduce its annual fixed charges (principal, interest, taxes
and capital expenditures) to a level that even if the
unfavorable economic conditions that have existed in 2001
continue, the Company will be able to pay all of its fixed
charges indefinitely. The Company is exploring a variety of
alternatives that would eliminate its current covenant defaults
and achieve this goal, including a sale and leaseback of certain
of its assets, mortgaging certain of its real estate assets,
changing its senior credit facility and issuing additional
subordinated debt or equity.
The Company has received a proposal from its senior lenders with
respect to modifications of its senior credit facility and a
proposal from a party that would purchase certain of the
Company's facilities and lease them back to the Company which
together provide a framework to eliminate the current covenant
defaults and revise the Company's capital structure to achieve
its goal.
William H. Spell, PW Eagle CEO, stated, "The economic conditions
facing our industry worsened in the third quarter. The weak
overall economy with negative GDP growth and the continuing
overcapacity of PVC resin and pipe combined to make the third
quarter one of the worst in recent history. We are implementing
the cost cutting and efficiency enhancing plan that we announced
in July. We continue to believe that the Company will save more
than $7.0 million in 2002 as a result of those efforts. In
addition, we are constantly reviewing ways to cut costs and
become even more efficient as we face these difficult economic
times. We are exploring a wide range of options with our senior
and subordinated lenders and others to revise the Company's
capital structure so that even if the adverse economic
conditions that existed in 2001 continue indefinitely, we will
be able to pay all of our fixed charge commitments."
The results for the third quarter were negatively impacted by
two significant unusual charges. In the third quarter, the
Company took a charge in connection with the restructuring plan
that it announced in July of $1.2 million. The Company also
reduced its inventory value in the third quarter resulting in a
non-cash charge of $1.4 million.
Third Quarter 2001 Conference Call & Webcast
PW Eagle will hold its third quarter webcast and conference call
on Friday November 16, 2001 at 11 a.m. Central Time to discuss
the third quarter and nine month results. The conference call
will also be available live on the Internet at
http://www.pweagleinc.com The call will be archived at that
website for one week following its original webcast. The
telephone number for the conference call is 1-877-381-6503.
PW Eagle, Inc. is a leading extruder of PVC pipe and
polyethylene tubing products. The Company operates eight
manufacturing facilities in the midwestern and western United
States. PW Eagle's common stock is traded on the Nasdaq National
Market under the symbol "PWEI".
PACIFIC GAS: Panel Seeks Okay to Retain Legislative Consultants
---------------------------------------------------------------
The Committee of Pacific Gas and Electric Company seeks an
order, pursuant to sections 1103(a) and 328(a) of the Bankruptcy
Code and Rules 2014(a) and 2016 of the Federal Rules of
Bankruptcy Procedure, authorizing the retention and employment
of Public Policy Advocates LLC (PPA) as legislative activities
consultants to the Committee, effective as of August 1, 2001, to
monitor, on a daily basis, all legislative activities that may
affect the Committee in the PG&E chapter 11 case.
The Committee tells the Court that the services of PPA are
necessary to enable the Committee to effectively satisfy its
statutory obligations and pursue the interests of the unsecured
creditors of the Debtor because the Debtor's business is highly
regulated and resolution of the electric utility crisis in
California has drawn strong attention from the California
Legislature. The Committee expects that proposed legislation may
have an impact on the Debtor's reorganization and those involved
may take different positions from time to time, even day to day.
PPA was selected by the Committee as a result of an interview
process and commenced performing work for the Committee on May
25, 2001. The Committee tells the Court that it has relied on
the services of PPA since the firm's engagement late May 2001.
In particular, the Committee has relied on the reports of PPA in
evaluating alternatives to Debtor's Plan of Reorganization dated
September 20, 2001. In addition, the Committee continues to rely
on PPA to keep it abreast of reaction in Sacramento by the
legislative and executive branches of State government to
developments in the energy crisis.
The Committee notes that PPA has a wealth of experience in the
legislative arena, and has access to, and relationships with,
virtually all members of the Senate and Assembly and their
respective staffs, the Committee notes. PPA's president (Fred
Taugher) has 39 years of experience in the legislative arena,
and over 20 years in specifically providing the type of services
requested by the Committee. Other personnel involved in the
project have combined legislative experiences in excess of 40
years.
The Committee would like to have a continued supply of critical
information from PPA to assist it in its analysis. The Committee
also may request that PPA communicate directly with legislators
to express the views of the Committee and promote the Plan.
Saybrook Capital LLC, the Committee's financial advisor and
investment banker, also has been actively involved in the
legislative arena on behalf of the Committee. "Saybrook' s
functions, however, are distinct from the functions of PPA," the
Committee explains, "Saybrook is a financial advisor and
investment banker, not a legislative specialist or lobbyist.
Saybrook has utilized the weekly reports and analysis of PPA to
assist it in performing its functions as a financial advisor and
investment banker that take into consideration potential
legislative action."
Scope of Services
Specifically, the Committee contemplates that PPA will provide
daily monitoring and periodic briefing in order to advise the
Committee in the course of the PG&E chapter 11 case, including
the following:
(a) On a timely basis, PPA will provide the Committee with
copies of legislative/administrative position papers,
legislative Documents, proposals, press releases, and
updates on the status of all relevant legislation.
(b) PPA will provide the Committee with political and
strategic analyses and evaluations relating to the
relevant information gathered and presented to The
Committee. PPA will give its prognosis on the
likelihood of a bill's passage and a description of the
political forces likely to impact proposed legislation.
At the request of the Committee, PPA may provide additional
services deemed appropriate and necessary to the benefit of the
Committee's monitoring of the Debtor's estate. Such services may
include, but are not limited to, legislative promotion services.
Legislative promotion services will include presenting potential
restructuring proposals to the Legislature for review, analysis
and input.
PPA's Eligibility for Employment
Fred Taugher, President and owner of PPA, tells the Court that a
revies in connection with this application shows that PPA
currently lobbies the Legislature and the Executive Branch in
Sacramento for over 30 clients. During the last 5-year period
from 1996 through 2000, the total percentage of revenue PPA
derives from consulting services or lobbying services is no more
than 8.15%. Nevertheless, PPA does not represent the Debtor and
has no specific knowledge that any of its current clients are
creditors of the debtor, Mr. Taugher represents, noting that 3
clients engaged in the energy business, that could conceivably
be creditors are: the California Independent Petroleum
Association, Green Mountain Energy Company, and Mirant
Corporation. A former client, Davey Tree Service, is known to be
a creditor.
Mr. Taugher anticipates that PPA likely will continue to provide
services unrelated to the Debtor's case for the various entities
identified, and likely other creditors and parties in interest
of the Debtor, but Mr. Taugher believes that no services have
been provided to these creditors or other parties in interest
which could impact their rights in the Debtor's case, nor does
PPA's involvement in the PG&E case compromise its ability to
continue such services.
Mr. Taugher declares he personally has an IRA account of
approximately $900,000. Most of these funds are managed by three
different money managers. Each manager has the authority to buy
and sell stocks and bonds at will. Some of the holdings likely
include, from time-to-time, investments in companies that are
creditors. One IRA holding not controlled by the money managers
is a position of approximately $50,000 in Calpine.
Mr. Taugher also declares that PPA does not represent any other
entity having an interest adverse to the Committee in connection
with the PG&E case, and will not, while employed by the
Committee, represent any such entity. Further, no one involved
in the PG&E case has any connection to the U.S. Trustee or any
person employed in the Office of the U.S. Trustee in the
District, Mr. Taugher represents. Mr. Taugher believes that PPA
is eligible to represent the Committee under Section 1103(b) of
the Bankruptcy Code.
If any new relevant facts or relationships are discovered or
arise, Mr. Taugher covenants, PPA will promptly file a
Bankruptcy Rule 2014(a) Supplemental Declaration.
Terms Of Retention
The Committee understands that PPA intends to apply to the Court
for allowances of compensation and reimbursement of expenses for
the following services in accordance with the applicable
provisions of the Bankruptcy Code, the Bankruptcy Rules,
corresponding Local Rules, orders of this Court and guidelines
established by the United States Trustee:
(A) Monthly legislative monitoring services at the rate of
$6,000 per month. If the Committee requests PPA to engage in
legislative promotion services, the fee will increase to
$10,000 per month from the date of the request through the
end of the case or termination of PPA's engagement.
(B) The customary hourly rates, subject to periodic adjustments,
charged by PPA personnel for expert testimony, if needed,
are as follows:
Officer $300
All Others $200
PPA is not owed any amounts with respect to pre-petition fees
and expenses for services to the Committee.
Nunc Pro Tunc Employment
PPA's failure to timely file an application was excusable
neglect that would justify nunc pro tunc employment back to May
25, 2001, the Committee represents. Despite this and despite
that PPA is a small business dependent on recovery of its fees
for services rendered, PPA has agreed to write-off its fees for
the time period of May 25, 2001 through July 31, 2001.
Accordingly, PPA is seeking approval of its employment nunc pro
tunc only to August 1, 2001. The Committee explains that, within
days of its retention by the Committee, one of PPA's employees
with significant responsibility for the services provided to the
Committee resigned. PPA continued to fulfill its obligations to
the Committee, in part through supplemental services performed
by its independent contractor Edson + Modisette. However,
recognizing that its staffing had to be realigned, PPA submitted
to a further interview by the Committee in late June, 2001, to
reconfirm its ongoing engagement. Furthermore, PPA had never
been employed by a bankruptcy estate and did not understand the
significance of filing a timely employment application. These
factors were compounded by the intensive legislative activities
during the June and July 2001 time period. PPA worked tirelessly
during this period to keep the Committee apprised of the daily
legislative developments, the Committee tells the Court.
Dispute Resolution Provisions
The Committee and PPA have agreed, subject to the Court's
approval of this Application, that any controversy or claim with
respect to this Application shall be brought in the Bankruptcy
Court which will be the sole and exclusive forum. Trial by jury
is waived, and if the Bankruptcy Court does not have or retain
jurisdiction, any such claims and controversies will be submited
first to nonbinding mediation and, if mediation is not
successful, thereafter to binding arbitration. judgment on any
arbitration award may be entered in any court having proper
jurisdiction. (Pacific Gas Bankruptcy News, Issue No. 17;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
POLAROID CORPORATION: Signs-Up Ordinary Course Professionals
------------------------------------------------------------
Polaroid Corporation and its debtor-affiliates customarily
retain the services of various attorneys, accountants, tax
professionals, and other professionals to represent them in
matters arising in the ordinary course of their business.
Because it is impractical to seek the retention each ordinary
course professional on an individual basis, the Debtors seek the
Court's authority to:
(a) employ the ordinary course professionals without the
necessity of a separate, formal retention application
approved by the Court, and
(b) compensate the ordinary course professionals for post-
petition services rendered, subject to certain limits,
without the necessity of additional Court approval.
Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom,
reminds the Court that the Debtors have filed applications for
the retention of Evan D. Flaschen and Anthony J. Smits as Joint
Foreign Representatives, as well as the firm Bingham Dana LLP as
international counsel to the Debtors. Prior to Petition Date,
Mr. Galardi relates, Bingham Dana had also provided tax,
employment, corporate finance, general corporate and litigation
advice to Polaroid Corporation. To the extent that Bingham
continues to perform such ordinary course services after
Petition Date, Mr. Galardi notes the Debtors request the Court
that they would like to compensate Bingham in the ordinary
course.
Prior to the filing of these chapter 11 cases, Mr. Galardi also
tells Judge Walsh, the Debtors retained the firm of Loyens &
Loeff for advice regarding the law of the Netherlands, and the
firm of Slaughter and May for advice regarding the laws of
England and Wales. In addition, Mr. Galardi relates, the
Debtors may continue to retain additional counsel qualified in
other foreign jurisdictions for the purpose of assisting the
Debtors with specific issues arising in such jurisdictions.
Accordingly, the Debtors request that these foreign counsels be
compensated as ordinary course professionals.
The Debtors propose to pay, without formal application to the
Court by any ordinary course professional, 100% of the interim
fees and disbursements to each of the ordinary course
professionals upon the submission of an appropriate invoice to
the Debtors. However, Mr. Galardi emphasizes, that the total
interim fees and disbursements should not exceed $30,000 per
month per ordinary course professional. And for the duration of
these chapter 11 cases, Mr. Galardi says, neither should it
exceed $300,000 per ordinary course professional.
However, with respect to Arthur Andersen - a public accounting
firm that provides international tax consulting services to the
Debtors, Mr. Galardi notes, such interim fees and disbursements
shall not exceed a total of $50,000 per month and no more than
$500,000 for the duration of these chapter 11 cases.
If any ordinary course professional exceeds these limits, then
the Debtors propose that payments of their fees and expenses be
subject to Court approval upon application.
Recognizing the importance of providing the Court and the United
States Trustee information about each ordinary course
professional, who is an attorney; the Debtors further propose to
require such professional to submit an Affidavit of Proposed
Professional and Disclosure Statement. Such affidavit must be
filed with the Court and serve upon the United States Trustee,
counsel to any official committee appointed in these cases,
counsel to the Debtors' pre-petition and post-petition lenders,
and the Debtors' counsel within 30 days after the date of a
Court order granting this motion. Upon receipt of such
affidavit, the Debtors ask Judge Walsh to give notice parties 20
days to object to the retention of such professional. If there
are no objections, the Debtors request that the retention and
compensation of such professionals should be deemed approved.
The Debtors anticipate that they will be employing and retaining
more ordinary course professionals. In such event, the Debtors
request Judge Walsh for permission to supplement the list of
ordinary course professionals they submitted to the Court.
If the Court will not grant the relief requested, Mr. Galardi
warns, the ordinary course professionals might cease their
services to the Debtors. As a result, Mr. Galardi says, the
Debtors will lose the expertise, experience and institutional
knowledge of these ordinary course professionals. Moreover, Mr.
Galardi notes, the Debtors' estates will incur significant and
unnecessary expenses if the Debtors are forced to retain other
professionals without similar background and expertise. Mr.
Galardi emphasizes that it is in the best interests of the
Debtors' estates to avoid any disruption in the professional
services required in the day-to-day operation of the Debtors'
businesses.
Thus, the Debtors assert the Court should approve their
application. (Polaroid Bankruptcy News, Issue No. 3; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
POLAROID CORP: Seeks Extension of 10-Q Filing Deadline for Q3
-------------------------------------------------------------
Polaroid Corporation announced it has filed a Form 12b-25 with
the Securities and Exchange Commission requesting an extension
of its deadline for filing a Form 10-Q for the third quarter and
nine months ended September 30, 2001. The company indicated
that its request is related to its recent Chapter 11 filing.
Polaroid Corporation and its U.S. subsidiaries filed voluntary
petitions for reorganization under Chapter 11 of the U.S.
Bankruptcy Code on October 12, 2001. The case is being heard in
the U.S. Bankruptcy Court in Wilmington, Delaware, by the
Honorable Judge Peter J. Walsh under case number 01-10864.
As previously announced, Polaroid has obtained a court-approved
commitment for $50 million in debtor-in-possession financing
from a bank group led by J.P. Morgan Chase & Co. This
commitment is available to supplement the company's existing
cash flow and help fulfill obligations associated with operating
the business, including payments to suppliers and vendors.
Polaroid continues to make progress in its efforts to accelerate
and intensify exploration of a possible sale of all or parts of
the company. Polaroid has not yet finalized a plan of
reorganization, but believes it4 is unlikely that there will be
any recovery for the company's stockholders in any such plan.
Polaroid Corporation is the worldwide leader in instant imaging.
The company supplies instant photographic cameras and films;
digital imaging hardware, software and media; secure
identification systems; and sunglasses to markets worldwide.
Additional information about Polaroid's Chapter 11 filing is
available on the company's web site at http://www.polaroid.com
"Polaroid" is a registered trademark of Polaroid Corporation,
Cambridge, Mass. 02139.
PRANDIUM: Eyes Chapter 11 Filing with Prepack Restructuring Plan
----------------------------------------------------------------
Prandium, Inc. (OTC Bulletin Board: PDIM), announced that it has
filed its third quarter Form 10-Q with the Securities and
Exchange Commission. The report discloses, among other things,
the status of Prandium's negotiations with certain of its
creditors regarding an acceptable capital restructuring of the
Company.
In the report, the Company announced that on November 7, 2001 it
executed a term sheet with an authorized representative of the
holders of notes of FRI-MRD Corporation, a non-restaurant
operating Prandium subsidiary, to complete a restructuring of
such notes. Furthermore, the Company indicated that it has also
been negotiating with some of the holders of its 9-3/4% Prandium
notes and 10-7/8% subordinated Prandium notes with respect to a
restructuring. Prandium's negotiations with such note holders
contemplate that an acceptable capital restructuring will
include the filing of a voluntary prearranged or prepackaged
chapter 11 reorganization plan.
The Company does not currently contemplate that any prearranged
or prepackaged chapter 11 filing would involve any of its
operating subsidiaries (Chi-Chi's, Koo Koo Roo and Hamburger
Hamlet).
In light of the amount that the Company owes to creditors and
the size of the Company's operations, the Company does not
anticipate that, under any such prearranged or prepackaged plan,
there will be value available for distribution to its current
stockholders or the holders of Prandium's 10-7/8% subordinated
notes.
Intended Sale of Hamburger Hamlet
In the report, Prandium also announced that on October 23, 2001
it entered into a definitive agreement to sell the stock of The
Hamlet Group, Inc., with its 14 Hamburger Hamlet restaurants, to
Othello Holding Corporation, for approximately $16 million in
cash. The proposed sale contemplates the filing of a voluntary
prearranged or prepackaged chapter 11 reorganization plan and is
subject to a number of conditions, including court approval in
any such chapter 11 case and Othello receiving adequate
financing to pay the purchase price. Cash proceeds from the
sale would be used to repay certain indebtedness under the FRI-
MRD notes.
Credit Line Update
The Company also reported that on October 18, 2001 it entered
into a forbearance agreement with its senior lender, Foothill
Capital Corporation. The agreement provides that Foothill will
forbear from exercising certain rights and remedies available to
it as a result of existing defaults under the credit facility
until at least January 10, 2002. Although Prandium has no
outstanding debt under the Foothill credit facility, Foothill
currently holds cash as collateral for $9.4 million of
outstanding letters of credit the Company has issued in the
normal course of its business. The Company is currently
negotiating with a different lender to replace the Foothill
credit facility with a new credit facility.
The company believes its available cash balances will provide
sufficient financial resources to fully fund operations during
the anticipated restructuring period.
Restaurants Continue Operations
Prandium continues to support its Koo Koo Roo, Chi-Chi's, and
Hamburger Hamlet restaurants (approximately 190 locations) and
their customers with the same high quality customer service it
has always provided. In addition, Prandium continues to
maintain all normal business functions including marketing and
concept development activities designed to generate new
business.
Kevin S. Relyea, Chairman and Chief Executive Officer of
Prandium, commented on the announcements, "We are taking steps
that are critical at this point in the process. We continue to
pay all of our employees and vendors, on time and in full, and
maintain normal credit terms with our suppliers and business
partners."
"We are extremely grateful to the customers, employees and
others who have supported the Company through these challenging
times, and we look forward to continuing to serve them during
and after our reorganization," Relyea concluded.
Prandium cannot provide any assurance that it will be able to
reach final agreement with its creditors with respect to an
acceptable capital restructuring or consummate the sale of
Hamburger Hamlet or replace its credit facility or file any
voluntary prearranged or prepackaged chapter 11 reorganization
plan. If the Company cannot reach final agreement with the
various parties involved in these matters, there is substantial
doubt about the Company's ability to continue as a going
concern.
Prandium operates a portfolio of full-service and fast-casual
restaurants including Hamburger Hamlet, Koo Koo Roo, and Chi-
Chi's in the United States. Prandium, Inc. is located at 18831
Von Karman Avenue, Irvine, CA 92612.
PROVIDIAN FINANCIAL: Fitch Concerned About Rising Credit Losses
---------------------------------------------------------------
Fitch lowered Providian Financial Corp.'s (Providian) and
Providian National Bank's (PNB) long-term ratings to 'BB-' from
'BB+' and affirmed the short-term ratings of 'B' for both
entities. All ratings have been removed from Rating Watch
Negative where they were first placed on October 12, 2001. The
Rating Outlook for all ratings is now Negative.
Fitch's rating action reflects the more difficult operating
environment surrounding the company since announcing
disappointing results for the third quarter and lowered
forecasts for the full year 2001. This is due to rising
credit losses and weaker than expected receivable growth in the
company's core credit card business. Fitch anticipates that both
trends are likely to persist over the intermediate term and this
has prompted the company to rethink its origination and risk
management practices.
Although Providian is taking remedial actions to address credit
quality concerns, the company's earnings and asset quality
measures will continue to be impacted by accounts already
originated, particularly in the 'standard' segment which has the
highest delinquency and charge-off rates. This segment accounts
for approximately $9.4 billion or 29% of the company's managed
receivables at September 30, 2001.
Moreover, Fitch is concerned that Providian's weak operating
performance could impact its ability to conduct financing
transactions in the capital markets and thus pressure the
company's liquidity. Although Fitch views the company's
liquidity profile as sound, reduced financing capacity in the
capital markets, over a protracted period, will eventually
strain Providian's liquidity unless financing alternatives are
restored.
The company's deposit program has provided Providian with
additional liquidity at the present time. However, Providian's
banking units are subject to regulatory oversight and Fitch is
concerned that potential regulatory scrutiny could negatively
impact the company's business in the future. Should regulatory
actions occur, it will likely place downward pressure on
Providian's ratings.
Fitch will continue to monitor performance in Providian's
securitization trusts and conduit facilities for further
deterioration. In addition, rating triggers in certain private
transactions may further reduce the company's liquidity as early
amortization events or increased 'trapping' of cash could
occur. An early amortization event will impact the company in
two ways. First, Providian will have to hold capital against
these receivables as they come back on balance sheet; and
second, Providian will have to obtain alternative financing for
the receivables. Today's actions by Fitch do not impact any of
the ratings on the public Providian Master or private Gateway
Master securitization trusts.
Fitch's Negative Rating Outlook reflects the uncertainty
surrounding the appointment of a new CEO, the exploration of a
range of strategic options currently underway, and regulatory
uncertainties. Fitch will evaluate the credit implications of
the execution of any one or a combination of strategic options
as they occur.
Ratings lowered are as follows:
Providian Financial Corp.
* Senior debt to 'BB-' from 'BB+';
* Subordinated debt to 'B' from 'BB';
* Individual to 'D' from 'C/D'.
Providian National Bank
* Long-term deposits to 'BB' from 'BBB-';
* Short-term deposits to 'B' from 'F3'
* Senior debt to 'BB-' from 'BB+';
* Subordinated debt to 'B' from 'BB';
* Individual to 'D' from 'C/D'
Providian Capital I
* Trust preferred stock to 'B' from 'BB-'.
Ratings Affirmed:
Providian Financial Corp.
* Short-term, 'B';
Providian National Bank
* Short-term, 'B'.
RESPONSE BIOMEDICAL: Arranges Bridge Financing of up to $500K
-------------------------------------------------------------
Response Biomedical Corp. (RBM: CDNX), developer of the RAMP(TM)
diagnostic system, arranged a loan facility for up to
US$500,000. The first tranche of US$100,000 was advanced to the
Company following the acceptance by the creditors of the
Company's proposal to its creditors. An additional US$200,000
will be advanced upon the approval by the British Columbia
Supreme Court of the proposal to creditors with the balance to
be advanced upon FDA clearance of the RAMP Myoglobin Assay.
"This bridge financing will fund the first installment due under
our proposal to the creditors and allow us to operate until
March 2002 in our current, scaled-back mode," said Bill Radvak,
President and CEO of Response Biomedical. "The core R&D group
that remains in place continues to advance our development
program while senior management is focused on developing
strategic business relationships and long term finance
solutions."
The terms of the loan facility provide for interest to be paid
quarterly at an annual rate of 8%. The loans, secured by the
Company's assets, are repayable one year from the dates of
receipt, or earlier at the Company's discretion. The Company has
agreed to pay the lender a bonus in the form of common shares
equivalent to 20% of the principal of the loan. Bonus shares
will be issued at the Discounted Market Price as defined by the
CDNX and no less than $0.15 per common share. The loan and bonus
share transactions are subject to the approval of the CDNX.
Response Biomedical develops quantitative, diagnostic tests for
use with its proprietary RAMP Reader intended to be used for
clinical, STAT-lab and point-of-care applications. The RAMP
System is expected to reduce the cost of healthcare by allowing
rapid and easy-to-use medical tests to be performed in
hospitals, clinics, laboratories and physicians' offices
worldwide. The Company's platform technology has the potential
to be used with more than 250 medical tests that are currently
performed by traditional laboratory methods. Response
Biomedical's shares are listed on the Canadian Venture Exchange
under the trading symbol "RBM". For further information,
visit the Company's website at http://www.responsebio.com
Early this month, as related in the Troubled Company Reporter,
100% of the voting creditors of Response Biomedical voted to
accept the proposal filed with the British Columbia Supreme
Court under the Bankruptcy and Insolvency Act. The Company, the
report said, would begin seeking court approval and move to
fulfill the terms of the proposal to the satisfaction of the
trustee.
REVLON CONSUMER: S&P Assigns Low-B and Junk Ratings
---------------------------------------------------
Standard & Poor's assigned its single-'B' bank loan rating to
Revlon Consumer Products Corp.'s proposed $325 million senior
secured credit facilities. The bank loan rating is based on
preliminary terms and conditions, and is subject to review once
full documentation is received.
In addition, Standard & Poor's assigned its single-'B'-minus
rating to the company's proposed $250 million of senior secured
notes maturing in 2005. At the same time, Revlon's single-'B'-
minus corporate credit rating, triple-'C'-plus senior unsecured
rating, and triple-'C' subordinated debt rating are affirmed.
Proceeds from the new credit facilities will be used to
retire existing senior secured bank debt. Revlon's existing bank
loan rating will be withdrawn upon closing of the new
facilities.
The outlook is negative.
Total debt outstanding was about $1.6 billion at September 30,
2001.
The ratings for Revlon reflect a weak financial profile,
characterized by high debt leverage and a prolonged period of
poor operating results. Despite its strong brand name, Revlon
has been challenged in its efforts to reverse the decline in
revenues and market share due to intense competition in the
mass-market cosmetics industry, divestitures, and the ongoing
reduction of inventory levels by retailers. Specifically,
revenues have declined 40% to $1.35 billion for the trailing 12
months ended September 30, 2001 from $2.25 billion in fiscal
1998.
Revlon's credit protection measures are weak for the rating.
Standard & Poor's expects fiscal 2001 debt to EBITDA to be in
the 8 times area; EBITDA interest coverage will likely be under
1.5x. Standard & Poor's anticipates that credit protection
measures will remain weak over the intermediate term. Revlon's
proposed refinancing of its bank debt will provide additional
financial flexibility through the extension of maturities and
improvement in liquidity.
The proposed bank facility, which consists of a $200 million
revolver and a $125 million term loan due 2005, is rated one
notch above the corporate credit rating. The facility will be
secured by a first lien on substantially all of Revlon and its
domestic subsidiaries' stock and assets, and two-thirds of its
first-tier foreign subsidiaries' stock. The bank loan rating
anticipates that the borrower would retain sufficient value as a
business enterprise to repay the bank loans in full in the event
of a default.
The proposed $250 million senior secured notes due 2005 are
rated the same as the corporate credit rating. The notes will be
secured by a second lien on substantially all of Revlon and its
domestic subsidiaries' stock and assets, and two-thirds of its
first-tier foreign subsidiaries' stock, providing a strong
measure of protection to lenders. However, based on
Standard & Poor's simulated default scenario, which severely
stressed the company's cash flows, it is not clear that the
distressed enterprise value would be sufficient to cover the
full amount of the notes.
Outlook: Negative
Although the proposed refinancing should improve the company's
financial flexibility, the ratings could be lowered, if Revlon's
operating performance and credit ratios weaken further.
TELESYSTEM INT'L: Ability to Meet Current Obligations Uncertain
---------------------------------------------------------------
Telesystem International Wireless Inc. (TSE: TIW, Nasdaq: TIWI)
reported its results for the third quarter and first nine months
ended September 30, 2001.
Continuing cellular operations recorded 459,000 net subscriber
additions for the third quarter, a sequential increase of 7%
compared to 429,000 net additions for the second quarter of
2001. Total cellular subscribers reached 4,781,600, an increase
of 71% compared to 2,795,300 at September 30, 2000. Subscriber
totals for the 2001 and 2000 periods have been adjusted to
reflect the sale of the Company's B-Band affiliates in Brazil at
the end of the first quarter of this year.
Operating income before depreciation and amortization (EBITDA)
more than tripled to $60.1 million compared to $16.7 million for
the third quarter of 2000. Operating income was $8.0 million
compared to an operating loss of $27.0 million in the same 2000
period. For the first nine months, EBITDA was $169.0 million,
up 104% compared to $82.7 million last year, while operating
income was $29.8 million compared to an operating loss of $37.9
million for the same period last year.
EBITDA from continuing cellular operations more than doubled to
$64.6 million compared to $26.8 million for the third quarter of
2000. Operating income was $13.0 million compared to an
operating loss of $13.3 million in the same 2000 period. For
the first nine months, EBITDA from continuing cellular
operations was $182.8 million, up 82% compared to $100.2 million
last year, while operating income was $48.1 million compared to
an operating loss of $9.1 million for the same period last year.
On a stand-alone basis, ClearWave N.V., the Company's operating
subsidiary in Central/Eastern Europe, recorded a net income of
$5.4 million for the third quarter and $5.3 million for the
first nine months of 2001.
TIW's proportionate cellular subscribers from continuing
operations totaled 725,900 at September 30, 2001 compared to
749,500 at the end of the third quarter last year. The
calculation of the number of proportionate cellular subscribers
from continuing operations was modified as a result of the
issuance of Units in the first quarter of 2001, which reduced
the Company's equity and voting interest in ClearWave from 100%
to 45.5% and 80.7%, respectively. TIW accounted for 535,700
proportionate cellular subscribers at September 30, 2001 at the
ClearWave level, instead of the 1,179,700 it would have recorded
had it maintained its 100% equity ownership of this subsidiary.
"We are very pleased with ClearWave's performance for the third
quarter and the first nine months of this year, highlighted by
strong subscriber growth, effective cost management and the
successful execution of its business plans," said Bruno
Ducharme, President and Chief Executive Officer of TIW.
"ClearWave's results reflect its market leadership in Romania
and rapid penetration of the Czech Republic market."
Update on Dolphin Telecom plc
As previously disclosed, Dolphin Telecom plc and certain of its
subsidiaries voluntarily filed for protection from creditors
during the third quarter and the court-appointed Administrators
have called for offers to purchase Dolphin's assets. This
process is still under way and TIW does not expect the outcome
to have a material impact on its financial condition.
The financial position and results of operations of Dolphin are
reported in the Company's financial statements as discontinued
operations. The loss from discontinued operations for the nine-
month period ended September 30, 2001, includes the results from
operations as well as a net gain of $15.9 million from
deconsolidation of Dolphin and is included in net loss but
reported separately for current and prior periods.
Results of Operations
Consolidated service revenues for the third quarter increased
19% to $196.6 million compared to $165.7 million for the same
period in 2000. EBITDA was $60.1 million, an increase of 260%
compared to $16.7 million in the third quarter last year,
reflecting mainly the continuing improvement in ClearWave's
results. The Company reported an operating income of $8.0
million compared to an operating loss of $27.0 million in the
third quarter of last year. Income from continuing operations
for the third quarter was $208.2 million compared to $25.7
million for the same period last year. Net income for the third
quarter was $224.0 million compared to a net loss of $47.8
million for the same period last year. During the latest
quarter, the Company recorded a non-cash gain of $238.9 million
on the forgiveness of debt following the exchange of its Senior
Discount Notes for new Senior Guaranteed Notes and cash, as well
as a gain from discontinued operations of $15.9 million
resulting from the deconsolidation of Dolphin. The Company also
recorded a loss on sale of investments of $8.6 million, related
to the disposal of its interest in a Brazilian wireless Internet
venture. Excluding these items, net loss for the third quarter
would have been $22.2 million.
For the first nine months, consolidated services revenues
increased to $570.0 million compared to $449.3 million for the
same period in 2000. EBITDA was $169.0 million compared to $82.7
million last year and operating income was $29.8 million
compared to an operating loss of $37.9 million for the first
nine months last year. For the 2001 period, the Company
recorded a gain on sale of investments of $100.1 million, which
includes a gain on disposal of its Brazilian B-Band affiliates
of $106.1 million recorded in the first quarter. As described
earlier, it is also recorded a gain on forgiveness of debt of
238.9 million and a loss from the discontinuation of the Dolphin
operations of $426.8 million which includes the gain of $15.9
million described earlier. As a result, net loss for the first
nine months was $162.2 million compared to $255.4 million last
year.
CEE Cellular - ClearWave N.V.
TIW holds its investments in Central/Eastern Europe - MobiFon
S.A. in Romania and Cesky Mobil a.s in the Czech Republic -
through ClearWave N.V. ClearWave's service revenues increased
51% to $130.6 million from $86.3 million for the third quarter
of 2000 and EBITDA rose sevenfold to $46.0 million from $6.0
million for the corresponding period last year. Net income was
$5.4 million compared to a net loss of $9.4 million for the
corresponding period of 2000. ClearWave achieved profitability
for the first time in the second quarter of 2001 with a net
income of $1.5 million.
For the first nine months, service revenues rose 51% to $343.3
million, compared to $227.2 million for the same period last
year, while EBITDA almost tripled to $99.9 million compared to
$37.1 million for the same period in 2000. Net income was $5.3
million compared to a net loss of $13.1 million for the
corresponding period last year.
ClearWave added 300,600 net subscribers in the latest period,
marking its second highest number of net additions for a
quarter, to reach 2,303,000 total subscribers, double the year-
ago level of 1,159,100. The third quarter subscriber growth
exceeded the strong results of the second quarter of 2001 during
which ClearWave recorded 284,500 net additions. For the first
nine months of 2001, ClearWave grew its customer base at an
average rate of over 92,000 net additions per month. On a
proportionate base, ClearWave added 137,700 net subscribers
during the period to reach 1,179,700, almost double the 623,400
proportionate subscribers at the end of the third quarter in
2000.
MobiFon, the cellular market leader in Romania, added 160,400
net subscribers in the third quarter compared to 148,300 for the
same period in 2000. Total cellular subscribers increased 62%
to 1,622,700 compared to 1,000,100 at the end of the same period
last year.
For the third quarter, service revenues increased 21% to $96.1
million compared to $79.3 million for the same period last year,
reflecting subscriber growth. EBITDA increased 57% to $52.4
million, compared to $33.4 million for the same 2000 period.
Operating income was $32.9 million, more than double the $15.7
million recorded in the third quarter of 2000. For the first
nine months, service revenues were $260.7 million, up 20%
compared to $217.6 million for the same period last year.
EBITDA rose to $139.0 million from $96.3 million last year.
Operating income increased 85% to $83.9 million from $45.4
million in the 2000 period.
In the Czech Republic, Cesky Mobil added 140,200 net cellular
subscribers in the third quarter to reach 680,300 since March 1,
2000, the start of full commercial operation. This compares
with 137,100 net additions in the second quarter of 2001 and
86,300 in the third quarter of 2000. The acceleration of
subscriber growth for the first nine months of 2001 reflects
increasing awareness of Oskar, the company's brand, and its
national network coverage and quality.
For the third quarter, service revenues were $34.5 million
compared to $7.0 million for the same period last year. As a
result of higher revenues and slightly lower SG&A expenses,
negative EBITDA was reduced significantly to $5.8 million
compared to $21.4 million in the third quarter last year. For
the first nine months, service revenues were $82.6 million
compared to $9.6 million for the 2000 period. Negative EBITDA
was $36.0 million compared to $53.4 million for the 2000 period.
Brazil Cellular
TIW holds its investments in Brazil - Telemig Celular
Participa?oes S.A. (Telemig Celular), licensed in the State of
Minas Gerais, and Tele Norte Celular Participa?oes S.A. (Tele
Norte), licensed in five Northern States, - through Telpart
Participa?oes S.A. (Telpart). As previously disclosed, the
Company is involved in ongoing litigation with one of its
partners in Telpart. TIW is reviewing strategic alternatives
with regards to their investments.
Service revenues for the third quarter declined to $63.7 million
compared to $76.7 million for the same period last year. The
decrease reflects the sale of the B-Band cellular operations in
the first quarter of 2001 and the devaluation of the Real
against the US dollar, which more than offset the revenue
contribution from subscriber growth in the A-Band operations.
For similar reasons, service revenues for the first nine months
grew slightly to $219.5 million compared to $213.4 million for
the same period in 2000. As measured in Brazilian Real, the A-
Band operations service revenues for the nine months grew to
R480.0 million compared to R350.2 million for the same
period in 2000. The B-Band cellular companies generated service
revenues of $6.8 million and $23.3 million, respectively, for
the third quarter and first nine months of 2000.
Telemig Celular added 101,300 net subscribers for the third
quarter to reach 1,531,200, while Tele Norte's customer base
grew by 45,900 subscribers for a total of 880,600. Both
companies expect continued subscriber growth for the balance of
the year. At September 30, 2001, total subscribers increased to
2,411,800 compared to 1,606,000 at the same time last year.
EBITDA was stable at $20.5 million for the third quarter
compared to $20.0 million for the same period last year,
reflecting increase in service revenues mostly offset by the
devaluation of the Brazilian currency. For the first nine
months, EBITDA increased to $85.2 million compared to $61.6
million for the 2000 period. Operating loss was $0.4 million
for the third quarter and operating income was $33.0 million for
the first nine months compared to $1.2 million and $5.7 million,
respectively, for the same periods last year.
Asia Wireless, Corporate and Other
The Company's Asia wireless, paging and corporate activities
recorded negative EBITDA of $6.4 million for the third quarter
and $16.1 million for the first nine months compared to negative
EBITDA of $9.3 million and $15.9 million, respectively, for the
same periods in 2000.
Liquidity and Capital Resources
As of September 30, 2001, the Company held cash and cash
equivalents of $239.6 million, including restricted cash of
$91.6 million and $37.1 million held at the corporate level.
The Company has drawn the full amount of $83.5 million available
under its corporate credit facility which expires in July 2002.
Investing activities for the third quarter used cash of $101.0
million, of which approximately $74.0 million was invested in
the cellular networks in the Czech Republic and Romania. For
the first nine months, investing activities used cash of $77.3
million, reflecting mainly the proceeds from the sale of the
Company's B-Band affiliates in Brazil which was more than
offset by the acquisitions of capital assets.
Financing activities for the third quarter provided cash of $2.5
million, resulting from changes in long-term debt offset by the
restriction of $91.6 million of cash which became unrestricted
subsequent to September 30, 2001. For the first nine months,
financing activities provided cash of $237.7 million, which
includes the net proceeds of $248.6 million from the issue of
Units in the first quarter of 2001.
Total consolidated indebtedness as of September 30, 2001 was
$1.2 billion, including $282.3 million at the corporate level.
On September 19, the Company completed a private exchange offer
under which the holders of 99.9% of its outstanding 13 1/4%
Senior Discount Notes due 2007 and 10 1/2% Senior Discount Notes
due 2007 tendered such notes for an aggregate cash consideration
of $50 million and $194.8 million total principal amount of new
14% Senior Notes due December 30, 2003 issued by TIW. Interest
on the new Notes is payable semi-annually and the first two
payments may be made in cash or additional Notes at the option
of TIW. The total accreted value of the two series of Senior
Discount Notes as at September 19, 2001 was $491.0 million and
the aggregate principal amount at maturity was $546.5 million.
The committed cash obligations of the Company for the upcoming
twelve-month period, including the repayment in July 2002 of the
amended Corporate facility, exceed the committed sources of
funds and the Company's cash and cash equivalents on hand. As a
result, the Company's ability to realize its assets and meet its
obligations during the normal course of business over the next
twelve months is uncertain. Its financial statements have been
prepared on a going concern basis, which assumes the Company
will continue in operation for the forseeable future and will be
able to discharge its liabilities and commitments in the
ordinary course of business.
The Company continues to review opportunities to refinance
subordinated debt, amend its debt agreements, raise new
financing and sell assets. In connection with the Company's
ongoing effort to refinance Subordinated debt and raise new
financing, the holders of the 7.75% convertible debentures
consented to postpone payment of the September coupon on such
debentures to November 12, 2001. The interest payment can be
made in cash or securities. If the Company elects to pay the
coupon in securities, the debenture holders would have the
option to receive shares or additional debentures. In the
event the debenture holders elect to receive shares as
consideration of the interest payment, approximately 7.5 million
subordinate voting shares will be issued.
TIW is a global mobile communications operator with 4.9 million
total subscribers worldwide. The Company's shares are listed on
the Toronto Stock Exchange (TIW) and NASDAQ (TIWI).
TIW is also the strategic partner in two leading cellular
operators in Brazil. In Central and Eastern Europe, TIW is a
cellular market leader in Romania and launched services in the
Czech Republic in March 2000.
TELSCAPE INT'L: Court Extends Lease Decision Period to Dec. 21
--------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approves
the motion by Telscape International Inc.'s Trustee to further
extend the time within which the Trustee may assume or reject
unexpired leases of nonresidential property.
The time within which the Trustee must decide whether to assume
or reject the Leases is extended through December 21, 2001,
provided that such extension does not prejudice the lessor's
right to seek a hearing to consider a reduction of time.
Telscape International is a leading integrated communication
providers serving the Hispanic markets in the United States,
Mexico and Central America, offering local and long distance
telephone, internet and pre-paid calling card services. The
Company filed for Chapter 11 petition on April 27, 2001 in the
District of Delaware. Brendan Linehan Shannon at Young, Conaway,
Stargatt & Taylor and Victoria Watson Counihan at Greenberg
Traurig, LLP represent the Debtors in their restructuring
efforts.
US DIAGNOSTIC: Taps Imperial Capital to Pursue Financing Options
----------------------------------------------------------------
US Diagnostic Inc. (OTCBB:USDL) reported its financial results
for the quarter and nine months ended September 30, 2001. For
the quarter ended September 30, 2001, the Company reported net
revenue of $12.3 million as compared to $30.1 million for the
same period last year. The decrease resulted primarily from the
sale or closing of 46 imaging centers since May 2000. Net
revenue relating to those centers that are still in operation as
of September 30, 2001 was $12.2 million for the third quarter of
2001 compared to $11.5 million for the third quarter of 2000.
The net loss for the third quarter was $2.3 million versus a net
loss of $9.6 million for the third quarter of 2000. The results
for the quarter ended September 30, 2001 included asset
impairment losses of $.8 million and a $1.5 million net gain on
sale of imaging centers. The results for the quarter ended
September 30, 2000 included a $3.8 million net loss on sale of
imaging centers.
For the nine months ended September 30, 2001 net revenue was
$44.7 million as compared to $107.8 million for the same period
last year. The decrease resulted primarily from the sale of the
sold facilities. Net revenue relating to the open centers was
$38.0 million for the nine months ended September 30, 2001
compared to $35.8 million for the nine months ended September
30, 2000. The increase in net revenue of the open centers is
related to a 2.3% increase in scan volume.
The net loss was $15.7 million versus a net loss of $14.1
million for the nine months ended September 30, 2000. The
results for the nine months ended September 30, 2001 included
asset impairment losses of $16.3 million, a $10.4 million net
gain on disposition of imaging centers, a $3.3 million minority
interest gain on sale of imaging centers and an extraordinary
gain, net of taxes of $.5 million related to early
extinguishment of debt. The results for the nine months ended
September 30, 2000 included a $6.4 million net gain on
disposition of imaging centers and a minority interest gain on
sale of imaging centers of $5.2 million.
The Company's sales of its imaging centers pursuant to the plan
of restructuring were not completed within the one year time
period following the plan's approval on July 21, 2000. As a
result, effective June 30, 2001, the Company is treating as
continuing operations its remaining operations that had
previously been presented as discontinued operations. The
accompanying condensed consolidated statements of operations
have been reclassified to reflect this presentation.
Based on current estimates, unless the Company can successfully
sell imaging centers at favorable prices and terms, obtain
additional significant financial resources (which is unlikely),
or restructure its debt, the Company's current cash and cash
from operations will be insufficient to meet its anticipated
cash needs. Furthermore, the Company has defaulted on the March
31, 2001 and September 30, 2001 interest payments on its 9%
Subordinated Convertible Debentures due 2003. Also, the Company
has defaulted on its obligation to repurchase Debentures,
required as a result of failing to maintain consolidated net
worth of at least $18.0 million. On May 1, 2001, the Company
received a default notice from the Trustee under the Debenture
Indenture. These defaults could give rise to an acceleration of
the maturities of the Debentures and other debt instruments
under cross default provisions. In addition, the Company
is prohibited from borrowing additional amounts without causing
additional non-compliance with certain Indenture covenants and
an additional default under the Indenture. Furthermore, the
Company failed to pay the $10.0 million principal amount (and
accrued interest) of its 6 1/2% Convertible Notes that matured
on June 30, 2001. This failure constitutes a default under the
Notes and may also constitute a cross default under other of the
Company's debt instruments which could entitle the holders of
such instruments to accelerate their maturity.
In light of the Company's financial condition and prospects, as
well as these defaults and other potential defaults which may
also constitute cross defaults under other debt instruments
permitting the acceleration of such debt, the Company will
require a restructuring of its debt and is currently engaged in
negotiations with its secured and unsecured lenders.
Accordingly, the Company has suspended its imaging center sales
except in special circumstances while pursuing a proposed debt
restructuring with the assistance of its financial advisor,
Imperial Capital LLC, and its counsel, Greenberg Traurig, P.A.
The Company continues to be in discussions with its primary
lender as well as an ad hoc committee of unsecured debt holders
that has retained legal counsel and a financial advisor.
Unless the Company can successfully restructure its
indebtedness, sell additional imaging centers or otherwise
obtain liquidity in the short term, the failure to make the
payments described above and other payments that are due, the
related defaults and potential cross defaults, the lack of
working capital and the inability to incur additional debt will
have a material adverse effect on the Company's ability to
maintain its operations, as well as its financial condition.
Moreover, if these matters cannot be resolved successfully,
the Company would be required to pursue other options, which
could include seeking a reorganization, or its creditors could
file an involuntary bankruptcy petition against the Company
under the federal bankruptcy laws.
US Diagnostic Inc. is an independent provider of radiology
services with locations in 10 states and owns, operates or
manages 22 fixed site diagnostic imaging facilities.
US OFFICE: Wilmington Court Approves Disclosure Statement
---------------------------------------------------------
In the US Office Products' Chapter 11 case, F&D reports relates,
the US Bankruptcy Court in Wilmington, Delaware, approved the
adequacy of the Company's Disclosure Statement to be distributed
in the solicitation package with the Company's proposed
Liquidating Plan. The hearing for confirmation of the Plan has
been set for December 13 with objections to the Plan due by
December 6.
According to F&D, under the Plan:
(i) priority claims will be paid in full,
(ii) pre-petition secured claims will recover approximately
86% of the net realized proceeds from the sale of
assets plus 50% of any unused funds in the expense
reserve at the end of the liquidation,
(iii) general unsecured claims will receive approximately 3%
of the proceeds from asset sales plus the other 50% of
unused funds in the expense reserve plus all proceeds
from the sale of its 49% interest in Dudley Stationary
Ltd., and
(iv) holders of intercompany claims, equity interests and
subordinated securities claims will receive no
distribution.
US Office Products (now known as BRM Holdings, Inc.), one of the
world's then-leading suppliers of office products and business
services to corporate customers, filed for chapter 11 protection
on March 5, 2001 in the US Bankruptcy Court for the District of
Delaware. The company, which posted $2.5 billion in sales last
year, is represented in its restructuring efforts by Brendan
Linehan Shannon, Esq., at Young Conaway Stargatt & Taylor, LLP.
As of January 2001, USOP reported $850,468,000 in assets and
$1,325,204,000 in debt.
WARNACO GROUP: Engages Rosenman & Collins to Sue GE Capital
-----------------------------------------------------------
The Warnaco Group, Inc., and its debtor-affiliates seek to
retain Rosenman & Colin LLP as special litigation counsel in
connection with potential litigation against General Electric
Capital Corporation.
Stanley P. Silverstein, Vice President of The Warnaco Group,
Inc., explains that GE Capital on behalf of itself and other
"participants" earlier asked the Court to compel the Debtors to
assume or reject a purported "master lease agreement" and
schedules between the Debtors and GE Capital dated December 1994
and October 1997. GE Capital also requested Judge Bohanon to
require the Debtors to pay all past and future post-petition
"rental payments" due under the contracts until the Debtors
assume or reject the contracts, Mr. Silverstein adds.
Mr. Silverstein tells the Court that the Debtors expect to
resolve the dispute with GE Capital by a negotiated resolution.
However, Mr. Silverstein advises Judge Bohanon, in the event the
Debtors will be required to litigate the matter with GE Capital,
the Debtors' regular bankruptcy counsel, Sidley Austin Brown &
Wood, cannot represent the Debtors in that litigation because it
also represents GE Capital in unrelated matters. For that
reason, Mr. Silverstein says, the Debtors deemed it prudent to
retain and employ commercial litigation attorneys to represent
them in connection with the GE Capital motions in the event a
consensual resolution cannot be timely reached.
According to Mr. Silverstein, the Debtors will look to Rosenman,
principally through its partner Martin E. Karlinsky, to provide
the legal and litigation support required by the Debtors in
connection with the potential litigation involving GE Capital,
including:
(a) analysis and review of the contracts, the GE Capital
motions and all relevant pleadings and documents related
thereto in connection with the potential litigation of
the GE Capital motions;
(b) the defense and representation of the Debtors in
connection with their objection to the GE Capital
motions, if necessary, including, without limitation,
the preparation of all briefs, pleadings, motions and
orders in connection therewith;
(c) to the extent deemed necessary or desirable, drafting,
preparing and prosecuting actions or pleadings, seeking
declaratory or affirmative relief with respect to the GE
Capital issues raised in the GE Capital motions and any
objections thereto;
(d) attempting and assisting through negotiation and
settlement to reach a resolution of the potential
actions and the GE Capital motions if possible;
(e) the issuance of periodic status reports to the Debtors;
(f) performing all other necessary and legal services in
connection with the contracts, the GE Capital motions,
and the potential actions including, but not limited to,
the attendance at any depositions, hearings or other
judicial proceedings in connection therewith;
(g) taking all necessary actions to protect, preserve and
enforce the Debtors' rights under the terms of the
contracts; and
(h) providing other advice and services relating to the
contracts, the GE Capital motions, and the potential
actions as the Debtors may need and request from time to
time.
Mr. Silverstein informs Judge Bohanon that the Debtors have
selected Rosenman because of the firm's familiarity with the
Debtors' businesses and affairs. Rosenman is also the Debtors'
special intellectual property counsel, Mr. Silverstein notes.
Rosenman will charge the Debtors for its legal services on an
hourly basis in accordance with its ordinary and customary
rates:
Hourly Rates
------------
Partners $350 to $550
Counsel $340 to $550
Associates $180 to $400
Special Counsel $305 to $450
Para-professionals $ 85 to $230
Mr. Silverstein advises the Court that Rosenman is seeking
relief from complying with the Monthly Compensation Order
regarding the payment of fees and expenses in connection with
its retention as special litigation counsel only for the period
of time from the Petition Date through and including October 31,
2001. Rosenman proposes to serve monthly statements for payment
of 80% of fees and 100% of expenses incurred in connection with
services rendered as special litigation counsel for the period
of time from the Petition Date through and including October 31,
2001, on or after November 20, 2001, on:
(i) the Debtors,
(ii) counsel to the Debtors,
(iii) the Office of the United States Trustee for this
district,
(iv) counsel to the Debt Coordinators for the pre-petition
banks,
(v) counsel to the agent for the Debtors' post-petition
secured lenders, and
(vi) counsel for the Committee.
Starting November 20, 2001, Mr. Silverstein adds, Rosenman will
apply to the Court for allowance of compensation for
professional services rendered and reimbursement of charges and
costs and expenses in accordance with the Monthly Compensation
Order.
Martin E. Karlinsky, a member of the Rosenman firm, swears that
"Neither I, Rosenman, nor any member, counsel or associate of
Rosenman, as far as I have been able to ascertain, represents or
holds any interests adverse to the Debtors or the Debtors'
estate in matters upon which Rosenman is to be employed."
Mr. Karlinsky admits that Rosenman has previously represented GE
Capital in matters completely unrelated to the Debtors. But in
light of the limited role for which Rosenman is sought to be
retained, Rosenman does not believe that its past, current or
future representation of GE Capital places or will place
Rosenman in a position adverse to the Debtors. Mr. Karlinsky
advises the Court that both the Debtors and GE Capital have each
waived any conflict of interest with respect to Rosenman's
retention as special litigation counsel to the Debtors. (Warnaco
Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
XETEL COMMS: Talking with Creditors to Restructure Obligations
--------------------------------------------------------------
XeTel Corporation (Nasdaq:XTEL), a comprehensive electronics,
manufacturing and engineering solution provider, reported
results for its second quarter and first six-months of fiscal
2002 ended September 29, 2001.
Net sales for the second quarter of FY2002 were $16.1 million, a
66% decrease from the $46.7 million reported for the second
quarter of FY2001. Net loss for the second quarter FY2002 was
$5.7 million and included approximately $1.6 million of expenses
for inventory losses, reserves for bad debt and employee
severance. This compares to net income of $1.0 million recorded
in the second quarter of FY2001, which included $0.2 million
(net of taxes) of recovery income.
Gross margin for the quarter was negative 23% compared to
positive 8.1% in the second quarter FY2001. The decline in gross
margin was primarily the result of having a higher level of
fixed costs and a lower revenue level in the current quarter
than in the previous year's second quarter coupled with employee
severance charges and inventory write-offs and reserves.
Selling, general and administrative or SG&A expenses were 15% of
sales in the current quarter compared to 4.2% in the prior year.
The increase in SG&A as a percentage of sales is primarily due
to the decline in sales. SG&A expense for the current quarter
included charges for employee severance and increases in
reserves for bad debt. Operating loss was $6.0 million compared
to operating income of $2.2 million ($1.8 million, exclusive of
recovery income) last year.
Net sales for the six months ended September 29, 2001 were $55.5
million, a 38% decrease from the $89.4 million reported for the
six months ended September 30, 2000. Net loss was $5.6 million
versus net income of $2.6 million recorded in the six months
ended September 30, 2000, which included $0.7 million (net of
taxes) of recovery income.
"Business remained soft in our second quarter as existing
customers continued to reduce demand as a result of the economic
and electronic manufacturing services industry slowdown. With
our industry slowdown, coupled with reduced access to capital
markets for many of our customers caused a number of our
customers to experience financial difficulties. Accordingly, as
a result of one customer filing bankruptcy and several other
customers having their capital raising plans canceled or
deferred, we established larger reserves for accounts receivable
and inventory exposures with respect to these customers,"
commented Angelo DeCaro, Jr., XeTel's president and CEO.
"While we were unable to maintain our record of seven
consecutive quarters of profitability, we have taken additional
cost reduction actions that have further reduced our breakeven
revenue level. We will continue to focus on cost control,
balance sheet management and new sales opportunities during this
industry downturn. We believe that we have taken appropriate
actions to reduce our variable costs to respond to our reduced
sales levels and are prepared to take further actions as
necessary."
Mr. DeCaro added, "We continue to pursue collections of
inventories liabilities due from Tellabs, Inc. through the
lawsuit we filed in July but do not expect resolution until
after the first of the year. We have continued to work with
Ericsson U.S. over the past several months to recover the excess
inventory XeTel is holding. In September we believed that the
situation would be resolved though a third party sale of the
inventory arranged by Ericsson, however the transaction was
never completed and as of today, Ericsson has refused
to pay for most of the excess materials. Although we remained
hopeful that we would not be forced to take legal action to
collect from Ericsson, we are prepared to do so. The non-
resolution of this matter and the Tellabs matter have negatively
affected our liquidity, financial results and our ability to
service a number of obligations. Accordingly, we are currently
in discussions with our lenders, landlords, and equipment
lessors to restructure our obligations to improve our liquidity
position. No agreements have as yet been reached and there can
be no assurance that these negotiations will lead to a
satisfactory resolution. We remain dedicated to resolving these
issue as expeditiously as possible and to work with suppliers,
creditors and our lenders through this difficult period."
Founded in 1984, XeTel Corporation is ranked among the top 50
electronics manufacturing services industry providers in North
America. The company provides highly customized and
comprehensive electronics manufacturing, engineering and supply
chain solutions to Fortune 500 and emerging original equipment
manufacturers primarily in the networking, computer and
telecommunications industries. XeTel provides advanced design
and prototype services, manufactures sophisticated surface mount
assemblies and supplies turnkey solutions to original equipment
manufacturers. Incorporating its design and prototype services,
assembly capabilities, together with materials and supply base
management, advanced testing, systems integration and order
fulfillment services; XeTel provides total solutions for its
customers. XeTel employs over 300 people and is headquartered in
Austin, Texas with manufacturing services operations in Austin
and Dallas, Texas.
BOOK REVIEW: Getting It To the Bottom Line:
Management by Incremental Gains
----------------------------------------------------------------
Author: Richard S. Sloma
Publisher: Beard Books
Soft cover: 196 pages
List Price: $34.95
Review by Gail Owens Hoelscher
Buy a copy for yourself and one for a colleague on-line at:
http://amazon.com/exec/obidos/ASIN/189312259X/internetbankrupt
In the author's words, "(t)his is a book about how to optimize
operating profit in an ongoing business consistent with and
supportive of the owners' (and/or creditors') demands." As in
his book The Turnaround Manager's Handbook, also published by
Beard Books, Richard Sloma's guidance is all-inclusive,
straightforward, and wise. He is perhaps unique in his ability
to use quotes and maxims liberally without sounding the least
bit preachy or trite.
A quote from Francois Voltaire, "perfection is attained by small
degrees," explains the main premise of this book, management by
incremental gains. It is based on the simple notion that change,
for better or worse and accidentally or on purpose, only occurs
incrementally. Without a succession of small changes in the same
direction there can be no progress or growth. Mr. Sloma defines
management as "getting work done through the efforts of others."
Thus, change in an organization depends on people. Mr. Sloma
takes a pragmatic (and perhaps somewhat dim!) view of the
ability of people to change, and maintains that the smaller a
change planned by management, the more likely it is to be
successfully implemented.
Mr. Sloma provides "real-world tested and proven methodology for
working with people in a professional manner to maximize their
individual commitment to goal achievement." He offers
recommendations based on his more than 30 years of management
experience that "strike(s) the long-sought-after logical balance
of viewing and managing people as if they were competent,
conscientious, and ambitious individuals who genuinely seek
opportunities for professional growth and development."
Getting It To The Bottom Line is not only about people skills,
by any means. Mr. Sloma introduces financial and operational
performance numbers, and gives details on how income statements
and cash flow statements measure the magnitude and direction of
planned changes in financial and operational performance. His
operational framework is illustrated in the following eight
steps:
* Quantify the do-nothing scenario
* If it works, don't fix it
* If it doesn't, quantify minimal acceptable performance
levels
* Quantify components of any financial performance gap
* If necessary, cut your losses, liquidate, and reinvest
elsewhere
* Quantify management action plans to bridge the
performance gap
* Define and establish a reporting and control system
* Define and implement an incentive compensation program
Mr. Sloma examines each step thoroughly, using recognized
financial analysis methods, as well as some of his own.
Throughout, he consistently emphasizes the importance of
achieving ambitious goals one small step at a time. He
admonishes managers to "spend no time or effort making 'little'
plans. They have no magic to stir men's blood - or to make
owners as wealthy as they could be!"
This is a solid and substantive book that targets managers at
every level. Mr. Sloma presents his concepts in such a way that
anyone charged with leading an organization can learn to do it
better. On the last page, he even tells readers to "drop me a
line and let me know what you think and how it's going." Why not
read the book and take him up on it?
Richard S. Sloma is an attorney with more than 30 years of
senior management experience. He has served as Chief Executive
Officer, Chief Operating Officer, Chairman and Vice Chairman of
the Board of Directors and Board Member of six international
companies. He holds degrees in business from Northwestern
University and the University of Chicago, and a law degree from
De Paul University.
*********
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Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
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sourcing of attractive high yield debt investments. For more
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Real-time pricing available at http://www.debttraders.com/
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette
C. de Roda, Ronald P. Villavelez and Peter A. Chapman, Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
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*** End of Transmission ***